Agribusiness CEO shares lessons from building ventures in Nigeria, Zambia and Rwanda
Olawale Rotimi Opeyemi is the founder of JR Farms, an agri-processing and trading business that operates across Nigeria, Rwanda and Zambia. He revealed some of the industry lessons he has learnt to James Torvaney.
Tell us more about JR Farms.
We offer three main services: food processing, agro-commodity trading, and agro-consultancy.
The processing business deals with food products such as coffee, garri (a flour-like food made from processing cassava) and livestock feed in Rwanda, Nigeria, and Zambia respectively.
As a point of principle, we have a strict focus on adding value to agricultural products within Africa, so we don’t trade raw commodities except to companies that are going to add value within the continent.
How did you get into the agriculture business?
I was brought up in an agrarian community, so I have always had an itch to work in this business. As a child in Nigeria, I grew up spending my holiday peeling cassava and frying garri in my uncle’s local cassava processing factory.
After I finished my NYSC (National Youth Service Corps – a programme that places Nigerian undergraduates in a different location in the country for a year for the purposes of nation building), I started researching and blogging about agriculture, about how it created jobs and built infrastructures in different African nations in the 1960s and 1970s. In 2013, I started a farmers’ co-operative; buying cassava from almost 100 farmers and selling it to wholesalers.
The project eventually failed, but it made me realise two specific issues that affected farmers and consumers in Africa that I wanted to address: the processing gap and the issue of middlemen.
Explain a bit more what you mean by the processing gap…
I quickly realised the need for a factory. Local processors couldn’t deal with all the cassava that was being produced by farmers, so it was hard to meet the demand for value-added products using domestic produce.
Africa is going to continue importing finished products for a long time if this processing gap is not met. But we don’t need more small scale farms and processors; we need more large scale commercial farms and processors that can produce hundreds of tonnes of product every day.
And what specifically are the difficulties faced with middlemen?
I’ve travelled to around 16 African countries, and I think the problem is the same with middlemen across the continent, particularly when it comes to staple consumer foods like rice and garri. These are people who buy from farmers and sell to retailers. They are almost all informal – most of them don’t even have a registered company – and they can often manipulate prices. Because they are informal, there is little transparency with their pricing and it can become difficult for businesses to track inventory and receivables.
These middlemen usually don’t add any value to the product itself, but they can take quite a large cut of the final price. For example, in Nigeria cassava might sell for 400-500 naira per kilo at the farm gate, but the middleman who buys it may wholesale it at about 1,200 naira. This can make it very expensive for consumers to access basic foodstuffs.
The problem is that it is very difficult for farmers to reach the market/end users without these middlemen. They have huge access to end users. Even now, we still rely on middlemen for the majority of our garri sales. With coffee and cassava flour, however, we usually sell direct to businesses, so are not reliant on middlemen.
I think we can bridge some of this gap through technology, for example, e-commerce platforms where producers can reach retailers and businesses directly.
You’ve set up physical processing plants in two countries now – Nigeria and Zambia. How is the process of setting up a factory, and were there any unforeseen challenges you faced?
Starting up a factory is a long and difficult process that requires a lot of capital. Just identifying the right opportunity and getting the necessary data can take a huge amount of time. For example, in Zambia it took us almost two years on the ground, speaking to experts, understanding the business landscape, before we even started construction on our first factory.
Certification, and dealing with the various government bodies and regulators, is a major bottleneck in many African nations. You need to picture everything from the beginning – where each piece of equipment has to be, where water needs to pass, where wiring needs to run, which light bulbs you are going to use. You can’t just build it the way you want; you have to build it the way that gets the certifications from regulators. And you need to have it all mapped out from the start.
I learnt this the hard way. When we set up our first factory in Nigeria, I started out with a general plan, and ended up having to make all sorts of changes to meet the certification requirements.
Another one of the biggest challenges is managing vendors – building materials, equipment, machinery. Even if you hire a contractor, you have to be involved at every point. You end up needing to become a building materials expert, but if you’re not careful it can make you lose focus from the core of the business.
How was the business financed?
I started with family funds – from me and my wife. Now we have grown to the point where we have a number of external shareholders.
All of our external shareholders are project-based – for example, they invest in a specific factory-build as opposed to the business in general. It gives us more freedom and gives them more transparency.
What advice would you offer other business owners when it comes to raising capital?
I am very careful with the kind of investment we take on. All of our external investors we have found through personal networks. We have never received investment from someone we didn’t already know. I have seen people getting into messes with crowdfunding, they often end badly.
It’s important that you are clear with yourself on exactly what kind of investors you are – and aren’t – looking for. We don’t take investment from strangers, who are only focused on the financial returns – we are not set up to do that.
My strongest advice for other entrepreneurs is to build solid results first, before you try to raise investment. People invest in results, and investors want to see that you have proven yourself and the model. You will also get better terms as a result.
Another piece of advice is to solidify your structure. Speak to a proper lawyer, get your legal structure in place, your corporate governance structure. Set out clearly the requirements for being a shareholder, how many votes each share gets, what management’s responsibilities are. These things are very important once other parties get involved.
Explain the differences between the agriculture markets in Rwanda, Zambia and Nigeria.
The agriculture markets in Rwanda and Zambia are a lot more structured than in Nigeria – farmers have cooperatives, formal structures, and open pricing which makes it easier for processors to deal with them. Nigeria is more of a free market, with few organised cooperatives or structures, and bigger fluctuations in pricing.
Bureaucracy in all three markets is there, but worst in Nigeria. Dealing with the governments in Zambia and Rwanda is easier – everything is digital. We don’t have to meet tax officers in person and can file and track everything. This is a lot more difficult in Nigeria.
On the other hand, Nigeria is a much bigger market, with higher individual purchasing power compared to Zambia and Rwanda. There are a lot more people and there is more money in the system. Given the smaller supply of food relative to the population, consumers are also willing to pay higher prices for food.
What trends do you see in Africa’s agriculture industry?
African farmers themselves are ageing. The average age is something like 60 years old.
Meanwhile, there is a big influx of young people going into the business side of agriculture, a lot of young entrepreneurs. But there is a big knowledge gap. A lot of people come in, and then quit within two years because they are not seeing immediate results. There are millions of dollars being invested into the agribusiness space, but often the founders don’t have solid years of experience.
Lastly, what are your future plans for JR Farms?
We are looking to add both new products and add countries. We have been moving coffee by road from Lagos to Ghana and Côte d’Ivoire, so we are looking to establish new facilities in those countries, as well as a new coffee roastery in Kenya.
We are also looking at expanding into processing and trading of tea in East Africa, which we see as a big potential opportunity.