Agribusiness: What Every Youth Agripreneurs In Sub-Sahara Africa Should Know
By Akin Olatidoye
The dream of a successful and thriving business in agriculture can quickly become a nightmare for most interested young persons. On one hand there are opportunities in a globalized market1 but on the other hand, there are readily no structures and most times state of art resources to meet the demands of that market. Bottom line: The way of doing agribusiness, that is, business in agriculture or business with agriculture has changed! It might be worthwhile for one to consider some important issues before going the whole way!
First of all, the thing to know is how to determine the value chain for an agricultural activity before embarking on it. Value chains are linked to ‘customer intelligence’ which is knowing what the customer wants. When what the customer wants is known, the process of building a value chain in an agricultural activity starts. Usually, building a value chain often calls for employing the specified customer quality whether in the use of input. For example, seed variety, animal breed et cetera. It also calls for following methods or procedures in an agricultural activity that will meet customers ‘taste’. For example, winnowing of a grain crop produce or ensuring hygiene standard demanded by the customer. Value chains can be determined at any stage of agribusiness from production to supply of produce.
The advantage of building and developing a value chain is that it leads to competitiveness in the agricultural economy and market. Every aspiring youth agripreneur must know how the value chain of the agricultural activity or business they are going into before daring to embark on them.
Equally, it is important for the youth agripreneur to understand the nature and dynamics of agribusiness. This for example does not mean knowing how to practice a particular agronomy procedure or how to identify a lactating cow. Rather, what is intended is knowing the peculiarities of agribusiness. For example, agricultural activities are often regarded as high risk due to fluctuating weather patterns, crop failure and other variables. In places like Africa, certain agriculture sub-sector such as fruit and vegetables agribusiness attract low patronage because of other factors like preservation and storage facilities. These examples, generally point to one thing: unpredictable returns in agribusiness. One of the fall-outs of this is relatively low investor confidence for large-scale production. In some other cases these risk factors prevent agribusiness from accessing much needed input like capital from commercial banks and other income sources e.g. investors.
Of these various agribusiness dynamics, this piece will discuss one very vital one i.e. the gestation period of an agricultural activity or agribusiness. It is important to know the gestation period which is the typical normal time it takes for deliverables which are the products or the services in agribusiness to be developed and delivered to the market. Knowing the gestation period in agribusiness is fundamental for determining other procedural issues like the operational methods or technology to be employed. It also impacts on other areas such as financial planning; for example the capital requirements, forecasts of profits and other operational expenses such as the remuneration of the agripreneur.
Before choosing or deciding on agribusiness, the youth entrepreneur must know its gestation period. This will help the youth entrepreneur to avoid a lot of frustration related to income and sustenance. At the stage of deciding on an agribusiness for example, the youth entrepreneur must know in addition to factoring the start-up capital and operational costs, also consider the sources and the size of the consumption capital needed. The consumption capital is capital needed by the youth entrepreneur to sustain their livelihood while their agribusinesses mature. This capital is needed particularly if the agripreneur is to remain competent while in operation, to meet unexpected expenses such as social responsibilities and also to guarantee that a break even profit point is reached rather than sustenance.
An example of how to cope with the gestation period component of an agribusiness is to secure a consumption loan. A consumption loan will guarantee that an agripreneur can pursue a livelihood and an agribusiness at the same time without a conflict in either of the two. There are other forms of consumption capital such as social network- support systems that assist the agribusiness to maintain a livelihood while in business. Such social networks-support systems vary from place to place.
Another important factor to consider in the startup of agribusiness is the agricultural contract. Often issues earlier discussed such as the determination of a value chain and agribusiness related factors such as the gestation period form the basis of an agricultural contract. Knowing the peculiarities of an agricultural product or services in terms of the value it adds helps the agripreneur in bargaining, negotiating and accessing new markets.
Also, when an agripreneur knows the gestation period of a particular agricultural produce or service, it helps him to determine a whole range of other things. For example, knowing the time demands for supplying a particular quantity and quality of milk to buyers can help a diary to incorporate technology e.g. faster milking machines into his diary business. Of course, the dairy farmer might have to do these so as to be able to meet the demands of an agreement or contract
Akin Olatidoye works as a Programme Officer with OneLife Initiative for Human Development, a non-governmental social enterprise with interests in micro-enterprise, governance and new media culture. He and his team can be reached via firstname.lastname@example.org OneLife currently offers Business Support Service (BSS) to Agri-Business Clusters (ABCs) in the maize value chain in Oyo and Ogbomoso, South Western, Nigeria. Visit www.onelifeinitiative.org or follow the organisation on twitter @onelifeng for more information.
Datta, S. (2010). Management of Agri-business Contracts and Organizations Report. Centre for Management in Agriculture, Indian Institute of Management, Vastrapur, Ahmedabad, India.
World Bank. Using Value Chain Approaches In Agribusiness and Agriculture in Sub-Saharan Africa. Method Guide prepared by J.J Austin Associates for the World Bank.
Stakeholders consultation with Center For Enterprise Development and Action Research (CEDAR), Ibadan, Nigeria. August 2014.
Image via FMO