More than any time of the year, the month of December is buoyant. It is a season of joyfulness, distinguished by an incredible urge to spend cash.
I just returned from the Lakeside city of Kisumu. The unkempt dusty side walks are festooned with colours so bright. Much of it used clothing and shoes from Europe and America as well as toys, travel bags and blankets from the east. Not to mention the dizzying array of hardware, meticulously displayed.
Men and women, young and old, sellers and buyers sift through the clothing, hold garments against their bodies, try the shoes and scrutinize hardware. Amidst random disorder, the chocking dust and stifling heat, a deal is struck and a sale is consummated.
Scenes like this have now come to typify life in a majority of African cities not only in the month of December, but all year round. Random and unregulated, informal, a private version of capitalism crying out for order, a need to found and build businesses that can scale up.
Africa is deprived place, starved for many things. But the longing for capitalists who can found and run legal businesses is foremost. Fewer foundations and more enterprises. Households, neighbourhoods, communities and indeed nations will escape from poverty when they create small businesses that generate employment.
Capital flows into Africa through big bilateral peddlers of big capital like the World Bank who lend money for civil service reform or from microfinance institutions lending out money to widows to buy a dairy goat or sewing machine.
Putting money in the hands of the bottom billion through microfinance is great and laudable. However, a majority of people including myself and perhaps you too, detest the hassle of own business. We covet the stability and security created by capitalist innovators. Consider the example of America or closer to Africa, India.
Today many talented entrepreneurs, men and women of all ages are trapped in the random chaos of the side walk. Many of these street vendors are disciplined and hardworking. A few of them are smart and have the acumen to run a formal business.
What these capitalist in waiting need is capital, “patient” capital. Patient capital as the name suggests is unwearied and its yoke is light. It has longer payback period and its return is in the range of 5-10 percent as opposed to the 35 percent that venture capitalist seek. Think of patient capital as the cash that pays the bills while organizations learn the ropes. However, patient capital still has the rigor of venture capital.
What happens on the dusty side walks of African cities bears striking similarity with the plight of millions of hard working small holder farm families across rural sub Saharan Africa who eke out a living from the parched barren earth. A majority of these farmers are wise stewards of the earth. This knowledge and understanding bequeathed through the steady hands and keen observation of generations past.
Like their urban counterparts, they too subsist amidst randomness, relying mostly on natural capital; rainfall and soil organic matter. A majority of smallholder farm families remain unconnected with modern technology, quality seed, capital and lucrative markets.
Where would one look for patient capital?
Acumen, a non-profit global venture fund uses philanthropic capital to make disciplined investments – loans or equity, not grants – that yield both financial and social returns. Acumen seeks to illustrate that small amounts of philanthropic capital, combined with large doses of business acumen, can build thriving enterprises that serve vast numbers of the poor communities.
And the good news is that we have a local example of how this might work.
Acumen Fund has invested in an interesting social venture, Advanced Bio Extracts (ABE), which contracts and trains smallholder farmers in Kenya and Tanzania to grow the green leafy herb, Artemisia annua (sweet wormwood). ABE transforms Artemisia into pharmaceutical grade artemisinin, the bioactive compound used to make the new anti malaria drugs known as artemisinin based combination therapies (ACT). This herb was actually used in Chinese traditional medicine for over 200 years to treat malaria fevers.
ABE has contracted with 7,000 farmers, most with small farms, to grow artemisia in Kenya, Tanzania and Uganda. Artemisia offers to farmers, returns that are far greater to what they previously earned growing maize. Without having to work much harder, smallholder farm families could double or quadruple their incomes.
Nyanza Farms Limited, an agriculture and agribusiness company, incorporated in Kenya is another example. Nyanza Farms Limited works with a network of 8,000 contracted smallholder farmers in Western Kenya to grow African Bird’s Eye Chilli for export. About 100 local investors put in what ever savings they had. These individuals have put in personal contributions ranging between $500 and $5000.
Their contribution has helped purchase 25g of chilly seed (enough to plant 0.5 acres) for the 8,000 farmers as well as pay the salaries of 11 extension workers across Nyanza province.
A while back in village near Kisumu in western Kenya, I met a man named James Ogayi. He lives in a tiny house. Partially covered with corrugated iron, walls built from mud and poles and bare earth for a floor. He has grown maize all his life. Outside his house, was this tidy cage built from sticks. Inside this cage, beneath the grass thatched roof, James’ chilli seedlings formed in neat rows. James now in his mid 60s said to me that he would use the earnings from his chilli to improve his house.
Weaning smallholder farmers from subsistence maize production to high value export crops is something that must be done to extend the benefits of a globalized economy to the majority of Africa’s rural population.
We do not need the World Bank to fund a revitalization strategy to make agriculture work in rural Africa. We do not need another workshop to talk about rural poverty.
What organizations such as Nyanza Farms Limited need to better serve poor smallholder farmers is support/partnership from investors willing to take on risk/profit profile that most traditional financiers, and Africa has more than its fair share of these types, find unacceptable.
Ultimately, pioneering entrepreneurs who work with rural farmers must find the solutions to rural poverty. Poor people seek opportunity to earn a living, not dependence.