S3E7: From Farm to Table
Food prices are disproportionately expensive in African markets. In some countries, consumers spend 50% or more of their income on food. It's a logistics problem and a retail fragmentation problem, and it's also an agriculture and processing problem. So in this episode, we explore the agriculture and processing value chains on the continent.
[04:44] - Lack of processing capabilities is a problem in African markets. But processing capabilities are hampered by inconsistent supply from smallholder farmers, as we discuss with ReelFruit's Affiong Williams.
[08:33] - We speak with Releaf's Ikenna Nwezi about the company's interventions in the palm oil value chain in Nigeria.
[16:05] - On the importation and exportation of raw and processed foods, and the markets served by processors on the continent.
[22:03] - How do farms increase their efficiency? We talk precision agriculture with Revolute Systems' Jacobus Els.
[28:43] - A retrospective conversation with The Flip's Sayo Folawiyo and Justin Norman.
This season is sponsored by MFS Africa.
All this season, we're exploring value chains. And in the payments value chain, no fintech has a wider reach on the continent than MFS Africa. Through their network of over 180 partners - MNOs, banks, NGOs, fintechs, and global enterprises - MFS Africa's API hub makes connects over 320 million mobile wallets across 30+ countries in Africa.
- Affiong Williams–Founder & CEO,ReelFruit
- Ikenna Nzewi–Co-founder & CEO,Releaf
- Jacobus Els–Co-founder,Revolute Systems
- William Luyinda–Co-founder & CEO,EzyAgric
- Sayo Folawiyo–Co-founder & CEO,Kandua
- Justin Norman–Founder & Host,The Flip
New episodes straight to your inbox.
Get them as soon as they're published.
Supermarket: Hello. Can you just tell me in what aisle is tomato paste?
Justin Norman: I took a trip to my local grocery store to check out the price of tomato paste.
Supermarket: Right here? Thanks so much.
Justin Norman: There's a statistic I've heard about food production and consumption in Africa, which speaks to the lack of agriprocessing capabilities across the continent. The stat is that Nigeria is one of the largest producers of tomatoes in West Africa, and also one of the largest importers of tomato paste.
The agriprocessing deficiencies are a problem - and one that has caught the attention of even the richest man on the continent, Aliko Dangote, who invested tens of millions of dollars to build a tomato paste processing plant in Northern Nigeria. But the plant isn't running profitably, due to lack of local supply, due large in part to the inefficiencies and inconsistencies of smallholder farmers yields.
So back to the grocery store. 1 kilogram of loose tomatoes in this store were 21.99 Rands, or around $1.40. Then a 100-gram sachet of tomato paste was R11.99 or about 75 cents in dollar terms. So the equivalent price of 1 kilogram of tomato paste would be R119.90 or around $7.75 - about 5.5x more expensive than a raw tomato.
As we've talked about in recent episodes, the cost of food is disproportionately high in African markets. Another reason why is because so much of it is imported. And when there is a lack of domestic processing, not only is imported food more expensive, but imported processed food is more expensive too.
So in this episode, let's dig into the agriculture value chain.
Justin Norman: Before we start, we'd like to thank MFS Africa for their sponsorship of this season of The Flip. MFS Africa has been backing the growth and development of the ecosystem by investing in startups through its Frontiers Fund. One such investee is the Ugandan agritech company EzyAgric.
And I had the opportunity to speak with the company's co-founder and CEO William Luyinda about the variety of challenges smallholder farmers face, and the role the company plays in digitizing and increasing the accessibility of agriculture services for smallholder farmers in Uganda.
William Luyinda: I would summarize that farmers have the biggest challenges in the four main pillars: access to genuine and affordable inputs. Then also the challenge to access extension services. They’re also challenged to access profitable and consistent markets. And also challenged to access capital, enough for them to ensure that they do their production and they're able to scale their production.
Currently, the ratio of the extension worker to farmers in Uganda, it's around one to 15,000. That means that each extension worker has to reach 15,000 farmers. That's insane. Now with this limitation, that means that farmers lack access to information and to extension services.
On the other side, even when they start the production or when they’re in the real production cycle, they find it very hard for them to get genuine inputs at a little bit more affordable prices. So we are talking about Uganda where the counterfeit of inputs, counterfeit of almost everything is high.
Even those who are able to access inputs, they find it very hard for them to get the right know-how on how to use those particular inputs. They have a challenge of making sure that they're able to sell to transplant, consistent and profitable markets. So they end up already making sure that they sell to middlemen, which puts them in a situation which is non-profitable.
Lastly, it's access to finance. When you started from the people who give capital to the farmers is that they find farmers operating in the dark, their production is not visible or is not transparent to the people who provide capital. So you're talking about a farmer who just buys the inputs, doesn't keep any record, doesn't do anything around which can trace his production, and it's always also very hard for them to, for them to keep these records.
Justin Norman: We'll hear a bit more from William on how EzyAgric helps solve these problems for smallholder farmers later in the show.
VO: You’re listening to The Flip. The podcast exploring more contextually relevant stories from entrepreneurs around Africa.
Justin Norman: Welcome back to The Flip. I'm your host Justin Norman.
Back in episodes 4 and 5 of this season, on logistics and B2B commerce, we talked about a major problem consumers have in African markets - the cost of goods and food are disproportionately higher for African consumers, with consumers in some markets paying more than 50% of their income on food alone. Logistics play a major role, as does retail fragmentation and the inefficiencies along the supply chain.
And when talking about food, in particular, there's another important factor that we'll explore in this episode. Farming and the efficiencies of production and processing along the agriculture value chain. The problem starts, as we talked about previously, with smallholder farmers.
Affiong Williams: Every year we lose about 25% of our sales because we cannot get materials to sell. So we don't have stock.
Justin Norman: That's Affiong Williams, she's the Founder and CEO of ReelFruit.
Affiong Williams: And ReelFruit’s vision is really to be the largest end-to-end fruit processing company, based out of Nigeria, selling a range of interesting, healthy dried fruit snacks for the Nigerian market and the world.
Justin Norman: The beginning of an agriprocessing chain starts with the raw materials. Dangote is having a problem with their tomato paste processing plant because of the fragmented nature of sourcing raw materials from smallholder farmers across the country. It's a problem ReelFruit has, as well.
Affiong Williams: I think with most value chains in Nigeria we have this chicken and egg problem regarding the reliability of raw materials for processing which makes processing quite unviable. And what then happens is that people import processed goods to supplement that gap. So you have, for instance in my value chain, a lot of fruit being grown and rotting but it's not the right quality, right consistency for a large-scale processor to purchase regularly. So, for instance, fruit juice manufacturers instead of depending on the instability of the raw material will import juice concentrate to make the finished products. So that just becomes a trap, a circular trap, where there's no off-takers for raw materials, so there's no investment in bettering the quality of raw materials.
Justin Norman: In ReelFruit's circumstance, it means in the first case importing the fruit it needs.
Affiong Williams: My business is not in the farming of fruit or any other commodity, and we can't get it reliably and consistently, so we have to find alternatives, which is usually supported by importing. So, for example, biscuit makers who use fruit products in their biscuits or baking, or you know, who use it as inputs for cereals, et cetera, all are importing.
Especially when you look at the macroeconomics, you know, if you foresee that a devaluation is coming and you look at the difficulty with even border closures and those kinds of things that increase the cost of goods and make the port congested, we do have a case to be producing locally and being competitive against imports.
Justin Norman: This has ReelFruit thinking about and planning for building across the value chain.
Affiong Williams: We have inventory problems, right? And that speaks to a reason why we should scale up and get to the point where we can sell more and make sure that we're closing all these gaps around inventory. So the market has been what has pushed for us to continue to backward integrate.
Our goal is to actually play in all aspects of the value chain. You come in wanting to sell dried fruits to buyers across the world, you don't want to necessarily get into farming, but to survive and to defend your business, you have to do it. You have to operate in different aspects of the value chain.
And we've done the market end, we're in processing and scaling that up, and eventually we'll get into farming to secure raw material for our growth, but we do that, you know, planned. We don't just, you know, think that we can play across the value chain and be successful. I think it's extremely risky and it's also very time-consuming and you just open yourself up to a lot more risk.
Justin Norman: So when processors are struggling to procure raw materials, it compels investment at the farmer level of the value chain. Let's explore how that looks in another category - palm oil.
Ikenna Nzewi: My name is Ikenna Nzewi. I'm the co-founder and CEO of Releaf.
Justin Norman: Releaf is involved in the production and processing of palm oil, which is an interesting category to explore - 50% of the products in a supermarket have some amount of palm oil in them. It's a $60 billion global industry. And it can only be grown within a few degrees of the equator, making it a crop that is particularly well suited for Nigeria, given its geography. And yet...
Ikenna Nzewi: When you look at Nigerian smallholder yields per hectare, they are, in Nigeria, they are the worst in the world, effectively, for any major palm oil-producing country in the world. They are the worst. The macroeconomic view is that the country has far more demand than it does supply of vegetable oil, about 60% more demand.
Justin Norman: And it's expensive, in particular, because of inefficient production and processing by smallholder farmers. Here's how it works.
Ikenna Nzewi: So a farmer climbs a palm tree, cuts down what's called an FFB, which is a full fruit bunch, and it has hundreds of little fruits inside of it. So think of it like a grapevine, but like a lot more condensed and less vine in between the grapes. So from there they cut open the full fruit bunch and they remove the little fruitlets from the bunch that kind of holds them all together, they then squeeze the juice out of the fruit essentially, which is red palm oil. So red palm oil, it's used in a lot of local dishes in Nigeria.
So the red oil that smallholders produce could ideally be used for industrial purposes or more consumer purposes. So the industrial side would look like, you know, refining that red oil, bleaching a color so it looks yellow, and including it in like a Milky Way bar. And then the more consumer-focused side is to basically just strain that red oil with a little sieve and then to sell it to your friend and like a jerry can.
Smallholders see the extraction of the red palm oil as the business that they're in. Like 90% plus of their revenue comes extracting the red palm oil.
Justin Norman: But that other 10% of revenue for smallholders today comes from the nut of the fruit.
Ikenna Nzewi: Throughout that process, we saw how farmers would process the kernels. We saw a lot of farmers using rocks to basically crack open the nut. If you de-shell that nut, there's a kernel that's inside, as well, and that kernel can also be crushed into vegetable oil. And so when we saw people using rocks to de-shell these nuts to get access to the kernel, it was kind of a eureka moment for us because the buyers were very strict about the quality of the kernels that they would receive. They didn't want the kernels to be washed with water, they wanted to make sure the percentage of shell that came along with the kernels was below a certain percentage. And so what we saw is that a lot of buyers would either reject your product or discount the pricing that you thought that you were going to make if your quality wasn't on point with these commodities.
So our point of intervention is basically doing the nut de-shelling from the farmer. So we buy the nut, de-shell into the kernel, then we crush the kernel into palm kernel oil and then sell palm kernel oil to large fast-moving consumer goods brands or vegetable oil refineries that use it for like soaps and detergents.
Justin Norman: So what does investing at the level of smallholder farmer look like in this context?
Ikenna Nzewi: So what we do is we buy the nuts from the farmers and what we've also introduced is nut financing. So we'll finance the farmers so that they can go harvest more palm fruits. So they'll hire more people to harvest for them so that fruit isn't rotting on the tree, or they'll buy fruit from their friends. And then they'll process that fruit into the red oil, which like I said before is where they get the money from, and then the by-product of producing that red oil is the nuts. And so they repay our loans with the nuts, right? And so there's an opportunity to make more value for both the farmer and Releaf by basically advancing the smallholder farmers with more capital so that they're able to process more and have more working capital essentially. So they can produce more red oil for themselves, which is where a lot of their value comes from, and then we also end up with more nuts, which we then process.
Justin Norman: Now, Releaf is able to extract greater value from the nuts they purchase as they've developed hardware to de-shell the palm nuts, no matter the quality of the raw material inputs. And in a market with a supply deficit, the more raw materials Releaf can get, the more they can de-shell, and the more they can sell.
And as Releaf's de-shelling technology is undoubtedly more efficient than smallholder farmers' rock cracking method, it's the company's objective to demonstrate what that means for smallholder farmers in terms of upside.
Ikenna Nzewi: If the farmer sits down and spends more time cracking open those nuts and sells perfect quality kernels, they will get paid more than if they sell me the nuts. And that makes sense, right, like there's a cost for value addition. But the mindset that we are really trying to reorient farmers and rural communities in general around is to shift from a margin mentality to a volume mentality. So a margin mentality is okay, I created five widgets, how do I get paid $5 of profit per widget? A volume mentality is I produced 500 widgets, how do I get a dollar of profit from each of them? And so our focus in our intervention is really around using financing as a catalytic means to help smallholders increase their volume today. So the future is really in increasing productivity, not in paying the highest prices.
Justin Norman: And the goal, ultimately, is to help smallholder farmers scale even further.
Ikenna Nzewi: The role that companies like Releaf want to play is to help smallholder farmers get on that path to increased productivity. And it starts with a reorientation around this margin mentality into more of a volume mentality. So that starts with the finance. And then it leads into better processing yields on the red oil side of things.
As we identify great farmers and farming communities to work with, the second stage of intervention with capital is to provide better processing technology. So the processing technology that smallholders use to extract the red oil, there's stuff on the market that can be purchased for around $10,000 that can increase their red oil yields by up to 35%. And so if you add that 35% to that 90% of value that they're already doing today, like you're looking at a significant increase in income, like in between 20 and 30%.
And then the third step is to invest in better plantation management, if you will, or to make sure that the trees are outputting as much as they possibly can. But that takes time to orient people's minds and hearts and labor too. And it's not something that can be done in just one day.
You need to be a more integrated player in the value chain in order to help smallholders become more productive in a way that's like a win-win scenario. And so it's kind of an exciting path to take with these smallholders and with this technology from a solution that kind of focuses on the nutcracker and then moves into better oil palm productivity in the end, which then decreases the cost of food.
Justin Norman: Let's take a step back for a moment to talk about markets. We're exploring this topic in the context of high food prices in African markets, and for Releaf, they're focused on the domestic market in Nigeria.
Ikenna Nzewi: As it relates to Nigeria, it makes sense to just focus on the domestic market. So the Nigerian government has banned the importation of vegetable oil to spur this domestic economy, right? And the government doesn't want other countries who are further along in the process of working with this crop to make it difficult to stand up, you know, a domestic industry that can employ people and such. Now you can export vegetable oil, if you like, but the price of vegetable oil in Nigeria is more expensive than it is on the export market.
Justin Norman: And that's because in a global market, Nigeria is competing with other major vegetable oil-producing countries like Malaysia, which has very efficient production and greater volumes, and therefore lower costs. It underscores the opportunity to develop efficient processing capabilities, in terms of servicing not only a domestic market - and reducing the cost of food in domestic markets accordingly - but also in potentially having the opportunity to sell to markets in the global north with higher purchasing power.
It's an opportunity ReelFruit is trying to capture.
Affiong Williams: To be honest, it's much easier for us to scale to Europe and America, especially the US is the market that we're going to be focusing quite heavily on, and that's because it's just easier to trade with these countries. Not just that the markets are bigger, it's much easier for us to sell into Europe and get, you know, large distributors buying in large volumes. Those markets are much more attractive.
Justin Norman: It goes without saying that farmers in Africa may prefer to sell into Europe or the US or Asia because they can command higher prices. But they can demand higher prices only for higher quality, and higher quality at scale.
Jacobus Els: There's always a market for better quality fruits or food.
Justin Norman: That's Jacobus Els, the Co-founder and Managing Director of Revolute Systems in South Africa, who we're going to hear more from in a minute on precision farming.
Jacobus Els: If somebody wants something on the other side of the planet and they can't grow it there, they are willing to pay for it to bring it over.
Let's use apples as a good example. A high-quality apple that's going out of South Africa to the UK being sold at X amount of Pounds, you know, it really is Pounds, so that's times 20 Rand versus locally, that buyer if it’s Costco or whatever, the big markets in the UK or in America, they want a solid supply of fruits. So if you can be a company with enough farms saying that even in my worst year, I will still be able to supply you with this amount of fruits, then those deals start going through and your fruit starts moving across the planet.
And I think that really, that just shows why, you know, there's economy of scale and farming really is such an important thing because they can promise this produce and they can get these international deals and they can make money out of agriculture in South Africa.
Justin Norman: So the growth of the agriculture industries also relies on the improvement of quality and economies of scale. That's something that precision farming helps with, which we'll talk more about just after the break. But first, here's another word from our sponsor MFS Africa.
Justin Norman: Earlier in the show, we heard from MFS Africa investee William Luyinda on some of the problems smallholder farmers face in Uganda. He talked of four challenges and points of intervention: access to genuine and affordable farming inputs; access to extension services; access to markets for offtake, and access to capital. Here's how they're working to solve all of these problems through EzyAgric.
William Luyinda: EzyAgric is a mobile app. Also what we have done is that we have created a third-party network, so farmers that don't have access to smartphones, they're able to go to this agent and they're able to access these particular services.
We have created a module, which is able to disseminate this extension information in the form of infographics, video, images and even in the form of texts, to make sure that this awareness and farmers can get this kind of information at the palm of their hands, to make sure that they’re really empowered..
So farmers are able to map their gardens using GPS technology so that they know their actual, exact acreage so that they leave guesswork. Let's say they want to do tomatoes, their anticipated production, we understand that many more of these farmers, few of them really understand their unit cost of production. Then EzyAgric is able to estimate for them to say hey, you want to do tomatoes on 2.5 acres, so it costs you this much, and probably this is how much yield or this is how much income you'll be able to get.
Then for us, what we do is that you have created partnerships with these input suppliers, and supply them to the farmer. And at the end of the production, what we have done is that we are partnered with different off-takers or different buyers. So what happens is that off-takers on EzyAgric, they’re easily digital, they make payments to the farmers and also trace their produce from their farmers. Now, every payment which is done to the farmer we take it in the farmer’s season ledger or his production ledger for that particular season and record it as income. At the end of the season, we want to be able to give the farmer the visibility of this is how much you were projected. This is how much you really have used. This is how much has been your cost of production. And this is how much has been your income plus your yield out of your farm.
Now in this way with the use of technology, off-takers are empowered to have more visibility on the farmer's production, but also farmers empowered the other side. So that's the kind of value which EzyAgric is providing to the smallholder farmers currently, from the beginning of the season until the end of the season.
Justin Norman: Before the break, we heard from Releaf's Ikenna Nzewi about the company's incremental approach to interventions with smallholder farmers across the palm oil value chain. The third step, he said, is to invest in better plantation management.
Ikenna Nzewi: And then the third step is to invest in better plantation management, if you will, or to make sure that the trees are outputting as much as they possibly can.
Justin Norman: To make sure that trees are outputting as much as they can - that's where precision agriculture plays a role. But to see what that looks like on the continent today, we need to go to South Africa.
Here's Jacobus again, whose company Revolute Systems builds precision agriculture software for commercial farmers in South Africa.
Jacobus Els: We try to digitize the growing environment of crops. We work with what is called spatial data, special analytics, working with technologies that fall under the remote sensing concept. So we look at any data that can be put on a map, that reflects something about plants’ growing environment, plants’ performance via its leaves or the vegetative growth, be it the fruit growth, and trying to use measurements that we can put on top of a map. And then the other interesting part is the way that we get this data through remote sensing technologies. And what remote sensing means, in a nutshell, is really it's measuring something without touching it.
Justin Norman: So Revolute uses these frontier technologies to help farmers make data-driven decisions about where they should use specific types of fertilizers, for example, or how much fertilizer they should use, where they might need to install drains in certain parts of the farm, and so on. All of which helps to maximize the productivity of a farm, and to increase the quality of the crops grown on the farm, as well.
Jacobus Els: I'm talking more about using every square inch of your farm to its most productive level. And this way, it's one of the best tools we really have to work against this problem that we have, which is running out of space, having more mouths to feed, and growing better crops for every single part that we've already invested in growing food on. That is really, I think, that's the most important part of the work that we are doing is optimizing growing environments.
Justin Norman: The challenge and opportunity in a market like South Africa is quite different from a market like Kenya, where route-to-market is less certain. In South Africa, where both the export and domestic value chains are more defined, and the retail environment is less fragmented, and where there is always a market for high-quality food, maximizing the productivity of a farm means more revenue for the farm, without concerns about post-harvest waste.
But precision farming tools help increase the quality of fruits, first and foremost, which will result in less waste. And its tools can also help further by helping farmers predict how much fruit they're going to harvest, so they can make logistics and storage plans accordingly. Here's how one of Revolute’s products helps with that.
Jacobus Els: Where it came from, it was actually from industry telling us they've got this massive issue not planning well, not knowing what fruit's going to be coming in. And this is something even farmers would admit, we are not good at estimating how much food is going to come off our trees. And I'm talking about 30% of, you know, 40% off sometimes in worst cases. Now, this arrives at the pack store and, you know, just the logistical nightmare that ensues from there for the people that are having to sell it, to people that are having to transport it, to the people having to store it. You know, if you're working with a hundred thousand tons, that's a lot of tons that needs to be moved around the planets and be stored and you know, all of that. So it's still a lot of cash and a lot of logistical problems.
So it's got a little screen, you can see the images that the cameras are seeing, and you can see the little boxes where it's already marked the fruit, as you're driving you can see it marking the fruits, counting it. And when you're done driving up and down your orchards, and it's counting all the fruits, the data automatically goes to the platform. So then we can then we can start managing also with precision fertilizers, you know, using these fruit variation maps to put down different amounts of that.
But it's all about the logistics. It's about the fact that now we've got this accurate map of variation, it's not a total count, it just shows them where is more fruit, where is less, and they can go and do two counts and it extrapolates across the entire block. And they've got a good yield estimate.
Justin Norman: And when there's a good yield estimate, farmers and export companies can plan accordingly, to maximize profits even further. Because the price of commodities is also a function of time. If one type of fruit is harvested at the same time, a glut of supply means decreased prices. But if fruits are harvested first and reach a market first, or are stored, or transported to the global north during their winter to satisfy their full-year demand for seasonal products, that farmer is going to achieve even higher profitability.
Jacobus Els: There's always a market for better quality fruits or food. The best position you could be in as being the first one. Let's say you're the first country in the Southern Hemisphere to get your grapes ripe, your table grapes. Then you can charge a lot of money for it. You know, there's massive demand, you're first on the market the fresh grapes of the new season. There is going to be, for that exporter, that's going to be his goal is being that first one out for that cultivar, for that type of grape, and as the season progresses and more and more of them become available, your price drops and the need drops.
Justin Norman: In speaking to Jacobus about precision agriculture, I realized the objective is to make farming look more like manufacturing. In a global market, in which demand continues to increase, that there is so much variability or unknowns in output is problematic, especially when compared to manufactured goods, where manufacturers are in full control of how much they can produce. When farmers put seeds in the ground, they need to know how much it will yield them. So perhaps farming should look more like manufacturing.
Jacobus Els: We were starting the business, one of the first times we were on what we call South Africa a megaboer - the English for that is mega farmer, you can say - so you start driving on this farm and as far, there's table grapes on each side of you, and as far as your eye can see this road is carrying on and there’s table grapes on the left- and right-hand side of you. This is hectares upon hectares, kilometers and kilometers of road. There are mining trucks driving around, busy with, you know, working on grading new blocks there at the back. There's huge equipment moving left, right, and center. It's literally a massive factory without a roof. You know, highly planned, highly executed, and what precision agriculture is allowing us to do is take this factory where we've got these blocks of inputs and outputs, but very bad measurement tools of how much is going in and out. So with precision agriculture we can monitor every single part and not just this block, and actually, you know, work those inputs and outputs much more effectively and much more streamlined and monitored much better.
Justin Norman: Now, as I sat down with The Flip's b-mic Sayo Folawiyo for our retrospective conversation, I had in my head that African markets need more commercial farming. But what does that mean? Does it mean that smallholder farmers will inevitably become employees of commercial farms? Is that realistic, given the degree of smallholder farmers across the continent? Is more commercial farming even the right premise, considering the status quo?
I was reminded of a newsletter edition I wrote in September - The Flip Notes number 72, which I'll link to in the show notes - about our use of the term informal. Informal retail. Informal merchants. The informal economy. I made the argument that the use of the term informal comes with all of these parochial assumptions about these merchants. And I'm afraid I may have made that mistake when talking about smallholder farmers - so that is what Sayo and I talked about, as we reflected on this episode and this topic.
Justin Norman: This episode kind of led me down a path of believing that smallholder farmers shouldn't exist. And then the question is just what is the incremental path to inevitable commercialization?
Sayo Folawiyo: I didn't get that from this episode really.
Justin Norman: You didn't get that we need to move towards more commercial farming? Like if the problem, in processing, if the problem with fragmented retail starts from the fact that you can't go to one single source or one source large enough, or a series of sources large enough to provide the supply that is needed either to satisfy demand at retail or to satisfy demand in the processing space, it just seems like there needs to be consolidation at the farmer level.
Sayo Folawiyo: Why?
Justin Norman: Well, if Dangote's tomato processing plant can't operate profitably because they don't have enough inputs, how does that problem gets solved? By scaling up farming.
Sayo Folawiyo: I don't know why you think from scaling up farming, there's only one way to scale up farming. You can also make farming more efficient. It's not necessarily scale.
Justin Norman: Right. That's what precision agriculture is, but it seems like there's some commercial requisites for that.
Sayo Folawiyo: What? I hate this, this term is also weird. Precision agriculture. Rather, I know what it means in the context of the episode, but it's a weird term to make like a thing.
Justin Norman: I'm not making it a thing.
Sayo Folawiyo: You keep making it a thing.
Justin Norman: It's a thing.
Sayo Folawiyo: I think you just like the term.
Justin Norman: No, it's the name of...
Sayo Folawiyo: Yeah. It's the name of a technique, right? But it's suggesting that normal agriculture is not precision. Or rather the way you keep talking about it, it's like the only way to be precise in agriculture is with precision agriculture. And I don't think that's necessarily true.
Justin Norman: So I get what you're saying. Farmers practice precision agriculture. We're just talking about using technological tools to further enable that act. That activity.
Sayo Folawiyo: Yes. Exactly.
Justin Norman: But don't you agree that smallholder farming is quite imprecise?
Sayo Folawiyo: Yeah, from what we've heard, it seems like that's the case.
Justin Norman: Right. So then I guess there's levels. I think the crux of the episode is in order to reduce food prices further, one thing that needs to happen is domestic production. The reason why domestic production can't happen is because of variability in supply. The reason why there's variability in supply is because of the prevalence of smallholder farmers. The reason why there's a prevalence of smallholder farmers, to go back to a prior episode, is because it's the least risky way to satisfy fragmented market demand. That's pretty linear.
Sayo Folawiyo: Hmm. I think there's a big jump.
Justin Norman: From?
Sayo Folawiyo: From the need for more supply to smallholder farmers suck, let's commercialize blah blah blah. It's a very big jump, an extremely large jump that seems kind of a convenient jump.
Justin Norman: All right. So I guess there is something to be said about how, by the way, a smallholder farmer is anyone who has less than a hundred hectares. So a 99-hectare farmer who's using some commercial and precision agriculture tools is probably a significant improvement from the two-hectare farmer who is cracking palm kernel nuts with a rock.
Sayo Folawiyo: Yeah. I mean, for instance, in the Releaf example, tell me how that means smallholder farmers should not exist?
Justin Norman: Um, no, it doesn't. I think it just means moving smallholder farmers from something that they are today, like obviously there's a wide range of variability in the definition of smallholder farmer, right? So we just want them to move them to the commercial end of the spectrum.
Sayo Folawiyo: I mean, not really. You actually just want them to make sure that all the trees don't have nuts that get rotten or whatever, the fruits that get rotten. That's actually the outcome that you're aiming for. And there's lots of ways to get to that outcome. So I don't know where we've gotten this idea that the only way to get there is by...
Justin Norman: Well, I guess that's what I'm saying is that is towards the commercial end of the spectrum. Just higher output, greater efficiency, greater use of tools where available. All of that is just further along the commercial end of the spectrum.
Sayo Folawiyo: I don't know what you mean when you say the commercial spectrum. I don't know what the commercial spectrum is.
Justin Norman: Well, what are the characteristics of a commercial farm? High-efficiency output, use of tools.
Sayo Folawiyo: What are you talking about? What's the thing of a farm? It's like the precision agriculture thing again. Like what is the point of a non-commercial... what are you saying? If you're selling your shit you're a fucking commercial farm. That's what like commercial means. Like what is the commercial spectrum?
Justin Norman: That's actually, that's very interesting because you know how I wrote that thing like a couple of months ago saying that we shouldn't call it the informal market?
Sayo Folawiyo: Yeah. It's the market.
Justin Norman: Because we're like treating informal merchants with like a lack of respect by calling them informal and having these assumptions about who they are and what they do and, you know, this weird power dynamic. I realized I'm doing the same thing with smallholder farmers.
Sayo Folawiyo: Yeah.
Justin Norman: So the question is not actually about whether smallholder farmers should exist or not. It's just about how do you improve any farmers efficiency and output.
Sayo Folawiyo: Yes. That's more of a reasonable conversation.
Justin Norman: And it's not a smallholder farmer thing. It's not a commercial farmer thing. It's an every farmer thing. And then the thing really is like, everyone has an opportunity to and a need to improve efficiency. It's just that the how is different depending on who we're talking about and what stage of farm they are working at.
Sayo Folawiyo: Yeah, I mean, I'm sure there are important nuances in the types of farm and the size of the farm and things like that. And like what's the, again, what's the value chain? Some value chains might be more appropriate for commercial farming to be the thing. And others, maybe not so much. But this will be at the question of like, should they exist? I don't know. I don't know how we got there, to be honest.
VO: That's it for this episode of The Flip. Now, we've got a few more episodes of this season yet to go but instead of publishing them over the upcoming weeks in December, we're going to hold back and publish them in January. So this episode will be the last in 2021 - if you need your fix until then, we'd love for you to explore our past seasons and episodes of the show, which are available on your favorite podcast app or you can subscribe to our newsletter - The Flip Notes - which we'll still be sending out every Sunday. You can subscribe on our website theflip.africa. Thanks as always for listening, and we'll see you in January.