LEAF should fight copycat syndrome

Charles Dhewa Review Correspondent
Although Zimbabwe has a wide range of economic drivers, there is a tendency by potential entrepreneurs to indiscriminately imitate each other. This habit runs deep right from individual to corporate levels. A few years ago, one company decided to venture into producing mahewu, a popular traditional beverage. Currently we have more than six companies doing the same business.

Copying each other has done much harm in horticulture and chicken production, among other value chains. Because everyone is now producing broilers and eggs, the market has been flooded for the whole of 2015. While a crate of eggs should go for $4 for producers to break even, a glut has seen a crate going down to less than $3 a crate. Same with broilers where a chicken should fetch $6 for a producer to prices have gone down to $4 due to gluts.

An imitation culture is prevalent in many other economic sectors such as transport, food and property industries. A few years back, bottled water was a luxury but now everyone is packing and selling it. One Robert Sibanda decided to convert his Harare house into a wedding venue. Now everybody wants to do the same.

There is a danger for some of the prime land being converted into wedding venues and areas for relaxing and eating food.

Much of this copycat syndrome is not backed by any market research. Perhaps we can blame our education system for this mind set. We cannot build a powerful economy on such habits. The notion of low hanging fruit has been over emphasized yet literally the low hanging fruit is accessible to everyone and thus not very viable. Rather, it is the fruit higher up the tree that one should aim for. Without originality, it is difficult for any business to survive for more than five years. In Zimbabwe, there is so much we can do without stepping on each other’s business toes.

How is LEAF going to navigate

this terrain?

On Wednesday 4 November 2015, the Government of Zimbabwe unveiled a $10 million Localised Empowerment Acceleration Facility (LEAF) to fund youths, women and disabled people’s enterprises through a partnership between Government and the financial services sector. This comes after Government launched the revolving Youth Development and Employment Creation Fund almost four years ago, which failed because of low repayment rates by beneficiaries. The Youth Development and Employment Creation Fund got its funds from CABS and Stanbic Bank, which had contributed $10 million and $20 million, respectively when the facility was stopped. While this facility is said to have suffered a 78 percent delinquency, not much has been shared in the form of lessons that can inform LEAF.

Unanswered questions include: Was the delinquency a result of external or internal factors? Was it due to types of enterprises, interest rates or selection of beneficiaries? A thorough evaluation should have revealed the real reasons for failure to repay loans by beneficiaries. Without a strong evidence base, LEAF will suffer the same fate.

LEAF along agricultural value chains

To avoid some of the challenges mentioned above, in the agriculture sector, LEAF has to be spread along the whole value chain — production, processing, transportation, inputs provision, feed production activities like hay making, blending poultry feed from diverse ingredients, equipment fabrication, technology adaptation and trading (markets), among others. This will make sure we do not end up with more eggs or vegetables than the market can consumer.

Along the value chain, each node from production to marketing requires its own funding model. Research is needed to come up with needs-based finance packages which take into account complexities in different commodities along the value chain. Some commodities are slow moving. Others are high value low volume while some are highly perishable. We can’t have the same finance model for all agricultural commodities. The nature of commodities should inform loan packages. While the previous facility has supported agriculture production, there hasn’t been enough support for trading which is a major business for 50 percent of youth in agriculture markets. This category requires a different finance model.

Youths who are getting into agricultural production should be equipped with an appreciation of processing, marketing, transportation and consumer demand. Same applies with those in marketing, processing or transportation who should have an appreciation of production because some quality issues are affected by production and post-production factors. Every actor should understand user needs and preferences. Producers and processors should also thoroughly understand the demand for raw commodities in the people’s market because there is often competition between processing and the open market where raw commodities are marketed. Without such an understanding, youth will import equipment which will eventually be under-utilised due to lack of commodities as the open market consumes all the commodities.

Another way of addressing the copycat syndrome is insisting on innovative ideas. The level of innovation should be a priority in LEAF enterprises. A pool of assessors can be put in place to look at the proposals. Some of the ideas can be further researched in order to craft viable business models. A loan facility should not just be about money but knowledge, skills, ambitions and emotional intelligence, among other factors. New entrepreneurs under LEAF should be keen to march to their own drumbeat rather doing what everyone else is doing.

Capacity building under LEAF

There is need for a well — articulated curricula on financial literacy and loan management for LEAF beneficiaries. In most enterprises currently supported by financial institutions, financial literacy and loan management issues are left to the entrepreneur. Since banks focus on disbursing and extensions agents are interested in agronomic aspects, who is going to mentor the youth? Given that the majority of youth are start-ups, there is need for social capital to cover some costs like training and knowledge exchange.

Social capital can also cover mentorship costs, which youth should be able to pay for as their businesses grow.

Social capital can also enable outreach programmes for universities and colleges so that they are able to link up with rural enterprises, providing technical support. Such support can also cover advertisement costs for youth products so that they are able to compete. With time, youth can be able to meet these costs. Already established youth-focused enterprises can also be funded so that they extend their knowledge to youth. For example, projects which provide a market for commodities from youth can be funded by social capital to the extent that they provide mentorship to youth enterprises under LEAF.

Separating business from family

One positive thing about youth is that they are innovative and not stuck in old ways of doing business. If properly mentored they will be able to manage their businesses independent of family requirements compared to old people whose family commitments often weigh down business. Youth can even work through peer pressure. Fresh knowledge and possibilities from school leavers will become handy given young people’s healthy ambition and emotional intelligence. Initial disbursements can be done directly to suppliers of project requirements like equipment and inputs. This would be enforced through sustained monitoring and evaluation.

Training and capacity building services should be synchronised. Where there is money a number of service providers get attracted leading to different training packages from government departments, consultants and youth organisations just to access youth funding. To this end, there is a need for quality control on the knowledge as well as development of needs-based context-specific training. Much training tends to be too generic some of which does not apply in some contexts and enterprises. Managing the growth patterns of these enterprises requires a framework to graduate from micro, small and then medium. Youth can also be good in using ICTs to leverage remittances through their peers. This can enable them to build a sustainable pool of resources. They may also want to be capacitated on investment opportunities that give higher returns rather than going for fashionable things like cars.

Banks may not be in the total picture of what is being said in a proposal because some of them rely too much on documentation as opposed to physical appraisal. This leaves out knowledgeable people who are not able to put their ideas in writing. People to appraise business proposals should largely comprise a number of stakeholders like traditional leaders, government officers, local business people and others. Local teachers particularly those teaching agriculture can help in assessing.

LEAF should be understood as an enterprise anchoring someone’s livelihood. There might also be need to create room for school enterprises run by those who cannot afford school fees but are driven by passion. The school can be a market centre for locally produced commodities, just as schools can function as hubs for agriculture shows. Schools, colleges, universities and research institutions can work with these enterprises and run competitions like Local Youth Chambers Business Person of the Year Award. There is also need for a business model targeting the girl child. Young girls can start their enterprises at a local business centre but once they get married that might be the end of the enterprises. LEAF has to design a way for the girl children to migrate with their businesses wherever they are going unless they are moving outside the country.

Strengthening link between rural and urban youth

The rural and urban divide in youth can be successfully bridged through LEAF. Partnerships between government and financial institutions should support needs-based youth enterprises. This means banks have to be quite responsive to youth in terms of collateral issues. While most youth organisations are based in urban areas, LEAF has to support a decentralized implementation structure riding on diverse agro-based economic drivers and value chains. Strengthening youth enterprise value chains is important because they can use ICTs, minimising processes will be minimised. Youth in catering services should be linked with those in production in order to close knowledge gaps. While young women focus on catering, boys focus on sourcing raw materials for needs in the value chain.

Although a number of development enterprises have tended to be rural-focused, there is also need to consider the link between rural and urban youth.

Most urban youth enterprises are located along road sides because there has not been proper affirmative space allocation for them. Some are either renting or in the street. This affects their viability status on the loan form. If this is not addressed, 40 percent of the loan end up being spent in managing operational costs and going to unintended beneficiaries through renting. There is also need for a temporary registration facility for a year or two which will act as a recognised and formal identity so that youth are able to access some services like tenders. They cannot be expected to start paying taxes and other costs before they get off the ground.

One important thing is embedding learning practices in LEAF. This will ensure an accountability mechanism to make sure youth actually do something with the learning towards motivating change in behaviour and practice. Learning processes need real traction if they are to make a difference in how things are done. Collective learning does not happen on its own but has to be facilitated. More importantly learning should translate into action.

Roles of other actors

Flipping the agriculture game under LEAF means understanding the role of different actors. Because, at the moment, it is not clear who does what, smallholder farmers tend to be exposed to scams. Many youths, women and those with disabilities under LEAF can also be vulnerable con artists.

Most smallholder farmers are losing produce to unregistered buyers because there is no monitoring mechanism within the agricultural value chain. An important role for knowledge brokers is not just linking farmers to the market but understanding specifications of what is to be traded between buyers and sellers.

The Ministry of Finance should have a budget for robust information and knowledge gathering and processing unlike leaving it fragmented in different government departments, NGOs and parastatals.

It is important to create strong relationships along the value chain, particularly among the actors — farmer, broker, buyer and processor. These are all profit-oriented actors. The role of public enterprises should be limited to creating an enabling environment for private actors to work with farmers, women, youth and the disabled under LEAF. It is not ideal for a non-profit making organisation to be a broker between two profit-oriented economic agents, for instance, where negotiations are between a buyer/seller and a broker. The language used is totally different.

One is from the social enterprise angle and the other has a profit motive. An NGO brokering for vulnerable groups of farmers tends to be on the side of the farmers and will try to use social enterprise language. The buyer will be compelled to take the social status of the farmers into account and ignore market forces which will eventually bite him/her.

Experiences in Zimbabwe over the past few years have proved that it is unhelpful fix the price of maize at $378 per ton when the market is saying the real price is $250 per ton. Price fixing tends to create animosity between value chain actors and that should be avoided under LEAF.

• Charles Dhewa is a proactive knowledge management specialist and chief executive officer of Knowledge Transfer Africa (Pvt) whose flagship eMKambo has a presence in more than 20 agricultural markets in Zimbabwe. Feedback: [email protected] ; Mobile: +26a3 774 430 309 / 772 137 717/ 712 737 430.