Fertilizer Trade Platform: Growing Opportunities for SMEs and Food Security

11 Jan 2016

Like many Malawian women, when Dinnah Kapiza’s husband passed away she not only lost her loved one, she lost a source of income for the family. As a mother of 10 children, her training as a teacher wouldn’t be sufficient to support the family. She quickly realized it was time to diversify and increase her income.

Shortly after her husband’s death in 2002, Dinnah founded an agro dealer business. She started small, with a capital outlay of 20,000 Malawian Kwacha (US$310 then; US$26 at current exchange rates) selling seeds and chemicals in the town of Mponela in Malawi where maize is the primary crop. The average household annual income in the country, according to FINCA International, is 613,483 kwacha or US$815.  The average family size is five. However, as Dinnah ran the business and saw the opportunity to grow, she faced an all too common challenge of not being able to secure credit to build a reliable stock of products for an expanding customer base.

In 2008, Dinnah received a grant from AGRA and a loan from a Malawian bank, and expanded her operations to become a hub-agro dealer. In this role she was able to become the supplier of fertilizer to smaller agro-dealers, who in turn sell the fertilizer to farmers.  By 2015, her sales had risen to between 10 and 20 metric tons of fertilizer per month during peak periods – June to October and December to February. . She paid off her loan within 12 months and continued to buy all her stock on a cash basis.  This, however, made it difficult to keep up with her customers’ needs.

In September 2015, Dinnah’s business received a major boost, one that she had been hoping for, for some time. She found the credit, and the partner she was looking for when she attended the first annual meeting of the East and Southern Africa Fertilizer (ESAF) Trade Platform held on 24 and 25 September 2015 in Lusaka, Zambia. Established by the African Fertilizer and Agribusiness Partnership (AFAP) in 2014, ESAF facilitates dialogue and joint action between the private and public sectors to increase the commercial supply of fertilizer to the region.

It was there that Dinnah met with John Smith, General Manager for Greenbelt Fertilizer based in Beira, Mozambique, a private fertilizer company (an importer, blender and distributor). This meeting resulted in an agreement to obtain a credit facility for fertilizer from the company.

“The ESAF meeting has opened doors for my business. I was able to meet and discuss with the Greenbelt manager and strike a deal with the company.  As a result I have been able to import 90 metric tons of fertilizer from Greenbelt which has increased my sales tremendously,” says Dinnah.

Consequently, she added, she has extended credit to four agro-dealers. Based on this additional stock, she expects her sales to increase by more than 50 percent to about 30 to 50 metric tons per month during the peak period.

When she started the business, Dinnah served about 3,000 farmers, a customer base that has doubled over the last 13 years. In 2016, with the new credit line from Greenbelt she expects to serve up to about 10,000 farmers. That’s nearly 70 percent growth in just one year.

“My customer base has definitely grown as a result of my meeting …  Previously I only served customers in the central region of Malawi but have now expanded to the northern region,” she said. And Dinnah wasn’t the only one to benefit from the annual meeting.

The ESAF annual meeting attracted 250 delegates and provided the perfect environment for linkages and deals to be made. For example, Scorpius, a private South African company with interests in various sectors, also attended the meeting and expressed an interest in distributing organic fertilizers in South Africa. Scorpius, which has been provided land by the South African government to conduct fertilizer trials, has a pending MOU with AFAP to help introduce new fertilizers to the South African market. AFAP linked Scorpius to Seattle-based company, Perfect Blend, a manufacturer and distributor of biotic fertilizers. In December 2015, Scorpius signed an agreement with Perfect Blend to arrange for the two companies to set up an Agrobiotics Fertilizer production plant in South Africa and deliver Perfect Blend organic and organic based fertilizer to the South African market.

The annual meeting titled ‘Taking fertilizer supply to scale’ and initiated in collaboration with the Alliance for Commodity Trade on East and Southern Africa (ACTESA) a specialized agency of the Common Market for East and Southern Africa (COMESA), attracted representatives from private fertilizer companies from all levels of the value chain: financial institutions, development partners, agro-dealers and farmers associations, along with policy and decision makers who are driving the regional fertilizer agenda.

Bringing together private fertilizer suppliers and agribusiness companies to facilitate agreements, ESAF is directly linking suppliers to smallholder farmers in the region via a growing network of hub-agro dealers, just like Dinnah and smaller agro dealers. While the face-to-face meetings are essential to the Trade Platform, ESAF is also working on other strategies to create trade linkages like a database, currently consisting of over 3,500 stakeholders from the fertilizer sector and qualified buyers. For individual buyers and agribusinesses like Dinnah’s, these are more than linkages, they are lifelines to the opportunities and the food security they’ve been looking for.