In one of West Africa’s most turbulent countries, HBS alumni entrepreneurs are harnessing the extraordinary power of subsistence farmers. Can they kick-start a green revolution?
Re: Mr. Bukola L. Masha (MBA 2006); Mrs. Ndidi O. Nwuneli (MBA 1999); Mr. Udemezuo O. Nwuneli (MBA 2003)
by Francis Storrs
Ibrahim Mustapha grows maize in Katsina Fulani, a village of mud-brick houses topped by rusted corrugated roofs in northern Nigeria.
Like millions of farmers in his country, Mustapha is a “smallholder”; he and his family grow their crop on a 1.1-hectare farm, a plot roughly the size of a rugby field. The 50-year-old has been farming this small-scale way all his life, and he’s been taken advantage of just about as long.
The Nigerian government, long considered one of the most corrupt on the African continent, had controlled the nation’s seed and fertilizer industries for decades. And even though Mustapha and his sons had earned a reputation as hard workers, there was only so much they could produce within a system that left farmers either chronically undersupplied or dealing with bags of fertilizer cut with sand to meet labeled weights. In a given year, Mustapha would be lucky to harvest 1.4 metric tons of maize—one-fifth the yield farmers in Brazil and China can expect. To match their production, he’d need to invest about $500 per hectare. But Mustapha earned only around $600 a year—and that was if the weather cooperated.
In 2012, the weather did not cooperate. That year was among the rainiest on record, flooding more than 2 million hectares in northern Nigeria. Yet that December, Mustapha harvested 4.6 metric tons of maize, about triple his annual average. After saving some for his family and selling the rest, he netted an unimaginable $1,350. “I have plenty of money in my pocket and healthy maize for my family to eat,” Mustapha said then. “My children are already looking healthier—I can barely lift my eight-year-old. He’s the fattest in the village.”
On a continent more likely to evoke save-the-children appeals than thoughts of agricultural innovation, Ibrahim Mustapha is at the vanguard of what could be a green revolution. He belongs to a new farming program called Babban Gona, the brainchild of Kola Masha (MBA 2006) that is aggressively transforming Nigerian subsistence farmers into commercial growers. By harnessing the largely untapped power of smallholders—increasing their yields, rebuilding supply chains, and opening access to economies of scale—Masha believes he is on the way to helping more than a million Nigerian farmers climb out of poverty.
Ibrahim Mustapha’s farm tripled its annual harvest last year with help from Kola Masha’s innovative franchise model.
It’s a revolution that can’t come soon enough for Nigeria. The country was once the breadbasket of West Africa until Royal Dutch Shell discovered vast oil reserves in 1958, and the agriculture sector began to wither from neglect. Now, nearly half of Nigerian children under five are undernourished, even as broken supply chains mean that up to a third of produce is wasted. The World Bank esimates that some 22 percent of the nation’s 175 million people are unemployed; half of 15- to 24-year-olds in urban areas can’t find work. Some are turning to terrorist groups such as Boko Haram, which at least promise something to eat.
Masha’s Babban Gona system turns subsistence farmers into commercial growers using a franchise model that provides everything from seeds to loans.
Meanwhile, the Nigerian population is exploding. “Over the next 20 years, we have to generate 80 million jobs,” Masha says. “That’s the population of Germany, the world’s fourth-largest economy.” But endemic corruption has scared off many foreign companies. “Nigeria is a nightmare country. Things just don’t seem to work well there,” says Nancy Barry (MBA 1975), founder and president of Enterprise Solutions to Poverty, which mobilizes and supports leading companies and entrepreneurs in building profitable and inclusive businesses that incorporate millions of low-income people. “The biggest problem is not just infrastructure, it’s government and corruption and trying to get rules that people abide by,” adds Ray Goldberg, the George M. Moffett Professor of Agriculture and Business, Emeritus, at Harvard Business School, who conducts research in West Africa. “Because Nigeria itself has been such a frequent violator of so many of these things, people look on it as the most difficult country to change.”
And yet, a shift appears under way. A new reformist government has started treating agriculture as a problem to be solved by industry rather than by aid. Private companies are springing up throughout the food chain, from factories that produce fertilizer, to investors like Masha working directly with farmers, to retail-focused suppliers rebuilding local appetite for food grown in their country.
Universal among these agribusiness entrepreneurs is a core belief: The answer to feeding Nigeria—and once that’s accomplished, perhaps helping to feed the world—lies in finding ways to transform subsistence farmers into entrepreneurs. The global population is hurtling toward 9 billion by 2050, according to the World Bank, and feeding all those people will require a 70 percent increase in agricultural productivity. The existing system of multinational megafarms won’t be enough—the hope for the future lies not in mass production, but in production by the masses.
And that’s where Nigeria comes in. With only 40 percent of its arable land currently used by farmers, a more-than-ample water supply, and an exploding youth population that promises a vast supply of labor, there is potential unrivaled almost anywhere else in the world. “The whole country seems to be waking up to the fact that they have more natural resources than many other countries and more opportunities than ever in their history,” Goldberg says. “They are ripe for enormous revolution.”
In addition to chili peppers, Mustapha’s farm grows onions, tomatoes, maize, and sugarcane.
To witness the limits of government intervention, Nigerians once needed to look no further than the state-owned National Fertilizer Company of Nigeria (NAFCON). According to federal estimates, only 11 percent of its subsidized fertilizer reached poor farmers; middlemen skimmed off much of the rest, often to sell to big farmers with deep pockets. The NAFCON factory closed in 1999 and fell into disrepair. It stayed that way until 2005, when Onajite Okoloko (OPM 37, 2008) and a team of investors bought the shuttered plant and got it up and running again. Adopting a local word for “genesis,” Okoloko would call his new company Notore Chemical Industries Ltd.
Looking for professional managers two years later, Okoloko contacted Kola Masha, whom he’d met through a mutual friend. Masha had just graduated from HBS and was working at a medical-device company in Massachusetts. Okoloko’s call came at the right time. Professionally, Masha was eager to join a start-up; personally, he’d resolved to move closer to his aging parents in Nigeria. At the end of the two-hour phone call, Masha knew he would be returning home.
Ndidi and Mezuo Nwuneli
Cofounders, AACE Food Processing & Distribution Ltd.
In a country where 90 percent of processed food comes from imported ingredients, AACE sources its spices from local growers, reducing costs to consumers while supporting regional farming communities.
In 2007, the two businessmen worked with a group of Nigerian banks to complete the consolidation of a $222 million loan—the largest in Nigeria’s history—to rehabilitate the Notore plant. In 2009, a decade after NAFCON went dark, Okoloko brought it back online. “The African Green Revolution has indeed begun,” he said at the launch.
From the beginning, Notore focused on Nigeria’s smallholder farmers, who use about a tenth of the fertilizer of their peers elsewhere. Because farmers making a dollar or two a day couldn’t afford the standard 50-kilogram bags, Notore started packaging the fertilizer in 1- and 10-kilogram sizes, and reinforced the stitching to prevent middlemen from breaking into them. To reach farmers outside the trading areas, Notore trained more than a thousand “Village Promoters,” who sold fertilizer and used demonstration plots to establish its efficacy. Most important of all, they showed farmers that Notore and its products could be trusted.
Earning confidence among trading partners is a slow but essential enterprise in professionalizing agriculture, especially in a country like Nigeria where small farmers have historically had so little to depend on. “How do you go from a state of corruption to an orderly market?” says David E. Bell, successor to Ray Goldberg as the Moffett Professor of Agriculture and Business. “I think it has to start with you and me trusting each other. Then we find someone else we can trust, and they find others. Eventually there’s an alternative economy of people who trust each other.” The Village Promoter program, spearheaded by Masha, grew this way, eventually reaching about 58,000 small farmers. Overall, Notore’s products and activities have impacted the lives of more than 14 million farming families and counting.
The six months Masha spent traveling the countryside to set up the Village Promoter program helped him see the scale of the challenges facing Nigerian farmers. The biggest problem wasn’t the labor force—he’d never seen anyone work harder—it was a fragmented support system that no one could seem to fix. “The problems facing Nigeria and West Africa are too great for the public sector or traditional NGOs to solve,” says Masha. “The private sector can make a much more concerted, long-term effort to address these issues while simultaneously doing what it does every day, which is make money.”
Mustapha breaks for lunch near his home.
After leaving Notore in 2010 to set up his own investment group, Doreo Partners, Masha spent a short stint as chief of staff for Nigeria’s agriculture minister, Akinwumi Adesina, helping develop a deregulation and investment program, the Agricultural Transformation Agenda, that seeks to create 3.5 million agriculture jobs and add 20 million metric tons of produce to the domestic food supply by 2015. (Adesina says they’re already more than halfway to those goals.) In an innovative initiative developed at Notore, and now being studied by Brazil and India, the government has begun delivering subsidy vouchers electronically to more than 10 million farmers, a measure that has increased the amount of fertilizer that makes it to smallholders from 11 percent to 94 percent.
Masha returned to Doreo in late 2011, now able to launch the end-to-end investment he had imagined. He calls Babban Gona—which means “great farm” in the Hausa language of northern Nigeria—an agricultural franchise model, and it works much like a fast-food franchise: Babban Gona trains farmers-franchisees and offers them loans, then delivers seed and fertilizer directly to the farms on credit; district managers track production and dispense advice throughout the season. At harvest, Babban Gona provides transportation and support, including access to tractors that can do in one hour what would take a farmer 10 days to do by hand, and even the sacks, the needle, and the thread to package the maize. Masha’s company warehouses the grain at the end of the process, commoditizes it, and sells it to food conglomerates like Nestlé, which uses it to make baby food and breakfast cereal sold in Nigeria and abroad. Babban Gona then pays the farmers via a quarterly dividend payment. The system won the first annualHBS Association of Nigeria New Venture Competition for the West Africa region last year.
Workers at a Nestlé distribution center in Lagos unload maize produced by one of Kola Masha’s Babban Gona farms.
But improving farming conditions also required some upfront capital, and because many smallholders don’t have clear title to their land—and therefore no collateral—banks are loath to lend them the funds they need. To unlock financing for his initiative, Masha turned to his friend Ladi Balogun (MBA 2000), CEO and group managing director of Nigeria’s First City Monument Bank, which loans against measures like warehouse receipts. At the height of the growing season, First City has 9 percent of its $2.7 billion loan book invested in agriculture, compared to a national bank average of 3 percent. “There are millions of farmers that [still] need credit at affordable rates,” Balogun says, adding that his bank expects lending to increase 21 percent a year for the next three years.
Here’s what all of that looks like in practice: With a $500 input loan, 22-year-old Jamila Josua was able to afford much higher-quality materials for her 1.6-acre farm in the village of Nakala. And just as McDonald’s trucks raw food to its franchisees from a distribution center, Babban Gona delivered those inputs directly to Josua’s door, including 3 bags of improved seed, 14 bags of fertilizer (much of it from Notore), and 10 liters of herbicide. Because she is one of hundreds of Babban Gona farmers, and the system leverages economies of scale, all of these things come much cheaper.
To help protect Babban Gona’s investment, a district manager visits Josua’s farm and others in her immediate network, or Trust Group, twice a month (once announced, once not). That person, trained in agronomy and business, dispenses advice on everything from best practices to business ethics, while keeping track of growth rates and other performance measures with a smartphone app. This process also de-risks the loans in the eyes of banks. When the Nigerian government ran a loan program in the 1990s, the partial default rate reached as high as 73 percent. By comparison, 99.5 percent of the loans to Babban Gona farmers were repaid last season.
“Through this whole system, we’ve been able to demonstrate that we can get farmers a loan 50 percent cheaper than they can get themselves, and inputs that are 19 percent cheaper,” says Masha. “We get them the knowledge to increase their yields up to three times the national average, and sell their produce for about 37 percent higher than what they can get themselves.”
When Masha takes a moment to think back on what he’s accomplished so far, his mind turns to his family’s own history. His American mother was raised on a farm in South Dakota. Her father was poor, like most farmers in his community, but by the 1950s his fortunes had been reversed by working with a farming collective. “He had a larger farm, a tractor,” Masha says. “He made enough money to send my mom to college.”
Babban Gona farmers are beginning to experience similar benefits. Some have been able to buy cars and put new roofs on their homes; one is preparing to buy a tractor for his fellow members to share, another is sending his children to private school. The program is helping a farmer with 2 hectares secure financing to expand to 14—enough to earn him $10,000 a year. “It’s been wonderful to see,” Masha says.
As Nigeria struggles to crack the problem of feeding itself, boosting production is only half of the solution—the other half is convincing skeptical Nigerian consumers to eat what its farmers grow.
A couple of summers ago, Ndidi Okonkwo Nwuneli (MBA 1999) saw this dilemma firsthand when she stopped by a small restaurant outside Lagos in southwest Nigeria, not far from the home she shares with her husband, Mezuo Nwuneli (MBA 2003). It was a neighborhood place, and she wanted to know where the chef got ingredients such as produce and chicken. It turned out that they were bought at a nearby market, but actually originated from abroad.
Decades of corruption and haphazard regulations have conditioned consumers to see local food as overpriced and inferior, which it often is. (It’s also sometimes dangerous: An estimated 20,000 people died in 2008 from eating produce treated with poisonous chemicals.) As a result, 90 percent of processed food in Nigerian restaurants and supermarkets comes from ingredients grown somewhere else.
Ndidi and Mezuo Nwuneli
Their investment firm is transforming the landscape by supporting small- and medium-sized agricultural enterprises.
Photo by Allison Shelley/Getty
“Changing mindsets among the local populace that ‘Made in Nigeria’ products, especially food, are high quality and suitable for consumption has proved difficult,” says Ndidi. To change people’s minds, she and Mezuo have decided to change the marketplace.
In 2009, the couple launched a start-up agribusiness called AACE Food Processing & Distribution Ltd., which buys bulk spices and other ingredients, then processes and packages them to sell to local customers. “Our vision,” they say, “is to be the preferred provider of food for West Africans.”
Ndidi and Mezuo, both children of university professors, approach the ambitious challenge with a combination of academic rigor and devotion to social justice. At HBS, Ndidi did a field study project with the Center for Women & Enterprise, founded by Andrea Silbert (MBA 1991/MPA 1992)—an experience Ndidi says directly inspired her pre-AACE work launching several Nigerian nonprofits devoted to social entrepreneurship. During his time at HBS, Mezuo served as co-president of the Africa Business Club and worked with the admissions office to develop and implement new strategies for attracting more students from the continent. Both always knew they would ultimately return to their home country to try to address hunger and build Nigerian enterprises.
The couple is using their investment firm, Sahel Capital, to attack the problem in two different ways. The first is through AACE. The second is by managing the new $100 million Fund for Agricultural Financing in Nigeria, a partnership between Adesina’s Federal Ministry of Agriculture and Rural Development and Germany’s KfW development bank. Starting this year, the fund will make investments in small- and medium-sized agricultural enterprises that hold great promise. “We have always been driven to transform the landscapes in which we have worked,” says Mezuo. In Nigeria today, “there are tremendous opportunities to transform the landscape by supporting smallholder farmers and providing growth capital to agribusiness-focused entrepreneurs.”
When the Nwunelis started AACE, they experimented by sourcing their spices from local markets, similar to the one used by the restaurant Ndidi visited. But they soon ran into the same problems faced by other food companies: inconsistent supplies, opaque pricing structures, and mixed quality. But instead of turning to outside suppliers, they turned inward, building relationships directly with smallholder farmers and farmer collectives.
Like Masha and Okoloko of Notore, the Nwunelis believe in the benefit of working to build shared value over the long term. AACE provides groups like the Jaba Ginger Farmers Cooperative Society—which is made up of 3,000 smallholders, more than half of them women—with a trustworthy customer. In return, by sourcing ginger and chili pepper locally, AACE has been able to reduce purchasing costs of the spices by as much as 30 percent, savings it passes on to consumers.
The Seeds of Agribusiness
In the 1950s, agricultural economics professor Ray Goldberg went to his dean at Harvard Business School to pitch a new kind of conference. For the first time, it would bring together players from all parts of the supply chain—subsistence farmers to multinational conglomerates, seed sellers to supermarket buyers—to share insights and piece together a perspective on the global food system. The resulting executive Agribusiness Seminar, which held its 54th installment in January, now brings to HBS each year more than 200 leaders from places like the Department of Agriculture, the World Bank, Monsanto, ConAgra, and Walmart. They come, Goldberg says, because “this is the only place where these groups can talk to each other.”
Another reason people travel from around the world, though Goldberg is too modest to say so, is to learn from a giant of their industry. Goldberg, together with his late HBS colleagueJohn H. Davis, codeveloped the field of agribusiness, teaching the first course on the subject in 1955. At the time, agricultural businesses tended to focus narrowly on their particular jobs, but the professors argued that agricultural was a social, economic and political enterprise, and studying the entire system would lead to better decisions. This magazine named the publication of their 1957 textbook, A Concept of Agribusiness, one of the 20 most-influential milestones in HBS history, and today there are more than 100 agribusiness programs offered at colleges and universities around the world.
Considered HBS’s most prolific professor, Goldberg is the author, coauthor, or editor of 23 books, more than 100 articles, and more than 1,000 cases. He has taught nearly 20,000 students MBA students and Executive Education participants. One of his doctoral students, Michael Halse (MBA 1957, DBA 1979), helped lead the White Revolution in India in the 1970s and ’80s, replacing an inept state-run dairy system with a farmer’s cooperative now called Amul, one of the world’s largest producers of milk.
These days, Goldberg has witnessed a resurgence of interest in agricultural entrepreneurship at HBS and elsewhere. “The students have rediscovered food, agriculture, and economic development as something exciting,” he says. They’ve seen that agribusiness doesn’t have to be entirely adversarial, but that buyers and sellers along the food chain can benefit from cooperation based on trust. “The world has finally, finally got it,” the 87-year-old Goldberg says. “I’m just glad I was here to see it.”
The Nwunelis’ system is tapping into a change to the Nigerian consumer base: The middle class of Africa’s most populous nation has been growing quickly, now accounting for 23 percent of the population, according to the African Development Bank. “There has to be a big middle class” to support this kind of retail effort, says HBS professor David Bell. “If you have a society where there are only rich people and poor people, the rich people can afford to simply eat imported food, while the lower class lives off the farm.”
Tracking the rise of the middle class, AACE started small but has grown quickly. In 2010, its first year up and running, the company sold 6 tons of product, and then more than quadrupled sales the following year. In 2012, a year the company invested in a dedicated processing facility, it sold more than 70 tons, and were on track to source 100 tons from smallholders in 2013. In the future, the systems the Nwunelis are putting into place can be adapted to all sorts of nutritious foods—AACE has added soybeans, maize, and sorghum to its product line—but spices have proven to be an effective proof of concept. It now sells products to customers in 6 of Nigeria’s 36 states, including noodle companies, fast-food chains, and more than 30 supermarkets. AACE expects to directly employ 65 people within the next five years, and buy food from 1,000 farmers within the next three.
By systematizing new agricultural pathways that lead all the way to consumers, the Nwunelis hope that AACE will show that outside companies can succeed in Nigeria. Private industry seems to be redoubling efforts to invest in the country, after writing it off as impossible for some time. Cargill, for example, is working with smallholder farmers and investing in a plant to produce sweeteners from cassava, another important crop in the country. In 2012, SABMiller opened a $100 million brewery, its fourth facility in the country. Africa’s richest man, Nigerian-born Aliko Dangote, is putting some $80 million into processing factories for fruit and tomatoes, two crops Nigeria produces in abundance yet spends hundreds of millions of dollars a year importing.
If Nigeria hopes to regain its ability to one day become a major exporter, its success will depend on testing its supply chains on the local market. That’s how agricultural economies work out the kinks that accompany building up large-scale capacity. “If you look at the economies that have really become agricultural powerhouses, they built that global capacity off of a large internal market,” says Masha. “That’s how Brazil did it, that’s how Thailand did it, that’s how the US did it. They were all able to leverage their large internal markets to become major exporters.”
It’s about 7:30 in the evening in Nigeria, and Kola Masha sounds exhausted. Harvest is shifting into high gear, and he was working until 3:30 that morning, helping Babban Gona farmers stack 100-kilogram sacks of maize in a warehouse. Doreo Partners is still very much a hands-on company, even for its managing director. It’s the second week of November, and a tractor-trailer full of maize is arriving every day from about 50 farms within a 20-mile radius. The same thing is happening at Doreo’s six other warehouses, and it will continue that way deep into December. Being tired is a good problem to have.
Today, Masha has some particularly good news. As he tallies sacks of maize, he’s seeing yields of up to 6.8 metric tons per hectare, which is about five times the national average and eight times the average in this part of the country. It’s not yet time to harvest the farm of Ibrahim Mustapha—that smallholder with the chubby eight-year-old—but a yield assessment conducted earlier in the season showed he’ll easily exceed 6 tons, which will break last season’s record by 30 percent.
In the old way of doing things, Masha and his farmers would be in a simple trading relationship. He would look to get the lowest price from them, while they looked to get the highest price from him—someone wins and someone loses. But farming can’t operate that way these days in Africa, says Nancy Barry, former president of Women’s World Banking, an organization that has extended microfinancing to more than 20 million low-income entrepreneurs. “In agribusiness,” she says, “you have to create win-wins, or it’s not going to work.” With Babban Gona, Masha believes he has created just that, working with the farmers as partners to bring up yields and increase his supply to customers.
This is something that Masha’s biggest customer, Nestlé, has long understood. “In order to get milk locally for its products, Nestlé realized it had to be the one to train the farmers in production, in making sure the milk was safe, in how to manage the business,” says Bell. “Nestlé benefited and the farmer benefited.” Like Cargill, SABMiller, and other multinational firms, Nestlé—which now works with nearly a million smallholder farmers across West Africa—realizes that the future of meeting the globe’s skyrocketing food needs lies in cooperation and a new model of agriculture. “As more and more companies figure out that this is the new capitalism,” says Barry, “they’ll make the private sector exceedingly well-positioned to make a difference.”
But until those forward-thinking multinational giants are the rule rather than the exception, agriculture will need designs like Kola Masha’s—ideas that help Ibrahim Mustapha feed his family of six and along the way, potentially pioneer a way to help feed millions.