How to Succeed in Africa

"We can see that input suppliers are having to find local partners who provide technical support as opposed to straight supply and demand." --Karan Kapoor

“We can see that input suppliers are having to find local partners who provide technical support as opposed to straight supply and demand.” –Karan Kapoor

That Karan Kapoor, director of the Demeter Group, would become a leading trader in Africa comes as no surprise. His family thrived in the area, owning a cotton ginnery in Tanzania, where his father was vice chairman of the Tanzania Cotton Association for a number of years. The family still operates two coffee factories in Tanzania where they buy crops from small-scale farmers, then process and export. He began work as an actuarial analyst in the U.K., joining the Demeter Group in 2008 in its motor parts business.

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It took just a few visits to Tanzania to renew his interest in agriculture and he soon became involved in the company’s agro trading business. Through its Mukpar Tanzania Ltd. subsidiary (now closed), Demeter served as agents for Syngenta and YARA for 15 years, a relationship that continues today.

The struggle to find suppliers led Kapoor to push for a separate agro business team. In May 2013, Snow International began operations in Nanjing, China as a subsidiary of the Demeter Group, with operations in Tanzania, Ghana and Mozambique. In this interview, Kapoor shares his thoughts on doing business in Africa, serving the value chain and the growth of Detemer’s growing agriculture subsidiary Snow International.

 

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FCI: What motivated you to form Snow International as a separate agro business?
Dealing in the agro inputs business for several years, I always struggled to find suppliers who could offer a wide variety of products at affordable prices and also provide support. That was our goal when we founded Snow International. We invested in a team from the agro industry in China who had experience on registration support, sales and marketing, strong customer base and technical know-how on agrochemicals.

Formal operations began last May, with a fully-staffed office in Nanjing. We have invested in contracts with various major technical suppliers and formulators. We currently have operations in Tanzania, Ghana and Mozambique. In December, we also began trading in industrial chemicals to various mining sections primarily focusing on copper, as well as water treatment chemicals. This group runs independently from our agro group and acts as a support arm for our local African businesses. We are currently handling supplies to South Africa, Eastern Europe, Turkey, Australia and Nigeria, and we are focusing on expanding our base with contacts in Latin America.

FCI: Besides your family connection, why did you choose Tanzania to launch Snow International?
Tanzania was the initial stepping stone for the Demeter Group. Having worked closely with a large number of cooperatives and farmer groups, we knew their needs and were able to focus on growing our business. In cooperation with the Tanzania Gatsby Trust, we have launched a program to train lead farmers in the cotton, maize and horticultural sections on better agricultural practices. As a part of our commitment, we offer free delivery of inputs at affordable prices to the sectors. We are in the process of rolling out similar programs in four other African countries this year in the various agricultural sectors.

FCI: What is your view of the pace of input adoption in East Africa? What changes in the market do you expect going forward?
Inputs have been sold in East Africa for a while now, but the challenge is that inputs need to be used correctly. With development and education, that is starting to move forward. The private sector has to play an active role in educating farmers on the benefits of the right products and what the true costs are instead of depending on various schemes giving product out on a buy-back basis. Loan systems can work well if they take into account the full chemistry of what the crop needs, what pests might have developed resistance and ensure that training offered by those in the supply system are correctly carried out.

FCI: Is logistics a challenge to greater adoption?
There have been large changes to logistical procedures in Africa. Road networks in places have improved and local governments have worked hard to enhance clearance procedures at the ports. Inland transportation remains extremely expensive. If you are working with a landlocked country – for example Zambia or Zimbabwe – you definitely face challenges.

There are various ports to choose from, but depending on your choice, you must either compromise on waiting a month more or paying up to $4,500 extra per container. With the smaller ports on the East African coast being prohibitive for docking major vessels, feeder vessels are used, which take longer to reach their final destination after transshipment times.

Rail is not a feasible option for the agrochemical industry as most rail space is pre-booked and difficult to plan for. With weather patterns changing, one has to invest to ensure that goods arrive at the right time and are priced at an affordable level. This increases the cost of investment to distributors. The holding of inventory increases, and prices worldwide of various molecules fluctuate – in some cases weekly – such as seen in the trends of glyphosate and paraquat in 2013.

In the competitive environment we are working in, all factors to ensure cost, delivery, and other elements have to be critically analyzed before taking any commitments.

FCI:  Do you think perceptions of the African market are changing?
Yes. Thanks to the likes of Farm Chemicals International, the FCI Trade Summit and other international exhibits, healthy completion has been encouraged. Local distributors can now obtain high-quality products at affordable rates from reputable manufacturers. However, being on the ground we can see that input suppliers are also having to find local partners who provide technical support as opposed to straight supply and demand. The market is becoming more technical and developed. With the increased use of pesticides, the right chemistry has to be used to avoid resistance buildup from pests.

FCI: Can you talk more about your operations in Africa, and what is the goal behind your new office in Nairobi?
In 2013, Snow International formed subsidiaries in Ghana and Mozambique. We are fully operational in Mozambique, with the head office in Beira and a branch in Nampula. Snow Mozambique’s main focuses are on agricultural input trading and the supply of motor parts for heavy commercial vehicles. We are working closely with the cashew and cotton sectors in the country and our team has been active on the ground in promoting various farmer activities.

Our African agricultural operations are managed out of Kenya, simply due to the connectivity to other African regions that Nairobi offers. All logistics, field work and marketing campaigns are planned and executed through our Nairobi office with various members of our team in other African countries.

FCI: What are some of the main challenges you face in Africa and how do you address them?
One of the main challenges we face in Southern Africa with the inputs business is the training of farmers on the correct usage of pesticides and fertilizers. We appreciate the NGOs are taking a more active interest, but we encourage them to work more with local partners on the ground like the Gatsby Trust and AGRA – to work directly with the small-scale sectors which account for the majority of the farming market in Africa.

I believe that to start, you need to educate the end user on what he is buying, how to use what he buys, and offer the end user solutions on an integrated approach to farming, as opposed to focusing on only one aspect of the chain. In our programs we like to partner with various organizations where different groups bring expertise to the drawing board such as pesticide management, business training, logistics, specialists on various products, among others. We believe that only through education can you lead to the sector optimizing output as you give farmers the educated choice of what to grow.

The largest crops in the markets I work in are maize, cocoa, cashew, cotton, coffee and soya. Vegetables are also grown in many areas. The private sector is definitely pushing for input adoption and the right methods of using inputs. This is the way forward. I believe that inputs have their advantages; they just need to be used at the right time. There is no need to push farmers to use a product that will build resistance for the sake of a sale. In the long run you end up harming the business of the farmer as well as the input provider’s business. Certain sectors are growing fast – cotton, cashew, coffee, cocoa, maize, tobacco and rice. A number of large stakeholders for these crops are the export market, therefore, selecting the right inputs will be key.

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