Risk mitigation: Insights into Zimbabwean agriculture

Last week I spoke about participatory agriculture and how the time has come for people to have a say in how their food is grown. I also spoke about becoming a part of the agricultural value chain as investing in agriculture is the smart thing to do. One only has to look at a few key statistics to know that it is a profitable choice in the short, medium and long term. Did you know that:

  • Since 2009, investors in the USA, Europe, Middle East and Asia have been buying and leasing millions of hectares of African land for agricultural purposes.
  • Foreign Direct Investment in African agribusiness was $10 billion in 2010 and is projected to reach $45 billion by 2020? Agriculture is taking a huge leap in Africa and investors want a piece of the action too.
  • Africa’s agribusiness industry will be worth $1 trillion by 2030! That’s huge! If this projection by the United Nations comes true, agribusiness will become the ‘new oil’ in Africa!
  • The YouFarm Crowd Farming Platform allows you to become a part of this “gold rush” by creating the next generation of tech savvy, cellphone farmers who do not require land to be a part of the agricultural value chain.

We are our own worst enemies!

Humans have a tendency of letting themselves down. I would say that its a Zimbabwean thing, but I think all humans look for the path of least resistance. Zimbabwean farmers have a nasty reputation for side marketing. For those who do not know whats side marketing is, its when a farmer decides to sell their produce outside the contractual agreement, after being supplied with inputs to grow the crop. Zimbabwean farmers have also been known to sell inputs and there is a tendency to not use agricultural loans for their intended purposes.

Side marketing breaches any contract that a farmer may have with a company or individual that may have supplied inputs. I believe it is theft and as such the farmers should go to jail. Same goes for sale of inputs. Not only does the sale and misuse of inputs deprive the supplier of their return on investment, it results in reduced yields and profits. I can tell wild stories about the abuse of Command Agriculture inputs but thats not why I’m here. Another thing that Zimbabweans do very well is misuse business loans. An agricultural loan is a business loan. There is a tendency to want to pay bills, school fees and buy cars instead of using the money for what it was intended for.

Having said that, there is an interesting statistic that I came across while I was researching this phenomenon of side marketing and how to combat it. Commercial banks have a 95% loan recovery rate when it comes to agricultural loans that they issue themselves and a 50% loan recovery rate when Government is attached to the loan. This tells me that there is a perception that Government loans do not have to be paid back. Lets face it, you only have to survive for 5 years at the most before government forgives debts as an election promise. This tells me that given the right conditions farmers are willing to do the right thing.

YouFarm employs a range of strategies in order to prevent side marketing. These include working closely with the farmer and educating the farmers about the importance of cash flows and budgeting. To us, the farmer is an important member of our family and more importantly a partner. Where others see farmers as a means to an end we see them as the lifeblood and backbone of the YouFarm Crowd Farming Platform.

Agriculture is a science

Back in the day farmers used to plant seeds and pray for rain. But now we have so many ways to maximize yields. The use of agri chemicals, fertilizers and irrigation are the most commonly used methods. But there is so much more that can be done in order to mitigate the risks associated with agriculture and maximize yields and profits. YouFarm provides farmers with the latest farming technology and access to accurate weather data. One of our company goals is to transfer technology to Zimbabwean farmers. Imagine small-scale farmers having access to satellite technology, accurate weather data and mechanization. Add to that, our expert agronomists. This is a recipe for success and financial inclusion!

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Insurance

Crop insurance is a critical part of any farming project. Unfortunately in Zimbabwe we do not take it seriously enough. At YouFarm we make sure that all crops are insured. We do this to protect the investors money and because it makes good business sense. We insure against force majeur (pests, disease, fire etc) and political risk.

Change of culture

YouFarm has a variety of risk mitigation strategies in place in order to protect the investors money and maximize yields. Through extensive research we have gained some valuable insights as to why farmers behave in a certain way and what may tempt a person to side market. We aim to change the farmers mindset. As I said before, one of our core goals is to transfer technology to African farmers. We believe that any farmer can be successful if they have access to finance, guidance and technology. Next week I shall talk about agricultural finance and how it has held back new farmers in Zimbabwe.

Follow us on Facebook http://www.facebook.com/youfarmzw or on twitter @YouFarmZim. To register as a farmer or investor log onto the website http://www.youfarm.co.zw and fill out the registration forms.

 

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