"By Labour Comes Wealth". Nigerian Agribusinesses Flourish Amid Supply Chain Constraints

Nigeria’s Reelfruit announced on 23 September that it had raised USD3 million series A funding led by Lagos and Johannesburg- based Alitheia IDF[1] – an Africa-focused, gender lens private equity fund. Based in Lagos, Reelfruit is one of the pioneers of dried fruit snacks in the country with an all-female senior management team. Now, the firm is looking to increase output fivefold as it targets the US and others in the international market. As we mark Nigeria’s Independence Day today, in this piece we take a look at Reelfruit and three other firms which understand the sentiment of the Yoruba proverb that “by labour comes wealth”, as they innovate along Nigeria’s agricultural supply chain, in spite of constraints and economic headwinds.

Reelfruit

In 2017, the fruit snack firm won a grant from IDH Sustainable Trade initiative to set up a mango farm in northern Kaduna in order to boost supplies for its processing. There was barely any large-scale mango processing or production in the country at the time because the local market seemed to offer low returns, but Reelfruit saw untapped export potential. To illustrate, Nigeria earned only USD313,000 from mango exports in 2019 whereas neighbouring Ghana earned USD68 million in the same period.[2] Reelfruit says it now employs 50 women at its Kaduna farm and plans to create an extension scheme for 250 more mango and pineapple farmers. Further, it is preparing to acquire a new processing plant to expand its snack production – especially with the ambition of increasing its exports tenfold.

Founder and CEO, Affiong Williams, studied at the University of Witwatersrand, South Africa. Now in her thirties, Williams was a portfolio manager at Endeavour South Africa before she returned to Nigeria to establish Reelfruit in 2012.

Releaf

Established in 2017, Releaf says it has invented a machine that cracks oil palm nuts and processes them into cooking oil. The firm targets independent smallholders, mostly women, who grow the fruits and manually crush them using stones in order to extract the oil. This inefficient process means that the smallholders who account for around 80% of production do not get adequate compensation for their labour. It is also responsible for the country’s low output compared to its potential.

Thailand currently cultivates less farmland of palm oil than Nigeria but produces more than double the country’s annual output of 1.4 million metric tonnes.[3] Nigeria used to be the world’s leading producer, but political strife and Dutch disease (regarding crude oil) have reversed growth since the 1960s. The country now produces only 2% of global output and remains a net importer despite longstanding controls. For example, in 2016 the central bank included oil palm products among 41 items whose imports it declared ineligible for foreign exchange.

Presently, about 42% of Nigeria’s oil palm is grown in its Niger Delta region where Releaf is based. The firm wants to buy the nuts from farmers, process them and sell the oil to local manufacturers – but it must compete with heavyweights such as Okomu and Preston who own the two largest plantations in the country. Newly raised capital could boost the firm’s market prospects. Releaf announced this month that it had raised USD4 million in seed funding and grants with backers such as Japan-based Samurai Incubate and Future Africa – the latter cofounded by Iyinoluwa Aboyeji of Andela.

Releaf’s founders Ikenna Nzewi and Uzoma Ayogu studied at Yale University and Duke University in the US respectively. CEO Nzewi previously worked as an associate consultant at US management consultancy Bain & Company.

Tomato Jos

“Our mission is to create a middle class in northern Nigeria,” Mira Mehta says about her company Tomato Jos that opened a new tomato paste factory in northern Kaduna state in June this year. Ex-banker and aid worker Mehta founded the company in 2014 after seeing basketfuls of tomatoes rotting away on one road trip through the region. Nigeria is Africa’s largest tomato producer with around two million metric tonnes grown every year (mostly in the northwest). However, some 40% of that amount rots because there are few storage and processing facilities in the country.[4]

Local manufacturers Erisco and Dangote have unsuccessfully tried to solve this problem in order to meet the country’s hefty demand for tomato paste, which is used to cook many Nigerian dishes. Both manufacturers separately opened a tomato paste factory in the country around 2015, but Erico soon shut down because it could not get dollars to purchase and service its machinery. This occurred while the central bank tightened foreign exchange rules to minimize the impact of falling oil prices on currency devaluation. Dangote’s own plant remained open in the meantime, but it has continued to struggle because it cannot consistently find enough locally-grown tomatoes of the right quality.

Meanwhile, Tomato Jos has pursued a different approach. “The primary difference is that Tomato Jos spent five years focusing exclusively on farming (both commercial and smallholder farming) before investing in a factory,” says Mehta who went to Harvard Business School. The firm now has 500-hectares of farmland and one report says it has raised the average yield of its farmers from 5 to 22 metric tonnes per hectare.[5]

Tomato Jos has been backed by Goodwell Investments via Alitheia Capital and USAID among others. It closed a USD4.5 million Series A round led by Alitheia Capital in May 2020.

Pricepally

Nigeria’s food inflation has gone from 9% to 20% in the last seven years. Food prices have risen sharply due to currency depreciation, import restrictions and supply chain disruptions resulting from an increase in insecurity in the country. A couple, Mosunmola and Luther Lawoyin were among many Nigerians who worried about balancing the family budget under these circumstances. This was how they developed the idea for Pricepally and launched the startup in 2019.

Pricepally lets its customers pool their money to buy foodstuff in bulk so that they pay less. The firm tries to find the best bargains by buying directly from farming communities. Its customers then make orders online and have same delivered to them, so they also save time that would have been spent on trips to open markets. CEO Luther Lawoyin told us, “Our business is built for women – the mother, the caregiver who decides what the family eats and where to buy this food. 98% of our customers are women.” This reflects the cultural dynamic where most women have to juggle work and housekeeping. “On the supply side,” he said, “we also tend to buy from female farmers because our experience is, they’re better to work with and there is less stress when dealing with them.”

Pricepally announced pre-seed funding in April with financiers including Samurai Incubate and Launch Africa. CEO Lawoyin studied business administration at University of Lagos (Nigeria) while his cofounder Mosunmola studied computer science at the Federal University of Technology Akure (Nigeria).  

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*Photo by Markus Spiske on Unsplash

[1] Alithea IDF was formed in 2014 as a joint venture between Lagos- based Alithea Capital and South Africa’s IDF Capital.

[2] Fruit, edible; guavas, mangoes and mangosteens, fresh or dried exports by country in 2019. World Bank WITS.

[3] World Palm Oil Production (2021). US Department of Agriculture.

[4] Modernizing tomato production in Nigeria (March 2019). DW.

[5] Tomato Jos Farming and Processing Ltd., growing Nigeria’s tomato value chain (January 2021). Cross Boundary.