Playing chess with export business

One thing I have learnt about business, especially in this part of the world, is that it will take much longer than you expected.

About two years ago, I got excited about food export in Uganda. I have always had an itch for agriculture. Deep down, I believe among the first securities a country must guarantee is food security. You must be able to feed your people not just today but for a considerable time in the future.

With this passion in mind, a friend came around and shared a similar passion. He said: “Can we venture into this world of food export?” At that point we were totally clueless.

So we started talking to some people and looking for those already in this business. I remember some people telling me, “Those licenses are given by Salim Saleh.” That was the time when Saleh was shifting camp from Kasese to Gulu. I kept imagining that I had to make a trip to Gulu for a food export license.

Anyway, we decided to eat this elephant in chunks with this friend. The web information said one needed to belong to a horticulture association. We looked for one and paid for membership. After we paid, it just became hard to meet the chairperson to get more information on next steps.

Then we met someone who was an active exporter. They gave us an hour of their time and never opened their space to us again. I soon realised that some exporters were gatekeeping information. But that is a story for later.

With our membership, we called on Uganda Export Promotion Board (UEPB). They had certain requirements. Basically UEPB existed to assess one’s export readiness. So things such as your bank account balance. Initially they rejected us. So we had to raise some more money and build some credit worthiness.

Now UEPB gives you a letter that you then attach with other documents and submit to Ministry of Agriculture. This included getting an MOU with a packhouse already certified by the ministry, your list of farmers. Boom, we submitted and then got the email that we now had a temporary license to export. I must say, this whole process was corruption-free. I did not have to make the trip to Gulu.

As soon as we had the export license, it hit us that the real problem was getting the client. That is when I realised that some people existed just to sell clients. There were some online websites where we signed up and they link you to clients. I also realised that many people were no longer exporting, they had become consultants, you pay them to teach you the game of exporting. Things such as pricing.

Luckily we got our first client in UAE. At that point, I was now busy with my other job. So my partner was at it. It was avocado. Once we solved the client problem, it opened us to the new problem - supply and then quality. Most avocado comes from Fort Portal/Kabarole region. But you do not get all the avocado from one farmer, you have to aggregate.

Then you bring it to your pack house in Kampala, do the cleaning and sortation and then pack. In that moment, you have to schedule a flight. The thing is, you could book a flight and fail to aggregate the quantities. But avocados in that moment are also ripening. The way we harvest avocados in Uganda is just wrong. If you see how it is done in Mexico, the trees are short, but also the avocado never hits the ground. In Uganda, the trees are tall, and the avocados often hit the ground.

By the time Ugandan avocados arrive in Dubai or Sharjah, a good number have ripened. The client will usually offset that quantity from you. Imagine doing all that hard work just for avocado to arrive ripened.

The Middle East market was tricky, first it cannot fetch the right price. Secondly, a number of buyers are scammers. They will be loyal for the first five shipments then just disappear on the 6th shipment. There is always a new African exporter to supply.

At that point, I tell my friend that we need to speak unit economics. We need to know what it took to get a kilogramme of avocado to Middle East. From the cost at farm, the transport to pack house, the pack house labour, the water, the boxes, the freight cost etc.

So we had to make a hard call and say, this is not our product of choice at the moment. A month ago, I heard of a Ugandan that lost a whole container of avocado. The whole avocado supply chain in Uganda is currently screwed. You cannot think of a proper cold chain system. Even quality analysis.

At that point, we made a business decision to call off avocado. Then we picked on pineapples. We wanted to go into production of dried pineapples. Again, my partner tends to move faster (of course we knock more). As we were busy developing the pineapple farmer groups, we were also ordering a drier from China. We met the farmers and we now needed to convince them to dedicate some acreage to organic farming. We then onboarded a consultant to support us on organic certification. When we had paid him most of his money, he became elusive and abandoned us.

As we were on that journey, we decided that we would pursue the European market. Early this year, one of us left for Germany to attend two exhibitions. First was Fruit Logistica and BioFach. Fruit Logistica brings together more than 3,000 exhibitors. It is the largest expo for fruits and vegetables. It is sad, that Uganda did not have a single stall at the expo. So we kept wondering, are we really serious about export promotion?

And while there, my friend soon realises that we could not compete on most products, especially those that do well in greenhouse environments. It was here that the ginger insight hit. It is a product that was not taxing on cold chain requirements. Ginger can stay in the ground for over a year. And while at the expo, a relationship was striked with one of those German companies.

We went ahead and prepared, got the German counterparts to Uganda. We went through intense negotiations and arrived at an MOU with ginger being one of the products to kick-off. Now that meant going into the Ginger value chain. So we started those endless trips to Maya and Mpigi.

Usually you will find no more than six farmers that actually control every product in Uganda. There are those five to six farmers who grow 80% of the ginger in Uganda. And they are proud. Their pride is largely because they have made it with almost zero government support. They have had to learn the hard way, try with different chemicals. One of the farmers showed me their bleached body. They used a chemical that was disastrous. That chemical is banned on the world market but it was sitting on a shelf in a Ugandan chemical shop.

So it took us time to break into the circles of these farmers, to gain their acceptance and build a relationship. Here is the challenge with the European market, it is heavy on certifications. The more certifications you have, the better. But the thing is, most certifications last for only a year and they are for a specific product.

In that time, we start on a journey for getting a GAP certification for ginger. At this point, we have already been cash-strapped by the trip to Germany. Now we need to look for more than $3000 to handle the certification.

To really get just one farmer to the Global GAP standards is crazy. You are buying the PPEs, you are taking them through training, you have to facilitate the agronomist, you have to document their whole process. Now you can imagine, for two years, this business has done nothing but taken money from you. At that point, I also have Ortega Group that was now starting to take its share of the money.

Long story short, we finally get GAP certified for Ginger and it is now time to get a client. Then the first story you hear, the Chinese have flooded the European market. They can deliver a kilogramme of ginger at a cheaper price. Can you beat the Chinese? That is when you realise you have been playing Chess while the Chinese are playing 3D Go.

Now I partly understand why many Ugandans have been exporting for more than 10 years and they are still small players. They make just enough to exist. They just never scale. There is no qualititative change.

Personally, it has been a great learning experience, it confounds all theories you will acquire in a business school. There are many layers, many dependencies.

By the way, let us suppose we get a European client. There is also a working capital constraint. At some point this year, a sack of ginger went for as much as Shs600,000. At a bare minimum, you will need Shs300m in working capital to keep up. I remember visiting Uganda Development Bank. The only thing that worked well in that office was their free office coffee. Apparently, for them to fund you, you must put up enough collateral. We need something else, like a Uganda Investment Bank, which works as a venture capitalist of sorts.

In this kind of business, you must keep over 100 things intact and in sync at the same time. You sync financing, you sync supply, you sync logistics, you sync quality. Back and forth. But it is exciting.

Sometimes these days, I listen to government officials speak about agriculture in Uganda and just keep quiet. Have you ever seen a child speak about a topic?