The start-up exploits a “massive opportunity”

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Jerry Oche, co-founder and CEO of Zowasel

The weakening of Nigeria’s local currency and the shortage of US dollars in the country have prompted many food processors and other users of agricultural raw materials to source locally instead of importing them. One company well positioned to take advantage of this trend is Zowasel, a start-up that has built a digital marketplace connecting smallholder farmers directly to buyers.

Jacques Maritz spoke to Zowasel co-founders Jerry Oche (CEO) and Oghenekome Umuerri (CFO) about how they built the company and why running a digital product marketplace forced the company to settle in rural areas of Nigeria.

How did the idea for the business come about?

Oche: I grew up in a family of farmers. My mother, who passed away recently, was a small farmer. After college, where I studied economics, I started a career in advertising, and in 2011, I founded a digital advertising agency called Street Toolz.

Around 2015, I consulted organizations such as the World Bank, who asked us for data and research on agriculture in Nigeria. It made me think about my experience growing up in a farming community and how I should be one of the people solving the challenges of the sector.

While I was still working at the advertising agency, I appointed two people to help me with a commodity price comparison platform for farmers. When that didn’t work, we switched to a crowdfunding platform. Farmers could post their projects online and get crowdfunding from various people who would receive a return on their investment at harvest time.

However, the crowdfunding platform also failed and we had to move on to what we are doing now. We learned many lessons from this adventure: what works and what doesn’t, and we also met many farmers. We found that the biggest problem for them was market access; find a place to sell their products and make money from it.

Umuerri: The idea behind the crowdfunding platform was that after harvest, the sale of commodities would provide a return to investors. But Jerry discovered that the farmers had a problem in terms of sales. He realized that they needed to be guided through the process, including selling the merchandise. It made more sense to focus on connecting these smallholders with buyers.

Oche: This is how Zowasel was born, to provide market access to these smallholders. In 2017, I left my position as CEO of the advertising agency to focus 100% on Zowasel.

Building a market is difficult. You must have buyers and sellers on the platform from the start. How did you handle this?

Oche: We already had a network of farmers through the crowdfunding platform. On the buying side, I knew many big Nigerian companies through my work as an advertising agency. It was easy to knock on doors and tell them what we were doing. This created a soft landing for us to onboard both buyers and sellers.

What types of businesses are your top buyers?

Oche: We have a mix of multinational and Nigerian food processors as well as individuals. Some of the buyers produce for the Nigerian market while others export. For cereals, the majority of buyers produce products for the local market. Nigeria has over 200 million people, so there is a lot of local demand. Export crops include cocoa, sesame and soybeans.

Tell us about your value proposition to buyers.

Oche: Many large Nigerian companies import raw materials because it is difficult for them to source the right quantity and quality locally. We monitor the quality specifications of companies by teaching farmers to grow the right varieties and we train them in post-harvest handling. We aggregate these products from farmers in our network and deliver them to our buyers. We allow our buyers to focus on their core business of processing and manufacturing, while we take care of the raw material sourcing.

Zowasel eliminates middlemen from the raw material supply chain. There can easily be five or more intermediaries between the farmer and the buyer. This has created a situation where there is little price transparency. We provide our customers with daily information on the prices at which farmers are selling and how much buyers are willing to pay.

Umuerri: Traceability is currently a big topic. Because we work directly with farmers, we can provide buyers with accurate information on who exactly produced the produce, how it was produced, and the chemicals used. This contrasts with traditional intermediaries who aggregate products from various farmers. They are unable to identify the source or the environment in which they were grown.

If I was a food processor in Lagos and wanted to buy palm oil, for example, through the Zowasel platform, how would I do that?

Oche: Currently, there are two systems. Some companies and multinationals prefer to do it themselves. They visit our website, place the order and receive real-time updates until the products are delivered to their doorstep. Others prefer that our account managers do it for them. They would call an account manager or send an email, and our staff would handle the process for them.

Bagged goods ready for delivery to one of Zowasel's customers.

Bagged goods ready for delivery to one of Zowasel’s customers.

Explain how you source produce from farmers and what kind of support you provide to them.

Oche: We have 25 cultivation centers in rural areas across the country. From there, we provide free agronomic training and support to help farmers improve yields and the quality of their produce. We also help them sell on our platform. Additionally, we provide farmers with improved agricultural inputs, such as herbicides and pesticides, which are usually quite hard to find in remote areas of Nigeria. In some places we provide mechanization services.

We train them to grow crops with buyers in mind. For example, corn has several types of buyers: animal food producers, brewers, baby food manufacturers, and those who produce an edible community. Each requires a different quality of corn.

Grow centers act as points where farmers aggregate their produce and from where we deliver to our buyers.

In addition, we help with access to financing. Traditionally, banks had difficulty approving loans because these smallholder farmers live in remote areas and have no financial records. We work with Nigeria-based VBank and UK-based fintech SympliFi. We have production data from farmers selling through our platform, which helps banks identify who is creditworthy.

What about the delivery of the goods?

Oche: We have logistics partners. Once we receive an order, we hand it over to the logistics partners and they do the pickup and delivery.

It seems the company involves a lot of work with farmers instead of just connecting buyers and sellers.

Oche: Yes. In the beginning, we focused a lot on the online part. But we soon realized that we had to build the infrastructure offline in rural areas to make it work. It’s not a tech build scenario and just press play. You have to spend time with farmers to gain their trust. Our staff does not leave after the agricultural season; you have to be there all year round.

How does the business generate revenue?

Umuerri: We take a 1.5% commission from buyers and sellers; 3% on each transaction in total.

How was the company financed?

Umuerri: Jerry initially funded the business. However, over time we have received investment from companies like Promasidor, a Nigeria-based FMCG producer. We have also collected grants from organizations such as the German development agency GIZ and the Japan International Cooperation Agency.

We are still in our infancy and we are developing our infrastructure. We expect to break even within two to three years.

How many people currently work for the company?

Oche: We have over 20 full-time employees on our payroll as well as several part-time associates. We also have a team of over 100 freelancers who help us profile smallholders in the field.

And how did you manage to convince them to work at the start-up?

Oche: I believe that one of the reasons for our success is my ability to attract talent far smarter than me. The only way to do this is to define a vision of what we are trying to accomplish. People from the biggest multinational companies have joined our team because they believe in the vision and it is scalable. What we do isn’t something many people have done before, so we don’t hire for referrals, we hire for passion.

Umuerri: There is a problem in Nigeria’s agricultural space and everyone can see the problem. The opportunity is huge and clear; people are therefore eager to contribute to the solution, especially young people in Nigeria. Jerry’s dedication to work inspires others and that’s how we’ve been able to attract qualified people to work with us.

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