Is Your Project Profitable?

[Michael Blondino]

In the world of rural economic development one of the most common mistakes is executing a program without accountability to the truest measure of sustainability - participant and program profit. Just about everyone in business in the developing world can provide an important opportunity to their community but only if the opportunity is sustainable. It's all too common in economic development work that what began with good intentions fails because of business fundamentals, rather than philanthropy. Sustainability of development is tied to the program's intrinsic profitability.

A few years back, we had the opportunity to compete with a prominent national for private funding in his home country. Now while it may seem on the surface that we were potentially putting someone out of business, the fact is that the gentleman would have put himself out of business after wasting several hundred thousand dollars. His intention was to get the government of his country to get behind an agricultural processing program. We pointed out that the people from which he sought local support profited by the failure of the industry. How? By skimming relief money from international donors. His response was sadly too common, "I know these people. I'll go to their house and tell them how important this is." Look, people who profit from something are not motivated to change.

His tactic was to bolster donor/funder support for an idea that hadn't been researched properly. What he needed more than anything was to know his product from farm to retail, to know complete production data and what were the most likely causes of failure to his venture. Moreover, he didn't know product's price points or how the product migrated along the value chain. He hadn't done any research on what the market would set as a conservative basis for his forecasting.

I have to say that getting reliable numbers in an undeveloped enterprise effort is challenging beyond words. In our field of cashew production, it was virtually impossible to know how fast training would occur, the split to whole nut ratios for the workforce, the correct and fair wage of each workers place in the production or reasonable expectations for quality of production. At the beginning we faced the same temptation to focus on product marketing rather than production at first. Over the first two years of our venture, we found that all of our marketing research while important didn't mean anything because we couldn't produce white kernel cashews at a competitive price. In fact, no one could; a fact demonstrated in no less than five large scale processing businesses failure and closure. Millions of dollars in investment capital were wasted by amazingly skilled investors because they didn't bring diligence to their decision in the fundamental component of sustainability - profit.

As we assessed the reality of our production problem we came to a shocking conclusion our project couldn't work. You can't imagine the horror I felt as our dream of working in arguably one of the poorest countries in the world came to a crashing thud. So, as all entrepreneurs do, we asked if there were any other ways to make the project profitable. We decided that there was only one possibility, marketing to retail. Not only did this dramatically increase the cost of capital improvements from about $50,000 to $450,000, but it required a much more rigorous focus on business training rather than merely processing skills. The profitability became a self-selling feature of our work.

Virtually every venture in every part of the world has partners or mentors that make the work sustainable. Someone said that sustainability means the beneficiaries of a program must continue it on their own. I couldn't disagree more. I'm not sure if it is an anti-colonial mindset or lack of long-term willingness to commit that has created this utter misread of development work. There is nothing wrong with an organization having an influence in a rural community for decades. In my opinion, there is something wrong when they don't. The real measure of their value is the impact they have on the betterment of the community and the individual households they work with. Long term business partnerships provide stability and presence to a fledgling start-up.

If you're in Africa wanting to create a business then do your research well. Production costs aren't interesting unless you plan to succeed. If you can't employ someone at a fair wage and still compete in your target market then figure out why. Is it their speed, their currency's value, or the quality of their work? You have to ask what can be done to tighten cost without sacrificing your worker's well-being. Some business ventures are stories of miraculous profitability and brilliant ideas, but most businesses are slow, methodical efforts of design and redesign working their way into a solid model for success.

If you're hoping that the UN family of organizations or the World Bank will be your answer to funding then you might as well pack up and go back to the bush. My experience is that the people in those organizations who want to help can't, and the people who can have pet programs and projects they are already committed to fund. In that sector it is all about who you know not the quality of your program. So, don't be discouraged, just work your business plan and you'll find money. After all it isn't government that fights poverty it's business.

You're feedback and stories are welcome.

[Wilson Wizalamu]

Dear Michael,

I am very glad to have this wonderful opportunity to network with a person of your calibre and experience as a friend. I am an accountant by profession. I graduated from the University of Zimbabwe with a Bachelor of Accountancy (Honours) degree in 1997. I am also pursuing a CIMA qualification at magerial level. At the same time I have just finished my MBA dessertation entitled "THE BOTTOM OF THE ECONOMIC PYRAMID BUSINESS MODEL AT CFX BANK LIMITED: BANKING THE BANKABLE CLIENTELLE THAT IS UNBANKED." I have worked for dynamic Zimbabwean Financial Institutions for an accumulated period of over 12 years. Unfortunately working is not rewarding in crises torn Zimbabwe hence my interest and motivation to move into business and fight poverty which is endemic here. Many colleagues are leaving the country in drives and droves in what has been characterised by some as a skills haemorrage or devastating brain drain.

My social entrepreneurial project has already been incorporated as PLEASANT MEADOWS (SSC) FARM. The SSC in parenthesis stands for "Small Scale Commercial". It is a RURAL enterprise 100km from the capital city Harare.

The followingis an extract from my FIVE YEAR DEVELOPMENT PROGRAMME

A. EXECUTIVE SUMMARY
a) Business Overview

i) VISION:

To become an ACCOMPLISHED SOCIAL AGRO-ENTREPRENEUR in ward 19 of Seke District specialising in RURAL, small-scale, on-farm and off-farm enterprises.

ii) NATURE OF FARMING DEVELOPMENT:

The envisaged enterprise is a small-scale intensive farm investment project to trade as Pleasant Meadows (SSC) Farm specializing in the following:

1. Horticulture on irrigated 5ha,
2. Dry land farming on 35ha,
3. Livestock breeding on 20ha
3.1. Cattle Breeding
3.2. Poultry
3.3. Goats breeding
3.4. Rabitry
4. Other Enterprises
4.1. Farmstead Agro-industries (Adding value to farm produce)
4.1.1. Peanut Butter processing
4.1.2. Sunflower oil extraction
4.1.3. Honey extraction, Honey products, candle wax extraction and candle
manufacturing
4.1.4. Sweet potato flour manufacturing
4.2. Animal traction (Draught Power) & Conservative tillage services
4.3. Bee Keeping & Honey production
4.4. General Agro-dealership
4.4.1. Hardware and farm inputs dealership
4.5. Farm Logistics (Transport-the planning and control of the flow
of goods and materials –inbound/out bound throughout the farming domain)
4.6. Masvingo~Harare Roadside Fresh Farm Produce Market
4.7. Construction Company
4.7.1. Brick moulding
4.7.2. Metal work – window frames and doorframes etc.
4.8. Fashions and Fabrics
4.8.1. Personalised tailoring
4.8.2. School Uniforms, Overalls and work-suits

All value added products from our processes shall be uniquely branded as
Pleasant Meadows Products.

b) Mission Statement

To pioneer rural social agro-entrepreneurial innovation that will re-invigorate marginalised OLD RESETTLEMENT SCHEMES in ward 19 of Seke District by meaningfully contributing to the economy of Zimbabwe as a self sufficient farmer earning a high quality rural farm lifestyle for my family, ultimately guaranteeing the country food security, and eventually creating much needed rural employment as well as contributing to foreign currency generation through value added farm exports.

c) Goals and objectives

 To take calculated steps to ensure that the four broad key result areas of the envisaged nature of farm development are realized within the first five years 2006-2011
 To run effectively and efficiently with annual farming seasons by securing the necessary working capital requirements for inputs and labour that will put me on a pedestal to great achievements in response to calls by the government to improve agricultural productivity for food security and thus the welfare of the farmer.
 To establish a 5ha portable irrigation scheme and consolidate my horticultural enterprise that would mitigate effects of drought should the season turn bad.
 To put up a boundary fence and demarcate paddocks from arable land.
 To buy a full complement of animal drawn implements for personal conservative tillage services and hire
 To establish and formalize a bee keeping project for honey production
 To ensure that infrastructure to facilitate efficient and effective running of farm is in place in order to guarantee intensive farming.
 To make profit and reinvest in growth of the enterprise.
 To be highly productive in order to remain financially solvent growing the enterprise from own resources.
 To meaningfully participate in the economic growth and development of Zimbabwe creating employment.
 To focus on customer satisfaction and community building.

e) Essential Values & Principles

 Commitment to farming with respect for the constraints of ecological systems
 Commitment to place—the farm is not a moveable unit of production, but a neighborhood presence
 Decisions are made with knowledge of their ecological impact
 Farm systems that respect the requirements of nature, farm family needs, and personal values and goals
 Farming goals that address the community, the environment, education and quality of life as well as profit
 Commitment to farming as a way of life, not simply a means of making a living
 Commitment to sustainability, the regeneration of rural and farming communities, and the value of genetic diversity
 Respect for the ethological needs of all livestock (i.e. “the five freedoms”: freedom to stretch all limbs; freedom to groom; freedom to turn around; freedom to access adequate ventilation, light, food and water; and freedom to access company of like kind)
 Love and respect for nature and the soil
 Love and respect for hard work
 Concern for social justice and social and ecological responsibility
 Reverence for all life—human, animal and vegetable
 Humility about the place of human beings in the scheme of nature
 Dedication to recycling, and to conserving and improving the quality of air, water and soil







B. FARM OVERVIEW
a) Ownership Summary:

Mara Farm - Self contained farm unit number 11 held under a 5 year lease with an option to purchase if minimum farm developments are met by the lessee - Mr. Wilson Wizalamu

b) Farm Background:

MARA OF PARONGE RESETTLEMENT SCHEME belongs to the Old Resettlement Schemes that preceded the recent A1 or A2 models of the Fast Track land reform. The farm has 36 self-contained units ranging from 38ha to 65ha. My plot is 60ha big and could qualify as A2 basing on size though administratively we fall under A1 under the jurisdiction of Seke District Administrator and I classify myself as SMALL SCALE COMMERCIAL FARMER.

c) Location:

The farm is located in Beatrice, which is in Seke District of Mashonaland East Province. The farm is 88km away from Harare (76km along Masvingo road and left 9km into the well maintained Westminster (dust) road up to Ringa, then left 3km to Mara farm). The plot is located in Natural Region IIa that is suitable for intensive farming and receives annual rainfall ranging from 750-1000mm per annum.

d) The management Team:

1. Farm Director: Wilson Wizalamu. B.Acc. (Hons) UZ. Certificate in Entrepreneurial Development UZ. I plan to stay on the farm and drive to Harare where I am currently employed as Financial Accountant. If the project flies as per this blueprint I plan to leave employment and work fulltime on the farm within six months.

2. Farm Supervisor: Shadreck Ntsabora (Over 30 years experience as farm worker and gardener) Assisted by AREX Officials.

e) Business Concept:

1. Best methods of sustainable agriculture are envisioned where conventional methods and organic methods will be blended as in permaculture.
2. Conventional farming utilizes synthetic pesticides and fertilizers depending on mechanization for most farm practices.
3. Organic farming integrates farming practices, utilizes organic pest controls and fertilizers, and relies on labour and low levels of mechanization for most farm practices.
4. Cognisance is taken of the fact that the choice of farming method will affect the costs associated with establishing and operating the farm, the amount of income from products grown and how and where the products will be marketed.

f) Market Summary:
The following options are available for the enterprise: -


1. Wholesale market
2. GMB &/ Contract farming
3. Westminster road Roadside Market
4. Subscription farming
5. Restaurants and public institutions
6. World Wide Web
7. Direct Marketing
8. Value adding opportunities
9. High quality farm product mix


See also Section K: Marketing Plan

g) Opportunities:

1. The market is grossly undersupplied with farm products. Food stuffs are being imported from neighbouring countries.
2. Government policy supports the rise of agric-entrepreneurs who will put the country of on a sure path to recovery
3. The niche to meaningfully contribute to Zimbabwe’s predisposition to regain “the breadbasket of Africa status”
4. Farm industrialization to add-value to farm products
5. High yielding borehole with potential to facilitate irrigation for horticulture
6. Natural region IIa that is suitable for intensive farming.

h) Competition

8 villages surround Mara Farm with villagers holding 12-acre fields each. The villagers are contended with wholesale subsistence farming with little or no commercial farming and poses no threat to a farmer with a serious commercial outlook

My competitive advantages will lie in the following:

1. Best practice farming
2. Value added products
3. Access to the internet for direct export farming
4. Meeting quality standards
5. The propensity to turn neighbours into out-growers (through horizontal integration) for the envisaged value added farm enterprise/industry.


i) Risks and Rewards
Risks:

1. Adverse weather
2. Pests
3. Volatile markets

The above risks can be addressed by:
1. Buying crop/livestock insurance
2. Reducing or eliminating debt once enterprise achieves self sustenance
3. Forward contracting to sell crops/livestock (GMB/ARDA etc)_
4. Forward contracting to buy inputs through GMB/ARDA etc_

Rewards;

1. Farmer’s welfare improves after making a profit.
2. Attaining a self-funding status in one season.
3. Creating employment
4. Food security for the country
5. Earning foreign currency

j) Socio-economic benefits:

1. Creating employment for surrounding villages
2. Being an example whom the rest of the region will emulate
3. Redemption (and provision of comfortable income) of unemployed extended family members .
4. Empowering the community through an out-grower programme
5. Guaranteeing the country food security, and earning the country sufficient foreign currency through farm exports
6. Honey & Garlic and such medicinal herbs improve the immune system of people by acting as a natural antibiotic

Currently the enterprise is funded from own resources but investors are wellcome. As I write I have 8 hectares of maize and 6 hectares of sunflower that urgently need AMMONIUM NITRATE FERTILISER. I am selling a house to raise working capital. Planning is somewhat challenging given our economic environment, a dollarised economy with scarce foreign currency. All inputs are in foreign currency. The good news is that farm produce will also earn foreign currency. Budgets and cashflows are in place that project a health bottom line - both social and economic profit. Due to limited space everything cannot be included herein.

I hope to hear from you soon. I am eager to learn more.

Your friend

Wilson Wizalamu
Pleasant Meadows SSC Farm
P O Box 8
Beatrice.
Zimbabwe
phone [phone]