IBAN’s Inclusive Business Sector Dialogue on Fast-moving consumer goods (FMCG) last year provided an exclusive glimpse behind the scenes of inclusive agribusinesses in Egypt and Tunisia. Eager to find out what challenges and opportunities companies and support organizations are facing in both countries, we asked representatives from ATUPEE, South Palm International, Délice Holding, Jouda and CARE International to report on their experiences and partnerships.
The business mentors of the Tunisian Entrepreneurship and Spin-Off Association (Association Tunisienne pour l’Entrepreneuriat et l’Essaimage, ATUPEE) accompany and support young Tunisian entrepreneurs throughout the successive stages of their project, with a focus on female entrepreneurship and “technopreneurship”. They point out that inclusive business in Tunisia is still a nascent trend which is slowly materializing in the form of government programmes or CSO initiatives like ATUPEE. In order to appropriate the principles of inclusive business and to generalize the facilitation approach for the implementation of future projects, raising awareness among and educating ATUPEE members and beneficiaries alike is paramount. Therefore, they provide young entrepreneurs with adequate training to ensure product quality, facilitate access to markets and support the going to market and commercialization of their products. They always do so in cooperation with private as well as public partners who step in when issues exceed ATUPEE’s internal competences. ATUPEE stress that inclusive business ventures require the collaboration with corporate partners in order to be successful, however, it is time-consuming in terms of raising the awareness of and persuading players in the Tunisian market.
South Palm, an inclusive export business with the mission to bring delicious Tunisian dates to the world, aims at improving the employability in rural Tunisia by launching a date packaging unit and waste collection and recycling service. However, South Palm is challenged to obtain financing for their project, and also to ensure the procurement of dates because of a lack of regulation and rising date prices. Therefore, South Palm needs partners to support them with long-term financing. In addition to that, they are looking for suppliers of packaging material who are scarcely available in Tunisia, which forces South Palm to fall back on expensive imports.
Délice Holding produces dairy products, cheese, juices and soft drinks and sources milk from smallholders, whom they seek to empower through microfinance and training as well as the supply of technical innovations and modern farming equipment. They train farmers in agricultural entrepreneurship using a format designed especially for the dairy sector and adapted to the Tunisian market. Facing the challenge to ensure the quantity and quality of the goods they procure from smallholders, Délice works with the farmers to mitigate the seasonality of the dairy sector in Tunisia and to improve the bacteriological and physicochemical quality of the milk. Public-private partnerships, for example with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, enable Délice to learn about, replicate and adapt best practices from other projects to the Tunisian context. M. Ramzi Najahi (Senior Manager Budget and Milk Supply Planning at Délice Holding) states that they are encouraged by the observation that their support for smallholders creates a showcase effect: The benefits which their suppliers enjoy, such as training, facilitation and financing, attract other farmers who approach Délice on their own initiative. To find out more about Délice and their partnerships read their blog on the inclusion of small-scale dairy farmers.
Using a business model similar to Délice’s, Jouda sources tomatoes for canning from smallholder farmers and collection centres in Tunisia. In addition to technical support, Jouda grants loans to farmers who cannot secure financing from regular financial institutions for lack of collateral. The farmers can pay off their debt in the form of produce supplied to Jouda. However, in order to reduce the financial burden of lending, Jouda is always on the lookout for financial institutions willing to give credit to smallholders. Facing the same challenges as Délice, they need to enhance both quantity and quality of the produce they procure from smallholders. For that purpose, they provide technical support to increase output and resilience, and they educate farmers about the benefits of selling by quality rather than weight.
In Egypt, Danone joined forces with CARE International to create a network of Milk Collection Communities (MCC) that empowers smallholders and secures the supply of milk for their production at the same time. Danone has already successfully implemented the model in other countries. However, replicating the model in new countries, such as Egypt, always entails new situations and challenges requiring adaption. In Egypt, cooperatives are not just farmer associations, they are privately owned but overseen by the government. Therefore, CARE has focused on working with the government entities, training them in accounting and communication or raising awareness about important issues such as regular vet examinations. At the same time, they have educated farmers about market dynamics, prices and resilience. While doing so, experience showed that the pace of change in low-income communities is much slower than in companies. Hence, companies wanting to engage low-income communities in their value chain need to take this into consideration as they often expect very fast results and very high KPIs. Furthermore, low-income communities are risk averse and need a proof of success before they embark on a project that radically changes their way of life. To make this kind of inclusive business model work, one possibility would be the creation of hybrid organisations as an intermediate body between the grassroots level and large FMCG companies. These organisations would provide support services to the smallholder suppliers and collect their goods in order to deliver them to the company. This interposition would make the large number of small suppliers more manageable and ensure that the collected goods meet the company’s quality standards.
While the current state of inclusive business in Tunisia and Egypt appears to be peppered with challenges, our interviewees’ bottom lines and the visible impact of their projects are encouraging. Noha Abdel Hamid from CARE explained to us what makes her passionate about the MCC project is seeing the women becoming more independent, confident and motivated. “Bringing income to the house allows them to be decision makers, in ways that exceed the revenue they are bringing to the household; it allows them to be more confident in themselves and revert the dynamics of feeling like a victim to a truly empowered woman enabled to make decisions regarding the future of her children and their education. Now, they go out of their houses and walk to the MCCs – a change that is very important as many rather moved in a limited space near their household, this increased mobility is liberating. So change is not only a change of income, it is change of social behaviour.”
This blog is a part of the March 2017 series on how businesses in the FMCG sector are including the BoP in their value chain. Read more here.