‘Agribusiness can pull many people out of poverty if approached smartly’
Ayodele Olajiga is a seasoned professional with over 20 years experience in Agribusiness, Investment Banking and Management Consulting. Passionate about driving economic development in Africa through business transformation and scaling enterprises, he is the co-founder of Foodpro Limited, a Nigerian FMCG business focused on processing and producing cashew nut products for retail and commercial customers in Nigeria and across the world. Beyond executing business strategies, Ayodele is deeply passionate about the development of SMEs and scalable start-ups and strongly believes education is the path to national development and growth. He cofounded ‘Teach for Nigeria’, a Not-for-profit organisation committed to ending educational inequality in Nigeria by ensuring that every child irrespective of economic background has access to quality education. In this interview with Tobi Awodipe he spoke on the need for Nigeria to focus on Agribusiness to pull many out of poverty.
Considering current challenges, how best would you say we could drive economic development in Nigeria and Africa as a whole?
The first step on that journey is to craft a collective vision with key milestones on what type of economy we want. This vision will state our ideal scenario across various sections of our economy and timelines so that we can track progress. This vision document will be the bedrock for a consistent policy and infrastructure environment over time.
If you take a country like South Korea, they had a vision of where they wanted to be and then crafted a strategy to support it. If you observe the policy and investment decisions, you can easily deduce their objectives. The transformation of their country was guaranteed once they set a vision and strategy to achieve it in motion. If you contrast that with our environment, it’s nearly impossible to figure out or predict what the policy environment will be like in six months, yet we need to be, to take a 10-year view or more on policy direction.
Similarly, as a business, we should be able to know the areas that government investment will go into based on the vision for the economy so that we can align our investments. However, most of what you see is short-term thinking and actions, which is the direct result of the lack of long-term economic vision. So, let’s go back and craft our long-term vision and strategy for the type of economy we desire and then act accordingly then the development will simply be a guaranteed consequence.
Businesses, including Agribusiness, have suffered setbacks since the pandemic started till now, how best can they reposition this year and beyond?
Businesses that have survived this pandemic are very lucky because quite a lot just had their value chain shut down without any room to pivot. I know for some sectors, the pandemic drove their growth, but it wasn’t the case for most. For the business standing, it’s time to consolidate, rebuild and grow.
It’s important to identify the lessons from COVID-19 around what the weaknesses in your business or areas of vulnerability are. This can be any combination of things ranging from low capitalisation, lack of diversification or too much of it, and many others. Identify the key issues and fix them or at least note them if you are unable to fix them. If you didn’t carry scenario planning before then definitely make sure you do it regularly. Finally, it’s important to focus on growing your business because the pandemic has also created opportunities either in your industry or similar industries.
Many new startups don’t go past the first year. As someone passionate about SMEs, what would you say is responsible for this and how can it be corrected?
I am not sure it’s something to be corrected or that can be corrected. Most businesses at that stage fail due to reasons such as lack of capital, inexperience managing a business, poor execution, lack of adequate marketing, the market for product or service non-existent, or simply bad timing.
My advice when doing a startup is to leverage things like design thinking to take controlled risks so that if it fails then it’s not too painful financially. Yes, you can work to make sure things like capital, management, etc. are addressed however even after all that there is still a high chance of failure. Hence manage your risk and have fun.
What major challenges would you say indigenous exporters face?
The tough operating environment is a challenge, though not restricted to exporters. The foreign exchange environment is a big challenge, especially in agribusiness where the farmers and traders want to use the parallel market rate to determine price whilst the exporter is expected to use official window rates in subsequent legs of the transaction. Even though the farmers/traders don’t have any inputs affected by dollars, they still use it to increase prices.
A lot of value will be unlocked if the country could just have one market-driven exchange rate. Logistics is also another challenge that needs to be tackled and I understand the rail network will soon get involved in long haulage. That would introduce significant efficiency and effectiveness into the sector.
Personally, how would you say you overcame those issues?
I am not sure one can claim to have overcome some of these issues, because they are affecting you on an ongoing basis. In my case, it’s really about finding ways to minimize the impact on your operations. One very important thing is having a scenario plan that identifies the risks you are exposed to and how you intend to mitigate them.
As an example, whenever there is a scarcity of FX, commodity prices go up significantly, because non-traditional buyers get involved so they can source their required FX. So, you have to be able to read what is happening and know what you will do in advance. There are other challenges such as logistics, maintenance and so on. These challenges just increase your cost of operations, as there is no getting around them. Ultimately just be proactive about identifying and mitigating the risks arising from these issues.
Financing is a major deterrent for many, how did you source funds and what pointers would you give for SMEs looking for funding?
This is a very hot topic and people are often like banks don’t lend. Concerning the banks, I would say, ‘be careful what you wish for because the high-interest rates could damage your business especially early on.’ My suggestion is to focus on cheaper sources of funding that can be supported by your business, depending on where you are in the life cycle. At the beginning, where you don’t have predictable cash flows, it’s better to use sources such as equity and grants.
As your business grows, then you can consider debt as a source of funding. However, it is important to ensure that this can be comfortably serviced by your cash flows. If possible, avoid the very expensive commercial debt as it imposes a very high-performance level threshold that may put your business in a distress situation.
With all you experience in investment banking and management consulting, why did you decide Agribusiness was it for you?
Yes, it has been an interesting career spending time in banking and management consulting. I don’t see it as changing to Agribusiness rather I am just adding another vertical to my zone of activity. My time in banking and consulting was very exciting and I had the opportunity to go underground on a coal mine, start a bank, and other interesting things.
However, I must say that the Agribusiness space in Nigeria has been the most challenging thing I have encountered in my career. My experience in banking and consulting has been very useful, however, I have learnt so much in the agribusiness space in the last few years sometimes the hard way. I went into the space to have an impact on the Nigerian economy with the view of creating value-added products. The agribusiness space in Nigeria is a strong lever to pull more people out of poverty if approached smartly.
What informed the choice of what to export and how do you source them?
Let me try and summarize a process that probably took a couple of years. We initially wanted to go into primary production of corn and soya bean. However, our investigations revealed the tough nature of the farming ecosystem. Hence, we decided to go into secondary processing with the view of one day coming back to cultivation. The idea was to find products where Nigeria has a good production base, but there was not a lot of processing going on. One of those products is cashew nut where Nigeria and the rest of West Africa mostly export raw materials to Vietnam and India. Interestingly, more than 50 per cent of cashews are grown in Africa (predominantly West) and more than 80 per cent of that is processed between India and Vietnam.
How easy is this for a young investor to consider going into?
The main barrier to entry is capital, because of the seasonality of the crop and lack of funding instruments that match the nature of the crop. I would recommend that new investors consider primary production as it gives you many options over a long period. However, it’s a long-term play because it takes about three to four years for the tree to start producing fruits.
Tell us about Teach for Nigeria, what do you seek to achieve with it?
Teach for Nigeria is a project started by about five of us and it’s a partner of the global organisation Teach For All. The organisation is focused on how to ensure that every Nigerian child irrespective of the socioeconomic background has access to quality education. Millions of Nigerian kids are out of school and the idea is to ensure that we drive that number to zero while ensuring the kids get good quality education. Teach for Nigeria has a full management team that is doing a great job of moving towards the vision; I support the vision as a member of the board of trustees.
What final words of advice would you give to people looking to go fully into entrepreneurship?
Given most businesses will fail, why not go for solving big problems and have fun at it? Also, remember that you can also be an entrepreneur with existing companies. It’s all about solving big problems.
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