Impact investments to feed Dar Es Salaam city in a sustainable way

Among the oldest references known to the use of credit or loans in urban cities was Sumer, an ancient civilisation in Mesopotamia (3,500 B.C.). It was farming alone that prompted a method for receiving goods on the promise of future payment. Long since then, today access to credit for agriculture faces many challenges, although the importance of food is not in doubt.

In the African continent, while the agriculture sector is employing about 43.8% of the population, only approximately 1% of bank lending goes to the agricultural sector. And food goes a long way to our plates from production to sales, creating environmental impacts that account for over a quarter (26%) of global greenhouse gas emissions, to give one example.

Food production account for over a quarter (26%) of global greenhouse gas emissions.

In Rikolto, we know that many things need to change in our food systems to make a significant impact, and one of them is collaboration across all sectors. By working with both farmers' organisations and the market, we want to ensure that the challenges and risks involved in changing towards sustainable production practices, transport, processing, marketing, etc, are shared.

“In Tanzania we facilitated connections between agricultural input suppliers and farmers to apply an Improved Input Supply and implement Good Agricultural Practices (GAP). In some pilots this resulted in a significant reduction in production costs for farmers and increased yields per unit area by 20-30%, says Harold Lema, project coordinator of Rikolto.

To this end, we connect not only farmers' organisations with inclusive markets but also more actors in the chain with a vision of mutual benefit. And that includes contributing to access to safe, nutritious and affordable food for people in the largest cities, such as Dar es Salaam in Tanzania.

In the African continent, while the agriculture sector is employing about 43.8% of the population, only approximately 1% of bank lending goes to the agricultural sector. In the picture, Dar es-Salaam is the largest city of Tanzania.

Partners for good food and a living income for farmers

East Africa Fruits Company (EAFC) is based in Dar Es Salaam, a city with a population of over 3.4 million. The organisation developed a robust logistics business transporting and processing vegetables and fruit from smallholder farmers directly to the market. The medium enterprise is working with 2,600 farmers, eliminating the middlemen and providing consistent quality and supply.

Their business model resonated with Rikolto, and since 2017 we have been connecting them with over 300 onion farmers in the Pangani river basin to facilitate a stable market for their onions in Dar es Salaam.

Growing onions is a rising business in Tanzania’s the Blue Mountains

Surrounded by the ‘Blue Mountains’ and sugar cane plantations, you can find two villages – Londoto and Msitu wa Tembo – along the Pangani riverbank in Manyara. Discover how Rikolto has supported farmers from those two villages by offering different agricultural services with the aim of transforming their local agricultural practices into agribusiness practices.

The company created an ambitious growth plan for the coming years, but they need to invest in transport vehicles, ripening machines, and collection centres.

In 2021, EAFC obtained a loan of USD 590,000 from Kampani through Rikolto. According to Wouter Vandersypen, director of Kampani, this association is an additional guarantee that the social impact for the smallholder farmers will be maximised.

Kampani is a Belgian social impact investment fund aiming to create financial and social impact at the level of the farmers.

“We create impact by strengthening the balance sheet of the organisation, something that is hard to do for many small and medium agricultural organisations and cooperatives. This allows them to make investments in what we call ‘CAPEX’, meaning buildings, lands, machinery… the type of investments that a cooperative, for example, could not make in the short term,”

Wouter Vandersypen Director of Kampani

“We create impact by strengthening the balance sheet of the organisation, something that is hard to do for many small and medium agricultural organisations and cooperatives. This allows them to make investments in what we call ‘CAPEX’, meaning buildings, lands, machinery… the type of investments that a cooperative, for example, could not make in the short term,”

“The investment will allow East Africa Fruits Company to engage in a long-term fair purchase relationship with thousands of smallholder farmers, many of whom are part of our ecosystem,” says Harold Lema.

Rikolto coordinated the social impact analysis of the investment, where the scalability potential of the EAFC business model was highlighted mainly in two areas:

Farmers with a guaranteed market and reliable contracts

In the past, smallholders farmers from Pangani river worked with auctioneers to sell their produce, which rarely gave them a fair deal for their work. Together with Rikolto, the company introduced a contract model to ensure profitability for farmers and high-quality standards for buyers.

Currently, East Africa Fruits Company signs the contracts at the start of each season, renewable annually, ensuring uptake of farmers’ production at a fair price covering their costs and including a fair margin.

Also, they purchase 100% of qualifying production, and in turn, the farmers commit to applying good farming practices. For bananas, this is a game-changer for farmers (mostly women) who needed to walk up to 10 kilometres to the closest market to sell their bunches, without certainty of selling their produce.

Additionally, they pay for transportation from farm gate to collection centres and provide an advance to farmers and pay the remaining balance on delivery through Mpesa.

Market vendors with improved working conditions

EAFC revolutionised the logistical model on how market vendors get their products... Vendors working with EAFC receive consistent, affordable delivery of high-quality produce at competitive prices directly to their vendor stalls at the market, saving time, cost, and quality losses.

Team of Kampani during a meeting with one of the farmers' partner organisations of Rikolto, that has obtained an impact loan in Nicaragua.

This in turn allows market vendors to sell safe, fresh, and high-quality products to end-consumers at an affordable price.

“While Kampani’s social impact focus is on smallholder farmers, it is nonetheless exciting to see the social impact at every level of the value chain. The EAFC business model eliminates the need for market vendors to wake up at 3:00 am to secure produce at auction, only to have it delivered hours later, at inconsistent times,” says Wouter.

Also, by eliminating the middlemen, the actors in the value chain increase their margins, and that encouraged them to work together for the sustainability of the business model with East Africa Fruits Company. Additionally, the company is ensuring traceability from the farmer to the market vendor, resulting in greater food safety.

Do you represent a financial institution? Are you seeking to invest in smallholder farmer organisations, but find it challenging to identify bankable opportunities in the agricultural sector? We can provide access to and understanding of bankable farmer organisations.

Feel free to contact us!