HOW IS FIGHTING POVERTY LINKED TO INVESTORS’ ROI?

by dr. Nimrod

It is 1994; I am a fruit grower, spraying a lot and dreaming of an alternative, eco-friendly solution for the never-ending fruit fly sprays. I start “playing” with some ideas and concepts of how I can do this.

Fast forward. It is 2018; Biofeed developed the most awesome non-spray technology for fruit fly control. This technology, when properly applied, as part of the Fruit Fly Certified Trade Zone (FFCTZ) protocol, reduces fruit fly infestation of the most dominant fruit flies of Asia, Africa, Australia, and Europe, by over 99%.

Field results indicate ZERO sprays, NO infestation, ALL weather, FULL season protection, SAFE and EASY to use, and the list of advantages and benefits it brings goes on and on.

In short, it is better than any good DREAM, wish, or desire I ever had, and it came true.

Because the technology works so perfectly well, I quickly notice that the “regular” business model of selling the costly technology through distribution will not serve the smallholders well. This is due to three reasons:

(a) Distributors can’t provide the necessary complementary professional service.

(b) The cost of the FreeDome technology (only) will be hard for smallholders to bear.

(c) The farmers will have no way of getting a better income for their produce unless they export those. But, who will help them to export the higher quality produce, and get a better price?

I wondered what I should do next.

Then I had an insight; THE PROBLEM is not the technology but rather the business model.

If the standard business model of selling through distribution channels is not relevant, then what other business model options are there?

I started studying the various business model options and their back-track history.

Oblivious to the meaning of the profound insight, I was blessed; I kept studying the world of the business models used in agriculture in emerging economies.

THE DOUBLE-EDGED SWORD BUSINESS MODELS

It took me time to understand that by using the wrong business models with smallholders, we don’t increase prosperity as desired, but instead, unintentionally, we increase poverty.

Numbers don’t lie; current business models are increasing poverty among smallholders in emerging economies!

Decades and billions $ of investments in African (and other emerging economies) agriculture by various organizations, including; the private sector, governmental, NGOs, international organizations, and yet, poverty rises regardless of the type of investment or investment model.

In sub-Saharan Africa, most people living in poverty are smallholder farmers, and most smallholder farmers live in poverty.

Is this acceptable?

Should we agree this situation go on?

If not, then what can we do to change?

As the access to technologies and money (finance) is far better today than it was 50 years ago, it will be too easy to say that the problem is lack of one of them.

So, if the growing poverty is not correlated with the availability of finance or technology, what could it be?

Now it becomes apparent that the issue of poverty may be closely related to the use of INAPPROPRIATE BUSINESS / INVESTING MODELS.

When inspecting currently used business models, we see that regardless of the type of investment (as listed above), i.e., for-profit or non-profit, the results are the same from farmers’ perspectives. It means poverty continues for decades with no change in sight.

Interestingly, in many cases, investments are made into low added value crops, such as staple crops. Detailed description and explanation why this is not supporting the cause of fighting poverty were given in a previous article, “Why Farmers In Emerging Economies Should Not Grow Staple Crops?”

We should also note that private investors, who invest in getting profit and positive ROI, often lose money when investing in smallholders’ agriculture. It explains the lousy reputation and the unwillingness for further investing in projects related to smallholders.

Based on the actual situation, where the private sector fear to invest in smallholders, and the increased number of people living in poverty, we conclude that the current business models miserably failed in:

(a) Bringing the desired result of increasing farmers’ income or profit.

(b) Facilitating a scale-up mechanism for sustainable transformation from poverty to prosperity.

Hence, current business models do not and will not provide the basis for fighting poverty.

As if the above is not enough, current business models are risky for investors and often brings investors to lose their investment.

To summarize, current business models may provide income and employment to the mechanism associated with them but fail to enable farmers or investors to increase their revenue and profits safely and sustainably.

Ultimately, current business models failed to bring the change they promised, create prosperity, and pull smallholders out of poverty.

THE TYPE OF BUSINESS MODEL WE NEED

It is self-evident that the private sector must be more involved, like it is with other sectors, for smallholders to see a fundamental and sustainable, positive change in their livelihood.

However, the private sector will increase its involvement ONLY if and when the business activities (investments) are profitable and offer an attractive alternative to other opportunities.

Hence, to get rid of poverty and bring prosperity, we must have a business model that enables investors, farmers, and other stakeholders, to profit simultaneously (win-win-win situation).

How do we make all stakeholders increase their income and profit simultaneously? Is it even possible?

For this task, we clearly can’t use the old inappropriate business models. There is a need for a new, novel, working business model. One that proved itself in the real-life, with real smallholders.

THE WIN-WIN BUSINESS MODEL

Understanding the link between poverty and investors’ inability to profit from doing business with smallholders, Biofeed and I focused on filling up the gaps through innovative developments containing three parts.

1) Freedome – a non-spray, breaking through, technological solution for fruit fly control.

2) Fruit Fly Certified Trade Zone (FFCTZ) – a state-of-the-art fruit fly management prtocol enabling the EXPORT of branded high-quality fresh produce, free of sprays and bio-security risks, to premium markets for a premium price.

3) Green Valley – a novel tailor-made business model for smallholders in emerging economies. The Green Valley business model provides the safety net to investors and smallholders alike to cooperate in a way based on the mutual interest to simultaneously profit by creating significant added value (and not by exploiting the other parties).

If we want to fight poverty, we can’t settle for income increase by small steps, such as 5%-10% a year, although even that is not achieved today. We must aim for tens and even hundreds of percent income increase per year!

In 2021, mango growers participating in the Green Valley project in Senegal have increased their income by 50% to 500%!

Keep in mind that the income of Israeli mango growers is € 50K per hectare, and that of an African is as little as € 500, i.e., before Green Valley, it is only 1% of the Israeli income.

From a business point of view, there is a considerable gap to bridge, and closing that gap introduces business persons with a huge business opportunity.

Significant opportunities are found where there is great pain! Green Valley’s business model deals with one of the global greatest pains!

A CONSUMER-ORIENTED BUSINESS MODEL

Green Valley‘s business model is consumer-oriented. But, WHY to be consumer-oriented?

Because we understand that the prosperity of smallholders will occur faster if consumers in premium markets would prefer to buy fresh, healthy produce coming from smallholders.

Green Valley model is therefore designed to facilitate that job while enabling investors a safe mode of action to impact the livelihood of smallholders while making a profit.

Green Valley fulfills its goal by enabling and facilitating fresh produce export at higher quality and quantities from smallholders to premium markets, where produce can fetch stakeholders the best premium prices.

By bridging the professional gap, which separates smallholders from reaching premium markets, Green Valley projects swiftly (in the first season) create high-value ROI and inequivalent unique added value for its investors.

Historical odds were never so favorite with smallholders, in particular now with the COVID-19 impact.

Nowadays, consumers are looking to invest their money “in smart purchases” that will allow them to buy fresh and healthy produce to positively impact social, health, and environmental issues that are dear to them.