Good Food for Cities

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

September 5, 2023
Josephine Ecklu
Inclusive Business coordinator
Harold Lema
Horticulture & Grains Senior Agribusiness Advisor Arusha
Heleen Verlinden
International Communications

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.

“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

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.

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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.

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.

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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.

From Dar Es Salaam to Dodoma and Zanzibar

EAFC has been working with an increasing number of smallholder farmers. In 2022, it sourced from 6,977 farmers (2,908 women and 4,069 men) among 47 farmers’ groups. The business model remains oriented around empowering smallholder farmers, by connecting them directly to the market, circumventing middlemen, and providing competitive prices and guaranteed offtake. “I like the prices they offer to us. We used to get lower prices from brokers, but EAFC has become a reliable buyer with good prices,” shared a male farmer.

EAFC’s activities have been growing at a steady pace. Last year, they achieved annual revenues of USD 10.7 million, a 92% growth compared to 2021. A new distribution centre and three new collection centres in Njombe, Mbeya and Morogoro were constructed and, in terms of logistics, the company increased its fleet size from 43 to 61 trucks between 2021 and 2022. EAFC also obtained an additional loan of USD 528,000 from Kampani, used to finance different collection centres and the extra transport capacity.

EAFC provides its growing base of farmers with training — sometimes in very close collaboration with NGOs such as Rikolto or SNV — and supports them in securing pre-harvest finance, fertiliser and seedlings. For instance, Rikolto and the local government jointly supported two farmer organisations (Msitu wa Tembo and Lendoto) to form Msitu wa Tembo Agricultural Market Cooperative Society, to improve their productivity and the quality of the produce they deliver. 15 farmers’ leaders were trained in leadership and financial management skills to manage the cooperative sustainably. The organisation is legally recognised by the government and can therefore access formal services from various stakeholders, including financial institutions. We equally supported these farmer organisations to link up with agricultural input companies, who supplied quality agricultural inputs such as fertilisers and pesticides. In collaboration with these companies, we established 10 demonstration plots to showcase Good Agricultural Practices in onion production to 746 farmers. The trainings provided on these demonstration plots focused on land preparations, seedling nursery preparations, transplanting, pest and diseases control and harvesting. Also, 356 farmers were trained in entrepreneurship skills such as farming as business, record keeping, gross profit analysis and market analysis.

This collaboration model, in which Kampani partners with an NGO – in this case Rikolto – to make sure its client – in this case EAFC – gets the needed technical assistance, advice and support, is crucial in mitigating risks for Kampani as investor. It’s also key to further building EAFC’s resilience and supporting its ambitions: the company is about to launch its operations in two new markets, the city of Dodoma (400 km from Dar es Salaam) and on the island of Zanzibar.

**This article was originally published on March 15, 2022. It was updated on September 5, 2023, with the last section, ‘From Dar Es Salaam to Dodoma and Zanzibar’. **

Multi-stakeholder collaborations to derisk investments

Collaborations between NGOs, cooperatives and impact investors, like this one between EAFC, Rikolto and Kampani, are powerful tools to contribute to resilient and thriving farming communities.

Read more about how an innovative stakeholder-shareholder investment model is helping smallholder farmers grow and thrive in this article published on the Stanford Social Innovation Review website, co-written by our Executive Director and Kampani board member Chris Claes, Kampani Executive Director Wouter Vandersypen and Kampani Chair Steven Serneels.

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!

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