TruTrade Africa aims to help small farmers in Africa gain a fairer share of the value of their produce. How could it unite rural entrepreneurs to implement a revolutionary new business model?
TruTrade uses IBM Social Business solutions on SoftLayer® to offer a central collaboration platform for small players in the value chain to determine fair prices in a complex agricultural value chain.
Unifiesentrepreneurs on a central collaboration platform
Enablesfarmers to see the optimal margin for their produce
Helpsfarmers secure fairer deals and increase their income
Business challenge story
Targeting a fairer deal for farmers
Agricultural value chains are highly complex, and many factors—including the weather, pests and logistics costs—affect market prices. Typically, buyers in Africa mitigate the risks of this volatility with a “buy low, sell high” business model. As a result, it is extremely difficult for small-scale farmers in staple food markets to obtain a fair margin—a challenge that rural entrepreneurs have been working to solve for many years.
Clive Lightfoot, CEO, Rural African Ventures Investments takes up the story: “Farmers are never going to get good prices with the ‘buy low, sell high’ approach, and we want to drive a fundamental, disruptive change in the marketing business model
. “Across Africa, cities are experiencing explosive population growth—creating a large and fast-expanding market of low-income urban consumers. Nairobi alone has 2.4 million such consumers, and the World Bank’s International Finance Corporation estimates that the total size of the market is more than 4 billion people, and worth more than USD5 trillion.
“The low-income consumer market is serviced by small, independent sellers, many of whom do not have space in their inventory for more than a day’s worth of products. As a result, sellers have a need for regular, dependable deliveries of quality, hygienic produce. This market is extremely valuable, but smallholder farmers do not have direct access to it. We realized that bringing this booming market direct to these farmers could help them to secure a fairer deal for their crops.”
He continues: “We wanted to empower stakeholders across the value chain to collaborate rather than compete—improving efficiency and driving up incomes for small producers. To build an effective network of rural entrepreneurs at speed and scale, we knew that we needed to move beyond traditional communications technologies such as email and phone calls, and we looked for a way to achieve our goal.”
Uniting people across the value chain
To make its vision a reality, Rural African Ventures Investments decided to partner with IBM Premier Business Partner WebGate to deploy a cloud-based collaboration solution based on IBM® Notes® 9 Social Edition on SoftLayer.
“One of the key challenges we faced before TruTrade was founded was the fact that we had many rural entrepreneurs all working in isolation,” explains Clive Lightfoot. “By partnering with WebGate, we realized that we could use the IBM cloud to deliver a level of collaboration that was previously out of our reach—making it easier to mentor new relationships across a large network of small players in the rural value chain.”
Mentorship and collaboration in the cloud quickly led to a major breakthrough: Transaction Security Services.
Clive Lightfoot comments: “Bringing rural entrepreneurs together with developers from WebGate helped us to develop an application called Transaction Security Services, which provides a transparent view of the costs and prices along the value chain. The application takes into account variables that have an impact on market price, such as transport, storage and processing costs, which helps us to determine the best price for each product.
“Once a farmer has agreed a deal, the entire process—from placing the order, tracking the delivery of the produce and managing the payment from the buyer to the farmer—can be managed in the cloud via the application.”
Recognizing that the Transaction Security Services concept had disruptive potential, the group—comprising rural entrepreneurs in Kenya, Uganda and Tanzania with Rural African Ventures Investments—decided to create a new joint venture to bring the new approach to market: TruTrade.
James Weru, Founder, Fair Trade Enterprises, explains: “TruTrade is based on a franchise model, in which a single franchise manager is responsible for a network of upwards of 20 agents, who in turn manage crop aggregation points where the farmers are. Fair Trade Enterprises was one of the first franchisees.
“Enabling small farmers to aggregate their produce and collaborate in a transparent way along the entire value chain offers them the benefits of cost-efficient value chain management, and direct access to low-income urban consumers. And because TruTrade’s revenues are directly linked to the percentage of the final market value that farmers can put in their pockets, we ensure the right balance of incentives to deliver a fairer deal to farmers.”
Roman Weber, CEO at WebGate Consulting AG, comments: “WebGate invested more than 1,500 free consulting and programming hours into the solution, which is based on cutting-edge IBM XPages technology, the OpenNTF Essentials Toolkit and the myWebGate Social Framework. The collaboration was a win-win for both WebGate and TruTrade, as it enabled our development team to gain experience working on an innovative and potentially game-changing social initiative—something completely different to a commercial project.”
Today, TruTrade is using its IBM solutions to support a fairer business model in a wide range of produce grown by Africa’s smallholder farmers.
“Scalability and cost-efficiency were both critical requirements—and by embracing the cloud model, we knew we could add new TruTrade franchisees rapidly as the business grows,” says Clive Lightfoot. “Businesses innovate by getting lots of like-minded people exchanging ideas—not by ‘sending in the experts’ and telling people what they should do. With IBM Social Business solutions, we enable local people to pool their domain-specific expertise to solve the complex economic and logistic challenges they face in reaching new markets.”
Today, TruTrade is on course to achieve its goal of transforming the business model for smallholder farmers across Africa, beginning with Kenya and Uganda.
“In the past, smallholder farmers were often forced to bear the majority of the risk in the value chain, and to sell their products at an extremely low price,” says James Weru. “Thanks to TruTrade, we are beginning to replace that model with a new fair trade approach.
“By facilitating the movement of the product along the value chain and helping people make better-informed decisions about their options, we enable farmers to obtain a greater share of the market price of their products—in some cases, an increase of up to 30 percent.
“In rural areas, the TruTrade model is changing the lives of farmers in a big way. For example, our members in Kenya can now afford to take their children to school, and they are better able to pay for medical care. In addition, we can boost the local economy by employing people to load trucks and assist in the cleaning and grading of the products.”
By aggregating many small entrepreneurs in the cloud, TruTrade gives farmers the economies of scale they need to target valuable new markets.
“In the old way of working, producers would sell their produce at the farm gate, after which it would be transported to a large city, sorted, cleaned, packed and then sold on,” explains James Weru. “One of the major disadvantages with this approach is that produce that does not meet the buyer’s requirements is simply thrown away—generating significant waste.
“One of our latest ideas is to shift packing activities to the place of production. In addition to creating rural employment opportunities, this process enables us to collect produce that would otherwise be wasted, and sell it to serve the highly valuable low-income consumer market.”
With coaching from their peers in Africa, delivered via IBM Social Business solutions, TruTrade members are gaining additional skills to help improve their income.
“We are showing farmers how to gain organic certification, which enables them to secure premium prices for their organic products,” adds James Weru. “This is a particular area of focus for Fair Trade Enterprises, and many of our producers are beginning to see improved returns.”
Working closely with WebGate, Rural African Ventures Investments is planning to deploy its IBM learning platform on mobile devices—making it even easier for farmers to gain access to expert support from their peers. In addition, WebGate and Rural African Ventures Investments have established a new company called mPEX, with the aim of making its Transaction Security Service business model available more widely across Africa and beyond.
Clive Lightfoot concludes: “Thanks to IBM and mPEX, TruTrade can give access to the very latest technology to people who until now were left behind. What’s great about the IBM cloud is that we can scale it almost infinitely—and it’s going to need that kind of level of scale, because the number of consumers in our target market is huge.”
About TruTrade Africa
Founded in 2012, TruTrade is a social enterprise that aims to unlock the vast potential of Africa’s rural producers by giving smallholders a fairer share of the value of their produce. Offering a secure way for traders, aggregators and small famers to collaborate and transact, TruTrade franchisees link small-scale producers to buyers with controls that enforce quality, enhance transparency and enable farmers to share in value addition.
Take the next step
WebGate Consulting AG helps companies achieve their business goals with expertise in web and mobile development, social business, CRM, and cloud solutions. To find out more, please visit: webgate.biz To learn more about IBM Social Business solutions, please contact your IBM representative or IBM Business Partner, or visit the following website: ibm.com/social View more client stories or learn more about IBM Collaboration and Talent Solutions