VENTURES AFRICA - A new class of entrepreneurs is emerging in Kenya – the new age farmer – buying land and planting high-yield crops, putting in water infrastructure to break dependency on rains, and even renting farms to cash in on returns often as high as a double payback in a single season and whose returns have now outstripped those in the stock exchange, bonds and even property.
After several bumpy years on the Nairobi Stock Exchange, where investors finally made returns of 33.3 per cent last year following several years of losses, and facing a property market where price growth is currently on or below inflation, many investors have been looking for a class of investment that can yet transform their seed capital in record time.
Against this backdrop, agri-business – which can take an initial investment as small as a few hundred dollars and where $15,000 opens the door to now hundreds of options – is attracting a growing class of ‘peri-urban’ farmers and agribusiness investors.
Most of the new investors prefer to own land close to where they live, so they can monitor their crops. But with land at its most expensive in urban regions, many are also turning to new models of renting farms.
Already companies have invested land that they rent to these enterprising farmers. The most common are farms renting out green houses. One such firm is Gramonra Gardens, under the stewardship of Samuel Gathigi, who quit his information system security engineering job with a major airline to introduce the land-for-rent model in Tala town, 25kms from Kenya’s capital Nairobi.
His 27-acre site offers green houses along with farm labourers and managers. The investors decide which crops they want to grow and pay an annual $700 to lease the greenhouse and $50 monthly for the farm labouring and management.
Already some 30 agropreneurs have leased greenhouses at Gramonra Gardens, each 8 by 30 metres and sitting on one sixteenth of an acre.
“Basically we manage the farming for the investors. The management involves advising clients on crops to grow, chemicals to buy, spraying, weeding, tending and harvesting. To assess progress, the farmers make fortnightly visits, but those who can’t make it get progress reports sent to them,” said Mr Githiga.
The crops preferred by these rental farmers include horticultural products such as tomatoes.
A typical 8×30 metre greenhouse can accommodates 800 tomato plants with a guaranteed uniform maturity and over 90 per cent of yield all year. Typically, each plant yields around 60 kg a year, which sell for $10 to $50 depending on season, and makes for earnings across all 800 plants of above $20,000 a year.
For the many new farmers running the same business model on land they have bought, the price of one sixteenth of an acre in commuting distance from Nairobi can be as high as $1500, but the payback still becomes rapid by comparison with other kinds of investments.
Agroproneurs are also considering the type of crops that bring the highest returns for the smallest investments.
A frontrunner has been tissue culture bananas, especially in Central Kenya, where the bananas naturally thrive. The best yields possible from traditional bananas optimum was around 10 tonnes per hectare, but tissue culture bananas yield an average of 30 to 40 tonnes per hectare.
Esther Gachugu, an agroproneur from the area, invested in tissue culture bananas and after a year was making as much as $250 in a day. She moved into fulltime TC Banana growing and from her proceeds over several years, today owns a hotel, a pickup truck and has flown outside the country to model economically viable farming.
The scale of these returns, which even including the cost of the land add up to more than 50 per cent a year on passion fruit farming, are what is now drawing so many new agropreneurs. The options for high return crops are plentiful.
But finding a market for the commodities can still be a headache for the new agropreneurs. The markets exist, but the pressure of supplying consistent product bogs down many farmers. For this reason, a new model where farmers produce the crops individually, but form a farmers’ group to supply in bulk and enjoy economies of large scale is quickly gaining ground.
Mbari ya Mboche, a farmers’ group in Central Kenya specializing in yellow passion fruits offers a classic example of joint marketing. It supplies its fruits to major supermarkets in Nairobi. Another group of 200 farmers still in Central Kenya specializing in tissue culture bananas is supplying major hotels in Nairobi and exporting.
There are also companies that have set up shop specifically to assist the new agropreneurs in marketing. Azuri Health Limited, which manufactures and distributes healthy foods, is being supplied by 600 such farmers countrywide. The company buys processed products from farmers, helps package them and stocks them in markets in both in Kenya and Sudan where the demand has blossomed.
“Every agropreneur’s headache nowadays is twin fold. Either getting the market for their produce or producing less than the buyers wants. Both of these can only be overcome through farmers forming farmers’ groups, which also get better prices,” said Tei Mukunya, CEO of Azuri Health Limited.