Having been in the macadamia business for nine years as an exporter, Frank Omondi was disturbed by middlemen taking advantage of smallholder farmers.
In his analysis, middlemen were taking home margins as high as 38 percent while small farmers, who form the bulk of macadamia growers, take a paltry 15 percent.
“To change this, we became the world’s first Fair Trade-certified producer of macadamia nuts,” says the co-founder and CEO at Grow Fairly, a macadamia and cashew nuts processor based in Kilifi County.
Mr Omondi says Kenya’s macadamia is distinct because of its social aspect – smallholder-driven and organically-grown, compared to South Africa or Australia, meaning that its global demand is immerse.
Suppliers and capacity
Presently, Grow Fairly has onboarded 15,000 cashew and 9,000 macadamia farmers and installed a factory with a capacity to process 400 to 600 metric tonnes and 600 to 700 tonnes of macadamia and cashew nuts respectively, every month.
According to Mr Omondi, a wildlife biologist, with the increasing population, the future of farming in Africa lies with smallholder farmers.
But scaling and bulking remain a hurdle. To skirt around this, the firm has built software to track, trace, and weigh produce using Bluetooth-enabled scales, paired to the software, and it pays farmers directly via M-Pesa.
Cracking logistics hurdle
The collection has always been a challenge to food-preneurs and one of the strategies that Mr Omondi has used to ensure a seamless flow of nuts from farmers across the country and reduce produce loss risk, is recruiting people from the locality.
“We have teams of field officers who report to a regional officer who then moves around with the truck collecting produce bought by the field officers and the software permits him to buy up to a certain limit,” he says.
In raising capital, he says, what he has learned is that “you can have as many documents and good ideas but your relationship with your fundraisers, either in equity or partners or in debt, matters [because] they buy you.”
He was lucky because his partner was a friend who needed less convincing. And with a proven track record, the nuts business has also been able to attract partners.
“We’ve been fortunate to get assistance from development partners such as NORAD, the European Union and USAID,” he says.
Bringing on board the development partners has helped with the training of farmers, ensuring that quality is tip-top and setting the company on a firm growth path since their goal goes beyond profits.
Domiciled deep inside rural Kilifi, Mr Omondi says that the biggest challenge they had to deal with when setting up the factory was electricity.
“We welded the factory roof using a generator. We applied for a power connection which took eight months, it was expensive,” he says.
The other issue is that in this kind of business, one has to keep a lot of stock and buy two-thirds of the stock in the first half of the year.
Also, with a turnaround of 120 to 180 days, one ends up tying a lot of cash so demand for working capital is extremely high as farmers are paid on the spot.
“We carry the burden from the farmer all the way to market and in times of market glut like early 2023, we tied a bit of our stock in the US,” he says.
Another challenge is finding the right people.
“The problem is that not all [jobseekers] are tooled and ready to plug and play so you have to train people on the job,” he says.
With an in-house laboratory, it has helped assure the products are quality, before leaving the factory for the US and European Union markets.
This is a lesson Mr Omondi learned the hard way after exporting Sh20.2 million ($150,000) cashew nuts consignment to the US in 2016 using his previous company Ten Senses Africa only to be forced to take them back for dumping because untreated water had been used.
“We learned not to ship a product you don’t have confidence in and we had to invest in our quality systems and processes,” he says.
“Now one of our key strengths is quality control. This gives us a piece of mind and guarantees our customers too,” adds Boniface Nganga, the managing director and co-founder.
Like a marriage
The serial entrepreneur says that the investment bug bit him while still studying at Moi University where he would organise paid-up trips for fellow students.
“Once you learn the principles of business, which are finding a niche and making money from it, plus the discipline of keeping money and paying back, you just keep going,” he says.
He advises that just like in marriage, every entrepreneur needs to get the right partner.
“In business, you’re also in HR (human resource) mode full time. Every time you spend with your team is a moment to understand them,” he adds.
Before getting into business, he advises one should learn all there is to know about the sector of interest.
“We have benefited by being under the wings of people who held our hands. Many people want to go straight without understanding the business. You have to put in school fees and the school fees here is spending time to learn,” says Mr Omondi, adding that one must also learn how to talk to people, “because in business, how you talk to your bank manager, suppliers and other stakeholders can mean failure or success.”
Grow Fairly is looking at expanding its footprint to Ethiopia where they are doing macadamia trials.
“We have sent 80,000 seedlings to Uganda and have our eyes in Tanzania as well,” he says.
If there is one thing that taught him the biggest entrepreneurship lesson, it is a tourist camp business that he had set up in Taita Taveta County years ago.
When the land lease agreement was aborted, his building was demolished, causing huge financial losses.
“I learned one key lesson; don’t give what you don’t have, and never commit what you can’t control,” he says.