Testing site-specific Commercial Systems to deliver 2WT-based

mechanization in Kenya

FACASI Mid-Term Review

Hawassa, Ethiopia

9th to 13th Feb 2015

Pascal Kaumbutho / John Mung’oo

Milestones:

Output 2.1:

Market analysis of small mechanization.

Country level literature review

Interviews of national and local market actors

Round table discussions with different key group actors.

Challenges and

Opportunities in Business

Models

Challenges:

1. Lack of Private Sector Participation: Low demand, taxation, few service providers including mechanics, spare parts, finance etc.

2. Few dealers in Kenya stock 2WT tractors

● Some are CAMCO, Flying Horse etc. Camcoimported 30 and were able to sell 20 to flower industry players.15 are still in store and it has not been easy selling them.

● They do not plan to buy more unless market is created.

Challenges (Contd.)

3. Few Service Providers

● There is a misconception that 2WT are hard to operate, this is only true to inexperienced operators.

● Previous Training targeting extension agents more than service provider.

Challenges (Contd.)

4. Lack of Government policy on Mechanization: A policy paper that was started in 1995 has never been completed. The policy formulation process started again last year and will be completed early this year (2015) (Traffic Act!)

5. Mind Set: Kenyans are used to 4WT. Service providers who have 4WT know a 2WT will reduce their fuel expenses..

● 2WT tractors will lower their status in the society

● Working business models are necessary

6. Lack of records to aid financing:

●Many banks in Kenya are willing to

lend money to farmers

●Most of financial institutions in Kenya

have Agribusiness departments

●The problem is that most farmers and

services providers do not keep proper

records and lack strong business

cases.

7. Dependence on rain fed agriculture

●Risk profiles are discouraging.

●Previous loan experiences are

negative

8. High Price

●The price of a Chinese tractor in Kenya is

US $ 2000.

●The price of a Brazilian planter is US $

4500

●A Sheller sells for US $ 720

●Trailer = US 1,450

●These prices are way beyond the reach of

smallholders farmers in Kenya

9. High competition from Motorbikes

●Bikes are used to transport shellers and water pumps to wherever they are needs

●A motorbike and a small-sheller with Engine would cost about US$ 800 whereas a 2WT with the same Sheller would cost US$2500

●2WT have advantage of being powerful than the motorbikes

A farmer on a Motorbike with a water pump to

transporter to watering point

Opportunities

●Decreasing farm sizes

●Multiple use of 2WT

●Experienced dealers (with 4WT, they

ask if there is a 2WT Demand)

●New Projects (IFAD, FAO, EU etc)

●Support from Devolved County

Governments since 2013

A small

bailer

at

ATDC -

Siakago

Results: Overview of Market Analysis of Small Scale Mechanization

Sector Profile and organization

2WT imports are by individuals and companies withshort-term service needs, mostly in transport

2WT for closing gaps between manual and animalpowered systems, and the 4WT is absent.

In a country with only 800 4WT absorption capacity,only some 1000 tractors are estimated to be workingtoday.

There is no known central effort to increase 2WT butthere are for 4WT

There are new opportunities in a devolved agriculturalsector and FACASI should move BDS faster to tap intothe great opportunities.

Output 2.2 Business Model Design.

Identification of key drivers.

Identification of existing business models

Business model mapping

Analysis of the performance of models

Identification of critical success factors

Preparation of an upgrading plan.

Results: BM design Mapping

Model Stakeholders Functions/ Services Interventions

for upgrading Dealer Service

provider

Government/

donor/ project

BM 1

Eric

(Bungoma)

- ATDC

- Mechanics

- Contractor

provides hire

services to

farmers

ATDC is in

charge of the

tractor but

provides it to

the SP when

needed

- Broaden the

range of services

offered – expand

accessories

- Finance (equity

bank)

- Business skills

training

BM 2

Rayfield

(Eldoret)

- Second hand

market actors for

4WTs

- Service

providers and

operators

- Imports and

distributes tractors

and machinery

- Manufactures

implements

- Provides

workshop and

support services

Provides

services –

ploughing,

seeding,

spraying,

harvesting,

transport

- Diversify into

2WT as dealer

and SP

- Finance

- Training

- Branding

Results: BM design Mapping (Contd)Model Stakeholders Functions/ Services Interventions

for upgrading Dealer Service

provider

Government/

donor/ project

BM 3

Muriuki/

Mwiti

(Laikipia)

- FAO

- Mechanics

- Suppliers

- Transporters

-

- Contractor

provides

planting and

spraying

services to

farmers

(planting

services are

with draught

animals)

KENDAT set

up the SP in

business

- Project

provided

training support

-FAO provided

training support

- 2WT

implements

- Access to

finance

- Training in

operations and

business

management

- Access to spare

parts dealers

BM 4

Teckia

venture

(Laikipia)

- Ol-Pajeta

conservancy of

wildlife –

training (project)

- Input suppliers

- Financial

institution

- Contractor

provides hire

services to

farmers for

planting

FAO support in

providing a

4WT

KENDAT set

up the 2WT SP

in business

- Project

support training

- Diversify

operations – agro

vet dealership

with spare parts

- Access to

finance

- Training in

machinery

operations

Results: BM design Mapping (Contd)

Model Stakeholders Functions/ Services Interventions

for upgrading Dealer Service

provider

Government/

donor/ project

BM 5

Kirari

(Laikipia)

- Dealer

- Operators

- Agro-dealers

- Mechanics

- Contractor

provides hire

services to

farmers

(ploughing,

transportation)

No prospects.

(The SP has no

interest to

upgrade because

of his age)

Results: Business model analysisPerformance assessment:

Components Private sector led SP models Dealer/

manufacturer led

supply chain

model

BM1 –

Muiuki/

Mwiti

Laikipia

BM2

Teckia

venture

Laikipia

BM3

Kirari

Laikipia

BM4

Eric

Bungoma

BM5

Rayfield

Eldoret

Infrastructure +++ ++ +++ ++ ++++

Offering (Product/ service)

++++ +++ +++ ++ ++++

Customer

++++ ++++ ++ +++ ++++

Monetization

+++ ++ ++ + ++++

Sustainability

++++ +++ ++++ + ++++

Critical Success Factors

Market linked TIMELY farming systems: Value-chainapproach

Access to PROVEN & SERVICEABLE equipment andaffordability of equipment: hence the need for ServiceProvider based systems.

Availability of financial services but for Service ProvidersFIRST.

Quality of work and life of machine: Training of ServiceProviders, 2WT operation as well as equipment/implements

Business development services: Training Service Providersin Costing services and Record keeping

Full-range, value-chain services: From planters to threshers and shellers, to animal feed choppers and millers

New Learning (Thanks to FACASI)…

● 2WT demand is luke-warm but has definite

space

● 2WT with CA Equipment lacks the critical mass

hence the necessary support services

● 2WT with CA Equipment lacks knowledge-

backing among users, hence the low demand

● It is possible to generate organic growth of

2WT services but it will take too long…

● Use FACASI unique place to influence other

BAU interventions in the making ($266m effort)

KCEP Business Model

● FAO (themselves) to train Master trainers to train

Trainers

● Opportunity Provision: Contract produce buyers to

hopefully contract farmers

● Education: Train farmers in CA

● Get 40000 farmers to adopt CA in 4 months, 80000

in a year!

● Build-in input voucher scheme

● Build support services for business advancement

Preparation of a Business

Model Upgrading Plan:

Building a Successful Business Model

1. Understand localised mechanization needs

2. Build a Business Case for each Service

3. Build Business Cluster (IP) among identified

stakeholders

4. Train Service providers beyond but with

Mechanization as entry point

5. Avail range of power and equipment for hire at

a hub with room for other agribusiness services

6. Organize exposure, information exchange,

value-addition etc. and links to markets

Way Forward for FACASI (Kenya):

• Have one Mechanization Hire Hub in each of

Laikipia/Meru and Bungoma/Uashin-Gishu

• Locals helped build ownership through visits

and training to see, hear, and learn from

farmers and SPs with experience in

conservation agriculture.

• Local hirers / Service Providers are integrated

and promoted as servers of choice placed on

a equipment commission and purchase

scheme (price of service control)

Way Forward for FACASI (Kenya):

• Attraction based on numbers and figure-

work to Micro-finance institutions

• Farmers can grow own finance scheme via

training, CVs and produce sales

• Broad advisory and marketing services (IT

backing, GIS mapping, Mpesa etc.)

• Sustain self-regulating mechanisms to

ensure win-win growth and effective

replication nationally and even regionally.

Thankyou…

Ahsante Sana…