The Reporter (Addis Ababa)

25 January 2014

Ethiopia: Financing Ideas to Swiftly Incubate Businesses

interview

Photo: Addis Fortune
File photo.

The Ethiopian Sustainable Agribusiness Incubator is a project funded by the United States and run by Precise Consult International (PCI). This is a firm mostly run by returnee diaspora from the US with the aim of hitching innovative business ideas into sesame, honey and dairy businesses.

PCI is a firm working on various managerial, financial and investment consultancy activities. And on agribusiness, both the US and PCI have inked a three-year deal to assist some individuals who have innovative business ideas yet remaining outside due to lack of exposure, finance and marketing challenges. Having realized that, an agribusiness investment forum was held here some days ago to connect innovators with financiers. Amanuel Assefa is deputy chief of the party of the incubation project. He spoke to Birhanu Fikade of The Reporter about dealing with the investors and other interested personalities, what the innovative ideas will do in bettering the sesame, honey and dairy subsectors and issues related to investment and value additions. Excerpts:

The Reporter: Let's start by talking about "Agribusiness Incubation in Ethiopia". What does this mean?

Amanuel Assefa: First of all, the project is supported by the United States Agency for International Development (USAID). In fact our relation with USAID is beyond financial support and working together in many aspects. "Ethiopian Sustainable Agribusiness Incubator" is a project different and the first to be implemented in Ethiopia. Some countries like Chile are very successful in running the project. In Africa, Mozambique is undertaking it well. However, it is not that much known here. The word 'incubator' itself is derived from the poultry science where eggs are artificially incubated in a short period of time. That same concept is to be applied here in the agribusiness. We are working on how to assist the formation of new companies. We have a lot of people full of ideas in Ethiopia. Yet they might not have the startups. They will know little about the business and the market. Hence, we are there to assist those who have innovative business ideas and the passion to engage themselves in the business. We will provide them essential services including financial supports from elsewhere so that they could tap into the real business world. We have value chain approach where the channels from producer to the end user are considered as key players and what we are trying to do is to address loopholes of the value chain. If transformation must be realized, many more companies need to be formed for the purpose. In a nutshell agribusiness sector and the entire Ethiopian marketing system is in a serious problem. For instance, middlemen dictate how the market functions.

What unique ideas do you expect to prevent such holdups and how do you identify the best ideas?

Actually we identify the champion ideas through competitions. We called for ideas to be submitted to us through different media. Our real target was to have the company of fresh graduates from the universities. These people are coming into the labor force with new skills and ideas. They are full of energy. After graduation some will have the chance to be recruited somewhere in the public or private sectors. Many are out of the margin. Therefore, by taking that into account we contacted some eight universities for the task. Unfortunately, we did not have that much applicants as we had anticipated. We are not happy about that. Hence, we went for those who were trying to do something in the agribusiness. In a short period of time we managed to have some 84 applicants. After thorough screening and evaluations, out of them, the champions have been selected by the board made up of public sector professionals and elite businesses from private sector. We provided them a month-long business plan training. So who are the finalists then?

For the sesame, honey and dairy subsectors, some 19 individuals have been selected for their innovative ideas.

How much money could each recruited entrepreneur get? What do you mean by money... You said you will provide them with finance for the projects they bring forth?

We don't give them a dime. But we facilitate the process on how they could get the required amount. One way could mean that we have staged agribusiness investment forum. The forum will bring those investors with thick wallets but doubting where to throw their money for better returns. We created a platform for that. For those intending to take bank loans will have our assistance for collaterals. If they intend to invest some 30 percent equity, we will assist them to have a non-collateral based loan from the Development Bank of Ethiopia. Equity financiers can also be approached for the matter. What makes Ethiopian agribusiness peculiar from the existing ventures? It is peculiar in a way innovative business ideas were sought and to be implemented to fill the gaps of the value chains. Our major aim is to achieve the transformation of those subsectors. The project is unique which will enable the formation of new companies by individuals who never had that exposure before. Such is a scorching job to deal with. We provide every required services for them. I think all that makes the peculiarity.

But the subsectors targeted are well known for their contributions; for instance sesame contributing well to the economy next to coffee. Why have those subsectors become the center of your interest? They have been identified both by USAID and PCI. Honey, dairy and sesame have huge unexplored potential. Yes, sesame is becoming economically significant. But it is merely exported just as a raw product. We don't have the instrument for value addition. The Chinese are putting a 30 to 40 percent higher value to the sesame they buy from Ethiopia. Honey and dairy are no exceptions. We are not there yet in maximizing the returns. Hence, we attempted to tap the potentials of these sectors.

How much money will the 19 finalist projects require to be invested on?

They do not necessarily require much. They are very small in scale. Some of them may need an amount of five million birr investment. By the way, agribusiness investment forums are common in the US today. It was PCI which managed to initiate such activities there in the US too. From the selected projects, one was submitted by a professor of biotechnology who is focused at innovating the sesame varieties in Ethiopia. Sesame is well known for shattering before harvest. Due to that some 30 percent yield is lost in every crop season. Non-shattering varieties are rare elsewhere across the world. Only the US has succeeded to have such varieties and it's very difficult to have one such variety. Hence the professor intends to come up with a non-shattering and three-fold yielding sesame variety through tissue culture methods. Hence, we are looking for partners who can work with the professor.

Is the professor an Ethiopian national?

Yes. He has been living in the states for quite a while. He is well experienced in dealing with teff grain and other crops. Currently, he intends to come back and work on sesame. He knows the crop well as his family survived on it here. We are assisting him to establish contacts with universities too. What are the possibilities of the agribusiness project if new jobs are to be created? Job creation is the focal point in addition to new company formation which we are working on. Probably from five to 30 employees will have a chance to win bread out of each of the 19 companies coming up into play. Especially, sesame will do much better than the rest of the subsectors in new job creations.

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