Q&A: Tanzania's Leading Rice Farmer, KPL, Setting the Pace

August 7, 2015
Source
Business Times

CARTER COLEMAN is the Founder and CEO of Kilombero Plantation Limited (KPL), Tanzania’s leading rice producer. The 5,818-hectare farm is located in the Kilombero Valley, 450km from Dar es Salaam. Prior to starting AGRICA, Coleman founded the Tanzanian Forest Conservation Group, a non-profit entity focused on preserving local forests. In the following interview with SKYE LAWRENCE, he says the need for preserving the rainforest from encroaching villages became evident to him during the two years he spent hang-gliding over the mountains -- and training falcons after he first came to Tanzania as a Rotary International Fellow in 1989. The Tanzanian Forest Conservation Group he formed has grown into a large NGO. Excerpts...

SKYE LAWRENCE: What is the history of the farm – and how did you end up buying it?

CARTER COLEMAN: In 2005, I decided to do a farming project. I wanted the farm to be in Tanzania because I’d been there since 1989. I hired a former Commonwealth Development Corporation (DCD) manager who had worked in Malawi and Tanzania. He and I looked around Tanzania for a year until we found this defunct farm which also had a title deed – a major advantage.

The farm had originally been a joint venture between the Tanzanian and North Korean Governments, an almost personal project between Kim Il-Sung and Julius Nyerere, the Founding President of Tanzania. In the late 1980s, the North Korean army cleared 5,800 hectares in the Kilombero Valley. Because there is no electricity grid, they built a little hydro-power station in the foothills of the Udzungwa- Mountains. They didn’t put in irrigation system – the most expensive piece of any farm – because North Korea ran out of money after the collapse of the Soviet Union!

All the North Koreans in Tanzania went home. So, the farm was left basically defunct – and was owned by the Tanzania Government until we came along and signed a purchase contract in 2006. We spent the last of our seed capital on hiring consultants to do studies for our business plan. Then we were like, “whoa, we need about US$70 million to have an irrigated 5,000-hectare farm!”

QUESTION: How did you fund the project?

ANSWER: We spent a year raising capital by visiting investment banks and private equity firms who basically said ‘thanks. Good luck with that. See you around!’ Agriculture is capital-intensive, has a long time horizon and is high risk with-low-to moderate returns. We were very lucky to have been introduced to Capricorn Investments who is our majority shareholder. It is primarily Jeff Skoll’s money. Capricorn has a long-term principled investment approach with a small portion of their overall portfolio willing to do high impact investments like our farm.

Getting the first anchor investor like Capricorn Investments is key to getting a project like this going. Now because British Secretary of State Justine Greening we have investment from AgDevCo. She believes in more-trade-less-aid – and that the British should be supporting British companies creating jobs and providing food security in the developing world. She visited the farm in June 2013 and – because it had become a showcase commercial farm with a transformative smallholder programme – she asked AgDevCo to invest.

Q: Was your goal to sell locally in Tanzania?

A: The goal is to sell within the East African Community (EAC): Burundi, Kenya, Rwanda, Uganda and Tanzania. The business case for the farm – and, indirectly, for each of the half-a-million smallholder rice farmers in Tanzania – is zero-duty trade within the Community protected by the common external tariff (CET). It is impossible to compete as a Tanzanian rice producer with agriculturally-developed countries such as Pakistan or Thailand. These countries have invested billions of dollars in irrigation over the last 60 years, and have a variety of agricultural subsidies for producers. Africa is years away from a similar system – so, you rely on the common external tariff.  

Q: What are the farm’s next steps?

A: Next, we are completing the pivot irrigation system to cover 3,036 hectares. Our first 500 kilowatt renewable bio-mass plant that gasifies rice husks is soon to coming online. We plan to build a second 1.2 megawatt plant soon so that we will be totally renewable – using hydro and bio-mass, with the exception of the diesel for the tractors and the combines. We will be completely off grid.

We have a strong smallholder programme where we’ve trained 6,527 farmer families and increased yields from one tonne-per-hectare to 4.42 tonnes a hectare this last season.

The Kilombero Valley is a flood plain between two mountain rainforests that gets a huge amount of rain. It’s hard to grow anything but rice in the rainy season. Everyone in the valley, around 150,000–200,000 people, rely solely on a rain-fed rice crop for their annual income and food security. The intensive rice system that we have introduced has been transformative for farmers.

Q: How have you increased yields?

A: By planting on a grid that is 25 centimetres by 25 centimetres. This is an unconventionally wide-row spacing and intra-row seed spacing. You get a better yield with these methods – and by planting on a grid rather than just broadcast helter-skelter. With an unconventionally-wide array of spacing, you get deeper root system, bushier plant – and, therefore: three and four times the grain.

Q: If yields are increasing, what are the biggest problems you see for small-holders to scale up production?

A: Smallholders need crop financing. We need a micro-financing institution (MFI), or a bank, to lend to them, and then KPL can have an off-take agreement. We’ve been working with one commercial bank and one MFI. The commercial bank had a great repayment rate, but then decided it was not worth the trouble because the programme was too small and not scalable fast enough, so they pulled out. The MFI had a bad repayment rate and, so, they didn’t continue.

Now I’m talking to two banks and AgDevCo about devoting some resources to this issue. Farmers need financing options to lift themselves out of poverty by not pre-selling a portion, or the majority of their crop prior to harvest. If they do this, it is worth a fifth of what it is worth if they can hold on until harvest. Pre-selling – and, therefore, losing value – is what repeatedly happens in Africa.

Q: In the US, there is a farm credit union system. Would something like that be a model that the Tanzanian government could set up?

A: Funding is a key challenge. The Tanzania government has this thing called Big Results Now (BRN) Initiative where they have Key Performance Indicators. They talk about our company – which is a registered Tanzanian Company – as a model project. They want fifteen projects like ours by 2017; a 1,000 new warehouses around the country, etc!

When they were announcing their Key Performance Indicators to the private sector, I said “ you don’t have a prayer of hitting your KPI’s until you sort out the market!”

In 2013 – with no forewarning or consultation with producers or consultation with the East African Community – the Tanzania government allowed 80,000 tonnes of Pakistani rice to be imported exempt from the common external tariff of the EAC! First: the wholesale price of rice plunged 54 per cent in Tanzania. Then Uganda, Rwanda and Burundi – which are key export markets for Tanzania’s surplus rice – imposed the common external tariff on all Tanzanian rice. It was a major double blow that destroyed the domestic and export markets. But, things are now just beginning to normalize.

Q: Tellus a bit about the Southern Agricultural Corridor of Tanzania? How is Agrica connected to SAGCoT?

A: KPL is the showcase project because we are in the Corridor – and we’re doing exactly what this Initiative wants: a state of the art commercial farm and with a lot of effective smallholder programmes.

SAGCoT is a great thing because the SAGCoT Centre plays a role in getting the government to stop the duty-free rice imports, for example. They play a useful lobbying role for sensible agricultural policy – and attracting donor funding for infrastructure projects, roads and power grids. [Africa Agribusiness Magazine].