Nigeria’s weakening local currency and a shortage of US dollars in the country, have prompted many food processors and other users of agricultural raw materials to source commodities locally instead of importing them. A company well-positioned to benefit from this trend is Zowasel, a start-up that has built a digital marketplace connecting small-scale farmers directly with buyers.
Jaco Maritz spoke to Zowasel’s co-founders Jerry Oche (CEO) and Oghenekome Umuerri (CFO) about how they built the business and why running a digital commodities marketplace required the company to set up shop throughout rural Nigeria.
How did the idea for the business come about?
Oche: I grew up in a family of farmers. My mom, who recently passed on, was a smallholder farmer. After university, where I studied economics, I started a career in advertising and, in 2011, I founded a digital advertising agency called Street Toolz.
Around 2015, I consulted for organisations, such as the World Bank, which came to us for data and research regarding agriculture in Nigeria. It got me thinking about my background of growing up in a farming community, and that I should be one of the people solving the sector’s challenges.
While still running at the ad agency, I appointed two people to help me with a commodity price comparison platform for farmers. When that didn’t work, we switched to a crowdfunding platform. Farmers could post their projects online and crowdsource funding from various individuals who would receive a return on their investment come harvest time.
However, the crowdfunding platform was also not successful and we had to move over to what we are doing now. We did learn many lessons from that venture: what works and what doesn’t, and we also met a lot of farmers. We discovered the biggest pain point for them was market access; finding a place to sell their commodities and making money from that.
Umuerri: The idea behind the crowdfunding platform was that after harvest, the sale of the commodities would provide a return to investors. But Jerry discovered farmers had a problem in terms of selling. He realised they had to be guided throughout the entire process, including the sale of the commodity. It made more sense to focus on linking these smallholders with buyers.
Oche: This was how Zowasel was born, to provide access to market for these smallholders. In 2017, I stepped down as the CEO of the advertising agency to focus 100% on Zowasel.
Building a marketplace is tough. You need to have buyers and sellers on the platform from the start. How have you managed this?
Oche: We already had a network of farmers through the crowdfunding platform. On the buyers’ side, I knew many of the big corporates in Nigeria as a result of my advertising agency work. It was easy to knock on doors and tell them what we were doing. It created a soft landing for us to onboard both buyers and sellers.
What type of companies are your major buyers?
Oche: We have a mixture of multinational and Nigerian food processors as well as individuals. Some of the buyers produce for the Nigerian market while others export. For grains, the majority of buyers produce products for the local market. Nigeria has over 200 million people, so there’s a lot of local demand. Export crops include cocoa, sesame and soya beans.
Tell us about your value proposition to buyers.
Oche: Many large Nigerian companies import commodities as it is difficult for them to procure the right quantity and quality locally. We take care of corporates’ quality specifications by teaching farmers to cultivate the correct varieties and we train them in terms of post-harvest handling. We aggregate these commodities from farmers in our network and deliver to our buyers. We enable our buyers to focus on their core business of processing and manufacturing, while we take care of the raw material supply.
Zowasel eliminates middlemen from the commodity supply chain. There can easily be five or more middlemen between the farmer and buyer. This has created a situation where there is little price transparency. We provide our customers with daily information on the prices at which farmers are selling and how much the buyers are willing to pay.
Umuerri: Traceability is currently a big topic. Because we work directly with the farmers, we can provide buyers with accurate information on exactly who produced the commodities, how they were produced and the chemicals used. This is in contrast to traditional middlemen who consolidate commodities from various farmers. They are unable to identify the source or the environment in which they were cultivated.
If I was a food processor in Lagos and wanted to buy palm oil, as an example, through the Zowasel platform, how would I do that?
Oche: Currently, there are two systems. Some corporates and multinationals prefer to do it themselves. They visit our website, place the order and receive real-time updates until the commodities are delivered to their doorstep. Others prefer to have our account managers do it for them. They would call an account manager or send an email, and our staff would manage the process for them.
Explain how you source the farmers’ commodities, and what type of support you provide to them.
Oche: We have 25 crop centres in rural areas throughout the country. From there, we provide free agronomic training and support to help farmers improve yields and the quality of their produce. We also help them to sell on our platform. In addition, we provide farmers with improved farm inputs, such as herbicides and pesticides, which are typically quite difficult to source in remote areas of Nigeria. In some locations, we provide mechanisation services.
We train them to grow crops with the buyers in mind. For example, maize has several types of buyers: animal feed producers, brewers, baby food manufacturers, and those who produce an edible community. Each requires a different quality of maize.
The crop centres act as points where farmers aggregate their commodities, and from where we deliver to our buyers.
Furthermore, we assist with access to financing. Traditionally banks found it difficult to approve loans because these smallholder farmers live in remote areas and don’t have any financial records. We work with Nigeria-based VBank and UK-based fintech SympliFi. We have production data of the farmers who sell through our platform and this helps banks identify who is creditworthy.
What about delivering the commodities?
Oche: We have logistics partners. Once we receive an order, we hand it over to the logistics partners and they do the pick-up and delivery.
It seems the business involves a lot of work with farmers as opposed to just connecting buyers and sellers.
Oche: Yes. In the beginning, we focused a lot on the online part of it. But we soon realised we have to build the offline infrastructure in rural areas for it to work. It’s not a scenario of building the technology and just pressing play. You need to spend time with the farmers to earn their trust. Our staff don’t leave after the farming season; you need to be there all year.
How does the company generate revenue?
Umuerri: We take a 1.5% commission from both the buyers and sellers; 3% on each transaction in total.
How was the company financed?
Umuerri: Jerry initially funded the company. However, over time, we’ve received investment from companies like Promasidor, a Nigeria-based FMCG producer. We’ve also raised grants from organisations like the German development agency GIZ and Japan International Cooperation Agency.
We’re still very early-stage and building out our infrastructure. We anticipate we will reach breakeven in two to three years.
How many people currently work for the company?
Oche: We have over 20 full-time staff on our payroll as well as several part-time contributors. We also have a team of over 100 freelancers who help us profile smallholders in the field.
And how have you managed to convince them to work at the start-up?
Oche: I believe one of the reasons for our success is my ability to attract talent far smarter than I am. The only way to do this is to set a vision of what we’re trying to achieve. People from top multinational companies have joined our team because they believe in the vision and that it is scalable. What we are doing is not something many people have done before, therefore we don’t hire for credentials, we hire for passion.
Umuerri: There is a problem in Nigeria’s agricultural space and everyone can see the problem. The opportunity is massive and clear; so people are keen to contribute to the solution, particularly young people in Nigeria. The way Jerry applies himself to the work inspires others and that is how we’ve been able to attract skilled people to work with us.