Josh Ruxin, head of Rwanda Works, discusses how investing in agribusiness could solve a number of the developing world’s difficulties.
Question: What types of industries would work best in Rwanda?
Josh Ruxin: So there are a couple types of industries that I’ve had a chance to study through my new NGO Rwanda Works. We actually thought we knew what needed to happen for entrepreneurs. This is going back a couple of years ago when our first investors came onboard. We thought that the best way to improve the private sector was to coach young entrepreneurs, was to provide expanded micro financing or midlevel capital for emerging businesses and we actually called in our friends at FSG, which is a small consulting firm that focuses on not for profits and foundations and we said we think we know what is going on here, but can you take a look at some of these industries and tell us what you think and they came back to us and they said there are a few areas where investments could be placed. One is tourism. One is fashion and home décor, which is really a bit of a euphemism for handy crafts and then lastly agribusiness.
Over the last year and a half I’ve been working with my team to continue to winnow down those opportunities to figure out where can we have the most impact, not just in raising capital or generating profits and creating employment, but also in throwing off social benefits. And what we’ve landed on is agribusiness.
The reason is that even though 90 percent or Rwanda is relying on agriculture for their livelihoods they’re incredibly underproductive. In fact, they’re so underproductive I’ve got a friend; he’s got a five million dollar maize mill, which he built, which is considered state-of-the-art. If you brought somebody from Nebraska out to take a look at this maize mill or corn mill they would say, “Wow, this could be out in Omaha.” But it’s not. It’s in Rwanda, so why isn’t it running all the time? The reason is there is not enough corn. There is not enough maize and when it was built he figured well certainly in an agrarian society there is going to be enough corn, I just go to the marketplace and I buy it. But what he found was the people were basically consuming just enough to stay alive and there wasn’t a lot going on in the marketplace.
So this is just one small example of one of the areas of agribusiness which is really ripe for investment and one of the big investment opportunities we’re looking at right now is consolidating farms, building multi thousand hectare farms with irrigation and with very sound organic or environmentally sound practices so that we can produce maize and soy, which run through these mills and then what happens to it? Well a couple things happen to it.
One is that of course it can be used for animal feed and when it’s used for animal feed, for chickens or for cows it makes the cows more productive. It makes the chickens fatter. It brings down the overall price of those protein sources including dairy, milk, yogurt, and suddenly very poor Rwandans who could not afford to buy these high protein products can start to purchase them. And when they can purchase those products that means that their kids are better nourished and when their kids are better nourished they’re IQs go up. It’s something that people don’t like to talk about, the cognitive impairment that happens from malnutrition. So by investing in agribusiness you can actually solve a number of different problems all at once, but it’s not easy. You actually have to start somewhere and sometimes starting somewhere means literally on the ground with farming.
Creative Approaches to Improving Sub-Saharan Agriculture
Josh Ruxin: I mean Rwanda is the most densely populated country in sub-Saharan Africa and the average farm size is only about one acre, which is not a lot of land and so we do need to figure out ways to farm more effectively and more productively. Of course there aren’t a lot of skyscrapers, so we’re not looking necessarily up, but sometimes what we are is looking up at a very micro level, so for example, peppers can be grown effectively inside large feedbags because you can actually concentrate the nutrients inside the bag. You can make sure that moisture is retained and you can have these incredibly productive pepper plants like green peppers, bell peppers, red peppers where which you can actually just put in your backyard or just outside the front door and actually have productivity happening in an area where otherwise it’s obviously not meant for industrial scale agriculture.
So we have taken a look at some of the different opportunities like that thought right now frankly, in Kigali in particular it is urbanizing at such an extraordinary rate that everything is being cemented over and where there was farm land it’s just new housing projects, low income housing, middle income housing that is going in, so it’s becoming extremely residential and right now I think the assumption is the grasslands of the country will be fertile enough to provide for us and as that urban migration begins to pick up I think there is this incredible opportunity for entrepreneurs in agribusiness in particular to get back to the basics and produce basic food, commodities for local consumption.
Lots of people when they think about foreign direct investment in a country like Rwanda think well what are we going to produce that can be exported? Exporting from Rwanda is really thought. There is no rail line. There is one planned to go out through Tanzania. There is just a direct flight three times a week to Europe, but it’s very expensive to ship things out of the country. You don’t need to look outside of the country in so many of the sub-Saharan African countries. With urbanization there are new opportunities that are emerging out in the countryside. You just need to get it right and do so in a sustainable way.
Question: What projects has Rwanda Works been involved with in this area?
Josh Ruxin: I can tell you what we’re piloting right now and might work just as well. So one of our pilot projects that we’re kicking off right now is actually in the dairy industry, so when a lot of people think about Rwanda they think about they’re being lots of cows and these Ankole cattle with their long steers, big horns on them and the fact is that most cows in Rwanda are not very productive and organizations like Heifer and Send A Cow have been working for years to build up the genetic material in Rwanda so that cows can produce 30, 40 liters of milk, but even in these areas where those cows are based now they’re not necessarily producing that.
One reason is they don’t have good enough feed or the feed is too expensive and that’s one area we’re looking at. And another reason is that they’re too far from the commercial processors, so if you’ve got a great cow living at your house that you’re feeding well and providing adequate water to if it’s producing 35 liters and there isn’t a market within four hours of your house you’re not going to have that cow be so productive because you can’t consume 35 liters a day and there is nowhere to sell it.
So one of the things we’re doing is actually helping to consolidate the dairy industry and purchasing one of the first refrigerated trucks in the country so that we can help those farmers transport that milk to the commercial buyers in Kigali. And again, this should in the long term lower the price of dairy, which in turn will improve children’s health, which in turn will provide us in Rwanda with kids who do better in school, more likely to attend, and who excel.
Recorded on: August 13, 2009