Earlier this week, I attended a workshop to discuss the future financing of Africa's seed industry, convened by the Alliance for a Green Revolution in Africa and held at one of Nairobi's swankiest hotels, Tribe, located next to the Village Market in Gigiri. While Tribe is an extremely stylish venue, no question, it fails the gestalt test in that its constituent parts make up much more than its whole. Everything is beautiful - yet together it somehow lacks a coherent theme. The venue aside, the workshop itself was outstanding.
Some six years ago, nobody was interested in investing in Africa's seed sector, so the presence of at least six representatives from actual or potential investors was very encouraging. Increasing populations, increasing food prices and long term investment in the breeding of crop varieties specifically suited to a range of different topographies have created an environment which may break the low input/low output cycle in African agriculture.
But attractive industry fundamentals don't automatically result in attractive investment opportunities. Managing a seed business is difficult and fraught with risk. It involves the maintenance of "breeder seed" - the parental material from which hybrid seed is itself produced. It involves uninsurable agricultural risks (drought, disease, pests, etc), regardless of whether it is produced by outgrowers or on owned farm land. Especially for hybrid seed, maintaining appropriate isolation during crop flowering to avoid genetic contamination is a challenge. Once the seed crop is harvested, it needs to be transported for sorting, drying, processing and storage, with attendant logistics and processing risks. Because agriculture is seasonal, all this has to be done some 5-8 months before the seeds are actually sold to farmers, which in turn leads to a cash flow challenge during the holding period. And then, seed companies face the universal business challenge of managing their large number of small agro-dealer debtors.......
Growth, too, brings its own business challenges. An owner-manager can generally manage a small business without too much managerial support, but as his/her business grows, s/he must invest in recruiting new managers, the development of business administration systems, internal controls and the delegation of authority.
Given all these risks, it often amazes me that there are people out there who want to take up this challenge and deliver improved seed to Africa's farmers. But there are, and they are a remarkable group of astonishingly determined and unsung heroes. During the conference, Aline O'Connor Funk, consultant to AGRA and a former seed business owner-manager in the United States, shared with us the tag-line of the American Seed Association. "First, the seed". It would take a brave person to disagree.