MAHESH PATEL’S SPEECH AT LONDON BUSINESS SCHOOL

Conference organized by London Business School's Africa Business Summit on 25th April in London where I was Keynote Speaker.

Their theme, "Leading the Way - Growth Strategies in an African Context”

Mine was as Follows

7 min. Video15 min. speech20 min. Q & A

ETGINTRODUCTIONS Good afternoon everyone. It's time now to talk about Africa. Thank you for inviting me to share my experiences with you. I would like to begin by playing a video which will provide you with some background on the Export Trading Group. (ETG - Video 7 min.)  This video is where Export Trading Group is standing now. Needless to say it has not been easy right from the start. I would like to have you remember 4 key elements from my intervention, and that is the first one: 1. Be focused, develop strengths and persevere. Developing Agricultural business, particularly in Africa, is a long-term play.2. The second, be passionate about what you choose to do. That will keep you moving forward.3. The third is my passion, my belief: there is a strong future for agricultural business growth in Africa. We have around 60% of the world’s uncultivated arable land which is suitable for crop production. I have plenty of ideas to share with you on what you could do.4. Last but not least, empower people – my mission is to empower African farmers by connecting them to a global value chain. My story, which I’ll share now, is the story of the African farmer moving from small scale subsistence to a steady commercial output.   1) Why is perseverance so important? Because I started with a business on the verge of receivership. A long way from where it is now. I joined Export Finance Company Limited in Nairobi in 1977 as CFO. At the time, the company used to distribute and market products manufactured by multinationals in Kenya such as Colgate-Palmolive, Chloride Exide and Del Monte to East, Central and Horn of Africa.  

In this business, I learnt about how to move goods from origin to remote destinations. This was not so simple because of the challenges of transporting on roads which were run-down or non-existent, lack of infrastructure, basic communication and civil unrest.  In 1981, the company was on the verge of receivership. I bought 100% of its shares and re-named it Export Trading Company Limited. During this time, competition in consumer goods distribution was stiff and there was an urgent need to change the business. I had to look for an opportunity with higher margins and one where I could still use my strength in logistics. I found my opportunity in agricultural commodity trading. At the same time, the African agricultural space was mainly small scale subsistence farming with most countries having about 70 percent of their population employed in this sector. Average production of food staples like Maize, Rice and Beans was hardly a few tones per family. Farmers had virtually no access to funding and yields were extremely low. Fertilizer usage was minimal as farmers had no funding to purchase this. It was a vicious cycle low productivity from minimal fertilizer usage resulted in low yields and the corresponding lower realization for crops sold meant that the farmer lacked the ability to purchase fertilizer to increase productivity. Small holder farmers would experience in the late 1980s the first major change, moving from government control to free markets. The late 1980s were a unique time in the Agricultural commodity space in East and Central Africa, most governments at the time were liberalizing the trade in basic subsistence food commodities. Previous to this the state controlled purchase of Agricultural commodities. This was grossly inefficient as there was a monopolistic structure and often lack of adequate funding to purchase product from the farmers. In many cases farmers were paid a year late for their crops or in some instances not at all. This resulted in the destruction of productivity. With the free market came competition and instant cash remuneration for the farmers this stimulated productivity. Additionally governments sold their Grain collection infrastructure to the private sector.   2) I saw this as a big opportunity to build on my logistics background and get into my passion for agriculture. It was apparent that if better prices were paid to farmers, productivity would increase substantially. The new ETG was born, accompanying farmers through this major step. We specialized in purchasing Agricultural commodities as close to farm gate level as possible and marketing these commodities in the country, region and the international markets. We purchased Grain procurement infrastructure that was being privatized by Governments and invested heavily in creation of farm gate infrastructure to purchase commodity directly from farmers. This investment has paid off and ETG now has over 300 procurement centers across 20 African countries, and relations with several thousands of farmers whose product we market. Further serving the needs of farmers, the same infrastructure is used to distribute fertilizer and other agricultural inputs to the small scale farmers. This is a very powerful partnership,

we purchase product from the farmer at top prices and sell to them fertilizer at reasonable prices boosting production.  By the early 1990s ETG had become a big force in the African agricultural space and was a significant contributor to hosting production. We were the leading supplier to Food Aid and the commercial markets in most of the countries we operated in.  In mid 1990s we took the decision to further enhance our business by investing in value add processing industries. This not only boasted our margins but created additional employment and ensured a more sustainable business. ETG invested in distribution chains in international markets and became a truly integrated supply chain manager in the agricultural sector.  Further empowering the farmers, ETG is providing a permanent marketplace for their output. ETG realizes that our business is dependent on small holder production and has created a true partnership with the small holder ensuring that whether in surplus or deficit commodity season, ETG will continue to purchase commodity. This reassures farmers that there is a permanent market which is available year-round to purchase their produce. We also respect that farmers earn their incomes once per season and so commit to paying them cash on delivery and at a minimum price or existing fair market price.    3) What contributed to this success? I’d like to touch on a couple points which contributed to my success: a focus on the farmer, systematic reinvesting, careful expansion, team spirit and goes without saying the Creation Of ETG Family. I had an unwavering focus on the farmer: We motivate, educate, inspire and guarantee farmers a market for their produce and have a commitment to pay them the best possible prices. This provides a long-term incentive for the farmer to continue growing food commercially and not just for subsistence. At ETG, we operate with the motto, “If farmers grow, we grow too”.   Majority of the profits which were generated by the business were reinvested back into the business to build infrastructure or finance trading activities. Over time, we developed our reputation and credibility and were able to seek trade finance loans from banks. The expansion into each new country of operation was gradual and well thought-through. Each country in Africa is unique with a different tradition, culture, customs, language, education and way of operating. This requires time, tolerance, lots of patience to understand and adapt operations. I built the business with a team of individuals who were eager to grow and learn, who could take on multiple roles and adapt as we expanded. Employees in senior positions have been with the company for at least 15years and some are shareholders.

   4) What next? In the last three years, we welcomed corporate investors in our business. We are working as partners to further grow the business and evolve into a more corporate company.The future looks bright. With a growing world population and Africa having around 60% of the world’s uncultivated arable land which is suitable for crop production, I strongly believe that Africa is the future breadbasket of the World and that this will be largely achieved through empowering the small holder to produce more. The opportunity is here, just in front of us.