SOKOINE UNIVERSITY GRADUATE ENTREPRENEURS COOPERATIVE SOCIETY

SUGECOStudy on Establishment of a Special Scheme for Knowledge Intensive and

Innovative Agriculture and Agribusiness Start-ups

Institute of Management and Entrepreneurship Development (IMED

Dr. Donath Olomi, Dr. Goodluck Charles, Dr. Neema Mori

May, 2013

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Litafika?

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Outline

• Background, Objectives, Methodology• Key Findings• Recommendations• Proposed Concept Note: Special Scheme for

Knowledge Intensive and Innovative Agriculture and Agribusiness Start-ups

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Enrolment in Tertiary Education (000)

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Background and Justification

• Expanding formal education vs. High and rising youth unemployment (time bomb)

• Expanding tertiary education vs. Graduate unemployment vs a severe shortage of skilled manpower

• Students at all levels (50%+) express strong interest in entrepreneurship

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Do you agree?

“The only way to avoid massive graduate unemployment in the future is to make

direct transition to viable business entrepreneurship a viable option for

graduates”

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To reach national growth targets, the output per worker in agriculture must grow from current level of 3.4% to at least 5.6% (IGC,

2010, URT, 2011)+

A key factor is knowledge intensive and innovative agropreneurs to enable a change from subsistence to commercial agriculture

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A five year (2007-2011) study by the Center for High-Impact

Entrepreneurship and Global Entrepreneurship Monitor (GEM) in

over 60 nations with a sample of over 800 graduates established that

businesses founded by teams of graduates have the highest employment

growth.8

• Low (largely unknown) rate of transition from college to business entrepreneurship

• Transition hampered by many factors, some general, others specific to youth or graduates

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Study Issues

• Incentives and services to ease investment and attract investors in the private sector in place

• The few graduates who have ventured into entrepreneering seem unable to take advantage of these

• Need to identify these incentives and services, assess access and explore improvements or new schemes accessible to graduates

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Objectives/Scope

1) Analyze relevant policy and regulatory framework

2) Analyze incentive schemes/preferential arrangements for start- up businesses

3) Identify constrains to start-ups in general and those promoted by the youth in particular.

4) Propose a mechanisms for empowering graduates’ start-ups.

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Methodology

• Literature review – local, regional, international

• Interviews with students, graduates, lecturers, SUGECO management, senior actors in MDAs, development partners, programs

• Validation meetings/workshops

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Research on university students entrepreneurial inclinations

1) Mufa 2005; UDSM B.Com students, 2) Massawe, 2005 - Final year technical colleges, 3) Olomi and Staki, 2009 - Vocational training centres

in Iringa4) Komba, 2006 - Primary school students in Dar and

Coast 5) Ally, 2008 Secondary and tertiary institutions

students in Dar, Arusha, Moshi6) Olomi et al, 2009 – B.Com and B.A students (UDSM)7) Kakete, 2012 SUA undgrd students

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ARE GRADUATES READY FOR ENTREPRENEURSHIP?

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ARE GRADUATES READY

• Positive relationship between “interest in entrepreneurship” and “perceived ease of getting jobs”

• Huge gender differences in interest, intentions and transition… why?

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GENERAL BARRIERS FOR START-UPS

• Access to finance (collateral 125%, trust, all others)• Relevant knowledge, skills• Networks/experience/tacit knowledge• Attitudes/values/culture • Attitude towards agriculture/MSEs• Access to productive infrastructure (serviced land,

premises, equipment)• Access to BDS/extension services• Access to workforce (rural area, skilled)• Weak enforcement of laws, regulations• Weak marketing and supply chains• Unfriendly regulation

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Specific challenges for young grads– May not have means of survival as they attempt to

start– Inexperienced, are perceived as risky– Untested commitment to what they want to do– “Elite mentality” (some not ready to start small, get

hands dirty)– Social values (“starting small”, “farming not for

graduates”) – changing, needs to change faster– First stage finance– Gender

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Specific challenges for graduate emergent farmers/agropreneurs

– Support structure is designed for smallholders, not for emergent farmers• Technology • Training (SIDO, etc)• Finance (microfinance)

– Access to land (ownership in prior generations),• Perception they are “land grabbers”

– Regulatory framework (licensing, certification, etc)– Services (utilities, etc)

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“ The support structure is designed around needs of traditional smallholders, rather than

emergent entrepreneurs who intend to build commercial farms

or large scale enterprises”

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Policy framework• Vision 2015• Kilimo Kwanza• Agriculture Sector Development Strategy• Rural Development Strategy• Youth Development Policy• National Economic Empowerment Policy• SME Development Policy• Integrated Industrial Development Strategy• National Nutrition Strategy

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Policy support

• PMO + PSD Department• H.E. President JK

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SPECIFIC ONGOING INITIATIVES

• MDA programmes• Guarantee schemes• Special bank windows• Equity finance• Non financial services

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MDAs

• TIC – Incentive Package – target established firms and fairly large start-ups

• SAGCOT• NEEC• SIDO• CARMATEC• COSTECH• Etc

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Financial Access – Guarantee Schems

• BOT- SME GS/ Export Credit GS • USAID/NBC• DANIDA/CRDB• AGRA/NMB • PASS/several banks• Contractors Access Fund

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Guarantee Schemes

– Have not worked very well, except for CAF– Some have had to conceal the fact – CAF Lesson - Need for “biting” sanctions for a

Guarantee scheme to work

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Financial Access – Special Windows/products

• TIB Agriculture• TIB Leasing• CRDB/SUGECO Pilot – it is working

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Financial Access - Others

• Angel Investors• Investor Matching/BiD Network• Venture capital • Work for Capital Scheme (Zambia)• Youth Entrepreneurs Fund (VCF) (Uganda,

Rwanda, Kenya)• Business Plan Competition – Prizes

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Non Financial Services -

• Republic of South Africa: RaizCorp• Farm Incubators – Ndondole, Pingoni, etc• SIDO – Incubation, TBS Certification, Labels• COSTECH – Technohama Business Incubator –

can benefit some members• UDEC, SAUT• Training Programs (UDEC, TIC/SIDOUNCTAD, IFM)• Business Linkage

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Key Lessons

• Entrepreneurial and FULL TIME management critical

• Graduation from incubators must be enforced• Selection of committed and able beneficiaries• Link to resources/networks• Some teams not sustained• Most promising also most sought by good

employers• Plan for sustainability

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Incentive schemes and other forms of support largely designed for

microenterprises, or established businesses or start ups with

significant resources (collateral, business experience, etc)

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The few designed for/accessible to fresh/young graduates are at the incipient stage, and are narrow and not yet scaling

up/sustainable• Incubators

• CRDB Pilot with SUGECO

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Other East African Countries Have or Plan to Launch Special Programs for Supporting Young Graduate Start-

Ups

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RECOMMENDATIONS

• Easing access to land for young graduates• Easing compliance to regulations and

certifications and utilities• Special scheme for young knowledge intensive

and innovative and graduates in agriculture and agribusiness

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Access to land and premises• Campaign to change attitudes of government and

community towards land and investment on land by Government, media and non state actors.

• TIC and local governments to acquire large chunks of land to be made available to serious investors, including graduates. – Graduate to have the possibility to rent services land

at a concessionary rate in the first few years

• Export Processing Zones Authority to provide premises for young graduates

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Compliance to regulations and certifications and utilities

• TIC, TFDA, TBS to have a special desks (attention) to support young, knowledge intensive and innovative investors in agriculture and agribusiness.

• TIC to waive the US $ 750 fee for investment certificates for local young (within 3 years of graduation) graduates

• Technology development institutions to study and respond to needs of growth oriented.

• Vocational education centres for agriculture and agribusiness

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Special scheme for young knowledge intensive and innovative and graduates in agriculture and

agribusiness

• PPP• Services:• Mentoring, coaching, training, networking• Guarantee scheme for 1st stage finance• Industrial attachment• Access to land, premises and utilities• Investment incentives• Facilitation in compliance, standards, certification

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Roles• SUGECO• LGAs• TIC• NEEC• SIDO• EPZA• ACT• Banks• SAGCOT Centre

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How to establish

• Presidential decree?

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