Unlocking the horticulture value chain
James Weru is a TruTrade franchisee and the managing director of Fair Trade Enterprises Ltd. (FTE). In this piece, he points to the impact of TSS on the lives of over 50 smallholder farmers in Machakos County, Kenya.
FTE is a registered agri-based social enterprise in Kenya. The company practices fair trade principles and promotes sustainable development in rural regions through the procurement of fresh horticultural produce and milk from smallholder farmers.
When FTE met with the farmers from around Machakos County in Eastern Kenya, we discovered that the biggest challenge for farmers was inadequate market access. In the past, farmers have worked with brokers who have exploited them by providing low prices, using faulty scales and buying produce on an inconsistent basis. To help alleviate these challenges, FTE intervened, bringing TruTrade’s Transaction Security Services (TSS).
FTE met with farmers and helped explain the TSS business operations. Farmers found that the TSS form provided transparency on buyer prices, as well as commissions to the TSS network and transaction costs. Additionally, it was made clear that if there were any excess after all expenses, it would be redirected to farmers in the form of a bonus. With the TSS training, farmers learned about our rejection policy, which allowed anyone to access the public information that detailed exactly how much produce was rejected for an individual farmer, which they welcomed.
The challenge of fair payments has been a problem for smallholders in the past, but with FTE and TSS, farmers receive cash on site for their produce using the Cash On the Bag (COB) fund. The money is guaranteed, unlike the old system with brokers who paid farmers later or sometimes failed to pay at all.
During the cultivation season, FTE supplied farmers with certified seeds through credit to allow them to produce higher quality vegetables. The costs of the seeds were recovered later from the sale of produce. Furthermore, FTE trained the farmers on good agricultural practices and food hygiene, while monitoring the use of pesticides through an agronomist ensured the maximum residue level was not breached.
The way FTE operated initially involved training two agents to work with roughly 50 farmers. The agents collected and paid for produce twice a week and delivered the produce to two collection points. Additional people had the task of checking the quality of the produce, placing it in crates and tagging the crates to ensure traceability. Then the produce was transported to a Nairobi pack-house where it was graded, packaged, and shipped – all within one day of arriving at the facility.
In 2015, farmers on average harvested 600kg/week, approximately 160 tons over the year with a turn over of $94,727. The baseline price was roughly $0.65/kg in 2015.
Increased incomes from this system in 2015 have advanced these farmers above the poverty line; payment of bonuses enhances farmers’ income and also commitment and our relationship; transparency improves farmers’ loyalty and trust; buyers are keen on buying produce with a fair trade story behind it; and improving farmers’ cash flow through COB plays an important role in scaling up production.
FTE have started to take steps to scale up our impact, securing three new international buyers in 2016 that are committed to providing consistent orders and fixed prices. Additionally, plans are set in motion to improve the payment method to farmers and agents by providing payments directly to their mobile phones or mobile bank accounts through TruTrade’s integrated payment platform. FTE’s projected figures for 2016 estimates an increase in trading volumes to 160-240 tons, due to the increased production from the existing farmers and the training of additional farmers’ groups.