Once an organization has been identified as a potential new client, Agriterra will perform a Company Assessment. The goal of the Company Assessment is to get a full insight in all financial and management aspects of the organization and to develop a business case and related action plan. The CA will usually last 5 days and takes place at the office of the organization. If the outcome of the Company Assessment is positive, an action plan will be developed based on the identified business case.
The Company Assessment for HFCU was conducted in the last week of October 2014. HFCU is located in Ethiopia, approximately 275 kilometres to the West from Addis Ababa. The union was founded in 2001 and started its business by providing services in one region with only 10 legally registered members (primary cooperatives). Over the years the membership has increased to 37 primary cooperatives, that represent a total of 30.413 farmers (22.202 male and 8.211 female). Currently the union provides different ranges of services to its members, such as input supply, output marketing, credit services, etc.
The union has experienced significant growth over the past years in terms of profits and output marketing of maize on contract to World Food Program. Before three years the union was in a sleeping mode, but the new board and management have shown revival of the union since their instalment three years ago. They have attracted new skilled personnel and diversified the business activities of the union.
However, the board and management have bigger ambitions for the future. The main focus of the future business ambitions are on two topics: 1) Increasing green output marketing of Niger seed, Wheat, White Pea Bean, and Sesame, 2) Increase value addition on Niger seed by establishing a Niger seed edible oil refinery. In order to realize their ambitions the union acknowledges that it requires additional support and capacity strengthening in particular on the fields of financial management, governance, business planning and market access. It therefore contacted Agriterra.
Nigerseed
During the company assessment the Agriterra team has made an analysis of the business case in terms of feasibility, relevance, sense of reality and profitability and have identified possible gaps in knowledge, skills and finance. Both the business case for the increase in output marketing and the business case for the establishment of a Niger oil refinery seem to be realistic to be achieved and operational in the next 3 years. However, solid background information is for a large part lacking. In particular a feasibility study for the refinery and financial forecasts to support the business case are needed. Although the union is already rather liquid, the business case needs access to sufficient volumes of working capital and an investment loan.
With respect to the increase in output marketing a major challenge remains finding good markets that can provide a higher price to farmers than the local traders do. The union has experience with output marketing, but has no experience with processing of crops except for cleaning. Based on the outcomes of the company assessment various other challenges have also been discussed with the board and management in order to identify the field on which support of Agriterra is needed.
Together with the board and the management the team has jointly developed an action plan for the year 2015. The 2015 action plan will mainly focus on increasing output marketing and preparing the union for the Niger seed oil refinery investment both in terms of knowledge and access to finance. If the results of 2015 are positive, a new action plan will be developed for 2016 focussing on implementation of the investment.
Reality in 2 years time?
