Agriculture and Agribusiness in Uganda: Khalid Kadala Presents Nkoola Agencies International

Interview with Khalid Kadala, Managing Director of Nkoola Agencies International Ltd

What is the status of the agribusiness and agriculture sector in Uganda currently, especially in light of COVID-19?

As a company, we buy produce from farmers and they are staying in their villages. Most of them were not affected by COVID-19 apart from getting some pesticides or getting transportation from their farms to our stores. Another challenge for us is transporting our products to Europe. Transportation because of the lockdown has become expensive to our clients there. This year, we have actually had a very good harvest since the start of the year, despite COVID-19.

What is a major challenge to boosting your activities and the company?

The challenges for the company are low production. We get very big orders and we cannot get the products to supply. Ugandans are producing on a very small scale for the products that we sell. We get our products from farmers through middlemen and most Ugandans are subsistence farmers. The middlemen buy the products while still in the field and then sell to us. We are trying to bring those middlemen out of the value chain which is a big problem here. We want to get those goods directly from the farmer to us.

Do the farmers know you?

We do about 20 different varieties of beans, including kidney beans, sesame seeds, soya, white maize, pigeon peas, ground nuts such as peanuts, in addition to herbs.

They do know us. There are financial challenges before they reach harvest time and they get loans from these middlemen who are mostly local to their districts. By the time it comes to buy at harvest time, the middleman controls the harvest. The farmer cannot sell to us directly because they must pay back the middleman. The middleman then controls the price that is paid to the farmer. They are completely dependent on them. They may know the final price if they come to us first, but otherwise, they cannot do anything about it.

How are you overcoming this challenge?

The government used to have cooperative agencies where farmers work together in their areas and collect their products and sell it to us. Recently, these cooperative union programs have been abandoned. We are asking the government to reinstate these programs. It is very politicized.

Are you able to provide loans?

At the moment, we cannot provide loans. If we can provide these loans, we can control the system. But if the farmers are getting the actual price that we pay to the middleman, then they would not need the loans anymore to hold them over until harvest. USAID did try to help the farmers by providing financial aid and setting up collections, but this has stopped. There is also the problem of storage and spoilage where products come to us in bad quality. Farmers do not have big enough storage, or do not know how to control pests and the products spoil.

How are you solving this problem?

Firstly, we need to work with the farmers in their districts and provide storage facilities and be able to pay for their product at the time of harvest. They will not give us their product to take to storage unless we pay in cash. If we are able to have storage facilities in different areas and have enough funds, that will solve the problem.

How do you find this funding?

We try to find financial support from the government rather than loans. Loans here come with a very high interest rate. With that interest rate and the transport costs to the markets where we sell the product, then our products will end up being higher compared to our competitors in China and South America and then we will not be able to compete. With funding, we can grow more and solve the problem of low production.

Are you looking for investors? What kind of investors are you trying to attract?

If we can find people, either internal or international, who are interested to work with us here, they are very welcome. As long as we understand each other, it does not matter where the investor is coming from. There is a lot of potential and a very big market for Ugandan products produced here. But because of low production caused by meager payment, the farmers are not motivated to grow more.

Can you go further down the value chain and insert yourself?

We cannot do everything. But we do have a smaller farm for certain products. We produce black pepper, which is not local to Uganda, and herbs. We used to get black pepper from Tanzania and Madagascar and export it to our buyers, and then began to grow it locally here. But we cannot be the farmers, processors, and exporters at once. However, we have traditionally been involved in exporting produce as raw materials. We are working on value addition to have products that are ready for consumption. We want to find an investor that can help us to move into that agriprocessing business. It will be better if they have some experience in that area.

What products do you offer?

We do about 20 different varieties of beans, including kidney beans, sesame seeds, soya, white maize, pigeon peas, ground nuts such as peanuts, in addition to herbs.

Who are your clients?

We export globally. We have clients in Turkey, the Gulf countries such as Oman, Arab Emirates, Egypt, Libya, clients in Russia, in Europe we have Italy, Slovenia, Belgium, the UK, Bosnia-Herzegovina, Romania. We also sell to the US and India. In Africa, we export to Kenya, Tanzania, and Rwanda.

How do you attract clients?

We got our start on Alibaba where we got 90% of our clients. We have also been attending agricultural conferences and trade shows and fairs over the years. We have met many clients there.

What is one of your success stories?

We used to have about 200 workers who were doing mostly beans. Because of the type of people who come to us and do this work, we know that we are able to employ and give them something to live for. It is something that I really feel happy about. About 98% of those workers are women and single mothers. They are able to earn a wage every day. We also have a success story with pineapples. More than half of the pineapple produced here in Uganda spoils in the field. The farmers do not have a way to sell them. If I am able to find a buyer to sell this product to and export so they do not go to waste, I will be proud. I also am happy that people call me personally to work with us. It makes me very motivated.

What differentiates you from your competitors? Why should someone choose your company?

There is something natural that you cannot explain about Ugandan products. For example, when you cook beans, Ugandan beans have a different aroma. I have tasted different products and they taste different from what comes out of Uganda. In Uganda, we have two seasons, as well as a third smaller season, which you cannot find elsewhere. This lets us have a new crop of any product twice a year. You will not find that with competitors. They have a harvest between September and November. So, from January to the next harvest, they are selling an old crop of produce from the previous year. Whereas, we have new product available all throughout the year from that specific year.

What is your competitive advantage?

We got into this business first. So many other people tried to get into the business and they ask for advance payment for their product, sometimes 100%, before they can export. We ask for a down payment of 10 or 15% to confirm the contract, but we also supply without advance payment. We also give products and wait for arrival of produce to get paid which is not something the rest of the local companies can do. We are not doing this because we have a bigger cash flow. Rather, we squeeze ourselves to make our customers happy. If we are able to get more funds, this would enable us to help more clients.

Project yourself into the medium term, three years’ time. What is your vision for the company? What do you want to have achieved?

We are trying to move from exporting raw material to exporting ready product. 99% of our clients have been buying raw materials to do the packaging, canning, and then supply supermarkets, etc., in different countries. We want to have our product from Uganda going to all these other countries. For pineapple canning, we have tried to look for machines and training our staff. We did have a smaller canning machine and tried to make samples to send to clients who were interested and they approved of our quality. We are now trying to get bigger machines and train our staff in the technology. We have talked to a company in Vietnam to send some of our staff there for training. For example, I have a client in Iran who wants to buy 20 containers of canned pineapple from Uganda on a monthly basis and wants us to contract that. I have many other clients interested in canned pineapples from Uganda from Oman, Algeria, Morocco, Holland, London, etc. Many people are interested in canned pineapples from Uganda. If we are talking about those quantities, then we need some help from investors to realize that vision.

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