Presentation on testing and demonstrating 2WTs based technologies in Kenya. And exploring the business models

1. Testing site-specific Commercial
Systems to deliver 2WT-based
mechanization in Kenya
FACASI Mid-Term Review
Hawassa, Ethiopia
9th to 13th Feb 2015
Pascal Kaumbutho / John Mung’oo

3. Milestones:
Output 2.1:
Market analysis of small mechanization.
 Country level literature review
 Interviews of national and local market actors
 Round table discussions with different key group actors.

4. Challenges and
Opportunities in Business
Models

5. Challenges:
1. Lack of Private Sector Participation: Low
demand, taxation, few service providers including
mechanics, spare parts, finance etc.
2. Few dealers in Kenya stock 2WT tractors
● Some are CAMCO, Flying Horse etc. Camco
imported 30 and were able to sell 20 to flower
industry players.15 are still in store and it has not
been easy selling them.
● They do not plan to buy more unless market is
created.

6. Challenges (Contd.)
3. Few Service Providers
● There is a misconception that 2WT are hard to operate, this is only true to
inexperienced operators.
● Previous Training targeting extension agents more than service provider.

7. Challenges (Contd.)
4. Lack of Government policy on
Mechanization: A policy paper that was started in
1995 has never been completed. The policy
formulation process started again last year and will
be completed early this year (2015) (Traffic Act!)
5. Mind Set: Kenyans are used to 4WT. Service
providers who have 4WT know a 2WT will reduce
their fuel expenses..
● 2WT tractors will lower their status in the society
● Working business models are necessary

8. 6. Lack of records to aid financing:
●Many banks in Kenya are willing to
lend money to farmers
●Most of financial institutions in Kenya
have Agribusiness departments
●The problem is that most farmers and
services providers do not keep proper
records and lack strong business
cases.

9. 7. Dependence on rain fed agriculture
●Risk profiles are discouraging.
●Previous loan experiences are
negative

10. 8. High Price
●The price of a Chinese tractor in Kenya is
US $ 2000.
●The price of a Brazilian planter is US $
4500
●A Sheller sells for US $ 720
●Trailer = US 1,450
●These prices are way beyond the reach of
smallholders farmers in Kenya

11. 9. High competition from Motorbikes
●Bikes are used to transport shellers and
water pumps to wherever they are needs
●A motorbike and a small-sheller with
Engine would cost about US$ 800
whereas a 2WT with the same Sheller
would cost US$2500
●2WT have advantage of being powerful
than the motorbikes

12. A farmer on a Motorbike with a water pump to
transporter to watering point

13. Opportunities
●Decreasing farm sizes
●Multiple use of 2WT
●Experienced dealers (with 4WT, they
ask if there is a 2WT Demand)
●New Projects (IFAD, FAO, EU etc)
●Support from Devolved County
Governments since 2013

14. A small
bailer
at
ATDC -
Siakago

15. Results: Overview of Market Analysis of
Small Scale Mechanization
Sector Profile and organization
 2WT imports are by individuals and companies with
short-term service needs, mostly in transport
 2WT for closing gaps between manual and animal
powered systems, and the 4WT is absent.
 In a country with only 800 4WT absorption capacity,
only some 1000 tractors are estimated to be working
today.
 There is no known central effort to increase 2WT but
there are for 4WT
 There are new opportunities in a devolved agricultural
sector and FACASI should move BDS faster to tap into
the great opportunities.

16. Output 2.2 Business Model Design.
 Identification of key drivers.
 Identification of existing business models
 Business model mapping
 Analysis of the performance of models
 Identification of critical success factors
 Preparation of an upgrading plan.

17. Results: BM design Mapping
Model Stakeholders Functions/ Services Interventions
for upgradingDealer Service
provider
Government/
donor/ project
BM 1
Eric
(Bungoma)
- ATDC
- Mechanics
- Contractor
provides hire
services to
farmers
ATDC is in
charge of the
tractor but
provides it to
the SP when
needed
- Broaden the
range of services
offered – expand
accessories
- Finance (equity
bank)
- Business skills
training
BM 2
Rayfield
(Eldoret)
- Second hand
market actors for
4WTs
- Service
providers and
operators
- Imports and
distributes tractors
and machinery
- Manufactures
implements
- Provides
workshop and
support services
Provides
services –
ploughing,
seeding,
spraying,
harvesting,
transport
- Diversify into
2WT as dealer
and SP
- Finance
- Training
- Branding

18. Results: BM design Mapping (Contd)
Model Stakeholders Functions/ Services Interventions
for upgradingDealer Service
provider
Government/
donor/ project
BM 3
Muriuki/
Mwiti
(Laikipia)
- FAO
- Mechanics
- Suppliers
- Transporters
-
- Contractor
provides
planting and
spraying
services to
farmers
(planting
services are
with draught
animals)
KENDAT set
up the SP in
business
- Project
provided
training support
-FAO provided
training support
- 2WT
implements
- Access to
finance
- Training in
operations and
business
management
- Access to spare
parts dealers
BM 4
Teckia
venture
(Laikipia)
- Ol-Pajeta
conservancy of
wildlife –
training (project)
- Input suppliers
- Financial
institution
- Contractor
provides hire
services to
farmers for
planting
FAO support in
providing a
4WT
KENDAT set
up the 2WT SP
in business
- Project
support training
- Diversify
operations – agro
vet dealership
with spare parts
- Access to
finance
- Training in
machinery
operations

19. Results: BM design Mapping (Contd)
Model Stakeholders Functions/ Services Interventions
for upgradingDealer Service
provider
Government/
donor/ project
BM 5
Kirari
(Laikipia)
- Dealer
- Operators
- Agro-dealers
- Mechanics
- Contractor
provides hire
services to
farmers
(ploughing,
transportation)
No prospects.
(The SP has no
interest to
upgrade because
ofhis age)

20. Results: Business model analysis
Performance assessment:
Components Private sector led SP models Dealer/
manufacturer led
supply chain
model
BM1 –
Muiuki/
Mwiti
Laikipia
BM2
Teckia
venture
Laikipia
BM3
Kirari
Laikipia
BM4
Eric
Bungoma
BM5
Rayfield
Eldoret
Infrastructure +++ ++ +++ ++ ++++
Offering (Product/ service) ++++ +++ +++ ++ ++++
Customer ++++ ++++ ++ +++ ++++
Monetization +++ ++ ++ + ++++
Sustainability ++++ +++ ++++ + ++++

21. Critical Success Factors
 Market linked TIMELY farming systems: Value-chain
approach
 Access to PROVEN & SERVICEABLE equipment and
affordability of equipment: hence the need for Service
Provider based systems.
 Availability of financial services but for Service Providers
FIRST.
 Quality of work and life of machine: Training of Service
Providers, 2WT operation as well as equipment/implements
 Business development services: Training Service Providers
in Costing services and Record keeping
 Full-range, value-chain services: From planters to threshers
and shellers, to animal feed choppers and millers

22. New Learning (Thanks to FACASI)…
● 2WT demand is luke-warm but has definite
space
● 2WT with CA Equipment lacks the critical mass
hence the necessary support services
● 2WT with CA Equipment lacks knowledge-
backing among users, hence the low demand
● It is possible to generate organic growth of
2WT services but it will take too long…
● Use FACASI unique place to influence other
BAU interventions in the making ($266m effort)

23. KCEP Business Model
● FAO (themselves) to train Master trainers to train
Trainers
● Opportunity Provision: Contract produce buyers to
hopefully contract farmers
● Education: Train farmers in CA
● Get 40000 farmers to adopt CA in 4 months, 80000
in a year!
● Build-in input voucher scheme
● Build support services for business advancement

24. Preparation of a Business
Model Upgrading Plan:

26. Building a Successful Business Model
1. Understand localised mechanization needs
2. Build a Business Case for each Service
3. Build Business Cluster (IP) among identified
stakeholders
4. Train Service providers beyond but with
Mechanization as entry point
5. Avail range of power and equipment for hire at
a hub with room for other agribusiness services
6. Organize exposure, information exchange,
value-addition etc. and links to markets

27. Way Forward for FACASI (Kenya):
• Have one Mechanization Hire Hub in each of
Laikipia/Meru and Bungoma/Uashin-Gishu
• Locals helped build ownership through visits
and training to see, hear, and learn from
farmers and SPs with experience in
conservation agriculture.
• Local hirers / Service Providers are integrated
and promoted as servers of choice placed on
a equipment commission and purchase
scheme (price of service control)

28. Way Forward for FACASI (Kenya):
• Attraction based on numbers and figure-
work to Micro-finance institutions
• Farmers can grow own finance scheme via
training, CVs and produce sales
• Broad advisory and marketing services (IT
backing, GIS mapping, Mpesa etc.)
• Sustain self-regulating mechanisms to
ensure win-win growth and effective
replication nationally and even regionally.

29. Thankyou…
Ahsante Sana…