Conversation #16 — Jonny Jacobs, Mango Farmer and Co-Founder, Longevity Development
In one of my odder finds, I met Jonny in the Kids tent at the Curious Arts Festival in July this year. He’d been roped in to be on a panel discussing the news with children by the host James Campbell (I can heartily recommend listening to children talking about the news — they tend to cut to the chase in a thoroughly refreshing way!) Jonny’s description of setting up a mango processing plant in Malawi was so fascinating that I decided I should ask him to repeat the story, in slightly more grown-up language, for all of you.
Jonny is a firm believer in the power of enterprise to drive social change, and has unique insights into enterprise and transformational development in sub-Saharan Africa, which I found very thought-provoking both in general, and in terms of our own challenges around innovation and enterprise in this country.
So Jonny, can you tell me about the mangoes?
Yes, our entry point into African agricultural innovation was through our first business, a mango processing unit. Well, actually it’s more than that, it’s an integrated mango production unit, both primary agriculture and enterprise. And it all came about because on a visit to Malawi, more than ten years ago now, we realised that a vast quantity of fruit was just rotting every year. In fact, about 85% of the fruit rotted on the floor, simply because there was no added value processor. There was no way to extend the life or innovate around what this product could become.
So it really started off as the proverbial two guys in a bar conversation but with each layer that we built, it just got more and more serious. We started by writing to Innocent drinks and saying, ‘how would you like mangoes from one of the poorest countries in the world for your giant masher?’ And they wrote back and said, ‘Well, it’s a bit more complicated than that. You’ve actually got to build a unit and we buy pulp, we don’t buy fruit.’ But with every level that we went through, we learned a bit more, and more people were saying this was a really good idea. One of the things we found is that in a jurisdiction like Malawi, where you have an unemployment rate of around 90%, the first thing we needed to do was build an enterprise, and this is very relevant to what has evolved to become Longevity.
How did you go about it?
One of the things we kept having to hurdle was people who were interested in social impact almost for social impact’s sake. There weren’t enough people having a real, honest conversation about enterprise: well managed, well run, progressive, forward looking business. So, we built our business and within five years we had two farms and a factory and we were supplying Coke and Ceres and Pepsi Co, and we did it with a series of anchor farms and a very large smallholder programme of over 5,000 smallholder families. Then about two years ago when we moved away from operations, we felt that there was a real need to find other progressive enterprises that would move the needle in food production, in water and in energy, and so Longevity became a two part business.
The first part is about advising both the public and the private sector on how to commercialise production in developing jurisdictions in sub-Saharan Africa. I say commercialise for the public sector, for the private sector it’s really to diversify. For example, we’re doing extremely interesting work with some of the largest tobacco companies in the world, to help them figure out what to grow instead of tobacco.
The second part is an investment business to find or start enterprises that we think would be additive to economic development. There we shepherd money and funding into those businesses and will be involved in running them to one extent or another. It’s not just Craig and me now, there’s quite a few people and a very large network of specialists in different areas that we deploy depending on what the business is.
That’s quite an amazing story, and I watched your TEDx talk about it as well -I liked what you said about writing to Innocent drinks and asking questions. You talked in your TEDx talk about ‘what don’t I know’ and started off saying ‘I don’t know how to grow a mango, I don’t know how people at Innocent buy their mangoes.’ Is asking questions still fundamental to what you’re doing? And is that what you would recommend any aspiring entrepreneurs do?
I can’t say yes to both of those questions loudly enough. A very good friend of mine, one of our business partners and a brilliant, brilliant agronomist says, ‘look, you’ve got to love what you do but you mustn’t fall in love with your own ideas.’ When we fall in love with our ideas — and we certainly had experience of this in mangoes — our bias tends to lead us away from real enquiry. Because we knew what we didn’t know, we were unafraid of the obstacles. You know, if I think back to it, to raise fifty million dollars, build two farms, a factory, to assemble a whole team of people and win all these customers, it’s incredibly daunting. Or it could feel daunting on paper when you start out.
So we attacked it from a pure problem solving perspective. Every problem has a dynamic, a series of solutions that you could deploy, that themselves will have different variables, and you have to try and take the emotion out of it. It’s difficult when it’s your baby and it’s something you’ve worked on, and I think we need that humanity to drive us through entrepreneurship because it’s incredibly hard. But if we start from the premise of ‘these are the things that I don’t know, who knows those things’, then we immediately turn the conversation into solving the problems rather than worrying about the responsibility for solving them.
What’s been the impact for the actual people on the ground? You talk a bit in your TEDx talk about the smallholders and I loved what you said about the fact that women make better farmers.
It’s true. What’s interesting is that it’s one of the things that we encourage when we’re talking to people about gender equality and we’re involved in all manner of programmes in our work. But one of the first things to recognise is that women are better at many jobs and that particularly lends itself to some of the agricultural work in sub-Saharan Africa, so we should embrace that, because it solves a business problem and a gender problem.
Absolutely. I’ve read that micro-financing companies often prefer to lend to the women in the household rather than the men because they get a better return on investment and more responsible use of the money.
I think that’s a pretty broadly accepted view at this point, that women tend to spend the money on things like food, school fees and roofs for houses where men tend to spend the money on…well, I’m just going to describe it broadly as entertainment.
I think that’s a very good description.
Thank you very much. But going back to your question, I think the business has had a dramatic and very measurable impact on both the macro and micro contexts. In the district of Salima, which is a district of around 3,000 people, when we started there were something like 750 to 1,000 full time jobs. And these weren’t jobs like doctors, lawyers and accountants, these are people cleaning toilets and waiting tables in hotels and simple town restaurants. Within our first five years we’d more than doubled that number and that’s excluding the smallholder programme, where of course you’re putting huge money into the hands of the poorest people in the world.
But the other number that was really interesting to us is that in 2016 we collected between $200,000 and $300,000 in taxes. You have to benchmark this against the environment: Malawi, one of the poorest countries in the world depending on what metric you’re using to measure it, has no tax base, and a tax base is one of the most fundamental things you can do for development. Pay people a salary, collect their taxes. We were paying something in the region of $500,000 to $600,000 a year in salaries to Malawians.
We also built, and the business continues to build, a huge bank of young talent. We found that there was a huge reliance in jurisdictions like Malawi on educational qualifications, it’s the first way that people separate out the employed from the non-employed. And I would never want people to think that I’m suggesting that that wasn’t important, it’s absolutely critical. Education is the silver bullet. But what we found is that this culture led to a feeling of ‘I’m the boss, I’ve worked and I’ve got my certificate and what that means is that I no longer have to work. It means I can sit in my office.’ Whereas people involved in a production business will tell you that they live and breathe production, so we realised quite quickly that we needed to prioritise the development of young people. We had to bring that vocational sense of urgency and drive to the people at an age where we had an opportunity to show them why it was important. We created a couple of hundred of technically qualified, hungry, driven Malawians who are able to put their talents to work. And a number have left the mangoes business now and are working for other businesses.
So actually you’re talking about culture change?
That’s right. Malawi Mangoes has had its problems, and it’s being refinanced now, but if there’s one success that we would all pick out it’s that this was all built in a relatively short period of time and it was built properly and real people are involved. Real investors, real customers. We built all of that from the point of investment in five years, and that smallholder programme is still making those supplies.
So the most important thing to learn is that this can be done. I have a background in venture capital, and anyone you listen to in the world of investment and finance will talk to you about Africa risk and how these things are very difficult. It’s true, they are difficult. But if we peel back the veneer of investment history experience and all the other reasons why investment hasn’t worked well in Africa, I think the single biggest reason is because we haven’t sat down and really looked at these problems honestly, openly, straight in the face, and then set about solving them. The biggest impact that Malawi Mangoes had on a country like Malawi is to say this is possible.
And that’s a complete change of mindset, isn’t it?
Yes. We had a notion early on that it was going to be important to our smallholder programme for them to see the totality of what we were doing. So we bus in teams of smallholders to the farm, to the factory, so they can see the bigger whole of which they’re a part. It was one of the best things we ever did, because the traction and the supplier loyalty we get from exposing people to that is priceless.
Is the mango operation set up as a private company or is it a social enterprise?
It’s a private company: we passionately believe in the power of progressive business. We also believe that one of the mistakes of the last thirty years is to think that governments and the philanthropic sector can solve economic development problems. We don’t think they can and we don’t think that should be an emotional question. If you look at thirty years of sub-Saharan Africa and certainly Malawi, we think it’s a mathematical observation. As I said in my TEDx talk, they’ve had a 16% increase in gross national income in thirty-five years. What we really want people to do is to establish profit making, value driven businesses which have more than just financial value at their heart. Why? Because businesses survive on more than just financial value.
Running a good, progressive business — good in the Stephen Green sense — is just good business. It’s about steering away from short termism and believing that value is built over time, and that financial value is a massive part of it but supply chain value, customer value, employee value, all of these things feed into the value of your enterprise.
So what is the role of government and the public sector? We know that it’s not just about investment, it’s also about culture, it’s also about infrastructure, so what do you think is the most important thing that Government can do in order to foster this kind of enterprise culture?
Well, I think it depends on where you are. Sometimes when you discuss the macro elements, it becomes meaningless: facilitating an environment where business can thrive, for example, that’s a given. But in different places it will mean different things, for example if you’re working in agriculture in sub-Saharan Africa, particularly in a country like Malawi, government has a great role to play around land use and the interaction between enterprise and local communities.
Until our second year, we had to deal with all the land development and acquisition ourselves. Then we developed a model for public private partnership on land ownership that was the first in Malawi. As a business, just the land itself is worthless to us so I don’t care about owning it. What I want is the security of tenure, to know that if I go there and build something and put an infrastructure in place, I’m not going to just wake up one morning and find out that it’s been taken. So we developed a legislative framework from which to do that and one of the reasons was that we wanted, ironically, the government to take credit for this economic development.
We tasked them with finding us some land and I have to say, it was a disaster. I think it’s one of the fundamental reasons why the business struggled and why it’s needed to be refinanced. In this kind of business you’ve got to have a full factory, and a full factory means you’ve got to be growing fruit and growing fruit means you have to have an area to grow fruit on. We’d only ever wanted to have one very small farm or one relatively small farm, you know, a hundred hectares, and then go big. And the government was so ham-fisted about it and there were all kinds of other problems in there including individuals seeking to earn money from both sides of the table, so it took the best part of four years and in the meantime, we had to bite off the smaller piece. So our experience of it is that government has got to play a key role in land and in community liaison.
One of the other things that Malawi and most places in sub-Saharan Africa need more is exports. At one end of the scale you’ve got something like Kenya, which builds a two billion dollar cut flowers export business in fifteen years. At the other you’ve got a country like Malawi: when you’re a business telling the government you exist and you have a customer, you will universally get a very warm, encouraging attitude, people want you to succeed. It’s not disingenuous but the structures and systems which need to be in place for countries to do that effectively and negotiate licensing arrangements with the countries to which they’re exporting are really sub-optimal. And what’s even more poor is the political will. It’s all very well standing up and giving big speeches about the importance of the sector and the important of developing business, but when you translate that into actual action, into making licensing easier, into making processes as streamlined as they are in developed economies, there is a total absence of engagement.
So, there’s a lot of talk but not a lot of making it happen. Do you put that down to a lack of knowledge about what needs to be done or is it cultural difference, or something else?
It’s a great question and the answer is yes on both counts and a couple of others. A colleague of ours was in a meeting in Malawi six months ago regarding the development of solar parks to add to Malawi’s energy infrastructure. One of the senior staff members of the state-owned electricity generation company said, out loud, ‘We Malawians don’t understand, if only we used our electricity at night, we wouldn’t have a problem.’
So on the one hand you have a genuine understanding problem, but on the other I think that there’s another cultural reason for that which is difficult. In countries like Malawi we don’t understand just how big a deal it is for someone to have left their village and gone and got a job. At the moment, I think we’re still very much in a place sometimes where people have only come out of their poverty a few minutes ago, metaphorically speaking, and so they’re very focused on protecting themselves, making sure everything’s okay, so even more than civil servants anywhere, and I think it’s very easy for us to call that corruption. But there’s a much more nuanced cultural evolution going on there, towards a place where people feel it’s their civic duty to develop these things.
But I think all civil servants are guilty of not liking change, that’s not just a Malawian context. We know that officials don’t like change and systems don’t lend themselves to change and innovation. However, in countries like Malawi you have to understand the consequences of what would happen to that person, or what they think would happen if they were no longer relevant. It means that new ideas and innovation are immediately looked at with great suspicion. So, handling that initial conversation for entrepreneurs is a big part of the learning process and very important. You want to be bringing in people on side from day one and showing them that they’re going to get the credit for these initiatives.
It sounds like you’re a perfect example of the fact that there’s a very long way to go between an idea and the actual realisation of it, especially when you throw in structural and environmental factors. Were there any points where you thought, this isn’t going to work?
The short answer is no, with a but. As far as the idea went, and building it from idea to reality, we just knew. It wasn’t an emotional thing but we kept seeing walls getting knocked down and more and more traction, so we knew we had to keep going. The but is the money, which was extremely difficult. In 2008, we went to the Business Fights Poverty conference and we found that the notion of taking wasted product and processing it and exporting it was the dream. It was the front and centre dream of every development brochure you would read from DFID to US CID, to any donor or organisation. Every one of them talks about the need to add value and process, but when we peeled back that curtain with development and finance institutions, the door was firmly shut. ‘This is new, this is green fields, this is the first in a place, you’ve built the perfect team, but come back to us in three, four, five years’ time when you’ve done it and we’ll be very happy to finance you.’
When you’ve proven it works?
Yes, when I don’t need finance — when I can go out to five hundred people for money. We got the first million from a group of brilliant wealthy businessmen who liked the idea and said, ‘for a million dollars between thirty of us, we’ll have a look. This is interesting enough to have a look.’ But when we needed to raise twenty million to build the factory, to build the bigger farm, we received an offer from a leading international commercial bank which was on better commercial terms than any of the development finance institutions. We received offers from them, but there was just no way you would ever be able to afford to accept those offers. To give you a flavour of it, one of the offers required a fully cash collateralised letter of credit for the entire amount of the loan to be deposited in their account. Which, by the way, means exactly what it sounds like: they wanted all the money for the loan in a separate ‘blocked’ account as security.
Surely, if you had all the money you wouldn’t need the loan?
That’s exactly what I said! We don’t finance the right things in sub-Saharan Africa, and that’s exactly why Longevity was born. There’s some brilliant entrepreneurs and projects and also established businesses which are at that one million stage and now need to kick it up to the next stage. People talk about the missing middle a lot when you look at Africa: you can easily go out and get finance for your $10,000 micro-finance system or your $100,000 micro-finance system, or if you want to go and finance a billion dollar dam. But if you want to raise three to twenty million dollars, it’s extremely difficult. One of the things we talk about at Longevity is that it’s not just a financial question, when we look at the missing middle, it’s about human capital.
What do you mean by that?
One of the reasons businesses struggle in sub-Saharan Africa is because there isn’t money and finance and funding going into developing the middle tier of human capital. It’s not about the chairmen, it’s about the line manager, the deputy factory manager, the farm manager. One of the fund concepts that we’re working on at the moment is about embedding human capital in the businesses in which you invest. It’s not about the quarterly board meeting where an industry expert comes along, which is amazing but it’s not enough for these fledgling businesses.
So you’re building the skills and the experience and the knowledge for the people who can keep those businesses up going and help them to scale…
…and develop the talent within the businesses to take it over. One of the problems is that you talk to people and they agree that it’s true. But then they want to know who’s going to pay for it. So the idea that we’re working on for Longevity is where the private sector investment money into the business is entrepreneurial, but you cushion it with a facility from development finance institutions to pay for the additional human capital. People are increasingly interested in having this conversation, and we hope it can become a real part of the investment narrative.
There’s a business we’re working on in Sierra Leone at the moment where we’ve seconded one of our technical partners to help them develop a new product line in coconut. They’re doing all the compliance and on-boarding of the customers: it’s a two or three year piece of work.
And then presumably at the end of that secondment, they will have changed the skill level in that team.
Absolutely — their bonus depends on it.
You’re operating in sub-Saharan Africa where many countries are undeveloped. But we have significant problems around entrepreneurship and innovation in this country as well, and in other developed countries. Do you think the model would work in developed countries as well to try and get enterprise moving?
Definitely. I come back once a quarter which enables you to get a really nice snapshot of how these things work. In the nearly ten years that I have lived abroad, the whole incubator, accelerator start-up industry has really exploded. And on the one level I think that’s amazing, because of course if we can make the best innovation and the best entrepreneurship more grass roots, that’s the whole ball game. But I’m also aware that this can become institutionalised in and of itself. I’ve often asked, ‘What is it you guys do here? What are the businesses that you created? Talk to me about jobs, talk to me about skills, talk to me about GDP’ and people were not used to answering that question. I think we have our own missing middle here in the UK but it’s just on a very different scale to the place where I live and operate. So I think it’s a very, very replicable model, with obvious adjustments, for somewhere like the United Kingdom.
Finally, what’s next for Longevity — where do you see it heading?
We have a huge amount of work to do in the environment we’re in and there isn’t a definite point at which that mission would be achieved. Our mission is to bring responsible enterprise to this environment and we’re just going to keep on doing that as far as we can: we want to see us developing lots of great forward looking businesses based on local talent.