Understanding The Nutrition-Sensitive SMEs Ecosystem in Morogoro — SUGECO at the Core of The Ecosystem.
This article is part of series of articles capturing information about Nutrition-Sensitive businesses in Tanzania. The program is a part of the work Global Alliance For Improved Nutrition (GAIN) Tanzania is doing in partnership with Sahara Ventures.
It is with no doubt the most important player in the Morogoro Ecosystem is Sokoine University Graduate Entrepreneurs Cooperative (SUGECO). The incubator was established in 2011 to promote youth engagement in agriculture and agribusiness value chains. The incubator has been playing an important role in supporting nutrition-sensitive businesses in the region. The incubator works strategically with the University to nature the agribusiness ecosystem in the region. Business such as Sanavita and Kinshaga Food Products who have been part of the Lishe Accelerator program they were initially supported through the incubator. The incubator also works as the center for product development and technology transfer, offering business development services for SMEs, and advisor to private and public agencies on issues related to nutrition and agribusiness. SUGECO is also playing a crucial role in addressing malnutrition, ending post-harvest losses, ending hunger, and creating employment opportunities for youths through agribusiness.
SUGECO has played a crucial role in incentivizing farmers to get into Orange-Fleshed Sweet Potato also know as “Viazi Lishe” by creating a business value chain by linking farmers to local food vendors also known as “Mama Lishe” and Baba Lishe. The team has been working with food vendors in Dumila, Kilosa Municipality, Morogoro Region. SUGECO has supported youths and women in the production, processing, and value addition of OFSP. The incubator has also been working with entrepreneurs helping them to learn to make healthy bread from OFSP instead of wheat. The incubator is helping the entrepreneurs by creating demands from local schools primary and secondary to adopt health OFSP bread instead of wheat bread. Some of the notable nutrition-sensitive products that emerged entrepreneurs from the incubator include; Akili Banana Biscuits from Kinshaga Food Products, Sanavita OFSP Flour from Sanavita, and SolarTunda Viazi Lishe Biscuits from SolarTunda.
While at SUGECO some of the key issues we learned even though there is acceptance from the market for nutrition-sensitive products and the entrepreneurs are working hard to develop their businesses. There are a lot of obstacles facing the entrepreneurs to build products that meet the regional and global markets due to things like; access to high quality and attractive packaging materials, access to seed-stage financing, machines to measure nutritional contents of different products, and challenges establishing new and sustainable markets for the nutrition-sensitive products. SUGECO is working with different ecosystem players in the region.
Accessing Capital and Investor Readiness
Part of the work that we are doing with GAIN Tanzania is to organize business clinics in different regions helping the nutrition-sensitive SMEs get the first-hand experience in engaging with commercial and impact investors. We reflected with the SMEs in Morogoro on what they face when raising investment and accessing finance.
Kinshaga Food Products Case Story, Accessing Capital From Financial Institutions.
Kinshaga Food Products shared his experience building his business from the ground up and lessons learned from engaging with financial institutions accessing capital. The company faced a local bank to access loans but the process was very cumbersome for a small business. Local banks lack understanding and services packages for SMEs and treat SMEs like established businesses. Eventually, they were able to raise capital but because of COVID19, they have faced some delays in production due to the complexity of receiving a machine they need for production which is stuck in China.
COVID19 has affected a lot of SMEs in Tanzania. Most of them have been forced to do business process re-engineering and completely change their business models. They haven’t received funds to bail them out and still they are expected to continue to comply with tax and loan obligations as if they still operate effectively.
Banks are pushing small businesses to continue to pay the interest fees even when they are not operating. The founder of the company, Elia Kinshaga also shared his frustration with agribusiness funds that have been designed to de-risks SMEs while accessing loans saying, most of these funds are not designed to support the SMEs since their priority is the safety of their own funds. He shared his experience with guarantee funds. Guarantee fund managers need to rethink their models to ensure they really serve the purpose and address real problems supporting SMEs. Otherwise, the fund will just be helping the banks to maximize their capital while benefiting everyone else except the intended type of businesses, SMEs at early and growth stages.
Jore Tanzania Case Story, Accessing Capital From Local Government Authority Youth Funds and SIDO
Three businesses shared their experience engaging with the local government authorities to access funding dedicated to youths and women groups. Rachel Kingu is the founder of Jore TZ. The company has a range of nutrition-sensitive products that are being sold in supermarkets in Dar es Salaam, Mwanza, Morogoro, and Dodoma. The company is involved in the value addition businesses of products originated from Cashew, Millet, Honey, and Pumpkins.
Rachel shared her experience accessing funds from the Mvomero LGA to support a group of women in which she was involved as a secretary. She shared frustrations on receiving LGA funds in groups. The lack of commitment of other women involved in the group made the group struggle to return the funds they received from the LGA. Out of ten women who were involved during the application process only two of them remained to run and managed the originally proposed project. Rachel advised on the need of the government to rethink how they offer the funds to youths and women to find a way to support actual businesses instead of just groups. The same feedback was shared by two other entrepreneurs in the room who were beneficiaries of the type of funds offered by the LGA.
Small Industries and Production Challenges
Most of the nutrition-sensitive businesses which were part of the study their main goal is to establish their own small-scale industry. All of them have started small-scale production primarily within their own homes. We had a chance to visit the production places of three SMEs in Morogoro; Jore Tanzania, Mirat Limited, and SECH Food Products.
Case Story, Jore Tanzania
Rachel Kingu co-founded Jore Tanzania in partnership with her parents with a vision to address the issue of stunting in rural Morogoro targeting Lugono and Kilemela villages. Rachel is a beneficiary of a US Embassy program — Academy for Women Entrepreneurs (AWE) and from Purple Planet Tanzania. She was part of the investor readiness training conducted by Sahara Ventures. The biggest challenge facing Rachel now is how to scale her production from the current small room in her parent’s house where she does production.
The main machine she uses for a production she bought from SIDO Shinyanga after meeting with a representative of SIDO at the Sabasaba exhibition in Dar es Salaam. Rachel's production capabilities can increase tenfold if provided with the capital, a larger space, and technical support. She represents other nutrition-sensitive entrepreneurs we engaged with who shared the same concern. Rachel's dream is to expand her business and sell her products outside Tanzania. She understands the challenge with standardization facing Tanzania food businesses and that is one area she is keen to receive support from.
Case Story, Mirat Products
Tito Bucheye is the founder of Mirat Products his primary products are daily products. Tito has been in the milk value addition business for more than 5 years. He started by buying and packaging Yoghurt from large producers such as Shambani Milk and sell to grassroots consumers. He changed his business model due to the small profit margin due to buying finished products from large producers. On his journey towards establishing his own milk value addition business. He took training from Promaco on how to use daily ingredients and processing equipment. Promaco is a Kenya-based company involved in the supply of specialty food and dairy ingredients and processing equipment in East Africa.
Tito is struggling to meet the market demand due to a lack of processing machines. Currently, he is using a traditional cocking stove to boil and process the milk during his production process. His ability to produce is at 100 liters per week which is way below the current market demand for his product. The other challenge is facing is the space of his production facility. He currently produces the Yoghurt in a small room with limited space. Tito is looking for commercial funds to help him grow his production capabilities. Against all odds, Tito still produces Yoghurt of the highest quality and astonishing taste. He has opened an outlet now to sell his products previously he used to do only delivery. Tito’s dream is to become among the largest producers of dairy products in Tanzania.
Case Story, SECH Food Products
SECH Food Products is a company owned by Monica Secharo. She founded the company in 2009 and started her operations formally in 2012. Monica developed an interest in nutrition-sensitive products after facing challenges giving birth to her first child to lack of enough blood. She attained the knowledge of producing nutrition-sensitive products from the Sokoine University of Agriculture (SUA) through a program that was supported by IFAD.
Monica's production capability is currently at 300 Kilos per month for the nutritious floor. She has a small dedicated room for production which she built from a loan. Monica's primary market is supermarkets, shops, schools, and individuals. She is struggling to meet market demands because of her production capacity. The other challenge Monica faces is tools to assess the quality of her products. She has to rely on her experience to anticipate the contents and the quality of the products. Monica requested the government to help small businesses with shared production facilities to ease the process of meeting standards.
The Morogoro Nutrition-Sensitive SMEs ecosystem is growing really fast and largely contributed by the role played by Sokoine Univesity of Agriculture (SUA) and Sokoine University Graduate Entrepreneurs Cooperative (SUGECO). The ecosystem is not perfect yet and still, there is a lot of work that needs to be done to support the SMEs especially in areas of production facilities, seed and growth-stage financing, technical support, and research. Compared to other regions this is the most promising ecosystem if the right resources are in place.