Nigeria: Partnership Provides Secret Sauce that Creates Growth from Wasted Produce
This post originally appeared the USAID Private Sector Engagement Hub Exposure site. Read the original piece here.
Nigerian cuisine is best known for its use of delectable spices, hot peppers, and a tomato base. Its flavorful recipes rely heavily on tomato paste when cooking. Nigerian farmers produce about 65 percent of the tomatoes grown in West Africa, yet nearly all of the country’s tomato paste is imported from other parts of the world.
Founder and CEO of Tomato Jos Mira Mehta started a tomato paste processing company after she noticed piles of tomatoes on the side of the road after an unusually large harvest. She learned that much of it was left to rot because the farmers had nowhere to sell the excess. A newcomer to Nigeria, Mehta traded in her finance job in the United States to join a nonprofit focused on global health, where she spent hours in the car, crisscrossing the northern part of the country as she drove between health clinics and hospitals. “It was a stunning visual,” she said. “There were tomatoes lining the roads as far as you could see.”
The sight of all these tomatoes on the side of the road was jarring. Mehta envisioned a tomato processing company that worked with farmers to produce locally-grown tomatoes that processed tomato paste for the country, avoiding the excessive waste of tomatoes.
“I had this very simple idea,” said Mehta. “Why can’t we just put the two together?”
After consulting with California’s tomato-processing powerhouses, the company focused on building a state-of-the-art model farm by experimenting with different seeds, irrigation techniques, and growing methods that increased yields and produced tomatoes with high enough sugar content to turn into paste. For the first six years, her team focused exclusively on getting the farming practices right before building the factory and fundraising.
To gain trust and build out the network needed to support the tomato paste factory, Tomato Jos paid farmers a high price for tomatoes. This business model resulted in temporary losses, which made conversations with investors difficult.
Seeking Outside Investment to Grow
After years of working alongside Nigerian farmers to hone agriculture best practices, the company was ready to open an integrated tomato processing facility. However, accessing growth financing proved difficult until Mehta connected with USAID, which helped her secure outside investment, expand her production, and increase the incomes of farmers in one of the world’s poorest regions. USAID-funded transaction support from advisor CrossBoundary, which helped Tomato Jos attract investors, helped those investors see past short-term losses to the company’s long-term growth trajectory.
“The value that we got from CrossBoundary and USAID was really to help us figure out how to tell that story — about why what we were doing mattered and why we were now ready to invest in a factory,” said Mehta.
CrossBoundary worked directly with interested investors to understand what information they would need to be comfortable investing. For one investor, it was a market-sizing analysis on tomato paste in Nigeria. For another, it was a valuation analysis conducted by a neutral party.
“CrossBoundary helped us understand what metrics investors want to see,” said Mehta. “They also identified comparable companies to help us position ourselves and determine what kind of valuation we could push for. Finally, just the introduction to new investors who I didn’t know — that was also very valuable.” The introductions from CrossBoundary, which is a well-recognized platform, gave Tomato Jos the first stamp of approval to get to the next stage of the conversation.
Ultimately, Tomato Jos raised $4.4 million in funding from a mix of Nigerian and American investors in May 2020. Tomato Jos put the capital to work quickly, placing an order for processing equipment and breaking ground on a factory, which became active in 2021. The new round of financing is enabling Tomato Jos to create nearly 90 new jobs and engage 84 new smallholder farmers. Tomato Jos plans to work with thousands of out-grower farmers in the future as it grows, injecting more than $1 million into the local economy each year in the form of increased incomes for farmers.
From Investment to Impact
Tomato Jos’ work has ripple effects throughout the community. Farmers who work with the company see improved tomato yields and incomes. These increases translate into important improvements in the lives of farmers and their families. When Tomato Jos began, it targeted early adopters and farmers that were willing to experiment with new approaches. Now, it has broadened its base to traditional smallholders and female farmers who don’t have any vegetable-growing experience at all.
In addition to creating a market-based solution to food waste in Nigeria, the partnership with USAID offers long-term growth potential for innovators, investors, and the economy as a whole. For example, through its work with USAID, Tomato Jos leaders developed new fundraising skills that can help them engage additional investors in the future without USAID support.
Through deals like this USAID and other development agencies can help investors find opportunities that deliver social, economic, or environmental impact, which often lead to additional investment and better financial outcomes for firms and investors. By unlocking private funding that is aligned with its development goals, USAID can ensure a deeper, more sustainable impact for years to come.
About INVEST
To support the market-based approach, CrossBoundary — a frontier market investment advisory firm — provided support to the Tomato Jos transaction through USAID’s INVEST program, funded by Southern and East Africa Regional Missions in support of the U.S. Government’s Prosper Africa initiative.
As the world’s development challenges become more complex, USAID recognizes the need for market-based solutions. USAID INVEST unlocks the power of private capital to drive inclusive growth in countries where USAID works.
