Starting a Green Grocer Business for Uganda? Go On, Save a Life
First the basics:
A green grocer is primarily a retailer who sells fruits and vegetables. For the purposes of Uganda, I will take the liberty to extend this definition to someone who grows fruits and vegetables for subsequent sale.
Still interested?
I don't think you can successfully start this business if you are not passionate about healthy living because It seems no one likes eating healthy! I remember as a child my mum slapped us when we didn't eat greens. Bless her, she had "to be cruel to be kind", she knew what every good mother knows; greens save your life. For example eating a minimum of 400 grams of fruit and vegetables a day lowers the risk of serious health problems, such as heart disease, stroke, some types of cancer, type 2 diabetes and obesity.
So then, how do you translate the passion to save a life into a viable business?
FIRST THE CONS
1. Low demand (local)
Uganda is a mainly subsistence econom y and a lot of families grow their own fruits and vegetables and therefore 80% of Ugandans will probably not be your clients. This leaves a small urban base which is slowly shifting from buying from street side/market stalls to the various emerging supermarkets. On this basis, should you choose to venture into this sector, I suggest that your focus is to supply supermarkets or for export.
2. Excellent organisation skills
As fruits and vegetables have a short shelf life, typically a few days for say bananas and mangoes to 1-2 months for lemons and oranges, this sector requires excellent planning/organisation skills. You need:
Cash - to buy and transport items at short notice.You need advance cash to buy fertiliser, pay for labour etc as it could be at least 5 months (during growth) before you realise any income at harvest. Uganda is typically an informal economy and so it is difficult for you to access credit facilities hence the need to have cash.Record keeping. In addition to financial records, you need production and quality assurance records.THE PROS
1. Out grower partnership
Having considered the various options, I believe the best is as an out-grower to an established export farm. This gives two advantages; assured market and technical support.
To supply say Tesco supermarket in the UK or to the European Union (EU) you need quality control systems in place for your products to be traced from the farm to the market as well as for sample quality checks to meet EU health and safety requirements. This makes export very expensive for a small farmer and thus need for the affiliation.
In Uganda, export companies like Farm Fresh Produce and Jaksons Uganda Limited would be a good start particularly as several reports and interviews with them indicates that their main challenge is finding sufficient quality outgrowers to help them meet the demand from the EU markets.
Now there is a golden opportunity - become an "out grower" of farm fresh and voilà, success!
2. Technical support
In addition to support from programmes like National Agricultural Advisory Services (NAADs) or for the out grower by the "lead" farm, specific technical support for the sector is available from the EU PIP programme: http://www.coleacp.org/pip. The PIP programme provides support in the form of cost sharing to cover cost of technical assistance and training while the investor provides the infrastructure and the working capital.
3. Excellent Profit and Return on capital
On the basis of a financial model we have developed (at inachee.com); I estimate the following:
Start-up Capital (A): Shs.13,538,374 Profit per year (B): Shs. 52,488,422 Return on Investment/Capital (years to get capital back) (A/B): 0.26 yearsIn other words, you can expect to get back your start-up capital in about 3 months.
The model is based on amongst others:
Being an out grower to a farm that exports say chillies;Inter-cropping. You inter crop the main export crop with other fruits and vegetables and thus earn other income; andIrrigation. Weather trends are increasingly unpredictable even in Uganda. Irrigation equipment used to start at $ 4,500 but products like the "money maker" wonder pump costs $ 150.This makes it affordable for the smaller farmer in Uganda.FINAL WORD
Not eating chillies/hot pepper is not necessarily what my mother spanked us for but growing other vegetables and fruits on your farm will save a life, it may well be your own or of your children so go on, plant fruits and vegetables; save a life.
Dickson E Wasake (ACCA) is a Chartered accountant and for over 8 years has been providing audit, accounts, tax and advisory to clients in Uganda, The Bahamas and the United Kingdom.
He shares his diverse experience as part of the "Investing in Uganda-my naked eye" writing series which include a model showing estimated profit, start up capital and returns on investment when investing in a given sector.
You can find out more about the series including a detailed analysis of this article and the financial forecast model the sector at http://www.inachee.com
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