Partners within the GSoko system are already realising early benefits from aggregation and warehouse certification. NAFICS Grain Trading Ltd. (Nafics) has been a member of the Eastern African Grain Council (EAGC) since its inception. We talked to the Head of Operations, Paul Musembi, to find out more about the early successes that the company is experiencing, as well as the benefits of leveraging the GSoko system
As a GSoko certified warehouse, Nafics is able to facilitate the route to market for farmers who have quality produce and want greater reliability of purchase and higher prices for their produce. In practical terms, farmers – normally as part of producer groups and farmer organisations, have their produce quality checked and stored at the warehouse for a few months before being sold at a higher price to our buyers. This waiting period is key as traditionally, mass produce is sold during harvesting time, which has a knock-on effect of lowering prices. By storing their produce at our warehouses, farmers are given the flexibility of when to sell their crops.
“GSoko is an improvement on what we had in the past, most notably because the platform aggregates data in its system, which is a departure from our previous reliance on handwritten Warehouse Receipts. In addition, GSoko has given the millers we work with greater transparency as to what stock is available, the quality and where it’s located.”
The company recently sold over 20,000 bags of maize, approximately a quarter of their stock at the time, in one day and at a higher price. The stock sold was originally received at the warehouse at a pricing of approximately KES 2,100 but after 5 months of storage, each bag was sold at just under KES 3,000. The first step towards ensuring the warehouses meet regional standards, in order to secure wider markets, is getting certification from EAGC.
“The process of getting our warehouses certified under GSoko was a detailed but worthwhile process as it enabled us to improve our operations and comply with best practices. We had to make some internal improvements before we were certified, including purchasing standard weighing and grading equipment, and upgraded our warehouses to include better lighting and security. As we were not able make all the changes immediately, the whole process took just under a year – EAGC supported us along the way.”
Several benefits accrue to certified warehouses over the long term; one such benefit is the improved access to finance for farmers. Banks come in once the quality of grains has been verified, received and stored in the warehouse. The banks uses RATIN (EAGC’s market information system) to determine the prevailing value of the produce and the farmers will be given between 70% and 80% of that value. The grain is stored for about three months before getting the purchase price and once the produce has been sold, the loan and the storage costs are deducted and the balance is remitted into the farmer’s account.
“In order for a farmer’s grain to be accepted by our warehouses, the grain has to go through rigorous quality testing which, by extension, encourages the farmers to produce grain that meets the quality requirements. Farmers are trained on quality management at the aggregation centres to ensure that they consolidate and deliver good quality. We also provide transportation for the farmers’ produce from the village aggregation centres to our warehouses, and issue the appropriate storage bags standardised at 50kgs. In addition, we can insure farmers’ produce against risks including theft, burglary, floods and fires. We offer to buy grains from farmers and therefore there is a ready market for the warehoused grains.”
In addition to this, the quality of produce is guaranteed for private sector buyers and traders because of the systems in place. Nafics only stores grade 1 grains. The company also has a wide supply of producers, making the system resilient against any market conditions, most notably shortages.
“We work hand in hand with the farmers and EAGC right from the pre-harvesting stage. We are committed to providing capacity building and training to support the farmers in getting the best and highest quality grains. Our training is also heavily centred on post-harvest handling (including the sorting, drying, and packaging) in order to mitigate against post-harvest losses. EAGC also provides farmers with post-harvest handling equipment such as moisture meters and drying machines to help facilitate the process.”
The certification process has been beneficial in terms of the conservation of quality and also in improving the wellbeing of farmers who are now able to get better prices for their produce. Looking at the EAGC GSoko system in the longer term, farmers will be able to get Grain Notes (G-Notes) once their grain is deposited at the warehouses, and they can use the G-Notes for important necessities such as accessing the loans from the banks, access to farm inputs through agro-dealers, medical care and school fees.
Paul further explains, “When more farmers interact with the GSoko system and build their confidence in it. We predict that looking for grain stocks will be less of an issue for us, and by extension, we will be able to increase our revenues as more farmers will store their grains in our warehouses. The more stock we are able to store, the more solid our business plan which should generate additional backing. Finally, we are currently renting our premises, but hope to have our own premises in the near future.”
Building trust is an incremental effort; the G-Notes will go a long way in increasing utility of the system, allowing farmers to take care of more immediate needs as well as any emergencies at home such as access to cash, medical care and also giving them access to farm inputs.
The private sector will play a bigger role in improving the broader infrastructure landscape, including providing bigger and better quality warehouses. Furthermore once the banks and agro input dealers come on-board the GSoko system, the farmers will have easy access to finances and agro inputs. In addition, the standardised and proven grading procedures reduce the need for farmers to carry out their own sampling to check quality checks.