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Turning Cashews Into Cash

Olam CEO Sunny Verghese has used his unusual business outlook and passion for socially responsible operations to make his company a global success.

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He tells his investor relations teams to discourage “the wrong kind of investors”, wants more global environmental regulation and taxes and believes that companies have an overwhelming responsibility to their supply chains. Sunny Verghese has an unusual outlook on business.

The Olam CEO has overseen the remarkable growth of the agricultural producer and processor from a sideline operation in Nigeria to a global business spanning 65 countries. The company’s success has come in part by turning social responsibility into a competitive advantage, making a solid business case for the kind of social investment that is only now finding its way into mainstream corporate culture.

Olam began with modest goals in 1989 as an offshoot of the Kewalram Chanrai Group, which had been operating textile factories and cotton spinning operations in Nigeria since the 1960s. When the oil price slumped in the late 1980s, the country began to suffer from an acute shortage of foreign exchange, and businesses struggled to find hard currency to buy inputs and spare parts. In response, the Kewalram Chanrai Group looked for a sector with quick export potential. They began with cashews, and expanded from there.

“When we looked at what was required for us to win in this business, it became evident that the large players were already very well entrenched and we were late to this game,” Verghese says from the company’s Ivorian headquarters in Abidjan. Despite the fragile political situation in Côte d’Ivoire over the past few years, Olam has continued to invest, opening the world’s largest automated cashew processing factory in February in the northern city of Bouaké.

In the late 1980s and early 1990s, the industry was undergoing huge change, as West African economies liberalized and broke up the state monopolies overseeing their commodity exports. The cocoa and cotton boards disappeared and were replaced by a fragmented, poorly structured industry of traders and license-buying agents, who had previously bought at the farm gate on behalf of the government. The rules of the game were changing, and Verghese saw an opportunity to take on the existing players.

“[Before] they could sit in London or New York or the major commodity trading hubs and source their raw material from the government monopolies, without really having to come here, dirty their hands or manage the emerging market risk,” Verghese said. “When the government monopolies started dismantling and disappearing, they started facing significant counterparty risk issues.”

The new traders were not able to manage pricing risk, so when the markets turned against them, they would default, leaving international customers without supplies.

“It was difficult for the customer overseas to come and enforce his contractual obligations in these markets. So counterparty performance and forward selling premiums became big issues under those circumstances,” Verghese explained.

“That’s when we realised that we had a significant opportunity to develop supply chain infrastructure and build counterparty credibility that was very high, so that in other countries, given the volatile pricing environment, we were still able to deliver reliably on a contract.”

Olam thrived in the new African markets, spreading across the continent and into major commodities, such as rice, cocoa and cotton and in niche products, like cashews. To do that, he explained, “we started at the origin and we resorted to buying at the farm gate, or as close to the farm gate as possible.”

But this was only part of the struggle. Creating supply security meant building loyalty and improving the lots of the smallholders that make up the majority of growers.

“Buying from the farmer directly, helping him improve his productivity, providing him [with] microfinance—in terms of loans—or agricultural inputs and market access, helping him to upgrade the quality he was producing, allowed him to dramatically raise his income and his livelihood, and therefore become a loyal supply partner for us.”

Verghese talks in terms that are becoming common in emerging markets and agribusiness. Companies, from brewers to traders, have begun to articulate what the Olam CEO calls “mutuality” to their investors and shareholders.

The reasons, he says, are relatively straightforward. Beyond it simply being “the right thing to do”, being welcomed into a country and being sensitive to its context is fundamental to being able to work there unimpeded.

“We believe in emerging markets it’s relatively easy to get a license to operate from the government but it is tougher to get a license from the community to operate in those markets,” he says. “You can only build a sustainable business in these markets when the community gives you license to operate. If they see you as a foreigner, as an exploiter of their resources, as not adding any value, they don’t want you there.

The growing trend towards consumer activism and responsibility has added momentum to the requirement.

“Our customers, like Nestlé or Unilever, in turn have demand from their consumers who are not satisfied in snacking on a bar of chocolate or drinking a cup of coffee without asking searching questions about where this coffee or cocoa is coming from. Is there any child labor involved? How environmentally sustainable is the supply chain for this product being used in their chocolate or their coffee?”

The company is creating its own “Olam standard” of sustainability, and is in the early stages of an environmental footprinting exercise to work out the carbon impact of its individual products and supply chain.

Verghese can rattle off statistics about the threat that climate change poses to the world’s population, and the links between global energy, water and agricultural supply. He talks about the water requirement per kilogram of meat in the same terms that most CEOs talk about their financial statements. His sense that there is an imperative to act, despite the high cost, is strong, although he acknowledges that to do so alone risks unilaterally imposing a drag on the company. The competition could gain short-term advantage by avoiding unlegislated “obligations”.

“It’s a catch-22 situation,” Verghese says. “We believe that the long-term solution is that carbon should be priced and carbon should be taxed because you cannot influence behaviour if that is free.

“I think stakeholder pressure will intensify to a level where everybody will have to comply with the minimum standard. So we are taking the view that it is the right thing for the sustainability of our business so we should do the right thing here, because if you want a business that is enduring, then we can’t take [that] view.”

The issue of “enduring” business, and the kind of long-term view that encourages corporate responsibility, is difficult in the current funding environment. Olam listed on the Singapore Stock Exchange in 2005 and the demands of “typically transient” shareholders with short-term investment horizons frustrates the strategist in Verghese.

“When we are investing in plantations, say a rubber plantation, the first yield is [after seven years]. The first maturity is [after] 12 years. The cash flow break-even is in 14 years,” he said. “As a CEO there is very little incentive for you to think that far ahead, because analysts are looking at the next quarter and getting upset if you [deliver] below expectations.”

“The problem with the current capital market structures and CEOs and their time horizons persuade people to be very short-term in their outlook.”

Despite this, he has no intention to change tack.

“I tell my team your job is not to go and market the company, your job is to go and de-market the company,” he said. “You have to tell them ‘are you sure you want to invest in us? Because here is the deal: we’re going to be cash flow negative for five years’. Most people would fall off their chair.”

Continuing with the heritage of the company’s early days and trying to improve its footprint “from seed to shelf” is going to become a competitive advantage all over again, as best practice in sustainability becomes more widespread and pervasive.

“One of the reasons why we have succeeded is the way that we have innovated our business model,” he says.

“We feel that benchmarking best practice is an important first step, but is lousy strategy, because at the end of the day, everybody is trying to follow best practice, so if you achieve that goal, you will at best be at the middle of the pack.

“You can never be a leading company, or a very successful company, by just being middle of the pack. If you want to be exceptional, you need to create the next practice.”

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Agriculture

Green-Sky Thinking

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In Johannesburg, city-dwellers like Linah Moeketsi have taken the future of sustainable farming into their own hands. Where land is becoming scarce, they look to the skies.


Doornfontein is one of Johannesburg’s older inner-city suburbs with decaying buildings and dingy alleys that wear a dour, monochrome look.

Daily commuters and street surfers jostle with delivery vans and mountains of metal scrap but the grey of the concrete city makes it hard to believe that there could be a patch of green in a most unlikely location.

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Above the humdrum of life here is a rooftop hydroponics farm looking down on the city, but upwards to a new route to restoration and urban preservation.

Atop the eight-floor Stanop building – offering a breath-taking view of the city and the landmark Ponte Towers in the distance – one woman has made it her mission to turn a grimy grey terrace into a green lung on the city’s skyline.

“City life is taking on a totally new direction… even people who think they couldn’t one day farm, find themselves on rooftops,” Linah Moeketsi tells FORBES AFRICA.

Moeketsi grows herbs, used to treat non-communicable diseases (NCDs), in a 250m x 500m greenhouse on the building’s terrace. But her rooftop farm is sans any soil – it uses a hydroponics system.

“I think because we are in the city and we would like to produce for people in the city, hydroponic farming is one of the answers because you can actually harvest more than twice the produce, and the growth rate is quicker and there is produce that you can have throughout the year that people demand because it is in a controlled environment,” she says.

On a windy Wednesday morning in October, we meet Moeketsi at her aerial green facility, a couple of days before she is to send some of her plant produce to the market.

She talks about her journey as an offbeat farmer. It all started when her father fell ill in 2013, when doctors failed to correctly diagnose his disease.

“They couldn’t see that he was diabetic. He didn’t show the signs of diabetes, but he had this foot ulcer that just wouldn’t go away,” she says.

“The future of city farming is great simply because we have more and more young people getting into this space. Even though it’s farming, they are looking at it from a very different angle.

Moeketsi decided to do her own research, so she read up books on African medicinal plants and used some herbs that belonged to her late mother, who had been a traditional healer.

“It took me a good eight months to help my dad and I actually saved him from having an amputation.”

The news of Moeketsi curing her dad’s diabetes using herbs spread. Sadly, her father died in 2016, at the age of 87. But she is proud to have helped prolong his life.

“So he passed away in his sleep, not sick, nothing, he was just old. But he was always grateful; he was like, ‘even when I die, I’m going to die with both my limbs’, so we would make a joke about it.”

READ MORE| Businesses At The Heart Of A Greener Future

After her father’s demise, Moeketsi rented some land and turned her knowledge on natural herbs into a fully-fledged farm. However, when the owner of the land returned, she was forced to vacate.

Land was always going to be a problem in the city. But instead of giving up, Moeketsi looked to the skies.

“Because of this passionate drive for an answer, I found myself researching what’s happening outside Gauteng and South Africa, and I saw in Europe, they were farming on rooftops,” she says.

In 2017, her dream became a reality when she secured a deal with the City of Johannesburg as part of an urban farming program, and started the rooftop project a year later.

When we visit her greenhouse, we are welcomed by the sweet lingering scent of herbs. It’s hot and humid, and two fans whir away to cool the air.

Moeketsi walks around the greenhouse wearing dark glasses and a white jacket, with a syringe in hand – she could easily pass off as a medical doctor.

She elaborates on the hydroponics system. There are four pyramids, each attached to their own reservoirs of water. On each pyramid, different plants, ranging from spinach, lettuce, sage, parsley, basil and dill, rest on beds with pipes connecting them to the reservoirs. Moeketsi plucks out one of the pipes and inserts the syringe; water spouts out of the tube and she returns it to the bed.

“Twice a day, you have to check that water is actually going through the pipes, because that’s how the plants get water and nutrients,” she explains, as she unblocks a pipe using the syringe. She says it’s one of the best ways to farm using little water.

“When you put in certain plants in the greenhouse, you know you are guaranteed sustainable farming because you can produce those plants and harvest them,” she says.

Moeketsi adds that this allows her produce to stay consistent season after season.

“So, from that point of view, it makes the city more sustainable in terms of food produce that is easily accessible and cost-effective for the consumer because not everyone around here can afford the high prices of food but they can at least afford what we sell, whether it is at R10 ($0.5) or R15 ($1).”

As Moekesti continues to tend to the plants, a farmer she works with walks in and begins filling up the reservoirs.

Lethabo Madela has known Moekesti for almost six years.

“When you look around Johannesburg, there is no space, so rooftops have saved us a lot, especially those of us that love farming,” says Madela. “I’m learning a lot and I think she [Moekesti] changed the whole concept of farming for me because I used to farm vegetables. I didn’t know culinary herbs or medicinal herbs.”

Moeketsi speaks of other farmers around the city who have taken to the rooftops to farm plants such as strawberries, lemon balm, spinach and lettuce.

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In a suburb called Marshalltown, a 10-minute drive from Moeketsi’s farm, Kagiso Seleka farms lemon balm also using hydroponics.

He produces sorbet and pesto from his produce which is then used to make ice cream.

“It [hydroponics] is great for farming sensitive plants in terms of temperature. Lemon balm does not like frost. But it’s better to grow even out of season so you can set a higher price,” he tells us.

However, he says hydroponics farming is a luxury not many farmers can afford.

“It [hydroponics] does have a bit of a higher capital upfront, but you get a higher yield and higher quality, so people are willing to pay more. Hydroponic planting saves about ninety five percent of water soil farming in a water-scarce country,” says Seleka.

READ MORE| Local Solutions Can Boost Healthier Food Choices In South Africa

“We do have water shortages, and I know people are on the whole ‘organic trip’ but, is it more important to have an organic plant versus a water-saving environment?”

The Program Coordinator for Agriculture at the City of Johannesburg’s Food Resilience Unit, Lindani Sandile Makhanya, says there certainly are more rooftop farmers in Johannesburg now than ever before.

Converting idle terraces into avenues of profit is becoming a norm. There are new rooftop farms being set up every day, offers Makhanya.

He regularly visits Moeketsi’s farm to check on the progress and collect produce to sell.

“Urban farming in Johannesburg is rising, mainly because the idea of producing our own food is very important because most people are moving to urban areas and therefore it stands to reason that we have to try to produce as much as possible,” says Makhanya.

“[There is growth] even in animal production, although we are moving away from the bigger numbers, but we are involving the smaller ones; because of the space issue, they are increasing overall.”

For Moeketsi, her farm has changed her life and given her hope for a better future. In addition to the teas, tinctures, ointments and medicinal products she processes from her plants, she plans to include more by-products such as syrups in the future.

“The future of city farming is great simply because we have more and more young people getting into this space. Even though it’s farming, they are looking at it from a very different angle,” she says. “That is why the city is changing and rooftop farming is going to get bigger and bigger.”

Clearly, farming in Africa is covering exciting new ground.

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30 under 30

Applications Open for FORBES AFRICA 30 Under 30 class of 2020

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FORBES AFRICA is on the hunt for Africans under the age of 30, who are building brands, creating jobs and transforming the continent, to join our Under 30 community for 2020.


JOHANNESBURG, 07 January 2020: Attention entrepreneurs, creatives, sport stars and technology geeks — the 2020 FORBES AFRICA Under 30 nominations are now officially open.

The FORBES AFRICA 30 Under 30 list is the most-anticipated list of game-changers on the continent and this year, we are on the hunt for 30 of Africa’s brightest achievers under the age of 30 spanning these categories: Business, Technology, Creatives and Sport.

Each year, FORBES AFRICA looks for resilient self-starters, innovators, entrepreneurs and disruptors who have the acumen to stay the course in their chosen field, come what may.

Past honorees include Sho Madjozi, Bruce Diale, Karabo Poppy, Kwesta, Nomzamo Mbatha, Burna Boy, Nthabiseng Mosia, Busi Mkhumbuzi Pooe, Henrich Akomolafe, Davido, Yemi Alade, Vere Shaba, Nasty C and WizKid.

What’s different this year is that we have whittled down the list to just 30 finalists, making the competition stiff and the vetting process even more rigorous. 

Says FORBES AFRICA’s Managing Editor, Renuka Methil: “The start of a new decade means the unraveling of fresh talent on the African continent. I can’t wait to see the potential billionaires who will land up on our desks. Our coveted sixth annual Under 30 list will herald some of the decade’s biggest names in business and life.”

If you think you have what it takes to be on this year’s list or know an entrepreneur, creative, technology entrepreneur or sports star under 30 with a proven track-record on the continent – introduce them to FORBES AFRICA by applying or submitting your nomination.

NOMINATIONS AND APPLICATIONS CRITERIA:

Business and Technology categories

  1. Must be an entrepreneur/founder aged 29 or younger on 31 March 2020
  2. Should have a legitimate REGISTERED business on the continent
  3. Business/businesses should be two years or older
  4. Nominees must have risked own money and have a social impact
  5. Must be profit generating
  6. Must employ people in Africa
  7. All applications must be in English
  8. Should be available and prepared to participate in the Under 30 Meet-Up

Sports category

  1. Must be a sports person aged 29 or younger on 31 March 2020
  2. Must be representing an African team
  3. Should have a proven track record of no less than two years
  4. Should be making significant earnings
  5. Should have some endorsement deals
  6. Entrepreneurship and social impact is a plus
  7. All applications must be in English
  8. Should be available and prepared to participate in the Under 30 Meet-Up

Creatives category

  1. Must be a creative aged 29 or younger on 31 March 2020
  2. Must be from or based in Africa
  3. Should be making significant earnings
  4. Should have a proven creative record of no less than two years
  5. Must have social influence
  6. Entrepreneurship and social impact is a plus
  7. All applications must be in English
  8. Should be available and prepared to participate in the Under 30 Meet-Up

Your entry should include:

  • Country
  • Full Names
  • Company name/Team you are applying with
  • A short motivation on why you should be on the list
  • A short profile on self and company
  • Links to published material / news clippings about nominee
  • All social media handles
  • Contact information
  • High-res images of yourself

Applications and nominations must be sent via email to FORBES AFRICA journalist and curator of the list, Karen Mwendera, on [email protected]

Nominations close on 3 February 2020.

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Entrepreneurs

The Life And Wisdom Of Richard Maponya

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He was one of the big names in business in Africa; as gentlemanly. as he was shrewd. He fought the odds and apartheid to stake his place in business and inspire millions of his countrymen to do the same.

Richard Maponya – the doyen of black business in South Africa – passed away in the early hours of January 6, after a short illness. Maponya turned 99 on Christmas Eve near the end of a long and fruitful life that saw him dine with the Queen, laugh with Bill Clinton and chauffer his old friend Nelson Mandela. Mandela asked Maponya, who owned a car dealership, to pick him up at the airport in Johannesburg after his release from prison in 1990.

Ï picked him up at the airport and that was the most frightening time of my life. We were chased by people on foot, helicopters, motorbikes and cars. Everyone just wanted to touch Mandela. They could kill him just trying to touch him,” Maponya recalled to Forbes Africa in a cover story in March 2017.   

Mandela was a close friend of Maponya since the 1950s. The future president, then a young lawyer   helped Maponya set up his first business against the restrictive apartheid laws that shackled black business.

Maponya wanted to open a clothing store in Soweto, Johannesburg; the authorities said no. Mandela lost the fight for the clothing store, but did manage to secure him a license to trade daily necessities. This opened the way for Maponya to start out with a milk delivery business that was to prove the foundation of his fortune.

More than half a century on, Mandela, then a former president of South Africa, beamed with pride, in 2007, as he opened the first shopping mall in Soweto.

Maponya Mall had taken the canny businessman a good deal of patience to put together. He acquired the land in 1979 – the first black man to secure a 100-year lease for land in Soweto – and spent many more years building up the mall.

“Ï fought for 27 years for that mall and was many times denied; they actually thought I was dreaming. When Nelson Mandela cut the ribbon to open the mall, that was the highlight of my life,” Maponya said years later.

It was a mile on a road less travelled by Maponya in a long journey from the tiny township of Lenyenye in Limpopo in northern South Africa where he was born. He moved across the province to Polokwane to train as a teacher and then, like many young men of his generation, moved south to Johannesburg in search of his fortune.

In those days, the gold mining city was booming, but only the few saw the fruits. Maponya was blocked at every turn as he tried to make his way in business; he won through making a fortune from property, horse racing, retail, cars and liquor.

Maponya mentored many black entrepreneurs and inspired many millions more he had never met. One of them was Herman Mashaba, the former mayor of Johannesburg, who made his own fortune with hair care products.

“To myself and the people I grew up with he was an inspiration to all of us to get into business…If he had started out in business in a normal world there is no doubt he would have been even bigger than he was,” Mashaba told CNBC Africa.

Maponya will be mourned by the millions who were inspired to follow him and by a business world that is richer, in more ways than one, for his nearly a century of hard work in which retirement was never an option.

“People who retire are lazy people. You retire and do what? Bask in the sun?  I am not that type of man,” he said in 2017 at the age of 96.

He could never be.

By Chris Bishop  

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