Soil Builders, using a bond to scale regenerative approaches in West Africa

An interview with Emiliano Mroue,  co founder of the WARC group, on how they are applying regenerative approaches with smallholder farmers in Ghana and Sierra Leone.

And how they are raising capital through the innovative New African Farmers Bond to scale their work.
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In the Soil Builders series we welcome back previous friends of the podcast to understand their progress and we discover new companies, startups, farmers, investors engaged in building soil all over the world.

More about this episode and the Soil Builders series on https://investinginregenerativeagriculture.com/2020/12/01/soil-builders-3/
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Transcript

SPEAKER_00: 0:01

Welcome to Soil Builders, a series where we follow who is building soils at scale. This is an experiment, so please share any feedback. Why this show, Soil Builders? I believe that most change in regenerative agriculture and food will come from, and is coming from, entrepreneurs building ways to regenerate soil at scale. I call these Soil Builders. Soil Builders are entrepreneurial farmers, ag tech companies, investment funds, food startups, new seed corporatives, teams within food companies, robot startups, investment vehicles, etc., etc., etc., or regenerating soil beyond their own farm gate and with more than their own money. This series allows the community of the podcast, which is you, full of funders, investors and fellow soil builders to follow their progress, their challenges and their breakthroughs. I hope you enjoy it and please reach out with any comments, feedback and ideas. Hi Emiliano, please briefly introduce yourself by sharing how come you're working on regenerating soils in Sierra Leone and Ghana.

SPEAKER_01: 0:58

My name is Daniel Obrower. I'm the founder and CEO of Work. Work is a social enterprise based out of Sierra Leone and Ghana. And our main objective is to help farmers increase their incomes by introducing regenerative agricultural practices. My path to Sierra Leone and to dedicating my life to this cause started when I was a teenager. I was living in Argentina and I did a first solo trip to Bolivia. I think I was seven or 18. And there I got exposed to the hazardous realities of silver miners in Potosi. And something kind of changed in the way I look at things. In any case, I continued my studies in business economics. Then I moved to Europe and I did a master's in economics. So nothing really related to development. Then I started working in a big multinational in Germany, Dusseldorf. So again, nothing really related to development. But while I was living there, my friends would go skiing in Chamonix and I would go backpacking in Afghanistan or in Africa so there was something else that I wanted to do in my life and in 2010 I did this backpacking trip in Sierra Leone and I got exposed to the realities of rural poverty in a country like Sierra Leone which is among the least developed countries in the world and got exposed to the realities of hunger it was the first time in my life I was so deeply embedded into communities that were exposed to chronic hunger and that And what is work

SPEAKER_00: 2:51

exactly doing?

SPEAKER_01: 2:53

Yeah. The first one is poverty and hunger, and that's fairly straightforward. A farmer that produces barely enough to feed his or her family had practically nothing else left to generate enough income to afford other basic things in his or her life, like education or health or proper living, etc., Just to put it in context, in Sierra Leone, more than 95% of the farmers live below the subsistence line. So in lay terms, this basically means that they don't even produce enough to feed their families. And consequently, there is chronic hunger. Up to 35% of the children in the entire country suffer from stunting. The second consequence of subsistence farming is related to sustainability. And let me just bring an example to illustrate why we think that subsistence farming practices can put pressure on fragile ecosystems. In southern Sierra Leone, before a farmer starts her season, basically she would stand in front of her, you know, a couple of acres of land, equivalent, you know, to a couple of football fields of land, and in front of her she would have two or three meter high grasses covering the entire farm. Grasses that she would need to clear or land that she would need to clear to prepare for planting later on. So at this point, she basically has two options. One is either spend with her entire household working for an entire month, or even longer in some cases, just to cut those grasses down, or they could simply burn them down in 30 minutes or an hour. So clearly, and actually understandably, farmers do burn their fields to clear the land before planting, and then they still need to prepare the land. So they do you would need to spend another 30 to 40 days working manually with hand hoes to prepare those lands for planting. Hand hoeing has an extraordinary impact that is basically, you know, exposing the soils or, you know, having naked soils, as we call it. And this could be disastrous for the topsoils, especially in tropical environments where rains are monsonical and there would be an extraordinarily strong rain at the beginning of the season, and if those soils are naked, you would see a river of topsoil, you know, simply eroding from the farmer's farm. This is happening year after year after year, right? So actually, the fact that soils are not covered is tremendously important in tropical environments, in addition to heat and oxidation that has an even bigger impact on soils than what it would have on temperate environments. So we as work, What we do is we seek to stack with eggs for smallholder farmers by supplying a bundle of inputs like seeds and fertilizer as a service to the smallholder farmers. So again, if we take a look at their farm, so the number one thing that we try to do is the farmer to be able to focus on his or her soil's health. So this bundle includes the, first of all, a crop rotation so that this farmer can move away from doing a monoculture that is very prevalent in West Africa so that she can move away from doing rice after rice after rice into rotating rice with soya beans or maize with soya beans or whatever the right crop rotation makes sense in her environment. Secondly, introducing or bundling the right inputs. This means the right to improve seeds and even organic fertilizers and other inputs that are needed for her to increase her yields per unit of land. And thirdly, it also includes the mechanization services. So this basically means that we would come with a no-till planter. So instead of her having to plow her lands within 30 days and then plant and spend a lot of time and resources, doing that, which is on top and sustainable for the soil erosion that we were discussing earlier, we do come and provide those planting services with a no-till planter so that now she can adopt conservation no-till planting system. So conceptually, the no-till planting coupled with crop rotation and covering the soils always covered with crops reduces significantly the soil erosion and actually helps the farmer to increase the carbon that she is able to sequester. From a farmer's perspective, this bundle results in significantly higher incomes. So the baseline is a farmer that was farming one or two acres by hand once a year with only one crop like rice. into one farmer that now is able to plant twice a year a crop rotation, so let's say rice and soybeans, that she can get much higher yields, in some cases five or even more, five times more. It's a farmer that now can put more of her land under production instead of doing one acre or two acres because that's how much she could do with her household, which is basically her labor force. Now she can mechanize this planting and she has an have to handhold the land anymore. So she could do four or five acres instead of one or two. And all this put together resulting farmers increasing their incomes by up to 10 times.

SPEAKER_00: 8:39

What are the main challenges applying regenerative approaches to countries like Ghana compared to places like the US and Australia that we hear from much more often?

SPEAKER_01: 8:48

There are several challenges to adopting regenerative agricultural practices and scaling in a smallholder farming context, I think. So, well, first of all, there is the behavioral element. So, to start with, farmers have been, you know, burning their fields to clear for generations now, and not only themselves, but actually other parties, especially cattle herders, burn down land, you know, in our for fresh grass to come up and be eaten by their cattle. I think that this behavioral change requires an extraordinary amount of sensitization and actually the creation of incentives for all the parties. And this is a challenge that we have been consistently facing in the areas in which we operate. A second challenge, I think it's related to the fact that we believe that mechanization is an important element to make regenerative agriculture the norm in Africa. We think that farmers also, especially smallholder farmers, have been plowing the soils once and again and again during generations. And in cases where farming has been more intensive, especially in places in East Africa, the soil erosion has been disastrous. In West Africa, we still have the opportunity to do it first and right to some extent in some places. But in any case, farmers in even in a micro scale, they have been exposing the soils to erosion year after year. And it could also require an important behavioral change to believe on the mechanization, especially on minimum tillage or actually no tillage mechanization. And then, of course, it does require the business models, the capital, the machinery, the knowledge, the skills to operate this type of mechanization to bring it at scale. So we think that's an important challenge. And there has to be clear incentives. to do this as well from the parties involved. And we do think that there is an economic incentive because we do think that if farmers choose to adopt whenever they have the access to, obviously, the mechanization approach, they would free up a meaningful amount of time that they could use to create or realize other additional streams of income for their families that may even not be correlated to farming in itself. So we think that that could be a very strong incentive for the smallholder farmers to adopt mechanization, specifically no-till mechanization. And then what has been proven, especially from Argentina, where I'm from, that no-till farming can result in much lower costs reducing the amount of fuel consumed in the farms, and it can even result in better yields in the longer term. So I think that there is a very strong and compelling economic case for the farmers themselves to adopt

SPEAKER_00: 11:53

this production system. What regenerative approaches are you applying?

SPEAKER_01: 11:57

The baseline farmer here basically does a monoculture, usually rice in Sierra Leone or maize in Ghana, over-tills the lands, as we were speaking before, and uses several cheap, in many cases unreliable, and extremely toxic agrochemicals like paraquat, for example. So the first thing that we do is to introduce a crop rotation so that 100% of the land that farmers produce is rotated. In places where we can squeeze two seasons in one year, we would do a rotation of maize and soya beans, for example, or rice and soya beans, or maize and other type of beans as one of the practices. The second practice is we seek to put 100% under no-till farming, so minimizing the impact that we humans have on the soil. And thirdly, we also introduce cover crops, and we seek to avoid burning so that during the dry season especially the soils remain completely covered. In addition to that, we are also working on the circularity of inputs as well, pelletizing chicken manure and contributing that fertilization into the soils. Those are the main practices. In the future, we also are considering introducing cattle in specific periods of time. But since cattle herding is not as widespread across the whole region as it is in other environments, this is something that we have not started doing yet.

SPEAKER_00: 13:43

Can you share what the New African Farmer Bond is?

SPEAKER_01: 13:47

Noting farming coupled with other practices such as crop rotation or covering the fields, keeping the fields almost always covered or the entire time covered, has the potential to significantly increase the organic matter on the soils. And for 1% of organic matter on the soil, there are 10 tons of carbon that are sequestered for years or centuries in one acre of land. So the 500 million smallholder farmers in Africa have the capacity to store gigatons, over five gigatons of carbon in the soils. So we see smallholder farmers not only as the potential drivers of economic growth or rural wealth and development, but actually as a future of food production for the world's increasing population, but at the same time, active actors in our quest towards mitigating climate change. But this will take a lot of money. So from our side, we have launched the New African Farmer Bond that is precisely a financial instrument designed to be able to provide these tools and inputs to smallholder farmers so that we keep on converting more and more land while producing more and more food following regenerative agricultural systems. The instrument is fairly straightforward. It's a five-year bullet with a 7% interest rate and basically work as an organization is targeted so What will the

SPEAKER_00: 15:27

bond be used for?

SPEAKER_01: 15:29

The bond is targeted to increasing the amount of farmers and the amount of land that is under regenerative agriculture. So this basically means, on one hand, capex investments, approximately 60% of the bond value is going into procuring agricultural equipment, especially no-till planting, combined harvesters to reduce harvest losses, and other basic farming equipment. And on the other hand, basically to cover the working capital and the What have you learned

SPEAKER_00: 16:19

from the process and what would you do differently next time?

SPEAKER_01: 16:28

how to develop the right criteria to define if this solution will work in that environment. Just to give you an example, we started our operations in Sierra Leone and we came to the conclusion that in Sierra Leone there are structural constraints that are so deep and so in-depth that may make part of this solution unsustainable, especially here in Sierra Leone from a financial perspective. What I'm trying to say is in Sierra Leone there are three extraordinary constraints. One is skill gaps, two is agricultural or agronomic expertise locally, and third, the usual political constraints. And especially the depth of the skill gap is so large that makes the rollout of some of the elements of our model extremely slow and therefore quite expensive and hence very hard to make it profitable. So we have become a lot better in defining those criterias and this is a key element for scale so that now we can shortcut significantly the amount of time that we take into going into one new location in our process of replicating the model on what we have learned. I think the second element is that we learned significantly how to accelerate the behavioral change process. I think there is still a lot to learn on this from our side And it's something that I feel in many cases it's underestimated, how tough it is to change behaviors, especially thinking that smallholder farmers, especially subsistence farmers, when they make farming decisions, they are not making economic decisions. They are making life decisions because the consequences of making a wrong decision is having simply a lot less food to eat and it's not making more or less money. So that naturally results in a much higher risk aversion. from the smallholder farmers. And this is something that we understood over time. And I think if I had to start again, it's something that I would consider a lot deeper moving on. I think as well, it's very important to understand the partners or the potential partners that are out there. And I think in this process as well, we learned a lot in identifying who are those that really are committed to this specific social environmental objective and have the patience and the resilience to navigate with us this path that is extremely hard and long.

SPEAKER_00: 19:08

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