Creating an agri-business hub: an investor’s journey in Rwanda
Published on The New Times
Three years ago, we had the privilege of meeting with the President of Rwanda (as part of the YPO group) and hear in person about his priorities for Rwanda and the Made-in-Rwanda initiative.Following that meeting, we started studying all sectors of the economy in the country, to see which one would have the most impact. It became clear that the largest sector in the country, agriculture, was the one to focus on.
A thriving, technology advanced agriculture sector would enable self-reliance and reduce the trade balance in the country. Having been familiar with investments in Rwanda through Ignite Power, we wanted to utilise the lessons and experiences we had and implement them into a new sphere.
Back In 2015, we made the first investment in Rwanda - Ignite Power which is by far the largest company in the off-grid solar sector in the country. With over 115,000 homes in Rwanda connected to safe affordable power (almost 1 million people), Ignite Power disrupted the market by offering higher quality products for a much lower price compared to the rest of the actors.
Rwanda Exploring Solar
Prior to Ignite entering the market, two companies, one German and one British, were present in the market, offering lead-acid battery (like those in diesel trucks) based home solar systems, for a cost of $ 500- $1,200 over long payment periods of time – about 5-10 years per contract.
Other than the high costs, this also meant clients were taking debt they did not understand, with unclear variable terms of payment – including long payment duration, for people that is was their first loan. Ignite team came into the market with superior technology - World Bank Certified, Lithium-Polymer batteries (like the one used by Tesla) and most importantly offered much lower prices of between $100 and $150, with simple monthly fixed fee (which clients understood) and short-term contracts.
The product was a huge success, and the company scaled up quickly.
The rapid growth and impact in the Rwandan market was a great starting point, and today Ignite Power operates in multiple markets throughout Africa and is now even exporting home solar systems to Mozambique from Rwanda for the first time in the country’s history.
Technology creating self-reliance and food security
With the lessons from Ignite, we went on to plan and roll out the next major disruption, this time in the agriculture sector. The first phase was defining the technology suitable for Rwanda, after assessing the options, it was clear that the best technology that can provide breakthrough results was Drip Irrigation, which uses less water, and provides superior yield.
A few attempts had been previously made to bring drip technology to Rwanda, so we had a
chance to learn and understand the “do’s and don’ts” for making a successful impact.
After interviewing dozens of experts, the main insight was the importance of choosing the highest quality technology and working with the most reputable global agriculture companies, which led us to Netafim, the company that actually invented Drip Irrigation back in the 70s.
The second lesson was scale: “finding land that’s big enough to make the numbers work”.
After nine months of searching, our team identified the optimal location to start: Gabiro Farm, where the technology could be scaled to over 16,000 hectares (ha). After taking in and understanding the two main lessons (among many others), it was time to take off.
The next step was working together with Netafim and GoR to define the business model - as we all believe in private investment driving social and economic growth. By creating preferable conditions for investors, the project will be a great success, which will create more replicated projects in the future. For that, we designed Gabiro Farm as an Agriculture Economic Zone, an “Agribusiness Hub”. In this hub, investors get the opportunity to invest in the land, leased out from the government of Rwanda.
The government has formed a Joint Venture (JV) with Netafim, and together we provide the investors with everything they need in order to grow their crops (and their investments).
The JV will provide each investor with access to water, services, training, access to the market and advanced drip technology. Each investor will take on land (300ha or more) and will enjoy the economics of scale.
The project will have profound impact on the Rwandan economy, ensuring food security, reducing import dependency, creating employment and build up a agriculture value chain and eco-system. It will also empower the local community, increasing rural income, livelihoods and create multiple new business opportunities. The project kicked off a month ago, with a JV agreement of Rwf 60b that was signed between Netafim and the government of Rwanda.
After dramatically changing the field of electricity in the country, we believe that now is the time to move forward and impact the field of agriculture in a green, sustainable way.
This project marks the start of a new era in agriculture for Rwanda, and another major step towards self-reliance, and real change for millions of people.