Mozambicans traditionally eat a lot of chicken and the demand has been growing. But in 2004, two-thirds of the frozen broiler chickens sold in Mozambique were imported from Brazil. By the time they reached store shelves, they were often past their sell-by dates. But they sold well because they were cheaper than Mozambican chickens. The country had the resources to supply its own chickens, and a thriving poultry industry could potentially employ thousands of poor people in jobs ranging from raising chicks and processing chickens to growing chicken feed. But the industry would have to become competitive enough to sell home-raised chicken more cheaply than the Brazilians.
Fighting poverty in the developing world is never easy. In fact, it can seem downright hopeless when we are confronted with facts such as the increase, in recent years, in the number of Africans living on less than two dollars a day. To successfully escape poverty, people need to earn decent and reliable incomes. Over the past 40-odd years, a number of organizations have developed and refined an approach that can help turn around bleak situations like this one. One such organization is Root Capital, a nonprofit social investment fund that is pioneering finance for grassroots businesses in rural areas of developing countries. Another is E+Co, which invests services and capital in small and growing clean energy businesses in developing countries. My organization, TechnoServe, works with the private sector to create income-making opportunities, and then empowers people to capitalize on them. Mozambique’s chicken industry is just one example of how we do this.
The first thing that needed to be done in Mozambique was a comprehensive value chain analysis. Our team started with demand and worked through from the supply of feed to egg production, the feeding and growing of chicks, meat processing, marketing, and retail consumption. We interviewed hundreds of participants in the poultry and feed sectors. Ultimately, we assembled a strategic plan that identified and quantified potential demand, the major constraints along the value chain, the high leverage and other points of intervention, and a specific industry development program.
As is so often the case, the constraints were multiple and interrelated. They included a lack of locally available feed; poor models for “outgrower schemes,” in which small-scale local farmers are contracted to raise chicks; few successful entrepreneurs operating hatcheries or abattoirs; few standards to ensure high quality and sanitary compliance; no industry organization; no retail marketing; and ineffective enforcement of tariff and import regulations. Moreover, while the overall economic returns were very attractive if the hurdles could be overcome, they required an upfront investment and cross-sector coordinating function that no single commercial actor could make. The sector was only able to move forward through an approach that emphasized pilots, education, and expansion at multiple points along the value chain and that coordinated multiple stakeholders.
That work took place in the feed grains sector, involving thousands of soy and maize farmers and growing that business from $15 million to $60 million in five years. Smallholder poultry farmers received business and technical training to improve production practices, and 11 commercial poultry businesses upgraded processing machinery, expanded production capacity, improved the quality of their broilers, and strengthened their links to smallholders. A trade group, the Mozambican Aviculture Association (AMA), was organized to represent industry’s interests and to launch a multimedia campaign throughout the country promoting consumption of locally produced poultry. Producers increasingly used the AMA seal on their products as consumers learned to associate it with a quality, standardized product. Government played an extensive role in enforcing import regulations and, along with Cargill, Michigan State University, and the University of Minnesota, in introducing bio-security measures and contingency planning for food safety in response to the threat of avian influenza.
In the period between 2004 and 2008, the Mozambican poultry industry grew more than fourfold, with annual production reaching more than 23,000 tons of chicken meat in 2009 and with consumption of locally produced chicken rising to 76 percent of the total market. More than 1,200 poultry jobs have been created. More than 2,500 small-scale farmers were trained and began participating in outgrower production operations, leading to two- to ten-fold increases in household income. Poultry processors’ annual revenues have increased from $20 million to $80 million. And the industry continues to grow. TechnoServe’s focus in Mozambique is now upstream—on a host of opportunities for the broader commercialization of the soy sector—and downstream—on the potential for retail chicken franchise stores.
TechnoServe/Mozambique’s 42 employees and nine volunteer consultants are spread across four standard and nondescript offices around the country, but they carry out most of their work on site at the businesses they advise. The overwhelming majority of the employees are Mozambican nationals. One employee is a former veterinarian who served as the managing director of a private veterinary cooperative and wrote the country’s most widely referenced manual on chicken raising and avian flu prevention. Our approach is simple: When necessary, we work with individual businesses that, in the aggregate, can make a big impact. But, whenever possible, we build up entire industries that can have profound poverty-reducing effects across communities and regions. It is possible to unlock value in different industry sectors in emerging markets, and these opportunities will grow over time. Success, however, requires government and business to adopt a strategy based on an analytical and market-oriented approach that is customized for the sector and focused on helping enterprises and people earn money. While ultimately reliant on commercial incentives and viability, the approach often requires upfront and subsidized investments to seed the market, to coordinate stakeholders, and to make interventions across the value chain. Our recent work in Mozambique is a case in point in how this approach can succeed.
In the past ten years, TechnoServe/Mozambique has similarly engaged in the cashew, fruits, forestry, and tourism sectors. Each of those interventions was different—customized for the particular opportunities and constraints of each sector. Yet all looked for ways to apply donor funding to rigorous analysis of the sector and to targeted, time-bound, and integrated interventions across the value chain that would catalyze longer-term industry growth. The overall impact for Mozambique was substantial: an estimated gross domestic product (GDP) boost of five percent, more than 8,000 new jobs, the integration of nearly 100,000 farmers into commercially viable value chains, and more than $50 million in capital mobilized in support of new opportunities.
Mozambique is just one example. Over the past four decades, TechnoServe and other developmental organizations have leveraged the business sector to improve the lives of poor people in countries across the globe, and have changed the discussion about how best to help individuals through business.
With the right assistance of nonprofits and humanitarian agencies, more and more small businesses in the developing world are receiving the help and training they need to be prepared for the global economy. This is not easy work, but it is important. When done right, it can catalyze vibrant, substantial, and poverty-ending economic growth.