Kenya: Smart Logistics – how a female trader helps smallholders

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Rose Mutuku talking to farmers in Kitui, eastern Kenya.

Copyright: WFP.

In 2006, Rose Mutuku quit her job at a local brewery to set up Smart Logistics Solution Ltd. What sets Smart Logistics apart from many other traders is that its business model is built around creating partnerships with smallholder farmers. Rose has a passion for rural development because she became tired of seeing farmers in poverty despite all their hard work, she says.

In the beginning, Rose’s small-scale business mainly bought sorghum from farmers and then sold it to a brewery. Over time, she found more buyers and diversified the commodities that Smart Logistics deals with. Currently, the company trades in maize, cowpeas, soya beans, chili and passion fruits.
In addition to 11 permanent employees, 17 mobilizers work for the company in various locations in Kenya’s Eastern Province. The mobilizers are paid on commission basis based on the volume of commodities they buy from smallholders.

Storage

Through a grant from the Market Linkages Initiative (MLI), Smart Logistics has managed to build seven village aggregation centers (VAC) each with a capacity of 200 tons. The aggregation centers will be used by smallholders to bulk their produce and shall be managed by village committees. Each village aggregation center is equipped with a moisture meter, pallets and weighing machines. Three out of the seven centers also have stitching machines, collapsible drier bags and sieves. Smart Logistics has also constructed a grain bulking center with a capacity of 10,000 tons, and plans to establish a laboratory within the center for quality testing

Marketing

In 2010, 3,000 farmers from 135 farmer organizations sold their sorghum to Smart Logistics. To ensure quality, the company sensitizes farmers on quality issues together with the Ministry of Agriculture and other partners. Smart Logistics sells all commodities bought from farmers as soon as they are aggregated. The company currently has four major buyers namely East Africa Breweries for sorghum, Promasidor and Bidco for soya beans and WFP for sorghum, beans and maize.

Smart Logistics secures long term contracts over two to five years with its buyers. Based on these contracts, it enters into an agreement with organized farmers to produce the required commodities. The hired mobilizers discuss the price to be proposed to buyers together with the farmers: they project what it will take the farmers to produce and prepare the commodity for the market, add profit for the farmer, then add 1.50 Shillings per kg for Smart Logistics’ profit.

Smart Logistics therefore makes its profit on volumes - and this is why long term contracts with buyers are so important to Rose, as they allow her company to plan ahead. Another unique feature of Smart Logistics is that unlike other traders, Rose’s earnings are based on commission rather than on market speculation.

Selling to WFP

Rose had four contracts with WFP over the last 2 years. The first contract was awarded through an open tender in 2010, and she supplied 53 tons of sorghum. In 2011, the company received three forward delivery contracts of 112, 56 and 51 tons of maize, sorghum and beans. Delivery for these contracts is expected to be completed by the end of the year. Using the contracts, Rose has secured credit from input suppliers (inputs are provided to farmers and recovered from the sales) as well as from banks: In 2011, the company managed to secure a bank loan of three million Kenya shillings (US$32,000).

Challenges

Smart Logistics faces a number of challenges. At the moment, the biggest is the drought in many parts of Kenya, as many farmers were unable to produce enough food to sell. Price volatility also negatively affected the company’s ability to supply maize and beans. In the future, the company plans to be a regional provider of raw materials to manufacturers and start with value addition of commodities through primary manufacturing – another key step to connect farmers to markets in Kenya.

Exclusive: United Nations Food Program Suffering Hunger Pangs, Facing $1 Billion Shortfall

CLICK HERE FOR THIS STORY ON FOX NEWS

By George Russell

Published November 17, 2011

| FoxNews.com

As the global financial crisis bites deeper into the economies of wealthy Western nations, some of the biggest donors to the United Nations’ World Food Program (WFP) are coming up short, while some of the nations with the most cash in the bank -- notably Chinaand Saudi Arabia -- are still kicking in comparative peanuts.

The result: WFP faces a $1 billion shortfall in its operational budget for next year, meaning that the food crisis for the world’s hungriest people, who WFP normally says are desperate, is likely to grow worse.

Members of the WFP’s 36-nation supervisory executive board, meeting this week in Rome, were told that the agency hopes to feed 85 million people in 74 countries at a cost of about $4.82 billion -- but so far, it only has anticipated contributions of about $3.75 billion.

“Yes, this does mean that some people in need will not get the food they deserve,” a WFP spokesman told Fox News. In this case, “some” could mean quite a lot, as the shortfall amounts to about 22 percent of the hoped-for 2012 budget, or the equivalent of one person out of five among the WFP’s desperately hungry target clientele.

The belt-tightening has notably affected contributions from the U.S. and parts of Europe -- and any problem involving the U.S. is always a big problem for WFP.

America in the past has contributed as much to the food agency as the next dozen or so governmentcontributors combined. This year, the $1 billion U.S. contribution on the WFP books is about $500 million less than last year, and only as big as the next half-dozen givers.

CLICK HERE FOR FIVE YEARS OF WFP CONTRIBUTIONS

(According to USAID, Washington’s contributions to WFP will reach about $1.32 billion this year, but the U.S. government uses a different fiscal year than the U.N. agency.)

Other big donors are in the same fix. The European Commission, bureaucratic arm of the European Union, has cut its food contribution by nearly a third this year, lopping off about $100 million. Britain has tightened up even more, slicing its WFP contributions by about 40 percent, while other big spenders likeSpain, whose economy has crashed in the global debt crisis, have cut contributions virtually in half.

Moreover, countries like China, with trillions in foreign exchange reserves, are not riding to the rescue. To be sure, the Beijing regime has bumped its last-year contribution up by an impressive-sounding 500 percent -- to all of $20 million. Populous India is down on the WFP’s contribution books for $13.9 million.

One major developing country that has stepped up more solidly to the plate is Brazil. Its WFP contribution has climbed from $12.7 million in 2010 to $75 million in 2011 -- a 600 percent increase.

The oil-rich Saudis, on the other hand, are giving $54 million this year, about $15 million more than in 2010, and most other OPEC nations barely make the donor charts at all.

According to the U.S. Energy Information Agency, Saudi Arabia’s net oil export revenues in 2010 were $225 billion, while OPEC’s as a whole amounted to a little more than $1 trillion.

The OPEC total is expected to rise to about $1.1 trillion next year. If Saudi Arabia kept its 29 percent share of the total, that would amount to about $319 billion.

CLICK HERE FOR THE USIEA ESTIMATES

George Russell is executive editor of Fox News and can be found on Twitter@GeorgeRussell

AlertNet News Blog - Food rotting in central Kenya while millions starve in north

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By Katy Migiro

A newly arrived Somali refugee holds her bag of relief maize outside a distribution centre at the Dadaab refugee camp, near the Kenya-Somalia, July 23, 2011. REUTERS/Barry Malone

NAIROBI (AlertNet) – The front page of Kenya’s The Standard newspaper on Friday juxtaposed a photograph of a starving, elderly woman in northern Kenya with another of a farmer standing next to his rotting cabbages in Central Province.

Some 3.5 millions Kenyans will require food aid by mid-August due to a severe, prolonged drought in its arid lands. Frustrated by the government’s poor response, Kenyan citizens have launched an appeal aiming to raise 500 million Kenya shillings ($5.5 million) in the next month.

Meanwhile, the central part of the country is experiencing heavy downpours and its farmers are feeding cabbages to their cows for lack of markets.

“As thousands die of malnutrition, food goes to waste,” the paper laments, blaming the poor state of Kenya’s roads.

The paper says it costs farmers more to take their produce to market than they will receive for it.

"It is disappointing and shocking that we have abundant food in some areas and which is going to waste, while thousands of Kenyans elsewhere are starving," local parliamentarian David Ngugi told the paper.

Pastor finds Canadian aid for sale on Haiti’s black market

Former Ottawa man buying donated food to feed orphans

BY DAVE ROGERS, THE OTTAWA CITIZEN

OTTAWA-A former Ottawa pastor trying to rebuild an orphanage for children who lost everything in the catastrophic Jan. 12 earthquake that levelled Port-au-Prince, Haiti says he is buying Canadian food aid on the black market that flourishes in the country.

Ismorin Noël, who operates Orphelinat de la Judée in the coastal city of Gonaives with his wife Louise, rushed to Port-au-Prince after the earthquake, hoping to rescue youngsters who have no homes or surviving families.

This week Ismorin plans to move 30 Port-au-Prince orphans from a collapsed children’s shelter to the orphanage in Gonaives, north of Port-au-Prince. The six-hour bus trip will cost about $100 Canadian.

Unfortunately the orphanage Ismorin and Louise founded in 2004 was heavily damaged by six hurricanes and tropical storms and suffered more damage during the earthquake.

The roof is partly collapsed, the kitchen is a shambles, many buildings in the city north of Port-au-Prince have been destroyed, malaria is a problem and there are open sewers everywhere.

The orphanage, which houses 28 children, faces food shortages and increasing building material costs. Louise, who hopes to return to Haiti from her home in Gatineau, said her husband buys the Canadian food aid before other black market vendors grabbed it for resale in the local market.

“They don’t have enough food, clothing or shoes,” Louise said. “Food is very hard to get now at the market.

“They have to buy rice donated by Canada because it is available only on the black market. When you see a helicopter dropping food, men fight over it and then sell it in the market.”

Louise said everything for sale in the market in Gonaives was first donated. She added a plan to give food aid to women, that is now under way in Port-au-Prince would deliver more food directly to families instead of the black market.

The Kiwanis Club, the Royal Canadian Legion and the French Café in Manotick are trying to raise $100,000 to rebuild the Noël’s orphanage near Ennery, a higher and safer location northeast of Gonaives.

Other supporters of the orphanage include the Ottawa charity Re-Imagine United, a church in Austin, Texas and École élémentaire publique Michaëlle-Jean on Claridge Drive in Barrhaven which donated 100 boxes of clothing, shoes and school materials.

Louise, a health care worker at Montfort Hospital, who came to Canada in 1992 from France, and now lives in Gatineau, established the orphanage because she wanted to rescue abandoned children. She is originally from Haiti.

“When I was growing up I saw a lot of poverty,” Louise said. “Girls would get pregnant during carnival, abort themselves later and leave the babies in plastic bags on the ground. I always wanted to save those babies.

“There are now 28 children there now. Fifty orphans needed a home after the collapse of the orphanage in Port-au-Prince, but Ismorin could take only 30.”

Haitian officials didn’t object to the move but Ismorin has had trouble with child traffickers, Louise said. One man demanded $50 for one supposed orphan and another asked $3,000 for “plenty of children.”

Ismorin refused to pay and moved on.

Lucie Demers, a spokeswoman for Re-Imagine United, said all the children who go to the Gonaives orphanage will remain in Haiti and won’t be available for adoption.

The new orphanage is designed for 65 children but may have to accommodate up to 100 temporarily. Demers said the charity isn’t yet registered with Canada Revenue Agency but all donations are used for the orphanage and nothing is spent on administration.

Orphanage supporters have raised $20,000 of the $100,000 construction cost but within a few weeks they hope to find volunteers who will design and build a new home for the children.

People can contribute online to Orphelinat de la Judée at www.reimagineunited.org.

© Copyright (c) The Ottawa Citizen

Corruption biting the hand that feeds: food aid industry facing tough questions

Brady Yauch

Probe International

Monday, April 5, 2010

The food aid industry is facing a number of scandals and criticisms that are providing fresh evidence that not only does food aid hurt Third World farmers, it is also a revenue source for corrupt politicians and terrorists.

In Haiti, as the relief efforts continue to percolate through the country, President Rene Preval is urging international food aid donors to scale back their contributions, saying now that the “first phase of the emergency is over” Haitians need to be weaned off some of the food aid so they can begin to develop the necessary means to meet their own needs.

“If food and water continues to be sent from abroad, that will undermine Haitian national production and Haitian trade,” he said.

His plea comes after decades of food aid have already undermined Haiti’s agricultural sector, according to a number of analysts. Haiti relies on the outside world for much of its sustenance—with the most recent statistics showing that 51 percent of the food consumed in the country is imported, including 80 percent of all rice eaten. In the 1970s agricultural production accounted for almost half of the GDP, but has since fallen to less than a third.

Jean Andre Victor, a Haitian agronomist, agrees with the president, saying the country needs to implement drastic agricultural reforms, not increase its shipments of food aid.

"There's a long history in Haiti of groups like USAID flooding the market with rice and other imports," he told the Associated Press. "This is not what we need. We need real help and that means completely changing the agricultural system."

But food aid, while being criticized for creating dependency in the country it is supposed to be helping, also often falls under the political control of corrupt government officials and criminal elements. Haiti is no exception.

Haitian National Assembly deputy Steven Benoit says that gangs are intercepting aid convoys with the help of information from corrupt government officials, selling the food on the black market, and lining their pockets.

"They (government officials) have their little gangs on the side and those gangs are operating with immunity because they know they are covered by high-ranking officials,” he said.

Other workers on the ground are also noticing that food aid is increasingly feeding the country’s black market. One Canadian pastor and his wife, working in Haiti to rebuild an orphanage destroyed in January’s earthquake, say they have to buy food aid from the black market.

“They [residents] have to buy rice donated by Canada because it is available only on the black market. When you see a helicopter dropping food, men fight over it and then sell it in the market,” says Louise Noel, the pastor’s wife. She added that everything for sale in the local market was first donated.

Somalia too

The problems in Haiti are just the tip of the iceberg facing the global food aid industry. A recent internal report from the United Nations Security Council says that as much as half of the food aid to Somalia is lining the pockets of corrupt contractors, radical Islamic militants and local United Nations Staff. The report writes that the World Food Program—currently the largest aid agency in the country—is particularly problematic.

“Some humanitarian resources, notably food aid, have been diverted to military uses,” the report said. “A handful of Somali contractors for aid agencies have formed a cartel and have become important power brokers—some of whom channel their profits, or the aid itself, directly to armed opposition groups.”

While the allegations of problems of food aid diversions first surfaced last year, the World Food Program denied the allegations and stated that its own internal audit found no widespread abuse. But the authors of the recent damning report have, according to the New York Times, questioned how independent the internal audit was and are now calling for a new outside investigation of the United Nations agency.

Food aid in Somalia is big business. Transport contracts alone are worth $200-million and are the most important source of revenue in Somalia—with 80 percent of those contracts going to three Somali businessmen who are suspected of connections to Islamist insurgents. These three contractors have dominated the transportation of food aid in the country for the past 12 years.

“On account of their contracts with WFP, these men have become some of the wealthiest in Somalia,” the report was quoted as saying.

The investigation concludes that, in the end, only about half of the food it ships to the country actually makes it to starving Somalis.

Food aid from days gone by is also facing tough allegations after the BBC reported that millions of dollars of international aid for victims of the mid-1980s famine in Ethiopia was used by rebels to buy weapons. Using CIA documents and interviews with former rebels, the BBC says militant leaders posed as merchants when they met with aid groups that poured into the country after the Live Aid charity concert in 1985.

"The aid workers were fooled," said the former commander of the rebel group Tigray People's Liberation Front (TPLF), Aregawi Berhe.

Patricia Adams, the executive director of Probe International, who has monitored the aid industry since the 1980s and written books about the problems of foreign aid, says the recent revelations prove that state-sponsored foreign aid is perhaps the most corruptible of all government handouts and should be phased out.

Further Reading:

• How best to help Haiti
• Foreign aid takes another blow—this time in Australia
• Help Haiti build a real government
• Another foreign aid critic says there is a better way
• Thinking outside the foreign aid box
• Aid’s corrupting influence in Afghanistan should be considered
• Foreign aid on the ropes

Mismanagement Plagues Aid Program in Western Sahara

For at least five years, a UN humanitarian program responsible for providing food to refugees in western Algeria has been beset by mismanagement and corruption, according to documents obtained by the Center for Individual Freedom.

The documents -- reports prepared by the Inspectors General of the UN High Commission on Human Rights (UNHCR) and the World Food Program (WFP) -- detail allegations that Algerians working for the UN have been diverting food aid intended for refugees. Even more disturbing, the reports raise the possibility that the beneficiaries of this ongoing theft are the Algerian-backed combatants in a long-running conflict with the government of Morocco. (You can read the full reports for yourself by following the links at the bottom of the page.)

The UN first began providing food assistance to refugees in western Algeria – also known as the Western Sahara region – in 1977. The Saharan refugees were originally displaced from their homes, generally in Morocco, as a result of fighting between Moroccan government troops and Algerian-backed fighters of the Polisario Front. Fighting has continued on and off ever since.

Because the Algerians continue to support Saharans in their conflict with Morocco, they have an obvious interest in providing whatever assistance they can. And thanks to its own mismanagement, the UN has become a partner in that effort.

Here's how: according to the two Inspectors' General reports, the UN receives an estimate on the number of refugees in need of assistance from the Algerian government. Though the UN has made several attempts to independently verify the count, these requests have come to nothing in the face of Algerian inaction. This lack of an independent and reliable count, "for such a prolonged period constituted an abnormal and unique situation in UNHCR's history," one report says.

That allows the Algerians to grossly inflate the number of refugees in need of assistance. According to the IGs' reports, Algeria lately has requested aid for about 156,000 refugees. The UNHCR Inspector General estimates there are actually 91,000.

As a result, aid shipped to Algeria ostensibly to help refugees could be diverted to other, less charitable, uses. Thanks to UN mismanagement, such gaming of the system is no problem at all.

From the very first moment that the aid supplies arrive in Algerian ports, both reports describe how serious problems can allow supplies to be skimmed, stolen and diverted. The WFP IG's report includes page after page of problems with basic procedures that are contrary to standard practice and basic common sense. These range from warehouses that are so poorly managed it's impossible to determine what supplies are actually present to shipping containers being opened at ports of entry in order for load to be shifted without records of what happens to the supplies that are unloaded.

Further mismanagement makes it impossible to determine just how much is being carried away because basic records of shipments and deliveries – which are supposed to be maintained by local UN personnel – are nothing but an idyllic fantasy.

Worst of all, most of these problems were first discovered in audits conducted in 2000 and 2001. But no steps have been taken to rectify even the most basic problems.

So they continue. Agencies and organizations working for the UN that are supposed distribute food to refugees are stealing it. And the UN sits by and does nothing. As a result, Algeria is able to utilize UN-provided resources to support troops in the Western Sahara as they harass Algeria's neighbor, Morocco.

To the casual reader, this story may sound fairly insignificant. But consider the number of similar aid programs that the UN is currently running around the globe. And apply the fundamental mismanagement and corruption that infects the UN's Western Sahara program to each of those aid efforts.

The implications are staggering.

But given the UN's track record, that shouldn't surprise us at all.

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To read the Report of the Inspector General's Office, UN High Commission on Human Rights, click here. (.pdf)

To read the Report of the Office of the Inspector General, World Food Programme, click here. (.pdf)