Last week I interviewed the Country Manager for Kenya of a large agricultural trading group. The group originated in Africa, and it operates worldwide. What attracted my attention the most is its cooperative approach to dealing with its suppliers.
In this group, they buy commodity products from small farmers, and accumulate their volumes to sell. They perform also some value addition activities that allow them to generate larger profits, and to pass some of these benefits to the farmers in terms of better pricing.
This is an important element contributing to the sustainability of their business model. In the words of that manager: “We look at it in terms of the holistic value: we’re part and parcel of Africa’s growth. The only way we can grow together with the farmers is to share part of these profits with them by giving them better terms.”
I thought this is in sharp contrast with the typical Western, “Porterian” approach: if you are a large trading group buying from small farmers, power lies with you and you can use it to negotiate better purchasing prices for your raw materials. What happens to the small farmer who is squeezed? It doesn’t matter too much, as there are plenty and they can easily be replaced.
The Kenyan group has some international institutional shareholders, so it’s not that they don’t feel the pressure to generate profit. It’s a different approach to business that is based on a mindset that thinks in terms of community. We Westerners have a lot to learn from Africans’ communal mentality, don’t you think?
Interesting comment from the manager. Is there any proof that he does this? Most companies in the West would of course also claim that they take care of their suppliers, particularly if they come from the developing world. And my experience in Kenya is that those trading groups are very price conscious.
Hi Christian, given that this was an exploratory interview I didn’t go further asking for a proof. But I believe this is an interesting area for a research project!