AIF’s ‘Africa Feeding Africa’ Inclusive Model: Sustainability with a Commercial Business Model?
“The world needs smallholder farmers. AIF can do its part by making rural livelihoods more sustainable.”1
- Amar Ali, CEO of Africa Improved Foods
On September 22, 2019, Amar Ali, CEO of Africa Improved Foods (AIF), Rwanda, received Corporate Social Intrapreneur of the Year Award from Schwab Foundation for Social Entrepreneurship. Amar Ali had led AIF to become a purpose-driven social enterprise in Rwanda, manufacturing high quality, fortified and nutritious complementary foods. He boasts of an inclusive business model that aimed to reduce poverty, create jobs and address stunting and malnutrition through partnerships. Through a value-chain approach, AIF aimed to benefit all the three segments of stakeholders – Rwandan smallholder farmers, employees and consumers. Amar Ali planned to combat malnutrition in Africa by producing nutritious foods in Africa, using African crops, by the African companies, to feed Africans, instead of complete dependence on foreign aid.
However, access to finance had been a major barrier for the growth of nutritious foods in the region. To address the funding challenge, AIF was formed through first-of-its-kind, innovative Public-Private Partnership (PPP) model in the region, by establishing a state-of-art facility in Kigali, capital city of Rwanda. .......
AFRICA IMPROVED FOODS - A SOCIAL INNOVATION AT RWANDA
wanda, an African country ravaged by a 1994 genocide which claimed a million people, had achieved significant development since late 2000s2, regained political stability and emerged as one of the fastest growing economies in Central Africa.3 However, in an attempt to rebuild the economy, there was increasing dependence on foreign aid which amounted to a big chunk of around 30-40% of the government budget.4 Also, humanitarian aid which lacked essential micronutrients led to significant increase in malnutrition rates. Consequently, malnutrition remained a key public health concern in Rwanda and was put at the forefront of GoR’s Vision 2020 Agenda......
Finally, in 2015, in-principle agreements were signed by a consortium of four partners in Amsterdam and Africa Improved Foods (Holding) BV was founded. Subsequently, Africa Improved Foods Rwanda was established as a joint venture between GoR and the consortium with AIF having 92% equity stake and GoR having 8% stake (Exhibit II). The four main equity sponsors were: (a) Royal DSM, the majority shareholder of the venture; (b) International Finance Corporation (IFC),.......
AIF’s ‘AFRICA FEEDING AFRICA’ BUSINESS MODEL
AIF was established with an objective to manufacture affordable, nutritious and high-quality food products sourced locally to improve maternal and child health status in Rwanda and across Africa. It featured an inclusive business model that addressed the nutrition problems of African populace with African resources (Exhibit IV). “Our vision is for Africa to feed Africa,” ..............
AIF’s Products (Institutional Products & Commercial Products)
Institutional Products for Institutional Customers - AIF mainly produced porridge flours (with added milk, vitamins and minerals) meeting the nutritional demands of different population segments such as pregnant and lactating mothers, older infants and young children for the critical first
1,000 days of their lives. AIF predominantly ..........
Commercial Products for Commercial Customers
To make AIF’s products affordable to its non-profit programmes, the company launched a range of commercial products under the ‘Nootri’ brand. The Nootri-range included Nootri Toto (for young children), Nootri Mama (for pregnant mothers) (Exhibit V) and Nootri Family (for whole family), which were made available across East Africa. ............
Building a Locally Sustainable Model
Local Sourcing of Raw Materials and Training Intervention with Farmers: In an attempt to help promote agriculture in Rwanda, Amar Ali decided to source everything locally, which had a substantial impact on the economy. The factory needed 28,000 metric tons of maize and 12,000 metric tons of soy annually.20 These raw materials were directly sourced from Rwandan farmers instead of traders. Within one-and-half ..................
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SCALING UP
Though AIF was recognized for its sustainable business practices, Amar Ali’s path was not without challenges. Rwanda being a country plagued with uncertain weather conditions such as drought, floods, poor rainfall, etc., Amar Ali found it challenging to procure the raw material from local sources alone, especially during times of recurring famine as Rwandan farmers could not deliver adequate quality and quantity. He had to depend ...............
Replicating the Model in the Region
Leading global economists suggested that improving nutrition is the best investment that can be made in global health and economic development. That is what GoR and its partners did when they invested in the US$60 million facility and established AIF. With this initiative, Amar Ali aimed to break the continuous cycle of malnutrition, f............
Scaling up AIF Rwanda
It was said that for every US dollar invested in nutrition, the country would yield US$16. However, a study of 300 African SMEs revealed that access to finance was the top barrier to the growth and delivery of nutritious foods in Africa.36 GoR and DSM faced a similar challenge when they searched for corporate partners to fund the venture (AIF) – given the social nature of its business .........
Furthermore, business with institutional buyers like WFP and GoR did not prove to be a viable business model, as AIF had to align its prices with the lower European prices. Also, with rising raw material prices due to bad weather conditions and poor harvest in the African region, AIF was losing money on its institutional business. .........
Assignment Questions
I. Considering the benefits and challenges of PPP model, discuss the reasons behind creation of a social innovation like AIF trough PPP model.
II.
III. ..................
Exhibits & Annexures
Exhibit I: Rwandan Malnourished Children Below the Age of Five (2010-2014/15)
Exhibit II: Structure of AIF
Exhibit III: AIF Holding and Partners’ Investments
Exhibit IV: AIF’s Inclusive Business Model
Exhibit V: AIF’s Products Catering to Pregnant and Lactating Women and Older Infants
Exhibit VI: Africa Improved Foods Ltd.’s Revenue
Exhibit VII: Competitors of AIF