Business Sustainability Model
A self-sustaining business model is difficult to achieve in any economic environment. It is much worse in third world countries that lack capital resources and efficient value chains. Business sustainability in a war zone is almost impossible.
Hundreds of articles and books have been published relating to why 8 of 10 new businesses fail in the US and developed countries. Much of the research is based on companies plugging into established value chains of supply and distribution. Faults or failures are related to ineffective strategies, under funding, poor planning, and execution. It is rare to find information related to business sustainability in frontier markets or areas of conflict.
The US and other coalition nations poured billions of dollars into Afghanistan to “jump start” the economy and counteract the influence of the Taliban and other bad actors. In our organization and others, little attention was given to business sustainability. Like “the field of dreams”, build it and they will come mentality. No one in the right mind was coming to southern Helmand Province without considerable fire power. Ultimately most projects were not self-sustaining and could only remain viable with further international assistance and funding.
Plus the paperwork required was overwhelming.
Perhaps the most limiting issue to success in the wars zone was the standard tour of duty for regular military, reservist, and their civilian counter parts. Standard tour of duty lasted 9 months for reservists and one year for military and civilians. Most initiatives took longer than 12 months from start to finish and sometimes 2 years or more. A lot could happen in any business market over 2 years. In a war zone, the entire operating theater can change dramatically. Between ineffective handoffs of outgoing and incoming resources plus changing environment, sustainability was a huge issue.
The few organizations like ours that had a continuous presence in the field over several years became critical for the success and sustainment of initiatives. At times I was called on to facilitate solutions to problems that had no formal means of solving within the established regulations and guidelines.
Good work happening all over the country on Agriculture. usaid-ag-extensions
A small project like the produce packing house in Marjeh was illustrative of the challenges of self-sustaining businesses. There were numerous contributors to the problem. Western experts and project managers weren’t trained to study the entire value chain. Nor were they usually in the country long enough to benefit from lessons learned. In western countries, a new business just needed to establish itself and plug into the existing value chain. In Afghanistan, most value chains never existed or were disrupted by years of conflict. There was little chance of business sustainability.
A simplistic way of describing the agricultural value chain from farm to consumer.
An Afghan farmer needs land, fertilizer, irrigation, seeds, equipment, fuel, sun, pesticides, money, and knowledge. In the area around Marjeh in Helmand Province, Afghanistan none of these basic needs are a given except for the sun.
Land: A farmer may have land but the Taliban might prevent him by force to grow poppies rather than produce.
Irrigation: If the farmer had the freedom to grow produce the land may not be close enough to the Helmand river for irrigation or the irrigation ditches may have been destroyed by bombing or military operations.
Seeds: Provided the farmer has land and irrigation he now needs seeds and fertilizer. Since the farmer hasn’t been trained to recover and save seeds from the previous crop he must purchase them. Since there isn’t a system of seed distribution in the southern part of the country the seeds may not be available. If the seeds are available, the farmer needs money to purchase them. In most cases, the farmer doesn’t have money to purchase seeds because he could not sell his crops profitably the previous year.
Fertilizer: Fertilizer is in short supply and expensive. There is little natural fertilizer because farmers in Helmand don’t raise livestock due to the lack of feed. The only fertilizer factory in the country in the north is producing a fraction of the country’s needs. Transportation makes importing fertilizer expensive and the price exceeds what most farmers can afford.
Equipment: Farm equipment is basic because there is no money for modern equipment. Even if the farmer was given new equipment, which some agencies attempted, the farmer had no money for fuel to operate the equipment. It was rare that fuel was even available.
Training: There is no modern agriculture extension service in Afghanistan as in the US and other western countries. There were no government experts to train farmers by on agriculture best practices. Few farmers knew anything about raising crops efficiently other than one their forefathers had shown them.
Processing: Once the crop was ready for harvest the farmer needed to know how to process, sort, package, care, and transport the produce to market. Most produce or vegetables were placed in large bags and transported on the backs of people, donkeys, or Afghans’ 3-wheel motor scooters to the local market.
Planning: Since there was little coordination between farmers or districts all the farmers could arrive at the market on the same day with the same produce. Plus, the local markets could only consume a small portion of the available harvest. There was no method available to get the excess harvest to larger markets in nearby towns.
Fixing the pieces
Many (NGOs), non-government organizations, and government agencies tried to fix individual links to the value chain for agriculture. The scope & breadth of projects covered just about every aspect but were not well coordinated. If an organization understood the entire value chain due to limited movement in the conflict zone, funding, regulations (US, Afghan or other coalition countries), logistics, local government, etc. most fixes were just band aids.
One of them bought and distributed wheat seed to local farmers who promptly sold most of it to Pakistan traders. Without fertilizer, equipment, or the knowledge how to grow wheat they had no use for the seed. No one asked the farmers if they wanted to grow wheat.
Next fertilizer was supplied to farmers. Most didn’t know how to properly utilize the fertilizer on their crops nor had the equipment necessary to spread it. So they sold it also.
Large farm equipment manufacturers wanted our support to test the use of combines and other large farm equipment. Most farms in Afghanistan are only a few hectors. Nor was there any fuel available. It would have been another impractical and unsustainable solution.
The list goes on with a few organizations starting to focus on basic training for the farmers to increase yields of their traditional (non-poppy) crops and prepare the harvest for market.
The actual design and construction of the produce sorting and packing house and Marjeh had begun prior to my arrival to Helmand province. My role was to assist with plans for sustaining the operation through private investment and facilitating the improvement of the entire value chain.
The value chain.
Figuring out the requirements for building out the value chain wasn’t complicated. We knew we would need to repeat the initial test project with multiple projects. We would develop 5 similar packing houses and one distribution center in each major district. The traditional hub and spoke arrangement for moving goods from individual farms to centralized cleaning, sorting, and packing facilities then onto larger storage and distribution centers was a common model used worldwide in agriculture. Marjeh would be the model sorting and packing house for five more in nearby communities. A larger distribution center would be constructed in the middle of these communities on near the ring road in the larger city of Gereshk.
At the distribution center, there would be agricultural processing equipment that could further prepare the produce and fruits for shipment to Kandahar, Kabul and middle east markets like Dubai. Dubai imports 100% of the produce and vegetables. USDA and the Corps of Engineers would design and manage the construction of the facility. I was responsible for Kabul government approvals and securing a private investor to purchase the facilities and a plan for operations and sustainment.
Meanwhile, issues started to rise on sustainment of the first sorting and packing house in Marjeh. Designed to be self-sufficient with solar power it became apparent there were some sustainment issues.
The local farmers needed training on the basics and how to grow and prepare their produce for sorting and packing for distant markets. They knew little about cleaning, grading, or packaging that was required for other markets. They were only accustomed to bringing the harvest to local markets and stacking the produce with the best quality on top and lower quality hid underneath. We needed someone that could train the local farmers on the basics and how to work together operating this local packing house.
Help from Bolivia.
One of our teams focused on Indigenous Industries with raisin producers near Kandahar offered the assistance of their ag expert from Bolivia. Andres had the expertise and local connections to be successful. The first season 50 tons of fresh produce was processed at the facility. One of his monthly reports shows the effort it takes to make business sustainable in Afghanistan.
Someone forgot to build the outhouse. Training and development of local farmers were a priority.
This report shows the extent of local efforts to create a sustaining business.
A village elder and his dog became a critical part of successful business sustainment.
One of the more amusing developments was due to someone shooting holes in the new solar collectors on the roof of the facility. The Marines had already contracted to build a security wall around the facility but due to regulations and constraints on their operations could not provide additional security. Imagine my surprise when I get a call from Afghanistan while home on leave in Florida to assist the Marines with security! I guess by that time they considered me “the fixer”! Could I find a way to provide security to the facility? What they really meant did I have a budget that could be used for this purpose and someone to contract for the security?
I called the contractor from Bolivia, Andres Judah, that was assisting me with the local training of the Afghan farmers. He was in Kabul but had Afghans working directly for him in Southern Helmand. Could he provide security for the facility under the current contract? He told me he would work something out with the locals.
A few weeks later when I returned to Camp Leatherneck I contacted him to see if security was in place. He told me he solved the problem by hiring a village elder and his dog to sleep at the facility at night! Villagers respected their elders due to their influence in each village. It was a perfect solution.
When the Marines asked me about security I told them the problem was solved. Later that week in a staff meeting with the 2-star Marine General in charge the Marine XO told the General the security issue was solved. Not sure if they ever realized it was an old man and a dog providing the necessary security.
When considering the requirements to ensure a business is sustainable don’t forget the old man and his dog.
Copyright 2016 MEA Trading, LLC