Welcome to our Innovators Creating Prosperity series, spotlighting organizations across the globe that are positively impacting economic development.
Even though agriculture accounts for nearly a quarter of sub-Saharan Africa’s GDP, the region’s food import bill (how much it pays to import food products) is set to reach $110 billion by 2025. In a region where it isn’t uncommon for the average household to spend up to 50% of their income on food, there is significant opportunity to improve this sector’s productivity. According to a McKinsey report, with the right investment, the industry has the potential to double or triple its output capacity. Achieving that ambition, however, will require innovation and problem solving. That’s where Releaf comes in.
With the vision to make food production simple and more affordable, thereby making it more accessible to most people, Releaf has developed a business model that seeks to solve complex logistical obstacles in the agricultural supply chain. The company’s interventions ensure food production companies are able to access sufficient unprocessed harvests, enabling them to operate at higher capacity. The organization not only creates local jobs, but it also helps smallholder farmers, who make up 60% of sub-Saharan Africa’s population, generate higher income. Since 2019 Releaf has assisted more than 1,000 smallholder farmers to supply more than 7.5 million kg of food, and the company is just getting started.
We caught up with Ikenna Nzewi, the CEO and co-founder of Releaf, to learn more about their journey.
1. Where did you get your idea? How did you know there was opportunity?
After college my co-founders and I sought to understand the Nigerian agricultural market. We each traveled to 20+ states, following eight different crops from farmer to consumer. While we read that investment was a major impediment to development, we observed 90% of food factories operating at below 50% of their installed capacity, with many machines sitting idle! As we dug deeper, we uncovered this lack of utilization was driven by the scarcity of unprocessed harvests supplied by smallholder farmers and traders.
2. Who was your initial target market?
We decided to focus on palm processing factories that are nonconsumers of raw materials, which leads to underutilization of processing capacity. This market has excess domestic demand, and a majority of production is driven by smallholder farmers. It was also cheap enough for us to establish a pilot to test our business model while money was tight.
Theory Insight: Releaf discovered an opportunity to target nonconsumption—though there was strong local demand for palm, few options existed for people to “consume”. In many emerging economies, it’s often easier to focus on the local nonconsumption market because there isn’t strong competition.
3. What did your target market do/use before your innovation was available?
Our end users depend heavily on smallholder farmers who de-shell the palm kernel with rocks and rudimentary crackers that ruin the raw materials supplied to factories.
Theory Insight: In our most recent paper, we explain that people engage in workarounds—like using rudimentary tools to de-shell palm kernels—when they’re unable to access more efficient solutions. Workarounds like these point to innovation opportunities.
4. How have you raised funding, and what advice would you give others regarding fundraising?
We were fortunate to participate in Y Combinator (YC) which provided our first investment and allowed us to work on the business full-time. YC did more than provide pre-seed funding, though. We learned how to experiment faster, in/validate critical assumptions, and raised our seed round.
It’s not easy to get the first check, but once you do, get as close to your customers as possible. Don’t be comfortable, especially if you’re looking for a huge problem to solve. Customers will often sugar-coat challenges as it’s not comfortable to write that people are still cracking palm nuts with rocks.
5. Innovators often feel that the lack of an enabling environment in emerging markets—poor infrastructure, inadequate institutions, and little government support—is insurmountable. How are you overcoming these challenges?
We primarily overcome these challenges by focusing on markets where we are able to bring down the unit cost of the product even in the absence of an enabling environment. In addition, we make conservative assumptions about project budgets, time to implementation, etc. For example, don’t underestimate how the rainy season in Nigeria can slow industrial productivity!
6. What are some major barriers to your company’s growth?
In addition to the usual struggles associated with the lack of a robust business and innovation ecosystem in emerging economies, a particularly troublesome problem in Nigeria is the lack of electricity. We’re solving that problem with the use of generators, but even that solution is inconsistent. The key for us is to be nimble when challenges like these arise.
7. What can other innovators take away from your experience? Is there anything you’d do differently?
Be daring, go see the land. Conventional perspectives have been tried with plenty of funding. If your solution impacts rural citizens, you won’t be the best competitor until you spend time there and meet the people.
However, there are solutions to build from first-hand experiences and others that should rely on expert experience. For example, there are thousands of world-class people who work with smallholder farmers; you do not have to recreate the wheel on weighing commodities. Get started with the best-demonstrated practices, observe inefficiencies, and craft new solutions.