Agricultural small-to-medium enterprises (SMEs) across Africa typically have few pathways to scaling their operations: They could invest in new machinery to increase outputs, but loans are often out of reach. Product quality and pricing could be tailored for bigger food manufacturers’ needs, but existing systems often don’t align with large-scale manufacturers’ requirements. These are but a few of the many obstacles that agricultural SMEs face when it comes to joining global supply networks.
Dalberg, IDH, and Unilever have come together to help overcome the challenges agricultural SMEs face in becoming a part of the revenue streams they need to grow. Through an agreement signed on June 18, 2019, the three organizations aim to catalyze the step change in quality and volume SMEs need to join global manufacturers’ supply chains. Dalberg, IDH, and Unilever aim to improve the lives of 50,000 smallholder farmers, with a focus on jobs for women and youth and creating decent working conditions.
Under the agreement, Dalberg and IDH will raise $12m in funding to directly build the capacity needed for agricultural SMEs to be a part of a modern supply chain. In turn, Unilever will offer guaranteed offtake once quality standards are reached to underwrite the investment. In addition, Unilever will collaborate closely with IDH and Dalberg to provide advice and support to help SMEs become market-ready.
Designed to be mutually beneficial for African agricultural SMEs and global food suppliers, the agreement pairs IDH and Dalberg funding and technical expertise with a Unilever supply contract, helping transform SMEs into long-term, sustainable operators supplying far wider markets. In turn, Unilever will have access to a wider diversity of quality suppliers – a network that wouldn’t otherwise develop because companies like Unilever commonly cover only a small percentage of total output and carry a high risk in early years as volumes build up.
The activities undertaken by Dalberg, IDH, and Unilever as part of the agreement will help to cover the full operational transformation and diversified income stream required for SMEs to thrive, allowing them to establish long-term relationships with bigger industry players.