Farmers start potato processing in Kenya

February 20, 2013. Eight years after the foundation stone was laid, the  Nyandarua-based potato processing factory is now ready to go full commercial.

The factory and cold storage unit is the first of its kind in Sub-Saharan Africa and marks the birth of  an ambitious plan to venture into modern commercial production and marketing of potatoes, putting Kenya among the developed countries in Europe and the US, where potato processing is big business. On the continent, only South Africa has such a facility.

Specializing in collection, grading and storage of potatoes, it is making ready-to-cook potato chips (fries) that have found a ready market in selected supermarket and fast food outlets . “The demand for our chips is so high we can hardly meet it”,  said Midlands Chairman Junghae Wainaina,  explaining that read-to-cook chips save  users the trouble of peeling, cleaning, chipping and waste disposal. ‘’Potato is the most consumed food in the country generating tonnes of waste and those in our network have appreciated the innovation”, he said.

The factory will earn farmers an estimated 200 million every season once it opens officially in April, with new products line such as Mukimo, processed vegetables, animal feed and vegetable juices among others.  The factory has contracted some 1,000 farmers who are being supported with seed, agronomy and delivery of produce to the factory, benefiting 300 households and an estimated 250,000 people are now enjoying incomes and improved lifestyles due to a ready market for farm produce. ‘’The social impact of Midlands is what Vision 2030 seeks to achieve since it embraces the entire agriculture production value chain – farming, marketing, and processing in the rural areas”, he said.

Due to the high demand for potato, Midlands is even booking the crop before it is harvested.

Mr Wainana says the factory, with a capacity  to store 6,000 tons (60,000) bags of the produce is running below capacity and urges farmers from all the potato growing regions to register as suppliers. Storage of potatoes has remained a big problem in Kenya due to the seasonality of production. Farmers are exploited by brokers during glut while consumers pay high at off peak. Cold storage gives the crop a 24-month shelf-life and stabilizes prices by releasing the produce year-round while mopping up the glut. “Consumers are set to enjoy potatoes throughout the year at stable prices”, he said.

Looking back, Mr Wainaina has every reason to smile as he remembers the long bumpy journey Midlands has taken.

It took four years longer to get this far and a visibly  happy Wainana says it was sheer determination and belief  in the viability of the project that kept him going even when at times friends urged him to give up.  “ I have a tenacity to push what I believe in to fruition and Midlands is my best example”, he says.

Although the trying moments are behind, Mr Wainaina laments that the sluggish development of Midlands shows how badly farmers are treated. “If our farmers are not considered a high risk investment, Midlands would have gone into full production four years ago”, he says.  He urges the policy makers to support potato – Kenya’s second most important food crop after maize, for support by making it cheaper for farmers to purchase seed and fertilizer, and to also avail cheaper credit to marketing organizations to create a value chain that would ensure maximization of production. “All important crops in the country have a government support mechanism, so should the potato”, he said.

Mr Wainaina says after initially spending about Ksh5 million ($66,000) to sell the concept of a potato cooling and processing facility to farmers in Nyandarua, central Kenya, he got a paltry Ksh750,000 ($1,000) and was at pains to explain to the board that as the chairman of Midlands, it was worthwhile to commit the funds to the exercise.

The company’s shares were being sold through a private placement organised by Suntra Investment Bank at Ksh10.

Mr Wainaina thought farmers would troop in their numbers and snap up the 250 million shares on offer giving the firm a cool Ksh2.5 billion ($33.3 million) investment capital it so badly needed but that was not to be.

After the debacle, the easier option was to quit.

But believing that Midlands Limited was still a viable venture, Mr Wainaina soldiered on through all sorts of fund raising avenues — bank loans, grants, venture capital, harambee, name it.

Eight  years on, the agribusiness is sitting on Ksh 700 million ($5.3 million) worth of assets, has built the factory with a cooler and is set to go  into full operation in April while its share value has grown three fold. It is even contemplating going public before 2017, and is working on introducing an exporting line. “There is a high demand for processed chips in the international markets and we are planning to get into it”, Mr Wainaina said.

But Mr Wainaina is unhappy about the general failure in the country to embrace value addition and management of surplus and shortage in order to stabilise prices; failure by the government to support farmers through establishment of

value chains and failure by the investing public to take risks believing that farming is a poor man’s occupation.

Midlands Ltd. hopes to give farmers better incomes, and create employment through agro processing of local produce and waste management.

The main focus products include pyrethrum, potatoes, peas, carrots, cabbages and herbs.

The company is collecting potatoes grading, storing and selling them through established networks such as supermarkets and hotels, which has led to an increase of farmgate prices from Ksh 3 per kg to Ksh 20, resulting in some farmers earning millions in a single season.

Other long-term plans include drying vegetables which go to waste during the glut and processing long-life fries, crisps, pringles and potato flour.

“We must begin by adding value to farm produce at the villages, “Mr Wainaina said adding that there is a big market for food, locally and outside.

Mr Wainaina argued that a cooling facility (which can keep potatoes fresh for up to three years) and a processing factory would enable farmers to collect and store produce then release it as per market demand at stable year-round prices instead of the prevailing situa Mr Wainaina said there is a need for concerted efforts from the government and private sector to set up agro industries if Kenya is to attain the Vision 2030 status of a newly industrialised country.

Pearl Capital Partners inject  Ksh 200 million

Midlands has received a Sh200 million capital injection from private equity firm Pearl Capital Partners (PCP) to finance on-going expansion. The cash will be disbursed in two equal tranches of debt and equity.

The Sh100 million equity investment will see PCP get a 16 per cent stake

in Midlands PCP’s investment will fund expansion of the processing plant

and a planned launch of new products. “We are confident that, with this investment, we will grow the business and improve both the quality and

output of potatoes in Central Kenya.We will also be developing processed potato products that will successfully compete with imports,” said Midlands

chairman Junghae Wainaina.

PCP will draw cash for the investment from the $25 million (Sh2.18billion) African Agricultural Capital Fund (AACF), which is under its management.

PCP’s investment will also go towards management and working capital. “As a fund manager focused on the agriculture sector in the region, we remain committed to providing risk capital that should improve the opportunity

for market access to small scale farmers,” said PCP managing partner Wanjohi Ndagu.

See also HortiNews issue No 27 May – June 2013 ‘Potato processing factory brings vision 2030 closer’ https://www.hortinews.co.ke/application_manager/edit_article.php?id=818

By CATHERINE RIUNGU

catherine@hortinews.co.ke