Creating the Enabling Environment for Scaling Up a New Technology
This post was written by Dr. Steve New, Executive Vice President for Africa at Fintrac Inc.
This post describes an example of how collaboration between government, private sector and development partners stimulated a nascent market system for improved maize storage bags in Kenya. According to the African Post Harvest Loss Information System and the Rockefeller Foundation, postharvest losses of maize and other grains in sub-Saharan Africa have remained at 16-20 percent for the past decade. [1] In practice, losses at the smallholder level can increase to much higher levels, often quoted as more than 35 percent, during prolonged storage. This high probability of spoilage deters producers from storing either for home consumption or to sell when market prices rise, which could increase net household income for some of the poorest families. [2]
Fifteen years ago, USAID recognized the problem and funded research by Purdue University to investigate the potential of using low-oxygen or hermetic storage technology (HST) to reduce spoilage of dried legumes and grains in Africa. Research confirmed that hermetic conditions (lowering oxygen levels from 21 to below six percent) reduced storage losses and retained the quality of dried cow peas and grains, essentially by suffocating pests and reducing water loss. Based on their research trials, Purdue even designed a smallholder-friendly version of what is now called the Purdue Improved Crop Storage, or PICS bag, that can be manufactured, marketed and supplied for around $2.
Given the food security benefit for rural households, plus the potential net income gain from price rises during storage, the economic case for adoption of simple-to-use hermetic storage bags has never been in doubt. However, levels of adoption by subsistence households and small-scale growers have been low, and commercialization in targeted markets has not met expectations. Generally, hermetic bags have been produced by commercial companies in response to calls from humanitarian agencies and development projects rather than to meet market demand from growers. But in Kenya signs suggest that a more sustainable commercial market for hermetic technologies is emerging.
So, what changed?
In a concerted effort to reduce maize losses and increase smallholder farmers' incomes in Kenya, where many rely on maize as their main source of food and income, three development projects and five companies provide an important case study of how public funding can be used to incentivize the private sector without creating market distortions. Working together they have achieved commercial sales of more than two million hermetic bags since 2014, and most of these have been through sales to small-scale growers for home storage of maize. No additional breakthrough technology or new product discovery were involved.
The success to date is attributed to several key interventions designed to: 1) communicate the unique advantages of hermetic bags and stimulate demand at population level; 2) create competition between suppliers; and 3) engage government agencies to coordinate with the private sector to promote the economic, environmental, health and nutritional benefits of the technology to their constituents.
The three development projects invested the bulk of their contribution into nontraditional activities, such as financial incentives for companies who could achieve specified sales targets; cost-sharing support for roadshows and trade fairs that attracted thousands of people in remote rural areas; and a mass messaging strategy to promote the product, more akin to consumer advertising than traditional development practice. The companies either contributed the major part of the costs or received no payment unless the targets were met.
County governments were engaged and involved from the start to achieve political buy-in and support from agricultural research and extension staff who became key promoters of the HST campaign and the slogan “It works.” The Kenya Cereal Growers Association, often a voice for large-scale growers, saw the potential of HST for smallholders and brought together five commercial companies, each producing different versions of the bag, to agree on marketing and lobbying tactics. They are currently developing a new standard to keep fake products off the market and working with the national government to create a strategy for recycling the plastic liners essential for all brands of the bag.
Market analysis suggests that this investment of development resources in the three key areas of communication, competition and cooperation has created an effective enabling environment for adoption of the new technology and scaling up to current demand in a relatively short time. Over a three-year period, the development projects used their resources in complementary ways to create strong synergies for scaling up. They were able to gain the support of the government, private sector companies and a national trade association, each of which bought into a new opportunity that contributes to their various commercial and institutional objectives. As a result, more than 500,000 rural households are reaping the benefit from an average investment of $2 per bag. Although the tipping point for scaling up to population level may not have been reached yet, sales growth, supplier confidence and farmer response suggest that hermetic bags for home storage could eventually transform the maize market in Kenya and throughout Africa.
Dr. Steve New is Fintrac’s Executive Vice President for Africa. Dr. New most recently served as Chief of Party on the Kenya Agricultural Value Chain Enterprises Project, which was instrumental in commercializing PICS bags to more than 1.7 million smallholders over three years. Dr. New has more than four decades of experience in agricultural development and holds a PhD in Crop Physiology.
