Northern Uganda – Transforming the Economy through Climate Smart Agriculture Market Development (NU-TEC MD) is a seven-year Foreign, Commonwealth & Development Office (FCDO) funded program to increase the incomes and climate resilience of poor men and women in northern Uganda. The program stimulates sustainable, pro-poor growth selected agricultural markets to improve the position of poor men and women within these market systems and make them inclusive for poor people.
Palladium, a global provider of positive impact solutions to the private sector, governments, and donors, implements the program on behalf of FCDO. The Commercial Agent Model (CAM) is one of the approaches that the NU-TEC MD program promotes as a win-win platform for the agriculture market actors. The COVID-19 Information Hub details how the implementation of CAM has allowed small and medium enterprises (SMEs) to grow their businesses and increase farmers’ household incomes amidst disruptions of the pandemic.
The Commercial Agent Model (CAM) is an adjusted trader style designed to benefit farmers and off-takers. The model uses commercial agents to provide embedded services to farmers and aggregate produce for agri-businesses. The cost-effective model helps reach many smallholder farmers, including women and persons with disabilities. SMEs using the model incur less costs to source raw materials/produce. They have also registered a 75 per cent increase in sales due to the rise in volumes traded and higher quality raw materials sourced through agents.
Despite the benefits of the model, the pandemic has brought a lot of disruptions for businesses, and here is what SMEs are doing to stay afloat;
- Process optimization is very critical at this time. Businesses should have an in-depth look into their operations, identify waste, eliminate them, and maximize resources like raw materials and staff time.
- Seek information on how to adjust pricing because demand has gone down. It is now a very risky point because most companies react to reduce prices without considering the costs and margins.
- Embrace opportunities for diversification in their business models. For example, if sourcing grain for the export market is a challenge, a business can add local food distribution.
- Look out for new products or services lines. It means that if one business line is affected at least, the other keeps a business operating.
- Mindset change on approaches such as mergers, partnerships and joint ventures. It is tough to remain afloat unless you’re able to network and collaborate with other businesses.
The program is discussing with; The Grain Council of Uganda (TGCU), Uganda Manufacturers Association (UMA) and Uganda Small Scale Industries Association (USSIA) to encourage their members to adopt the CAM model and pivot their businesses and remain in operation.
If you need guidance on adopting the model, contact us on Tel: +256774040751 or jackline.kitongo@thepalladiumgroup.com.
What is the Commercial Agent Model (CAM)?
The Commercial Agent Model (CAM) is an adjusted trader style designed to benefit farmers and off-takers. The model uses commercial agents as points of sale for farmers. These agents link farmers to service providers for (inputs, mechanization, spraying, training, extension, offtake) and aggregate farmers’ produce. Agents ensure that the broader portfolio of embedded services to farmers is premised on a commercial approach and builds trusted relationships among the different actors. Most large and medium agribusinesses use the model to channel their products and services to smallholder farmers and distribute their finished products in the market. Over 80 businesses have benefited from this cost-effective model to deliver affordable and quality products and services to the most remote farmer.
How is the model facilitating growth among agribusinesses?
The CAM is the last mile model reaching many smallholder farmers, including women and persons with disabilities. Initially, the cost for outreach, especially to women and persons with disabilities, was high. By designing innovative mechanisms, we have enabled businesses to invest and easily reach out and recruit female agents. Below are the ways that SMEs realize business growth by using the model;
- Using female agents has enabled SMEs to reduce losses because female agents source better quality grain and provide the required volumes as per the advanced funds.
- Companies have also noted reduced sourcing costs as commercial agents do the grain traceability, storage, and transportation.
- Businesses see cost-effectiveness because agents earn no additional income from the company other than commission and profit margin on their services.
- Companies see an increase in sales of over 75% due to the rise in volumes traded and higher quality raw materials sourced.
The model encourages partnerships along the value chain; thus, actors can leverage each other’s advantage. Businesses need clear growth ambitions and expected benefits, analyze possible risks and find ways to mitigate them to build successful partnerships. Companies can access information on partnerships through training, mentorship and coaching. It will enable them to understand how to collaborate, create value and propel businesses.
What should SMEs do to stay afloat during this challenging business environment?
Since 2020, we have been encouraging businesses to develop business continuity plans. We help them assess if they achieve the planned objectives and guide them on attracting external funding to implement the strategies. To stay afloat, here is what businesses need to do:
- Process optimization is very critical at this time. Businesses should have an in-depth look into their operations, identify waste, eliminate them, and maximize resources like raw materials and staff time.
- Seek information on how to adjust pricing because demand has gone down. It is a very risky point because most companies react to reduce prices without considering the costs and margins.
- Embrace opportunities for diversification in their business models. For example, if sourcing grain for the export market is a challenge, a business can add local food distribution.
- Look out for new products or services lines. It means that if one business line is affected at least, the other keeps a business operating.
- Mindset change on approaches such as mergers, partnerships and joint ventures. It is tough to remain afloat unless you’re able to network and collaborate with other businesses.
How can SMEs integrate the model the business operations?
Agribusinesses working with smallholder farmers and would like to integrate the model in their operations can contact us for assistance on;
Tel: +256 774 040751
Email: jackline.kitongo@thepalladiumgroup.com