Potatoes to become booming business in Kenya

After steering a business from a simple idea to a multimillion enterprise in five years, Junghae Wainaina is both a happy and a sad man.

Happy because after a rough ride, his efforts are beginning to pay off, but sad because after 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.

But that was then.

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.

Five years on, the agribusiness is sitting on Ksh400 million ($5.3 million) worth of assets, has built the factory with a cooler and is set to go live this month, while its share value has grown three fold.

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.

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

This will put the industry in Kenya at par with industrialised countries in Europe and the US where potato is big business.

Joint efforts

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.

“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 situation where prices are determined by seasonal availability.

The Ksh 500 million ($7.4 million) factory and cold storage unit is the first of its kind in East Africa and marks the first phase of an ambitious plan to venture into commercial production and marketing of fresh produce that will knock out middlemen from the marketing of potatoes.

The cold storage is designed to hold about 6,000 tonnes (or 60,000 bags) of potatoes at any given time.

Midlands Ltd. has also introduced four new potato varieties bred in Netherlands.

The varieties are being tested by the Kenya Plant Health Inspectorate Service.

They will help alleviate the shortage of quality varieties, which has remained a major problem in potato farming.

Kenya has only one variety, Tigoni, developed by the Kenya Agricultural Research Institute, for fries and processing.

The shortage of the seed has forced farmers to plant their own from previous harvests leading to poor yields.

Potato seed multiplication centres countrywide have collapsed, causing a slump in production a situation also blamed on the allocation of the Agricultural Development Corporation farms in Molo and other areas to private developers.

The farms used to produce 70 per cent of seeds before they were phased out.