Building a Small Business in Botswana - Prospecting for Profitability in Pork
by Bryson Saez, MBA ‘14 (3/18/14)
From the classrooms of Sage Hall to a pig farm in Botswana, a first hand glimpse of a student's experience with the SMART program, organized by Cornell International Institute for Food, Agriculture, and Development
Arriving at a pig farm during feeding time was my introduction to business in Botswana. Hundreds of pigs jumped in their pens, squealing like they were being slaughtered. Some of the bigger pigs, the boars, were standing on their hind legs chomping on the bars of their gates. They were taller than me and weighed over 300 lbs. In that moment it looked like they would eat us if we got too close. Teammates stared at each other frozen in place. It was amazing, and kind of disturbing, to see the reality of how food is produced.
I was in Botswana as part of the Student Multidisciplinary Applied Research Team (SMART) program organized by Cornell International Institute for Food, Agriculture and Development (CIIFAD)- a program dedicated to the agricultural business development in emerging markets.
We were there to help a local pig farmer, Chatiwa Diallo, move from small to large scale pig farming. Her farm of 105 pigs sitting on the outskirts of the capital city of Botswana, was the beginning of Chatiwa’s venture. Always wanting to be an entrepreneur, she had started the farm when her husband, a part-time cattle rancher, went to a livestock auction and found no cattle for sale. On a whim he bought four pigs as a gift for his wife and surprised her by hiding them in the garage. Initially outraged by the smell of her previously clean garage she quickly saw the opportunity to start her own business. The problem was, after two years, she was yet to start turning a profit.
After feeding time, we sat down with Chatiwa’s farm manager, Tiego, to discuss business operations:
Finding out that she sold to both retailers and consumers, we asked “How much could you sell for to each?”
“40 Pula/Kg for retailers and 65 Pula/Kg for consumers” (Pula is the currency of Botswana and also means rain. Um, make it Pula?).
“What percentage of your business is retailer and what is consumer?”
“About 75% retailer and the remainder consumer, but we wish we could sell all the meat to the consumer.”
“Why don’t you?”
“To process the meat into cuts for consumers we have to use a butcher who isn’t always available, but we make more Pula when we do!”
“Hmm, ok, how many pigs do you sell in a year?”
“Well, we currently have 27 sow units, so we sell about 600 pigs.”
“Hmm… You keep talking about sow units what exactly is a sow unit?”
Sitting in the dirt in Africa listening to a pig farmer, I thought about the changes my career path has taken over the last two years as my grand dreams of solar energy powering the developing world (see business school application essay) had shifted to a much more traditional path.
As we dug into sow units I knew this project would be unlike anything I’ve ever done before, probably closer to the grass-roots business I had originally envisioned, yet containing the core elements of business that I love.
Sows (female pigs) who have given birth were known as sow units. For a period of approximately three years these female pigs could be expected to give birth twice a year to a litter of approximately twelve piglets each time. The majority of the pigs would be raised to weight and sold to the market as meat, however a small number could also be raised to become sow units themselves. Generally this number was equal to 1/12 the number of pigs being born. I immediately began thinking that sow units were like little factories that had the potential to build more little factories.
For those who like the numbers, imagine nine sows would give birth to 108 pigs (nine sow units by 12 pigs/liter) twice per year for a total of ~200 pigs. In one year 18 of these could become sow units themselves and after losses 180 pigs could be sold to market. Year two, adding in the additional sows, 27 sow units could produce ~600 pigs to be sold to market, more sow units, and so on. At retail of 40P/kg and 40kg/pig this equaled about P900,000 or $100,000.
We visited an operation with 200 sow units that looked like a manufacturing facility. It was modeled after a farm in China that had 20,000 sow units. I could only imagine what that level of agri-business looked like.
By the end of our time in Botswana, the team had pulled together a strategy for Chatiwa to grow her farm that included increasing her sow units for economies of scale, moving up the value stream into milling feed and down the value stream into processing, and selling the majority of meat to the end-use consumer. One of the best things we did was pull together an excel dashboard (thank you Managerial Spreadsheet Modeling) that allowed Chatiwa to adjust feed costs, loan rates, number of sow units, and other key inputs and see how this affected her bottom line.
We had our final presentation in Chatiwa’s home after an authentic Batswana meal of spiced goat cooked in small pots with a side of porridge-like sorghum grain. She was extremely pleased to have the team’s advice, the new excel tool that would allow her to understand the financial impact of her potential investments, and see a fast and low cost way to become profitable.
Spending the next week touring Victoria Falls and seeing amazing wildlife on safari, I was able to reflect upon what an amazing opportunity this trip was for me as well as how grateful I am to be able to utilize the world-class education I've received at Johnson to get my hands dirty and help a business grow.
(Above names have been changed to maintain anonymity of business owners)