Increasing producer incomes in fragile states through investments in Intellectual Property

Overview

This article outlines an innovative approach to private sector development through intellectual property that can be applied to higher risk fragile state environments with limited upfront capital and infrastructure costs, whilst delivering additional income for producers. The article outlines two key lessons from investments made in Zimbabwe by Windward Commodities, a social enterprise based in Barbados and the UK, that have the potential for application to other fragile states including Haiti.

Windward Commodities

Windward Commodities invests and advises in a range of commodity markets across Africa and the Caribbean. Windward develops new products, brands and supporting supply chains in order to generate added value which is shared back along the supply chain, ultimately creating additional income for farmers. Windward partners with large multi-national corporations such as ED&F Man in sugar, Ecom in coffee and RioTinto in aluminum, as well as regional companies such as Netrade in Southern Africa and is an investor in the Barbados sugar industry through the Plantation Reserve brand sold in over 1,000 stores across the Caribbean and UK.

02-Chilli Power

The Chilli Power™ case

Windward Commodities has built a supply chain and invested in the chilli sector in Zimbabwe through its Chilli Power™ brand that covers a range of products including chilli sauce. Chilli Power™ sources chillies from a network of over 2,000 farmers generating an average of $114 of additional income per farmer per year (the average GDP per capita in Zimbabwe is $950). Chill PowerTM is available in over 212 retail and wholesale stores across Zimbabwe as well as other regional southern African markets including Zambia where incomes are higher and markets significantly larger.

1. Investing in Intellectual property rather than physical property

The success of Chilli Power™ in Zimbabwe despite the macro-economic issues there demonstrates how it is possible to leverage and add value to supply chains by partnering with existing companies already operating in fragile states. Investing in intellectual property rather than infrastructure or physical assets significantly reduces cost and risk and generates additional income for producers. It is also increasingly important in modern supply chains where the value captured by traditional ‘upstream’ farming and manufacturing operations is declining relative to ‘downstream’ sales and marketing activities.

2. Domestic pilots create the potential for regional and global scale-up

Zimbabwe is a low income, fragile state with a limited purchasing power and as such Windward designed Chilli Power™ as a mass-market product with an attractive price point. Success in the domestic market and the learning and cash flow that this has created has allowed the brand to use Zimbabwe as a production hub for wider regional sales including Zambia. This in turn is driving a greater impact for smallholder farmers in Zimbabwe and is leading to opportunities in larger export markets such as the UK and US.

Critical success factors

Successful development of IP-lead strategies in fragile states have four clear success-factors:

  • Detailed due diligence on demand and supply-side opportunities is critical prior to investment.
  • Identifying supply-chain partners that can produce consistent quantity and quality is key.
  • Counter balancing low purchasing power in fragile environments with wider regional sales.
  • Expertise in Intellectual Property, product development, branding and sales execution is critical.
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