Tiger Brands, the country’s largest food manufacturer, is committed to supporting South Africa’s black farmer suppliers through its enterprise and supplier development programme. A key aspect of this is the aggregator model, which builds both smallholder and commercial farmers. Peter Mashala caught up with Litha Kutta, Tiger Brands’ enterprise and supplier development director, to learn more about this initiative.
In 2015, Tiger Brands announced its intention to contract producers and offer guaranteed offtake agreements for sunflowers and maize from local black farmers, through its Agricultural Commodities Enterprise and Supplier Development (ESD) Programme. The company then signed a collaborative agreement with the former Department of Agriculture, Forestry and Fisheries, to support smallholder farmers.
Although the agreement may not have yielded much yet, Tiger Brands together with other partners have made significant inroads towards achieving its enterprise development goals in agriculture. This is due to its aggregator programme having increased the procurement of sunflowers, maize, soya beans, ground nuts, beans, sorghum, tomatoes, peaches and apricots from smallholders.
According to Litha Kutta, Tiger Brands’ enterprise and supplier development director, the food manufacturer purchases at least 2 million tons of agricultural commodities annually. While they purchase 50% of their needs from local businesses, mostly large agribusinesses and former cooperatives, 50% of the grains are imported, says Litha.
“We want to reduce imports with the intention of growing our black farmer suppliers and contributing to the country’s development goals,” he says. Moreover, the company wishes to develop rural farming enterprises that promote sustainable sunflower and maize farming on arable tribal land.
The Smallholder Farmer Programme was deliberately created to utilise guaranteed offtake agreements to make Tiger Brands’ supply chain available to smallholder and women farmers. “This initiative has matured to a point where we can expand it a little more to create opportunities for new entrants.
“We aim to create 4 000 jobs and grow procurement spending on black-owned businesses to R2.3 billion by 2022 in order to develop 900 sustainable black-owned businesses,” Litha explains.
Working with smallholders comes with its own challenges, most of which are related to capacity. As a manufacturer, Tiger Brands procures a lot of raw materials. “Our demand for grains is so high that even white commercial farmers can’t satisfy it. Therefore we import half the grains we need. In light of this, one can imagine how difficult it would be to procure from smallholder farmers.”
The company launched its first Agriculture Aggregator model in 2019 to grow the number of participating small-scale farmers while growing the number of black suppliers. The biggest challenge for small-scale farmers is to produce at the scale and quality that corporates demand, he says. To compete sustainably, farmers must graduate from being standalone entities and develop their operational capacity and financial ability.
“This requires substantial development and support, often spanning several years, and adds additional complexity to corporate supply chains,” notes Litha.
FULLY-FLEDGED ENTITIES
The aggregator programme pairs small-scale farmers with black-owned farming companies known as aggregators. As farmers in their own right, these aggregators are expected to provide technical and management skills to small-scale farmers, enabling them to participate in Tiger’s value chain.
“As fully-fledged business entities, aggregators will procure from multiple farmers and enter into agreements with corporates like Tiger Brands, ensuring better guarantees on tonnages, delivery timeframes and quality standards,” he explains.
To qualify as an aggregator, farmers must cultivate at least 500ha of crops such as groundnuts for peanut butter brands like Black Cat, and white beans for KOO. Maize suppliers must have a minimum of 1 000ha under production. The aggregators receive contracts with Tiger Brands as fully-fledged entities and procure smallholder crops from multiple farmers. They choose which farmers they want to work with.
“We support aggregators by providing input finance, offtake agreements, and agrarian and technical support which they will have to extend to smallholder farmers under their contract,” he explains.
As part of the programme, Tiger Brands launched the Dipuno ESD Fund in 2019, committing R100m by 2025 to black-owned and black women-owned small enterprises. The fund provides liquidity support to black-owned direct and indirect suppliers, small-holder farmers and distributors who have secured procurement opportunities with Tiger Brands. “We provide production financing and grants for training and skill development through this fund, together with other partners,” Litha says.
Through Dipuno, they also have a Market Access Accelerator. This incubation support initiative drives the support of black-owned and black women-owned enterprises to commercialise their businesses and expose them to market opportunities. The support includes business training, compliance support, business governance, technical support, tendering and bid support to enable them to access procurement opportunities within the company’s supply chain, value chain and distribution chain.
There’s an additional Channel Development Programme, which aims to provide capacity-building support to emerging distributors to enable them to drive the distribution of Tiger Brands products in under-served markets. These include informal/spaza markets, sector-focused distribution, township food services, and private-sector food services suppliers.
DEVELOPING FEMALE AGRI-INDUSTRIALISTS
Tiger has spent over R300m on procurement through the aggregator programme, which consists largely of women-owned businesses. Tiger Brands is growing the number of black women-owned suppliers in its value chain, and three of its four active aggregators are women. “We just signed up three more suppliers, so by next season we’ll have seven aggregator suppliers,” Litha explains.
Tiger Brands relies heavily on women entrepreneurs. Of more than 150 farmers falling under the aggregators, 70 are women. They supply agricultural commodities to produce some of Tiger Brands’ most iconic and well-loved brands, including KOO, All Gold, Black Cat and ACE. Litha plans to onboard three aggregators each year and to procure 30% of their raw materials from black suppliers.
“We have other stakeholders on board, such as Exxaro Mining, Absa and Land Bank,” Litha says.
Tiger Brands plans to invest R1bn through these partnerships to support farmers through the Dipuno Fund. If the company is to increase its procurement from black suppliers, farmers must produce to their maximum potential. Aside from boosting production, this investment contributes to the creation of thousands of jobs in rural areas.
Since launching the aggregator model in 2019, around 834 permanent and seasonal jobs have been created, Litha says, and this number is expected to increase as more aggregators are onboarded.
ACTIVE AGGREGATORS
Tiger Brands currently sources from 157 smallholder farmers through four active aggregators or suppliers. Women aggregators Mpumi Maesela and Lusanda Moletsane are among Tiger Brands’ most successful.
Since 2020, Mpumi’s company SE Holdings has been supplying mainly A-Grade small white beans to Tiger. By participating in Tiger Brands’ aggregator programme, SE Holdings has sustainably grown from a small aggregator to a network of 50 contracted smallholder farmers across five provinces, namely Kwa- Zulu-Natal, Mpumalanga, North West, Lim- popo and the Free State.
Formerly a banker, Mpumi has a head for finance and a passion for farming. She facilitates her farmers’ production finance through Dipuno, and provides ongoing training using grant funding. SE Holdings services include pre-production planning and planting-scheduling training to meet standards and quality specifications, holistic farming support, financial manage- ment, and everything in between to help smallholder farmers get sound agronomical practices in place.
“The programme has been a life-changing experience for small-scale farmers, most of whom are females and youth. Through the programme, farmers who do not have access to technical support, financing for production inputs, mechanisation or offtake agreements are provided with comprehensive support,” says Mpumi, who is from the Eastern Cape.
Lusanda’s company, Khumo Ea Tsabo, produces small white beans for Tiger Brands. Her company was onboarded in 2020 and supported with R10.5m, which included a low-interest loan and technical support funding. Her cluster is in Nigel and Bronk- horstspruit. She says that as a small farmer with 100ha, or even a commercial farmer with 1 000ha, it is impossible to supply a pan- African food giant such as Tiger Brands.
“Without such initiatives, where we are able to aggregate and empower small farmers with supported access to the formal agricultural market, it would remain a pipe dream,” she says.
