Alliance Ginneries is a cotton ginning company sourcing all its raw materials directly from smallholder farmers. In his Impact Story, executive director Umair Zavari explains how he partners with NGOs to provide extra services to farmers and why Alliance Ginneries is pivoting to organic.
To start, could you briefly introduce yourself?
I am Umair Zavari, the executive director of Alliance Ginneries. My family has been in the cotton business for three generations.
Could you briefly describe Alliance Ginneries?
Alliance Ginneries is primarily a cotton ginning company. My family founded it in Tanzania in 1997. In 2002 and 2007/8, we expanded to Zimbabwe and Zambia. Currently, we are venturing into organic cotton and soybean processing.
How do you partner with low-income communities?
We source all our raw products from smallholder farmers, most of whom live in remote areas and do subsistence farming. We provide them a guaranteed market, extension services and other forms of support. The farmers are our partners: For us to be profitable, they need to be profitable.
Could you explain more about the impact you create in rural communities?
First, we create jobs outside the big cities. In Zambia, we run eighty offices in rural areas, all of which are manned with full-time staff. We also contract lead farmers and distributors every season.
Second, we directly impact the farmers we are working with. At the start of the season, we provide them with inputs on credit and recover the loans after the harvest. Also, we guarantee them fair market prices. This enables them to pay school fees and medical expenses.
Many of the farmers we are working with grow soy as well, because it is not labour intensive and requires few inputs. They asked us to provide them with a market, and we found it made business sense. In June, we will start to process soybeans in Zambia.
In addition, we partner with NGOs to go the extra mile and offer free community services. For example, we teach our farmers in Zambia and Tanzania how to build and maintain clean cooking stoves. We have also trained over 30,000 farmers in agricultural practices so far.
How do you impact women?
We work with 264 women’s groups in Zambia alone and have full-time gender officers in all locations. Growing cotton gives women an independent income. In addition, we partner with NGOs to do extra projects in the best performing groups. We run a village chicken project, for example, to help women generate an income outside the harvest season.
How many people do you reach?
Depending on demand, we work with 50,000 to 100,000 smallholder farmers each year. We also have 290 full-time employees in Tanzania and Zambia and contract 1,200 to 1,400 lead farmers in Zambia every year. In Zimbabwe, we had to reduce our business but hope to scale it up again when the overall situation has improved there.
What makes your business model financially viable?
We sell high quantities of sustainably sourced soy and cotton to huge markets. For cotton, our main buyers are large companies trading out of Europe. Every year, we produce up to 27,000 metric tons of cotton in Tanzania and between 8,000 and 26,000 metric tons in Zambia. In Zimbabwe, we produced around 30,000 metric tons back in the days.
While the market is competitive, few African cotton companies source as sustainably as we do. We are certified by Cotton made in Africa, which sets high sustainability benchmarks.
We also aim to produce around 70,000 metric tons of soybeans per year. They will be sold to refiners and the livestock industry within Africa. Southern and Eastern Africa have a net deficit of soymeal, since they have banned genetically modified crops from Brazil and Argentina.
What are your plans for the next few years?
We are pivoting to organic cotton. This creates a triple win for the farmers, the company and the environment.
The farmers will increase their net income, because the inputs for organic cotton farming are free. Also, we will pass the price premium – forty to fifty percent as compared to conventional cotton – on to the producers.
Alliance Ginneries will no longer need to distribute costly inputs to the farmers without knowing if the loans can be recovered. Organic farming hence reduces the weather risk we take.
Also, chemicals used in conventional farming run into the water system. Other long-term consequences are still unknown. Therefore, the environment will profit from the pivot, too.
How far have you gotten on these plans?
In Zambia, we are the first company to venture into organic cotton. We started planting it in November 2020 and will be certified organic in 2022 or 2023. This is how long it takes to extract all the chemicals from the soil and get certified. We aim to involve 20,000 cotton farmers.
In Tanzania, we are already in the third year of production. We had 5,000 organic farmers in the first year, 12,000 farmers in the second year, and we aim for 20,000 organic farmers this year.
What do you need to finalise the pivot to organic farming?
We received a grant through the European Union’s Enterprise Zambia Challenge Fund in mid-April. This will help us pilot organic cotton farming in Zambia.
Apart from that, we are mainly looking for corporate partners at the top of the value chain. A cotton t-shirt costs one to two dollars to produce but sells for one hundred dollars in some stores. It would be great if some of these retailers contributed back to the farmers. This is in their own best interest, as the awareness of sustainability is rising among consumers.
What challenges has Alliance Ginneries overcome?
Our biggest challenge is erratic commodity prices. In the past few years, the price for a pound of conventional cotton has been anywhere from 40 cents to almost two US dollars. When we buy cotton from the farmers, it is difficult to explain to them that we are price takers from the world market.
Also, climate change has amplified weather risks. In Zambia, we had two droughts over the past four years. We try to mitigate this risk by going organic.
In addition, the cost of doing business in rural areas is very high. The distances are crazy, and infrastructure is not well-developed. We partner with NGOs in these areas, which subsidise trainings and help us support the farmers.
What keeps you going despite these challenges?
We are working with vulnerable communities who have few other options. They need the cash we provide to cover their expenses.
What do you recommend to other inclusive business entrepreneurs?