Our Profit is the Jobs & Exports Firms Generate With Our Grants- USAID Trade Hub
Emmanuel Azaino is the Research & Development Director at the West Africa Trade & Investment Hub (Trade Hub), an initiative funded by the United States Agency for International Development (USAID) to assist innovative enterprises with high-growth potential to scale up. He spoke exclusively with Arbiterz on the agency’s initiatives to boost investment, employment and export and enhance food security in West Africa through partnerships with public and private sector organizations.
“The grant size for agriculture R&D is between $250,000 to $500,000. But if an organization has a compelling case, there is no limit. We can also give as high as $2 million for an R &D idea”.
What percentage of your funds do you devote to Nigeria?
The Trade Hub is an initiative that seeks to increase the value of West Africa’s exports and drive economic growth through co-investing with local and international private sectors in commercial projects which create new jobs. Nigeria is a big brother within the Trade Hub. What I mean by “Big Brother” is the fact that over 40 percent of the Trade Hub’s investment has gone to Nigeria. This should not be surprising because the population of Nigeria is 50 percent of the population of West Africa. The Trade Hub’s total budget is about $140 million (around N70 billion) for a five years period. Of this figure, over $ 6 million is set aside for support to SMEs and agribusinesses.
So, it’s a grant? The beneficiaries don’t have to return the investment to USAID?
No. They do not have to return the money to us. It is not a loan. The name Trade Hub may suggest we trade and so expect a profit. But we invest in companies that will make very good profits but we don’t take a kobo or cent of the profit back from them. Our profit is the employment the companies create, the jobs they create for young people and women when we assist them to expand their operations. So for firms applying for our grants, the most important thing is to demonstrate how they can create employment for youths and women. Nigeria has a youth population of 62% i.e. 62% of our population is under 25 years old and 13% of these young people are unemployed. Creating jobs for young people is very important.
What is the typical size of the grant you give ?
We have two grants making programmes. One of the grant programmes is targeted at going business concerns and by going business concerns I mean businesses that are already established and making profit and want to expand their operations either by acquisition of new equipment or expansion to new geographic areas. We call this The Catalytic Business Component Grant. The Catalytic Grant is between $250,000 to $2,000,000. The second is called Research and Development Component grant. Interestingly, I am the R&D Director for the Trade Hub, so I manage the R&D portfolio. This R&D grant is meant for agricultural businesses and agricultural research organizations that have an innovative idea that can be commercialized. It is also for what we call Agritech and Fintech companies that have innovative ideas that can improve the productivity, incomes and livelihoods of smallholder farmers. The agribusinesses are private firms but most entities doing research on agriculture are public sector organisations.
So you give grants to private firms as well to public organisations?
Yes, but we prefer the private sector. Each time public sector organizations are applying to us, we expect them to collaborate with a private sector organization that will be in the driver seat. This is because if an innovation is to be scaled, the private sector has to be involved. Public sector organizations do not have that the mandate to engage in business and scale technologies, so we want to see a private sector organization at the driver seat each time we are dealing with a public sector organization. The grant size for agriculture R&D is between $250,000 to $500,000. But if an organization has a compelling case, there is no limit. We can also give as high as $2 million for an R &D idea.
In which economic sectors have you been most active?
The sectors that we have been most active in is actually the agribusiness sector. And why is this so? It is so because of the fact that food security of a country is very important for economic growth.
We also understand that about 70 percent of the Nigerian population is involved in agriculture and that 48 percent of Nigeria’s workforce works in the agriculture sector. In addition, the country spends $5 billion annually on the importation of food. So, focusing on the agriculture sector, especially on achieving food security and import-substitution and then creating jobs for youth and women, is a very critical. This is why Trade Hub has a focus on agriculture and businesses and SMEs that have to do with agricultural production. There is a third component of the Trade Hub which provides technical support to companies that want to take advantage of the African Growth and Opportunity Act (AGOA) trade facilitation initiative and export to the United States of America.
How do find the companies and organisations that you support?
The Trade Hub publishes what we call the Annual Program Statement (APS) every year. The APS is like the Bible of the Trade Hub grants. It documents all of the conditions and the process for accessing the Trade Hub’s grant. We don’t do newspaper adverts or hold a microphone in the market to invite applications. There is no point. We know we will receive millions of applications 99% of which won’t meet the requirements. Combing through the applications would take all our time. So, what we do is to release the APS and put it on our website and then we start to scan the environment to identify suitable companies that we think fit with the objectives of the Trade Hub and we guide them to apply.
Also Read: USAID and IITA To Boost Soya Production with $829,222 Grant
When you say “suitable companies”, what do you look for in deciding suitability?
A suitable company is a company that has a good business model and is making profits. Such companies have existing markets which means that the company is like a moving train- whatever they are going to propose to us, it is just like fitting extra wagons to a train that is on the move. We are only helping the capacity of the train to carry, move and deliver more. So, we look for good organizations that already have thriving products for existing markets. The risk of failure is minimal; we are working with the companies to become much more successful and contribute much more benefits to communities and the nation.
So, you don’t support startups?
We do support startups but even when we support startups, we want to see that they have a good idea; we want to see that there’s a potential market for their products. We want to see that looking at the profit and loss at the end of the day it’s not like investing the Trade Hub’s funds in an organization that will waste the money. So, we really want to analyze the Startup to see that they have a good idea and that our investment in the Startup will not be a waste.
What are the professional backgrounds of the people that make the analysis and investment decisions at the Trade Hub? Are they agriculture experts or technology experts or finance experts with banking backgrounds?
We have all of those in the Trade Hub. We have agriculture experts, Fintech, Agrictech, and other technology experts. We have investment experts and grant management experts. We have experts in all of those fields and each time an application is evaluated, there is a robust set of selection criteria that the committee of experts work with. It is not that they sit and then decide how to make grants. There is already a guiding document for every committee that evaluates applications.
Probably you give indications to the companies applying on the criteria they have to meet?
Yes, we set all of those criteria in the APS. So, each time an organization grabs the APS, all the information is there. The APS is a public document. It is there on the internet. You can easily get it on the internet by using Google. We just don’t advertise it in newspapers or on the Nigerian Television Authority network. Yet, we get a lot of applications. In 2020, for only the R&D component of our grant, I received 140 applications and only about eight of them were relevant.
Why do you think there are only a few good applications? And do you see that creating a problem where you can’t even spend your 144 million dollars because you cannot find good projects?
There are so many conditions. Nobody is going to give you $2 million if you are not prepared for it. There are so many conditions to meet. For instance, if you are asking us for $1 million – how many jobs will this investment create? Someone is asking us for $1 million and the investment will generate only 50 jobs. This is not the kind of project that the Trade Hub wants to fund. Somebody asked us for $300,000 and he is going to create 6000 jobs. This is the kind of application that makes us very excited.
So, you rather fund something that creates employment than a project with big profit?
Yes, that is the profit of the Trade Hub, something that can create employment. The first hurdles are that it must be something that is viable because there is market for it and there is a good business model and it is profitable and the operation and market are sustainable. After these primary steps, the biggest hurdle is the capacity to generate jobs.
Then, the other thing we will consider is cost sharing. If your project is going to cost $1 million for instance, and you come to the Trade Hub, we will not give you all the one million. We can give you a maximum of $500,000 which is 50 percent. So, the organization has to also show that they can provide that cost share if the project is approved. So, if you are applying for $500,000 as a start-up, it means that you already have $250,000 that you are going to co-invest with us.
One other thing we consider is additionality. What do we mean by this? We want to see that without the Trade Hub funds, the project cannot be implemented. But if the project can be implemented without the trade hub funds, it means that you really don’t need the Trade Hub. So, this additionality helps us to screen off the already wealthy organizations from coming to take the funds. We also consider the scalability – how scalable is the idea? For Nigeria, Trade Hub grant cannot be used anywhere outside these seven states – Kebbi, Kaduna, Niger, Benue, Delta, Eboyin and Cross River.
A bias for agriculture is implicit in the choice of these states. You don’t mind entrepreneurs from Lagos or elsewhere having projects in those states?
Yes, there is a clearly bias towards agriculture. If you can come to Kebbi, or Kaduna, fine. One other thing we focus on apart from agriculture is apparel or textiles that could be exported under the AGOA. The USA actually needs textiles from West Africa.
Can you share with us some of the most successful companies or projects that you are supporting?
The Trade Hub just started. The first grant was awarded in November 2020. We don’t have many companies that have received grants but we have tens of them that are getting close to grants as we speak. The International Institute of Tropical Agriculture (IITA) has gotten a grant from the Trade Hub to produce a new variety of soya bean. This new variety of soya bean yields about 3.5 tons per hectare. The current variety in Nigeria yields 1. 2 – 1.5tons per hectare on average. The IITA is working with the grant as we speak. We have also given a grant to WACOT, an arm of the TGI Group. The reason they got this grant was because they are employing 5,000 farmers in Kebbi to produce rice for their rice processing mill in Kebbi. Then, we have another organization called REMIFREMS. The company is based in Eboyin and they are also doing a rice outgrower programme for a rice processing mill in Eboyin state. There are two recent grants that have been awarded to PIXERA and PFD (Partners for Development) which target the production of grains like maize and soya bean. The PIXERA project is in Kaduna and the PFD is in Delta state.
What’s the minimum grant you are able to make?
$250,000. But the total cost of the project must be a minimum of $500,000 (about N200 million). They don’t have to pay us back but we want to see our profits in the form of increased investment and employment, in form of businesses that can continue to produce sustainably, and reduce the importation of rice, wheat, and soya beans into the country.
What are the possibilities of collaborating with the public sector in West Africa to replicate what you are doing?
This project already exists in the whole of West Africa. We are just fortunate to have the headquarters in Abuja, Nigeria. Some of our methods will be taken up by other organisations as they see the success stories.