Agrikaab review: food production in East Africa

Background of Agrikaab

Agrikaab was founded in 2016 by Mohamed M Jimale, who was born in Somalia and moved to Sweden as a refugee. Having IT skills and ties back home to the nomads of Somalia, he decided to do something to help as drought hit East Africa.


I first learned about Agrikaab in 2017 when they were still called ari.farm. I loved the idea, but was really hesitant to invest, as it felt complicated. I remember it first seemed like you were to speculate on livestock prices, sheep and goats, and the camel milk business felt like an addon. The sheep and goat business came to an end in 2019, as what happens when a start up is trying to find its market fit.
"Our mission is to create new generation of farmers, contribute to the food security of the region and create jobs."
-Agrikaab

Nowadays Agrikaab builds also greenhouses and rainwater harvesting. As of spring 2019 the first produce is being harvested from the first greenhouses and rainwater harvesting projects have been started.

How Agrikaab works

You sign up on the site and create your free account. Once you have an account, you still need some balance on it before you can submit a purchase order for a share in a camel, a water harvest pond or a greenhouse.


For transferring money, there are a wide variety of options, credit cards, bank transfers, even bitcoins. Since the bank account is in Kenya, where the company is registered, there's no SEPA bank transfer. International bank transfers can be pretty expensive, so between credit card and Transferwise. I went with Transferwise. They're very cost effective and trustworthy. Transfering 1 375 € (the price of a camel) cost me 8,41 € and took 3 days.



After the money is transferred, you get to spend it on the projects that are available. Needless to say, I bought a camel πŸͺ.

Investing

Camels

How it works in a nutshell:

  1. You buy a camel for its 12-month lactation period
  2. You get an 8% dividend quarterly for the milk it produces
  3. Agrikaab buys the camel back for the same price you bought it

With camels, to be eligible for dividends you must own at least 30% of the animal. The lactation period of a camel is about 12 months, so that is how long Agrikaab will pay dividends for it. At the end of the 12 months Agrikaab lets you sell the camel back to them for the same price you bought it for.

Agrikaab's FAQ states that selling back an animal costs a 10% commission, so I asked about that. Here's the exchange.

So at the end of the 12 months of owning your camel, Agrikaab releases your original capital to you without the 10% commission and you are free to buy another camel.

The selling back feels a little odd from an investor's point of view. Why not just continue owning whatever 1375€ worth of camel and be given dividend on the principal? I feel this has to do with the fact that camel price can go up and down, and Agrikaab wants to simplify this appreciation change, perhaps benefit from it themselves. And since they don't have a 'camel fund' of which you own shares, but you own the actual animal that has a certain lactation period.

Water farm ponds

The quick run-down is:
  1. You invest in a farm pond. The money is used to build or renovate one.
  2. When it rains, Agrikaab will track how much water the pond captures. Every 6 months, investors will get $ 0.6 per 1000 liters.
  3. This agreement ends once the investor has receiver a 60% return on the investment. According to Agrikaab, this may take anything between 2.5 to 4 years.
Currently, the investment price of a cubic-meter of farm pond is $3 and the minimum size of investment is 50 m3 or $150. Currently there is a project that consists of two ponds being built, totalling 10,000 m3. With $ 30,000 you can fund the whole thing.

Greenhouses

Again, in short:
  1. You invest in building or renovating a greenhouse
  2. Agrikaab operates the greenhouse and sells its produce.
  3. You are eligible for a revenue share on the produce until you've receiver 30% ROI. This might take 18 months, or more or less.
You invest in building or renovating a greenhouse by the m2. One square meter costs $10, and the minimum is 20 m2, or $200.

Returns

As of March 2019 there isn't much data on how well the greenhouse projects or the water harvesting works, financially. Agrikaab is committed to returning investors' money until certain return on investment is reached. 

Expected returnInvestment period
Camelsup to 32%One year
Greenhouses20% - 40%Until 30% ROI
Water harvesting15% - 25%Until 60% ROI

So, as you may guess from the details, it's not yet a mature business. The business logic is simple. Camels: own a camel a year, get milk. Greenhouses: invest in a greenhouse, get revenue share from food. Water harvesting: You wait for rain to fall and you get compensated by m3.

But I am trying so hard to look past the numbers only. I mean the numbers look pretty great, but there're other kind of returns here too. Perhaps equally important, if not even more so. These investments employ and feed people.

That's pretty cool.

Risks

I'd be a fool to be so gullible to think that there was no way this could blow up in my face. Agrikaab have said they are an agriculture company and therefore no strict regulation is required. Well, not quite. Agrikaab accepts deposits from investors, which then they hold on to for us. My money sits on their account that I can then invest into their projects. But since they are not an investing company, their operations are not as strictly regulated. The more their operation grows, the more difficult it becomes to keep track of investors' money and their own. I know.

But I've decided not to spend energy weighing whether to trust this charitable startup. I'm going to follow with keen interest how they develop as a startup. I've decided to trust the intentions of this company, and will consider other kinds of risks. You can laugh at me if things go south. πŸ˜‰

Crime and unrest is probably my biggest fear. I don't believe the operations are insured, and I have mixed feelings about that. Insurance is probably impossibly costly, but also, if Agrikaab started to have trouble such as camels being stolen, food missing or structures destroyed, they'd be out of business. One of the main reasons they abandoned sheep and goats was that they got conned for hundreds of animals. They'll do what they can to avoid trouble, but then again, if something or someone destroys their operation, the investors will carry the risk.

In a bombing in 2019, Agrikaab's office in Mogadishu were also destroyed. Two employees were injured, but while lives were lost, Agrikaab was lucky to not have anyone among them. In an email, Agrikaab explained that this can impact milk deliveries, since the law enforcement has significantly restricted access to the city. These are the kind of risks involved with Agrikaab.

Drought is a problem. What if it doesn't rain enough? There's no water to harvest and nothing to irrigate plants with. Buying water is expensive and hits both the greenhouse projects and cattle. I imagine the business cases have been calculated without operational farm ponds, so maybe this is mostly upside risk.

Eventually prices will go down. Which is a good thing! The whole point is to help this area to get trough a rough time by making the cost of living lower.

Full disclosure and final thoughts

I own a camel πŸͺ that I bought in March 2019. The income from the camel is included in my monthly updates. I am considering using the returns from my camel to expand to rain water harvesting ponds and green houses.

I love the feeling of investing through Agrikaab. I love the idea of owning a camel that produces food in Somalia. I don't think about the returns that much, although I admit I probably would not investing with Agrikaab, if it was a charity. The fact that it combines investing with helping the local community is perfect for me.

I consider Agrikaab to be pretty high-risk and I would not be very comfortable having more than 1% of my portfolio in it. If you are considering investing with Agrikaab, do consider all the risks first. 
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