Afrwood Wakulima Market: Online auction of agricultural products in East Africa

Many new ideas are coming in every week via the VC4Africa website. Let’s meet entrepreneur David Amakobe who was born and raised in Kenya. Before he migrated to the USA he did business in Tanzania, Uganda, DRC, Sudan, Kenya and the United Arab Emirates. Currently he is setting up an online auction for agricultultural products.

What problem are you solving with Afrwood Wakulima Market?

Afrwood Wakulima Market is an online farmer’s wholesale market, set out to meet three main challenges players currently face in the agricultural produce wholesale market.

The first challenge is the ability to know the current market-price of the produce. Today players rely on post-trade reports of what the price was the previous day. But these prices vary considerably per specific market, while transportation cost are almost the same. Our platform enables traders to post the product, location, quantity, quality and price offered with ability to bid real-time.

The second challenge is meeting an inconvenience many African farmers experience that harvest perishable goods. They bring the produce to a non-climate controlled market and then they have to haggle over prices. But their clients know that they have to sell otherwise the produce will spoil. Via our platform the seller gets a good price, the buyer gets fresh produce without having to go to a physical market.

Last but not least is succession planning. We need to make sure that the technology savvy and environmentally conscious youth will continue with this business. Therefore the agricultural wholesale trade has to move from the current ‘spot cash’ physical exchange, to warehouse receipts, forward contracts and to futures trading. This is what we want to achieve with Afrwood Wakulima Market in Kenya, Uganda, Tanzania, Rwanda, Mozambique and Malawi.”

How does this work in practice for a seller in rural Kenya?

“A producer, trader, processor or miller can register on the website and we assess new members for ability and reliability. Then we invoice the approved applicant the platform user fees, which must be paid from a bank or mobile money account. On receipt of payment, Afrwood Wakulima Market approves applicant to list auctions or bid on auctions following the conditions of service. To list produce for auction a producer or trader must have the produce stored in an accredited warehouse or must be approved to sell perishable crops within their harvest period while standing on the farm.

To bid for the produce, buyers must be good for the money. A winning bidder is obligated to pay and take delivery as in any other contract of sale. The minimum warehouse receipt quantity in Kenya is 5000kg, we are a wholesale market and recommend a minimum lot of 20,000kg. But we accept any market lot that can be transported, starting 5000kg up. All the market towns have more than one cyber-cafe and more people are having smartphones so they can make use of our platform. We are currently in the proof of concept phase with about six registered users. But we are in negation with an established carrier who could act as distributor.”

What sorts of products are sold via the platform?

“At the moment players can list and buy cereals, tubers, roots, legumes, horticultural produce, eggs and other miscellaneous agricultural products. The platform also provides ability to trade in production contracts for sugarcane, tobacco and other contracted crops. Our mission is to make Afrwood Wakulima Market the online destination of farmers in East Africa.”

What is the business model behind the platform and when are you planning to break even?

“Afrwood Wakulima Market is a trading platform and we charge fees for participation and value added services. But market participation and verification fees make a very small percentage of anticipated income. The company projections rely on final value fees as our major income driver, hence we project our breakeven point will be when the platform volume is 400 tons of produce per week.

Our fees on final value concept means that we charge a low base fixed fee percentage on the reserve price, plus a percentage of the amount of money made above the clients reserve price. The platform charges a small fee to list depending on the reserve price, when the auction is successfully concluded we charge a large percentage on the money made above the reserve. Suppose a dairy cow is listed at a reserve price of say $850, we will charge say 0.5% for listing ($4.25). When its sold at $950 we will chage 25% of $100 which is the money above the reserve price, thus the transaction earns $29.25.”

What are your main challenges?

“Our mission aims to disrupt the market as it is currently organized. That means selling the platform to players whose interests are currently assured. The current wide price variance in the market benefits midmarket players, but has an adverse effect on consumers and producers. We have to sell this platform to producers and shelf edge providers, who currently have accepted the status quo as given. In summary, client acquisition is our current major challenge.”

On your profile I read you have a strong opinion about foreign aid to Africa?

“Foreign aid boils down to the power of pride and the lack of pride in oneself. First, I divide aid in two categories: disaster aid and development aid. Development aid is exactly what senator Ron Paul says: ‘Taking money from poor people in rich countries to give it to rich people in poor countries’. Hence excusing whole countries from responsibility and making them perpetually dependent on rich countries. This is not sustainable in the long run and makes a very unstable world.

I should know, I was born in Kenya and before I moved to the United States I worked for both the Dutch government sponsored Smallholder Irrigation Program and the FAO sponsored Small Farm Mechanization Program. Most development programs have no local ordinary people buy-ins. Even the officials just write the project documents to fulfil funder demands; doing the same thing repeatedly and expecting different result is insanity! This situation will not change in the short run because there are too many careers, organizations and country policies with a stake in continuing the charade! In the end, supporting businesses and market agricultural production programs will do the trick.

Disaster aid is when we are our brother’s keeper, this is human and acceptable but it should start from within the countries. This year Kenyans4Kenya did very well, but some organizations declined to work with them. Just wonder why! Hunger takes a toll but it’s not a disaster that requires relief, it’s a situation that develops overtime due to lack of planning by the governments who are too dependent on foreign aid and have no pride in themselves or their people whatsoever.”

How are you changing this with your company?

“We believe that agricultural production that is line with market demands is both profitable and self-sustaining. Having clarity in market availability and demands will generate production and jobs both in agriculture and in the supporting industries feeding the market perpetually. Contract production of sugarcane, flowers, tobacco, maize seeds and barley has been very successful in Kenya. Market clarity matters. I believe that putting clarity and removing excessive price variances will increase production, increase trade and eliminate the need for foreign aid.”

How can VC4Africa members contact you?

“Afrwood Wakulima Market is a trading name of African Wood Inc. We are located in the United States at One Commerce Center, 1201 N Orange Street, Suite 902, Wilmington, DE 19801. Our phone number is +1-302-884-6738 and my email is ceo [at]”