Traditional Equipment Dealer Model is Broken in Africa
Sub Saharan African Countries are trying to become self-sufficient and even become exporters of agricultural products. At the same time, there is substantial investment by foreign capital into larger agricultural projects in West Africa, Nigeria, Gabon, etc. These large projects have scale and can support efficient use of mechanized activities to make their operations profitable.
The traditional dealer model to supply equipment, parts and mechanical expertise has relied on highly capitalized dealerships to be established in each country. This results in high local costs of equipment and parts due to local tariffs, the high costs of local capital, and the need to amortize investment costs and costly overhead. Workshops are centralized at the Dealer location, requiring rural farmers to bring equipment to that central location. Dealers focus on current sales of new equipment and parts translate to lack of focus on value selling and maintenance. Equipment costs go up, part costs go up, and repaid costs go up due to lack of mobile maintenance and repair ability of local dealerships.
The result is it is significantly more expensive for smaller farmers to mechanize efficiently and therefore be profitable.
A New Supply Model is Changing the Game for African Farms
A new model developed and executed by TractorExport is decreasing costs and keeping more machines at work for small and medium-sized African farms. Core elements of the model include:
- Replacement of new equipment purchases with low hour high quality used equipment from the United States Midwest imported on an as needed basis.
- Replacement of high cost local brand name parts with high quality aftermarket parts where possible in addition to brand name parts imported on an as needed basis and delivered to rural locations by the vendor.
- Replacement of centralized dealer workshop system with mobile mechanics focused on providing regular maintenance services and parts on a cost effective basis to local farmers.
- More efficient mechanization coupled with development of contractor/sharing/co-op arrangements for equipment so that equipment costs can be spread out over a larger number of smaller farmers.
To make it work, TractorExport is developing a web-based international on-line ordering system that will be available soon: store.tractorexport.com, the site features multiple brands of parts supporting all major agricultural equipment brands, international shipping rates and local customs fees, so the farmer in any country can have a good approximation on how is going to cost, thus facilitating to order, plan and budget their parts purchases.
The group has created an online maintenance program that enables individual farmers who subscribe to the network to receive free help to plan and schedule their equipment maintenance planning. TractorExport is operating in-country mobile mechanics teams, with more than 30 mobile mechanics in West Africa.
The model is working and not just on paper. TractorExport has cut costs by 30% to 50% and increased equipment availability from 45% to 85% for projects such as Olam International's Palm and Rubber operations in Gabon. The company just entered into a new agreement with Societé Gabonaise De Transformation Agricol (SOTRADER), a joint venture between Olam International and the Government of Gabon, to service 375 Cat dozers and excavators over the next three years.
Let us know what do you think, and if you want to talk to us about this revolutionary new model and/or what TractorExport is seeing in the field.