Case study: Tanzania Turnaround – A Third World Case Study

In management circles there’s long been ‘joke’ that consultant is someone who borrows your watch to tell you the time, then keeps your watch. I’m hoping the following story goes some way to restoring faith to this somewhat maligned group of professionals – of which I am member. Two years ago my wife Andrea and I mothballed our consulting and training business in the Bay of Plenty to embark on Volunteer Service Abroad assignments in Tanzania. We ended up at place called Arusha in northern Tanzania where my role is business development adviser to the Tanganyika Farmers Association (TFA).
I call it dream job – though I don’t get paid (bar living costs and small allowance). But it’s certainly one of the most rewarding and satisfying things I have done in my life, and my wife (and business partner) also feels this way. She has been working as teacher trainer in the government school system.
Although one of Africa’s largest countries, Tanzania is also one of the poorest in monetary terms despite resources that include minerals, National Parks and the cultural diversity inherent in the 120 odd tribes that make up this fledgling democracy. And despite its vast tracts of arable land, with two reliable wet seasons in most parts, the country has been importing food for many years to supplement poor local production.
While it is home to many large and mostly foreign-owned farming estates growing coffee, tea, wheat, tobacco, cashews, sisal and cotton, these products are largely exported.
The reality is that Tanzania is largely population of subsistence farmers (80 percent at least). They operate with minimal support from government, are heavily dependent on the weather, and on food aid when crops fail. Most farmers cannot afford high yielding, more drought resistant hybrid seeds or fertilisers and so, even in good year, the productivity of their land is relatively low.
TFA is farmers’ cooperative owned by approximately 4700 Tanzanian farmers. Originally established in 1935 by expat farmers with large land holdings its structure has been impacted by political upheaval (including Zimbabwe-style asset nationalisation). These days its main customers for farm inputs (seeds, fertilisers, agrochemicals and implements) are now small to medium farms. For the past 15 years the organisation has not produced profit or returned any benefits to its members.
From being one of the largest, privately owned organisations in the country, TFA was destined to die. Many of its own members thought it already had.
When I took up my VSA assignment as business development adviser to the board and managing director, my main role was to develop plan for its survival, return it to prominence as an organisation farmers could be proud of, and support management to implement the plan. My own personal vision was to ensure farmers away from the major towns had access to the much-needed products TFA and its competitors supply so that not only could they reliably produce enough for their own needs but also have surplus for sale. I felt if TFA could do this then it was sure to survive and prosper.
The first couple of months in my new role could easily depress any manager conducting diagnosis of an organisation’s health. There had been no annual general meeting of shareholder/members for four years; the board met only sporadically; there were no governance policies at all at board or managerial level; the chairman was also the CEO and, as could be expected, was very autocratic; there were no accounting records prior to 2002; there had never been strategic plan, budgets or business plans; the organisation had bank loans in excess of US$1.5 million that were not being serviced; there was no marketing or sales competency within the business and the workplace culture was ‘do only what you are told to do’.
It was very apparent that if you wanted case study of mismanagement leading to failure of an organisation this was the textbook example. This was in February 2007 and I had two years to achieve turnaround.
The one ‘shining light’ was the financial controller, well qualified and experienced financial expert who had previously led the turnaround of the Kenya-based Unga Limited group of companies. He had been brought in to re-build the accounts systems and procedures and, with his experience, had developed the respect of the chairman and board. He was strong advocate for good corporate governance as the basis of long-term success and someone with whom I shared many views. He was also very supportive of and offered good critical analysis of the strategies that were being formulated by working committee of senior and middle managers which I was facilitating.
At the time of my arrival he had convinced the board to dispose of selection of non-core property assets to service the mounting debts, but there were no plans beyond this. The board was timid in its bid to save the organisation; almost paralysed. It seemed like the owners (members) and board had abandoned the organisation to die with management “picking over the bones of the carcass before it was finally discarded”.
Three months of research, trawling through cash receipts, annual reports, and doing market surveys yielded some interesting information. The organisation was akin to retired professional couple who are typically asset rich but cash poor, have good reputations in the community but are seen as well past their prime. Selling up some of the ‘lazy’ assets was good thing to do to release cash and provide options for way forward. The other key would be to trade on the very good reputation for reliable and good quality products and services.
Six months into my assignment Corporate Strategic Plan 2007-2011 (CSP) was rolled out for the board’s approval. The key strategies were to:
1. Sell all non-core assets to pay down all existing debts and partly fund the plan.
2. Leverage the TFA brand and continue to build its good reputation.
3. Increase sales of the farm inputs business six-fold over five years through proper supply chain management, focusing on customers’ needs and effective retail marketing and sales.
4. Target TFA members to return to TFA as regular customers, particularly large estates.
5. Develop two additional regional shopping centres to diversify the property portfolio and build revenue platform to sustain the organisation through agricultural lows.
6. Build an organisational structure aligned to the business and fill it with capable people.
7. Create workplace culture focused on performance and reward those that achieved the required results.
At around the same time as the CSP was agreed, the chairman decided to step aside as CEO and offered the post to the financial controller who, fortunately, decided it was challenge worth taking up. There otherwise would have been little hope of finding someone else with the inside knowledge and capacity to successfully lead the strategy. There is chronic shortage of business skills in the country, due largely to very under-resourced education system, and privately educated people working in higher-paid government jobs.
At the end of the first year of the implementation, TFA had achieved all its financial objectives and had doubled it sales of farm inputs. Also, for the first time in its history, TFA will have dedicated sales and marketing expertise in the form of separate division headed by marketing and sales manager and supported by regional sales managers – the key to accessing the large farming estates and developing focus on customers’ needs.
At this point TFA has hit ceiling in its ability to grow. While on track to double sales again this year, its growth is being dampened by limited working capital and access to medium- and long-term finance to fund crucial assets such as vehicles and construction. It doesn’t help that the Tanzanian banking system is in its infancy with computerisation only recently introduced.
Some of the most pleasing aspects of th