Nigerian startup Releaf, which develops proprietary hardware and software solutions to drive the industrialisation of food processing in Africa, is planning to expand into more crops and additional West African markets.
Releaf was founded in 2017, and took part in the Y Combinator accelerator programme in Silicon Valley the same year, but only started operations in the oil palm space in 2019 and deployed its proprietary technology in January of this year.
“Our hardware increases the availability and quality of raw materials for food factories and our sourcing software connects us directly to over 2,000 smallholder farmers,” said Ikenna Nzewi, who co-founded Releaf alongside Uzo Ayogu and Isaiah Udotong.
“Starting in Nigeria’s oil palm sector, we are creating technology that will make farmers and food factories in Africa more efficient and profitable.”
Nigeria is the world’s largest oil palm producer from smallholders, with 80 per cent of the local market share. However, palm kernel production rates are low because many farmers still rely on ineffective processes for de-shelling, including the use of rocks and inappropriate hardware. Ninety per cent of factories are also running at below 50 per cent of their installed capacity due to scarcity of quality raw materials and the capital to purchase them.
“With that in mind, we act as a bridge between smallholder farmers and food manufacturing companies, providing working capital for farmers to access more palm kernel and equipment, and processing the raw material into factory-grade inputs for vegetable oil factories,” said Nwezi.
“We also work with farmers to improve their monthly income by up to 5x, and grow their wealth by enabling them to spend their time on the most profitable aspects of palm production and financing increased local processing capacity.”
The startup closed its seed funding round in Q2 of this year, including investors such as Samurai Incubate and Future Africa, and plans to use the funds to increase uptake, which Nwezi says has been “great” so far.
“We have a network of more than 2,000 smallholder farmers, with around 600 that consistently provide output for offtake. We will continue to explore opportunities to penetrate the market a little further but our focus is on deepening our relationship and the value we create for our most productive smallholder partners, rather than focusing on numbers for the sake of it,” he said.
Nonetheless, Releaf is focused on growth. It plans to expand across West Africa in oil palm and into additional crops for a continental footprint in due course, building a network of decentralised factories that will power the industrialisation of food processing. But how does it monetise?
“After acquiring palm nuts from our network of smallholders, we process them into factory-grade inputs for vegetable oil manufacturers. These factories typically need to buy in large quantities and high quality so our quality assurance and volume means that we are able to secure significant orders from manufactures that go on to produce vegetable oil that consumers buy. We’ve experienced double digit growth every month since commencing operations in January and expect to maintain this growth indefinitely,” said Nwezi.
At a fundamental level, cracking the palm nuts has not been a major challenge. There has been enough technological advancement over time to make that possible and relatively straightforward. The challenge Releaf has had to navigate, Nwezi said, was how to make the process more consistently efficient and profitable for farmers, how to make its technology affordable, and how to create a workable model based on the capital it has been able to raise.
“We have also had to navigate challenges around importation and long lead times for some of the machines we have to order from outside Nigeria. Our work involves a lot of research and development, thus it can often be difficult to ascertain whether or not these machines will work as we would like them to until we have them on ground,” he said.
“Given that these machines often take up to six months to arrive, we then have to decide if we should pre-empt any issues by buying two different versions from different vendors or save money by buying one machine at a time, hoping that it works as you want it to. At the same time, we need to make sure we consistently make payroll and make sure that finances are responsibly managed. This is a challenge we have had to navigate and work out an effective solution for managing on a regular basis.”
With seed funding in the bank, however, the startup can feel a little more confident that the future is bright.