40 Chances

by Howard G. Buffett

  I worked mostly out of the Pentagon near Washington, but commuted to Afghanistan for extended posts. During these visits, the spirit and tenacity of Afghans impressed me on a daily basis. A large part of my work was characterized by pursuing answers to a deceptively simple question: What would permanently improve the lives of struggling farmers? Clearly, a top priority was increasing the yields of farmers’ crops, so that in addition to food to eat, they would have food to sell. But the larger challenge was to work not only on the supply of food itself but also on the elements that enable the food to enter regional and global markets in an efficient, productive way.

  One reason I put the delegation together to go to Bamiyan was to meet the local governor of the province, Dr. Habiba Sarobi. She—yes, she—was the first female provincial governor in the country, and she was well known for promoting women’s rights and equality. We met to express our support for her accomplishments in the province and to confirm her support for our general goals and efforts. We also went to inspect a new cool storage facility for local potato farmers, which we hoped to replicate throughout the province as a successful model for reducing postharvest loss. This model is a good example of an essential value chain component: potatoes are hardy, but they have to be kept in cold and—importantly—dry storage before they are shipped or processed. Otherwise they will begin to sprout.

  An agricultural value chain begins with high-quality seeds and fertilizer and tools and technology, whether it is crude hoes or high-tech tractors. But after crops are harvested, critical “downstream” links in the chain include the logistics of storing, packaging, perhaps processing, and shipping crops safely. The chain also requires business infrastructure elements such as access to markets, and getting buyers, contracts, and fair prices.

  In Afghanistan, the processing of certain kinds of crops into value-added by-products was of particular interest to us. Processing raisins involves drying and deseeding and turns more fragile grapes into a commodity with a long shelf life that is easier to ship. In this part of the world, there also is a big demand for processed tomato sauce made from tomatoes that otherwise would have a short shelf life. Processed tomatoes are highly valued throughout the Middle East. In some communities in Afghanistan, they are produced mostly by small groups of women whipping up big potfuls in their kitchens and ladling the resulting stewed mixture into mason jars by hand. Sometimes in clean conditions—sometimes not so much.

  Just as a chain is only as strong as its weakest link, you have to address the entire value chain comprehensively. On a separate trip, I visited a large-scale tomato processing plant. At first glance, its operations looked to be modern and clean—until I happened to look up and realized that ventilation holes in the roof acted as large nesting places for swarms of birds. At times, these birds would fly above the processing bins and tanks, making their own contributions to the production process. Outside the facility stood hundreds of empty blue and yellow containers. These were left open and exposed to the elements, with layers of old tomato paste caked inside the bins. The containers received no more than a rinsing out with water from a hose before reentering the facility and being used to store the paste temporarily until it was canned. At the time, the facility’s tin can sterilization machine was broken, so the sauce was poured directly from the containers into the cans and then shipped off to local markets around town.

  I’m sorry to share these appetite-wrecking observations, but they were an obvious concern for the health of locals eating the product and the absence of sterile processing would prevent these products from reaching broader markets. Whether the product was tomato paste, saffron, or flour, to sell commodities on regulated international markets, farmers and processors needed an advanced commodity testing laboratory to certify both raw and processed food quality. Lacking such a laboratory, along with the necessary training, was a critical gap in the value chain. Having basic regulations is one way to motivate a processor to clean up a facility and install safeguards such as mesh over ventilation holes. If a processor knows he can’t sell into a market unless his product meets specific standards, he will respond or otherwise go out of business. But without the laboratory facilities to test and reassure that he can meet these requirements, standards cannot be established, let alone enforced.

  As my time on the team progressed, I learned a considerable amount about the challenges of working in such a difficult, at times dangerous, and certainly infrastructure-poor environment. Earlier, I mentioned that our task force was unique. When I led the delegation of agriculture experts to Bamiyan, for example, we had the transportation flexibility and security to cover a lot of ground in a short period of time. Literally hundreds of other US development and foreign affairs officers were stationed at the US embassy and could be required to wait for weeks to travel “outside the wire,” or move in unfortified territory. I recall thinking that it was no wonder that some critics back home complained about the waste of resources in Afghanistan, since it is impossible to figure out what farmers need and to rebuild an economy from behind the wire. To make progress, you had to go talk to farmers and visit the locations that needed help.I

  Our task force had access to its own operating funds, expedited hiring, creativity in contracting, and congressionally appropriated investment capital. Freedom of movement outside normal government travel and living structures meant the team could go places and build the local relationships necessary for focusing on a wide variety of development needs. One team looked at transportation issues and how to try building roads and a commercial airport in Bamiyan: critical value chain components. Other teams worked with mining industry partners to help develop Afghanistan’s mineral resources in a way that would avoid circumstances found in some diamond and gold mines, such as child labor in horrendous conditions and wealth that never returns to the community. The thinking was that the more we helped make development and prosperity the result of organized, lawful, market-based activities, the less appealing it would be to young people to join forces with extremists or drug growers and traders.

  During a different part of our delegation’s trip to Herat, we had some conversations with Afghan farmers who had grown poppies but were now growing saffron. Saffron is the world’s most expensive spice, and it grows well in the dry regions of Afghanistan. At the time, the price of saffron on world markets was high. “We are farmers, we are poor. We will plant whatever gives us more income,” one farmer explained. Catholic Relief Services had started a program to distribute what are called corms, or the swollen part of the saffron stem beneath the soil surface that is used to propagate them. At least according to one farmer, that was the key primer for that particular value chain—and one with significant downstream social benefits. “If free corms are given one time, that is enough, and we can harvest future corms from our own land. The most important effect of no poppy production is that we will not addict young kids,” he said.

  Farmers showed us the saffron they had planted in the fields once used to grow poppies. Photo: Howard G. Buffett

  Dire circumstances push individuals onto paths they would rather avoid. This was a reality of the upheaval in Afghanistan in recent decades, and we ultimately focused on several programs aimed at restoring and supporting legitimate agriculture.

  The results in rural western Afghanistan particularly pleased us, given the challenges it faces. Nearly a million people in Herat Province are unemployed, and small-scale agriculture is the primary way of life. Herat is the breadbasket of Afghanistan, yet farmers there lacked both production and processing resources that would have brought significant income to the community. Despite these challenges, we predicted that investing in Herat’s value chains would bring a high rate of success.

  Initially, we worked on establishing farmer-owned cooperative councils, which are organizations that brought together more than 1,400 farmers across the province into producer associations. These associations provided local communities with increased food security, stability, and the benefit
of economies of scale. As with the cooperative structure in the United States, farmers can save money by organizing business coalitions and buying seed or fertilizer in bulk. This council also provided training so that farmers could improve their production and understand and execute contracts.

  LISTENING TO THE PEOPLE WHO WILL MAKE IT HAPPEN

  Next, we worked with shuras, or village councils, and organized farmers around a center-pivot irrigation project focused on wheat and alfalfa. That was an important technology investment. Relying on a long-term commitment from the governor of the province, this project offered the possibility of not only improving an individual crop but also enabling the farmers to plant two crops a year back-to-back, because one could now be irrigated during the dry season—increasing both income and food security. And we did not just show up with technology, install it, and leave, expecting them to figure it out on their own.

  In our very first meeting with the shura in a tiny village in the Guzara district, about fifteen of us gathered in a small room in one farmer’s mud-brick house. Shoes off, we all sat around a beautiful crimson rug while discussing irrigation options. One concern was managing the technology once it was installed: US farmers typically use a pivot that can irrigate a single 160-acre field. Here in Afghanistan, the smaller pivot we hoped to introduce would irrigate 68 acres, but it would simultaneously cover thirty or more small plots owned by different farmers. However, the group’s immediate enthusiasm and energy convinced us that we would all figure it out together. The farmers’ desire to boost their productivity was inspiring, and we got to work.

  We sat with members of the local shura in a village in the Guzara district to discuss options to replace poppy production. The discussion led to the construction of center pivots, allowing replacement crops and a second growing season. Photo: Howard G. Buffett

  At this and subsequent meetings, the farmers guided the process. We worked through how we would proceed together, making some early assessments of what size pivot and infrastructure would be needed. Originally we were going to use diesel pumps to operate the pivots, because we determined that the local electricity infrastructure would not supply enough energy. Local administrators, all the way up to the provincial governor, understood the value this could bring to their community: higher-yielding crops and even the prospect of harvesting crops twice in one year thanks to water provided during the dry months. They decided to build out their own electricity infrastructure so that the pumps were not subject to the uncertainty of obtaining diesel fuel to operate them. The result from just the initial pilot was that thirty-two farmers increased their production and family income, and the plan was for larger-scale expansion throughout the province.

  We also supported nearby villages in designing and building rural food processing centers, relying on their preferences and needs to guide project design. We identified a group of local women prepared to run a center and connected them with a local architect. He proposed a facility that these women said they thought was too big, as they did not feel they could manage so many people at one time, and we followed their guidance to get it right. Eventually the completed centers provided 120 new full-time jobs and the ability to process eighteen different commodity types, including pastes, sun-dried fruits, jams, and jellies. These centers created an immediate increase in value-added processing capacity, and they are owned and operated by local women’s associations. They now provide consistent availability of nutritious food and income throughout the year. These centers also promote stable village-level markets for vegetables and fruits, and they created jobs for many of the women in these rural communities for the first time in their lives. Visiting these women after the centers were constructed provided one of the most lasting impressions of my experience on the task force, as I think back to their huge smiles and the tight grip of their embraces.

  Finally, we focused on long-term capacity building for Herat. We put in programs that strengthened agriculture education, development, and technical capacity. These programs ensured that local farmers could be properly trained well into the future, and also allowed for important research and featured a commodity testing laboratory. As I mentioned before, this kind of lab is critical to help local farmers and processors prove that the safety and quality of their products meet standards to sell on global markets. Not only were these programs locally designed and built, but they stand to support a stable, agrarian economy that can last for generations to come.

  Too often one-off development projects and foreign contracts dominate the landscape. But my work in Herat convinced me that the more a community owns an outcome, and the more comprehensive the strategy, the more likely it is to succeed in improving livelihoods. My father and I have woven this notion into the work of our foundation, and our approach has evolved over the past decade. Now, we are more focused on comprehensive strategies to revitalize multiple aspects of a region and create lasting changes for its population.

  There are many situations around the world where focusing on only limited elements of a value chain has created terrible outcomes. In Ethiopia, in the early part of this century, farmers experienced two years of record harvests, and yet by 2003, starvation returned. Development efforts, led largely by the government, had focused on encouraging farmers to use fertilizer to increase yields. The country had also experienced above-average rainfall, which led to bumper crops, and the farmers enthusiastically increased their planting. The problem was, other elements of the chain had not been expanded or developed to handle a surplus. Terrible roads and weak shipping options meant it was difficult and expensive to move surpluses of grain in one part of the country to another region that needed them. The bumper crops depressed local prices, and the farmers had no way to store the crop; nor were there resources to access wider markets where they might get higher prices. As a result, huge amounts of grain spoiled. By the second season, some farmers even left their crop in the field to rot because it was not worth the effort to harvest. There were no financial infrastructure investments in safeguards such as subsidies for when prices dropped, or crop insurance to hedge against weather disasters, and no financing programs to help the farmers increase their productivity—let alone investment in the physical infrastructure needed to store and transport the crops.

  Designing and then nurturing a value chain means creating incentives and support for different components, but this work must be done carefully. Joe DeVries points out that countries will never develop their own seed industries if governments or aid organizations keep buying and distributing seed that cannot be reused by poor farmers. The governments may need to subsidize seed purchases while both the farmers and the seed companies are trying to gain traction, but at some point, the system must anticipate how the private sector will sustain all the elements of the chain. The companies need to sell high-quality seed, and the farmers need to learn to increase their yields using it so that they can afford to buy more.

  TRYING TO GO “OUT OF BUSINESS”

  Many organizations still use a template that is decades old: gather aid, deliver aid, leave a few years later. Instead, we need coalitions and portfolios of partners who are experts in vital areas that close gaps in the chains. Too often NGOs with the same capability compete for the same dollars, targeting the same traditional activities for the same populations. And donors need to consider the particular core competencies of their major partners and also fund specific links in larger value chains. Ideally, aid programs would be viewed more as “investments” and less as “charity” if we gave more thought to what happens after we leave a particular intervention. Through my grandfather’s philosophy of value investing, an investor looks for opportunities that are undervalued in the marketplace today, but that with the right support and development will increase in value over time. On its face, that might not seem like a realistic model for philanthropy, but I have watched my father apply this approach to our foundation and I think it is: the same way an unskilled investor might buy stocks that are priced too
high or flip stocks to make a marginal profit, donors and NGOs should resist short-term impulses by avoiding projects that only give quick and visible “wins.” They must think about how to put themselves out of business by putting their beneficiaries into business. True success over time—either making money in the market or making a difference in a community—is about a long-term orientation. In business, we call the approach value investing, which means creating new value for economic gain by taking a long-term approach; in philanthropy, it is about social value investing, which means creating new value for society by taking a long-term approach.

  The Defense Department was looking to maximize the social value return on its investment in Afghanistan by unlocking the local community’s potential to create a stable, prosperous society that would discourage terrorism, drug trafficking, and extremism. And in this case, the threat of risk was outweighed by the significant need. From the farmer councils to the pivots to the processing centers, each link in our value chain strategy was built, managed, and owned by the community receiving the benefit. But most importantly, we found that this approach transformed those who would be beneficiaries into shareholders. The work ethic and the determination of the people I met in Afghanistan were extraordinary. And it was exciting to work on developing and creating an environment to benefit farmers across the country. But when times got challenging, I thought about my friend in Bamiyan, and how I hoped someday he would represent one link in a thriving value chain, helping to raise the entire community’s standard of living.