Ayo Alonge, [email protected]
Damilola Ajayi is the Chief Executive Officer of First Darbut Company, an agro processing startup that deals in the distribution of palm kernel. Having sourced an initial capital for the business from a friend, he ventured into the business in 2014. Today, he is counting his numerous gains.
He spoke to Daily Sun on the nitty-gritty of the venture, its challenges and prospects.
He also called on the government to create incentives that would aide the rapid growth of small businesses in the country.
Background
First Darbut Company is into commodity supply and agro processing. We specialise in the supply of palm kernel nuts to palm kernel processing factories across southwest Nigeria and we also produce crude palm kernel oil (CPKO), palm kernel cake (PKC) and sludge. The CPKO is being supplied to refineries to be refined into edible vegetable oil. Our PKC, which is also a product of processed palm kernel nut, as earlier mentioned, is sold to piggery farmers and animal feed millers. Our company also renders consultancy services to agro processing companies and we have helped revive three companies that were almost folding up. They are working now and making good profit.
Starting up
The idea of this business came while I was in 400 level in the university. Personally, I like to take responsibilities and I was sure that settling for a civil service job or not, being self employed would deter my dream coming to realisation. This is an encouragement to youths around me that we all can’t be involved in fraudulent activities. Imagine if Dangote had settled for cybercrime, he won’t be in the position he is today. Even his friend Otedola, who was from a rich background also pursued his dream and there they are at the top. The only way I can take responsibilities and make life better for everyone is to start up an empire that will bring about change by providing employment for people and that would also render services.
Our products are also like an empowerment to people. I was not scared to start small. That was how the idea began and it has been awesome. When I was starting up, I tried as much as possible to raise fund from my family because I knew it is difficult to get a startup loan from banks. A friend of mine who just finished his father’s burial lent me the money he realised from the event which was N70,000 and then we started. Meanwhile, we already had a space in the industrial park in Ondo State and also one local fabricated expeller. But the only thing left then was a startup capital which my friend helped me with. Since then, we have been doing business.
Challenges
There are two major challenges. First, importation of vegetable oil, which causes crash in product prices and secondly, not getting financial institutions to support the small scale businesses. They refer to us as a startup but we keep growing and they keep coming to us to bank with them. We, honestly, do not have a reasonable collateral yet that can facilitate any huge loan which taught us to be prudent, hardworking, patient, and our ability to quickly restrategise helped us. We saw the results of hardwork even without facility from any financial institution. We grow, year after year, and we keep expanding.
Business prospect
The business is an interesting one such that you really do not need much advert to make sales. There are more that 10 companies waiting to pay in advance for your products, which you might not be able to still meet up with the demands. Well, importation has its effects on it; thereby, reducing local production due to unreasonable break down in prices and demand. Hence, there are always offtakers and there is an envisaged growing demand for vegetable oil in view of the deregulation of foreign exchange rate and consequent increased cost of the smuggled imported vegetable oil.
The recent ban has made the business attractive. The market for vegetable oil is national. With a population of over 140 million people and an estimated national population growth rate of 5.7 per cent per annum; an average economic growth rate of 3.5 per cent per annum in the past five years, Nigeria has a large market for vegetable oil. Among the various uses of vegetable oil are cooking or frying at home, production of soap, production of cream, production of butter, production of margarine and production of noodles food. Cake derived from the production of vegetable is used for production of animal feeds. Yet, what we produce is not enough for the refineries and I am sure the refiners too are working hard to meet up with the excess demand they get from their customers.
Marketing
The price of any product or service depends mainly on the materials used for the products, the finishing and the number of units produced or bought. The company has installed a costing system and embarks on effective cost control to reduce cost per tonne of the product. Although the products of our company compete with the existing companies, the pricing of the products is a bit lower than our competitors which matters a lot in order to induce the industries to patronise our products. Arising from the good quality of our products, we sell at the same price or lower and sometimes higher than that of our competitors, depending on the situation.
Expansion
We have approached the Bank of Industry (BoI) on several occasions, but we couldn’t meet up with their requirements. We are with them again, hopefully something reasonable will come out this time. Commercial banks like Fidelity, Sterling and Wema banks approached us with a loan but then their interest rate is a bit high and would be too much for us to accommodate.
Intervention
Helping small businesses start and thrive is a win-win situation for the government and the entrepreneurs in question. Local businesses help support the tax base through businesses taxes and through the wages provided for employees. I will appeal to the government to give us an enabling environment to express ourselves and exempt us, considering our age, from some difficulty in accessing loans and getting machinery. Some government programmes help businesses start, grow and relocate to specific areas. Government at all levels can do this by offering startup incentives and taking steps to create a business-friendly environment. These steps include tax credits, workers training, free land, zoning changes, low-interest loans, infrastructure improvements and help with fast-tracking certifications licensing, permits and registrations.
Goals
Our short term goal is to get modern expellers that can process 15-20MTS of palm kernels per day. Having this will make us achieve our long term goal which is to build a refinery and also start packaging edible vegetable oil.
Risks
Risks attached to this business could be political, macroeconomic and industrial. Most of the losses we encounter come from not getting good quality products or raw materials which, in our case, are palm kernels from farmers and one may lose huge money, if not careful. Due to the way the market is structured, it is a chain thing and each chain with its values. So, one needs to always give money in advance to farmers for products. When you give to an unfaithful farmer, he mismanages the fund, bringing a loss to you and also not having efficient machines, the one we call expellers. This could also reduce the yield of oil which brings in loss.