Mathematician finds formula for profitable fish value chain

Dave Okech studied Mathematics and Statistics at the university but his heart was in the fish industry. He started small, as a fish farmer, then saw a business opportunity in the inefficient value chain.

To boost fish production in Kenya, and ensure traders earn good money for their catch, the value chain must be efficient so that fishery businesses receive high-quality feeds and other input, and find ready markets.

While interacting with other fish farmers, Mr Okech realised that fish farmers had little knowledge of how to access high-quality feed manufacturers, and likewise the feed makers could not reach a substantial number of farmers. There was also the challenge of finding good fish markets.

In 2020, just before the pandemic struck, he started AquaRech, a business that links all traders in the value chain.

“I was a medium-skilled farmer in Lake Victoria for about four years doing cage fish farming and encountered myriads of challenges. I saw the same problems replicated in the aquaculture sector. We couldn’t access fish feeds easily; we couldn’t access markets because there was no proper route to the markets,” he adds.

The Mandela Washington Fellow says AquaRech acts as a link for fish value chain traders, enabling smallholder farmers to reach top feed manufacturers.

The initial plan was to build a digital platform but many small traders still prefer physical locations so he invested in infrastructure.

He built cold chain facilities and warehouses for bulking fish feeds, providing a one-stop shop for input suppliers, producers, cold chain providers, marketers, and consumers.

AquaRech buys feeds in large volumes, delivers them to its warehouses, and transports them to farmers.

“I sold my stake at the fish farm to raise money to start AquaRech, in addition to funds from an angel investor and my father. Some non-hard cash capital also came in form of business development training,” he says.

Mr Okech says they work with cold chain suppliers to provide the necessary facilities to enable AquaRech to aggregate fish. In doing so, he says they provide immediate market access to farmers.

“We offtake the fish, bulk them at the cold chain facility/aggregation centres,” he points out.

AquaRech is also franchising.

“We supply franchisees with fish, they invest in infrastructure and professionalise fish trade. We target women and youth who are willing to engage in the fish trade,” he adds.

Capacity

Within three years, the business has grown and now employs 21 workers. Mr Okech says currently AquaRech does 100 tonnes (100,000 kgs) of fish feed sales per month, serving about 400 farmers mostly small-scale, generating revenue of about $100,000 (Sh12.4 million).

The company has a 10-tonne capacity cold chain facility and can process five tonnes of fish daily.

“We cover Kisumu, Siaya, Kakamega, and Homa Bay counties and looking to scale up to Nairobi,” he says, adding that they have plans to set up operations in Kirinyaga and grow aggregation capacity to about 60 tonnes of fish per day in all its outlets.

Demand for fish in Kenya outstrips supply, with a current supply of 163,600 tonnes in 2021, according to the latest data from Economic Survey.

The annual demand is an astronomical 600,000 tonnes.

“There is a huge demand for fish locally that we do not need to export our fish,” he says.

Affordability Part of the challenge is that fish is unaffordable to many households because the farmers buy feeds at high prices and pass on the additional cost to consumers.

“We look at affordability on two fronts. Our data shows that if you buy locally-manufactured feed that cost Sh100 per kg with low crude protein content and with a feed conversion ratio of about three, you need 3kg of the low-quality feed to raise 1kg of fish and if you do that as a factor, you end up with Sh300 as your cost of production for the fish,” he says.

“That fish will probably be sold at Sh290 so the farmer makes losses. We source feed that costs Sh142 per kg, with a food conversion ratio of 1.5 and a guarantee to buy back the fish at Sh300 per kg. The farmer makes a profit of about Sh80, takes eight months to produce the fish while those who buy the low-quality feed take 13 months to produce and end up making losses,” he adds.

What he has learned so far? “Be quick to accept failure and change course if your product or service is not doing well. That’s how you’ll survive the entrepreneurial journey,” he says.

Operational challenges

He may be counting his gains three years into the business, but he has had his fair share of challenges. Getting a startup off the ground is not easy, he says.

“Raising funds is not child’s play and getting people to believe in your entrepreneurial story is a tedious process. Commercial banks would not lend to a startup because they look at things in black and white – money and collateral. You’ll be lucky if you get investors who don’t care much about collateral and believe in your story,” he says.

The second challenge was profit. When he started, he says, he imagined he would make a profit as soon as he hit the ground running.

In reality, he realised AquaRech could only work without the supporting physical infrastructure and so he needed to invest heavily.

As a founder of the company, Mr Okech says that what gives him joy is that the platform has moved farmers from loss-making to a profit zone.

“It was sad seeing farmers take 13 months to produce fish and make a profit of only Sh13,000. I’m happy seeing franchisees earn from their businesses, move volumes and be able to qualify for loans from their respective financial institutions. That makes me happy,” he says.

For those looking to invest in the aquaculture value chain, Mr Okech says Kenya’s fish industry is still nascent with lots of job opportunities, but also requires government support.

“Policies regarding the importation of fish feed inputs, for instance, import duty waiver on certain fish feed production equipment, waiver on feeds itself are essential policies that need to be put in place by the government to boost the sector,” he says, adding “I hope for an aquaculture sector that works for the well-being of all. Everybody should be able to access fish affordably at one point.”

Fish Farming In Kenya

Fish farming, also known as aquaculture, is a growing industry in Kenya due to the high demand for fish products and the declining fish population in natural water bodies. Kenya has a suitable climate and abundant water resources that make it conducive for fish farming.

There are several types of fish commonly farmed in Kenya, including tilapia, catfish, trout, and carp. Tilapia is the most commonly farmed fish due to its ability to tolerate different water conditions and its fast growth rate.

Fish farming in Kenya can be done in ponds, cages, or tanks, depending on the availability of resources and the type of fish being farmed. Ponds are the most popular and cost-effective method, with small-scale farmers using earthen ponds or plastic-lined ponds.

To start a fish farming business in Kenya, farmers need to obtain the necessary permits from the government, secure a suitable site, and have adequate knowledge and skills to manage the fish farm. They also need to purchase quality fingerlings, fish feed, and other inputs, and follow good aquaculture practices to ensure the health and growth of the fish.

Fish farming in Kenya has numerous benefits, including providing a source of nutritious food, generating income and employment opportunities, reducing overfishing, and conserving natural fish stocks. However, it also faces challenges such as disease outbreaks, water pollution, and lack of access to finance and markets.

Here are some key points about fish farming in Kenya:

1. Types of fish: The most commonly farmed fish species in Kenya include tilapia, catfish, trout, and carp.
2. Farming methods: Fish can be farmed using different methods such as pond farming, cage farming, and tank farming. Pond farming is the most common method in Kenya.
3. Challenges: Fish farming in Kenya faces several challenges such as lack of access to quality fish feeds, limited access to credit, and low fish production due to poor farming practices.
4. Government support: The Kenyan government has put in place policies and programs to support fish farming, such as the Aquaculture Business Development Program and the Kenya Marine and Fisheries Research Institute.
5. Economic benefits: Fish farming in Kenya provides employment opportunities, contributes to food security, and generates income for farmers.
6. Market opportunities: Kenya has a growing domestic market for fish, and there is also demand for fish products in neighboring countries such as Tanzania, Uganda, and Rwanda.

In summary, fish farming is a viable economic activity in Kenya, with the potential to contribute significantly to the country’s food security and economic growth.

Cost Of Starting Fish Farming In Kenya

The cost of starting a fish farming business in Kenya can vary depending on several factors such as the scale of production, location, and farming methods used. However, here are some estimates of the cost of starting a small-scale fish farming operation in Kenya:

1. Land preparation: The cost of land preparation can range from Ksh 20,000 to Ksh 50,000 depending on the size of the land and the farming method used.
2. Pond construction: The cost of constructing a fish pond can range from Ksh 30,000 to Ksh 80,000 depending on the size of the pond and the type of soil in the area.
3. Fish fingerlings: The cost of fish fingerlings can range from Ksh 10 to Ksh 20 each, depending on the species and the source of the fingerlings.
4. Fish feeds: The cost of fish feeds can range from Ksh 80 to Ksh 120 per kilogram, depending on the quality and brand of the feeds.
5. Labor and other expenses: The cost of labor and other expenses such as electricity, water, and transportation can vary depending on the location and scale of production.

Overall, the estimated cost of starting a small-scale fish farming operation in Kenya can range from Ksh 50,000 to Ksh 200,000, depending on the factors mentioned above. It’s important to note that this is just an estimate, and the actual cost may vary depending on individual circumstances. It’s also advisable to seek advice from experts in the field to help with planning and budgeting for a fish farming business.

By ELLY AKOKO