During field tests, GCS discovered that many smallholder farmers pay casual laborers 3,000 Tsh/bag to thresh their rice, which at 12 bags per acre, amounts to 36,000 Tsh/acre. This means that for a small 5 acre plot, farmers pay casual laborers 180,000 Tsh or 112.5 USD per harvest on average. Considering that farmers make less than $300 for a 5-acre harvest of rice, this is a rather significant expenditure (more than one-third!). Reducing this expenditure could significantly raise profits for smallholder farmers, who are among the poorest individuals in Tanzania.
While large farms tend to produce crops for exporting purposes, mid to small-sized farms sell to local food markets. Mid-sized farms often sell enough crops that they are able to influence market prices and take advantage of economies of scale; mid-sized rice farmers can often afford more efficient technologies, such as an engine-powered harvester that harvests, threshes and winnows all at once. Smallholder farmers, on the other hand, are very much price-takers. With just 5 to 10 acres, small farms do not have enough market power to influence the value of their crops through price-setting. [Although cooperatives do exits, most villagers do not belong to one.] In fact, small farms may have to take very low prices due to competition with mid-sized farms whose per unit costs are lower. If small farms do not charge the market price, an interested buyer can walk down the street to another farm.
But there is another reason why this thresher has so much potential. Threshing is tough work. Actually, tough is an under-statement. Threshing rice is back-breaking. When GCS tested their prototype in the field last week, they found that in many areas casual labor is too expensive. As a result, many smallholder farmers are forced to thresh the rice themselves. This involves 2-3 days of tirelessly smacking big bundles of rice stock against the ground until all the individual rice falls off. Such labor takes a toll on your body, especially for farmers in their 40s and 50s. When asked about the rice thresher directly, many farmers that GCS interviewed laughed with joy. “Yes, we would be happy to buy it for (100 USD)”. Given our estimates of the cost of casual labor, their responses are rational. People in regions where casual labor is cheap, already value that work at more than 100 USD per 5-acre harvest.
The exact price of Bernard’s motorcycle thresher has yet to be determined. Probably, it will sell for close to 200 USD. Although this is a significant purchase (and double what GCS plans to charge), it may enable entrepreneurial motorcycle drivers (of whom there is a surplus around Arusha) to make a living threshing rice, sorghum, and other crops during harvest season. If they charge the going rate for casual labor, they will be able to pay for the machine after threshing just 9 acres or two small plots.
This is what innovation for the bottom of the pyramid looks like -- adding value, where value is needed.