Two faces of the Afghan private sector...

Casting (if that is the right word) manhole covers

Recently I had a chance (courtesy of the Afghan Industrial Association) to visit a few potential ABIF grant  applicants. The trip was designed to see what some of their members have already achieved and get an idea of the kind of future investments that they planned in order to develop their businesses further.

Lifting bits of old tanks

It is great to get out of the office and meet real business people in their "natural habitat". Such visits always provide valuable insights into how the Afghan private sector operates despite all of the problems and obstacles in the way, and the nature and scale of businesses that have been built up. There is really no substitute for first hand impressions, and this visit was an excellent opportunity to get to understand our applicants' perspective.

The first three photos on this post are of a factory that recycles scrap metal, breaking down things like old Russian tanks and turning them into essential products such as manhole covers, which are then sold to the local municipality. The process is pretty basic, but the business is successful.

It was really impressive to see this place operating at what looked like full capacity. My first questions concerned the availability of raw materials (including Russian tanks), but it seems that this is not a problem at least for the time being, and electricity supply, which has traditionally been a huge problem in Kabul, but as with the domestic supply, this has improved daramatically in recent years.

Cutting up sheet metal

For people who are particularly health and safety conscious, there may be questions over some of the working conditions in the factory, but improving standards on such issues is a question of education and gradual regulation. It won't happen overnight.

The most encouraging thing was that there was an air about the place of being busy. Everyone (and there were possibly about 30 people working at the time that we toured the factory) was busy.

The next photos show the interior of a newly opened fruit juice factory we visited on the same day. Built with the support of a donor project, we were told that this was a US$20 million investment. Unfortunately, by the time we got to the factory, they had finished the day's production run, but nevertheless it was clear to see that this was a well equipped factory being managed to the highest standards.

Early stage of fruit processing

The company was processing fruits mostly from the Kandahar region and producing concentrates and juices. The range of products included apple (the waste from which can be seen in the background of the first photo), pomegranate, melon and grapes. Interestingly, the factory manager reported availability of inputs as a constraint on their business and described plans to develop better linkages with farmers.

Another idea that the owner had to improve the business was that the remnants of the pressed fruits could be processed to be used as feed for livestock. At the moment such remnants are treated as a waste product; the factory dumps rather than sells the mashed fruit and local families apparently come to collect it for their own animals.

The potential for food processing in Afghanistan is significant and well documented. But it is going to take targeted and co-ordinated investment at all stages of the value chain to realise this potential.

Final stages of the juice production process

Horticulture is one of the six ABIF focus sectors. It would appear that we are going to receive some interesting applications in the first round (deadline for concept notes is today).

Our hope is (and the kind of ideas that we have been encouraging among potential applicants) that our grants can stimulate investment in processing facilities that can provide the commercial incentives and an anchor point for backward linkages to small scale producers.

Where it fits with their core investment idea, we have been encouraging potential applicants in the horticulture sector to look at ways in which they can provide services on a commercial basis (for example private extension services such as cultivation training) to contracted farmers in order to increase yields and incomes as well as improve the security of supply to the processer. This kind of win-win approach typifies the kind of business models that we are promoting.

And finally, a photo that I hope without being sentimental (because there is nothing sentimental about a two year old scrabbling around in dust and mud by the side of a road in temperatures close to zero) illustrates poverty in the every day life of many Afghans.

These were a couple of kids I saw sitting and playing by themselves in the street outside the scrap metal factory.