Darren Mercer: Yes, the short answer I guess is yes and yes. And once there’s 6 million new mobile phone handsets are delivered to farmers, it will take our number of farmers to around 18 million or so. But I can tell you, and I think we said it today on one or two occasions that our goal is to increase the number of farmers on our platform to 30 million or so by the end of this year. Now, the plans to do this are through our partnership with AFAN in Nigeria who’ve committed to add 20 million new farmers to the platform, and our partnership with the Ashanti Investment Trust in Ghana, who themselves are committed to add between 2 million and 4 million new farmers this year. I think for those of you who aren’t, who AFAN or who AFAN is, this is the All Farmers Association of Nigeria, which is the umbrella body that sits above all of these 56 agriculture and commodity cooperatives in Nigeria.
Now, they have a remit from the Nigerian government to ultimately enroll all of the 60 million or so farmers in Nigeria and develop and modernize the country’s agricultural sector. And so, they’re doing this by improving access to better farming inputs, providing education, delivering access to finance, and so on. And it’s their partnership with us, which is most valuable, and which is really focused on making those initiatives a reality. And we’re already making a real difference, which in turn we are seeing through results increasing in crop yields, food production levels, and of course reducing post-harvest losses. I mean, I believe such as the extent of our impact that we’re not only helping Nigeria’s farmers feed their own country, but it’s through the initiatives that we have with AFAN, which help us put us in a position to export significant or larger quantities of produce through the rest of continental Africa and to other parts of the world.
Scott Gordon: Thank you, team. From today’s results, I can see that the export business of Tingo has generated significant revenues in the first quarter of trading. Is this level of growth sustainable and do you have access to enough produce to satisfy demand?
Darren Mercer: Yes, that’s a very good question. I think I said earlier the impacts of the liberation of the exchange rate controls will only make Nigeria’s produce even more attractive in international markets. And with our partnerships with AFAN and Ashanti, we aim to fully capitalize on the opportunity we have in front of us. Success in this area will deliver a significant increase in income to our farmers, and the benefit is, of course, in AFAN, that enables them to invest more into their land and their farming inputs, increasing their crop yields and production levels, and thereby creating more produce for us to buy from them. And this is illustrative really of the strength of our ecosystem and the virtuous circle or loop that it creates.
The partnership we signed with AFAN and the prime commodity exchange, or PCX, as you’ve seen, as we refer to it, really enhances and strengthens our position and our ability to grow our export business. Because not only does the partnership give us unrightful logistics and goods handling capabilities in Nigeria, but it also gives us improved access to huge quantities of produce and prime access to the PCX commodity trading platform, which is one of only a number of small commodity exchanges in Nigeria. With more than 12 million farmers currently in our platform, and with 6 million about to be added, rising to 13 million by year-end, our access to substantial quantities of produce, again, puts us in a strong position to grow this area to grow our export business and capitalize on the ever increase in global demand.
I think the final point I’ll make on this subject is that, at the beginning of June, we made a small announcement that we’d agreed to a loan facility arrangement with AFAN, which will be made available to their farmers and passed on to their farmers to enable them to cultivate new farming land and increase food production levels. I think for people to understand why we did that. As we’re all too aware, it’s very important for a farmer to know that he or she has reliable access to credit or funding to enable them to purchase the inputs they need for their farming. Now, historically, the Nigerian government would pledge loans to the farming communities, but more often than not, these loans turned up rather late. Now, the impact of that was that the money came in too late for the farmer to be inside to plant their harvest.
And now bear, of course, we have to bear in mind that crops are seasonal. So, the program that we’ve introduced today in partnership with AFAN overcomes that issue. It ensures the farmers receive the necessary funding, and at the appropriate time, and so that all the inputs they purchase are the right ones to grow the right crops for that particular land and the specific conditions that are prevalent in that location. So, with this first loan facility, which we intend to do much more of, we are now able to ensure that thousands of acres of new farming land are cultivated and thousands of additional metric tons of crops are produced each season. So, this not only has a huge positive impact in the lives of the farmers, obviously, but also it further increases the levels of produce that we can access and significantly strengthens our supply chain.
So, look, when you put all of these things together, I think we’re in a very strong position. And as you can see from the statement today, you know, $340 plus million of revenues in the export division in Q2 rising, we believe to a billion dollars or more of revenue per quarter before the end of this year.
Scott Gordon: Our next question asks, you reported export sales in your Q2 results of $348 million, and that you expect that to increase to $1 billion per quarter in Q3. Are you able to tell us what parts of the world you are now exporting to?
Darren Mercer: Yes. The exports we transacted in Q2 were to other countries in Africa. And whilst we will continue to make exports within the African continent, we’re also expanding into other parts of the world, including, primarily including in the Middle East, where demand significantly outstrips local supply. I think, I said earlier that the competitive cost of our produce now, given the devaluation of the Naira is opening up a number of new markets tours in other parts of the world.
Scott Gordon: The next question asks, can you explain in more detail the reason for the significant reduction in the company’s cash balance at June 30th, compared to the previous two quarters? My own expectation was actually to see a further increase in cash.
Darren Mercer: Well, that’s a question I’m sure most people are interested in. Look, we touched on the explanation already, but I agree. I think it’s worth going into a bit more detail. As Kevin mentioned, just a short while ago in his presentation, our investments in outlay into capital expenditure and inventory. During Q2 was approaching a billion dollars, of which $460 million was spent approximately on the new mobile phone handset. And more than $500 million was spent on inventory payments to support both Tingo Foods and our export business. And let’s not forget on top of that, we also paid out about $170 million of tax in April on the single mobile profits of 2022. But as Kevin pointed out, whilst cash reserves fell to a little over $50 million at the quarter end, which by the way would’ve equated close to $90 million on the old exchange rate.
Our receivables and the export deals are loan amounted to almost $350 million on the balance sheet. Now all of that flows back into cash during the current quarter, and of course, the outlay to the inventory suppliers for Tingo Foods, which we outlaid at the end of Q2, also has generated a positive cash flow inflow in the third quarter. And as I’ve said on a number of occasions today, the investment we made into the new mobile phone handsets, it started generating revenues and profits from September. Unless it’s not forget the inflow from those mobile phones is something that we expect to see over the next three years on a monthly basis.
Scott Gordon: The next question asks, I know this question has been asked before, but I’m still confused as to why the NWASSA app is on a USSD platform, and it’s not a standard app, as you would see in the App Store or Google Play?
Darren Mercer: Okay, let me try and square this circle once and for all. So, look, first thing we need to understand that Nigeria’s telecoms and internet infrastructure, it’s just not as well developed as countries like the United States or the United Kingdom, or developed Europe and as such 4G, 5G, even Wi-Fi, sometimes even 3G are only available in the largest cities, and certainly not in most of Nigeria’s rural areas. In fact, where many of our farmers are located, they don’t have access to data coverage. And as such a web-based app that we would typically expect to see on our handsets in the U.S. or the UK or Europe for example, it just simply won’t work in those areas. As such the USSD platform, which is similar to the old WAP services that some of you may well remember, was used commonly on mobile phones when the displays were in micro, which is primarily text-based, but this is the only type of platform that’s accessible to many of Nigeria’s farmers.
It is not just Tingo that offers USSD platform in Nigeria. In fact, nearly every bank, insurance company, telco, and public service provider, they all operate a USSD platform because of those very issues. All of that being said, I mean, Nigeria is developing at pace. A network and data coverage will continue to get better over time, which is the reason why we are now developing and then was a web-based app, which once launched will be operated in parallel with our USSD version. Look, I think it’s when we launch the full version of the TingoPays app, which is web-based, that you’ll see a platform that resembles what you are used to seeing in the United States and Europe. But remember the difference here, is that’s aimed at the middle classes in Nigeria, cities and towns, such as Lagos and Abuja.
And it isn’t aimed at the farming communities, in the rural parts of the country.