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    High Yield

    Distribution revolution promises to make food prices manageable

    The market for agribusiness goods in Africa could reach $1 trillion dollars in annual value by 2030 if dedicated efforts are made to feed the region’s fast-growing urban population, according to a World Bank report.

    Yet, even as 96% of consumable product transactions occur at the small vendor level, only a handful of business people have figured out how to penetrate that market, leading some multi-national groups to pack and leave after discovering that they cannot competitively handle product distribution.

    In Texas, USA, ripe bananas, after being transported 5,000Km to reach a consumer, cost KSh100 (98 cents) per Kg. In Kenya, the same weight of bananas costs KSh130 (126 cents) after only traveling 200Km to reach the market.

    But the distribution challenge is not a uniquely Kenyan problem. Across urban Africa, prices of basic consumer goods are rising because the value-chains cannot keep up with rising urban demand.

    In Kenya, due to rapid urbanization and costly informal distribution, inflation on food prices was 13.3% in 2014-2015, but the administration of the country is yet to lay a finger on the solution that might end the problem for good.  

    “In the short and medium terms, the policy options preferred by both governments and their development partners focused predominantly on social safety nets aimed at cushioning vulnerable communities and urban consumers from food inflation,” said researcher Chris Ackello-Ogutu, in his paper titled Managing Food Security Implications of Food Price Shocks in Africa.

    Ackello-Ogutu says that among the solutions that stakeholders should be looking at implementing include clear distribution networks.

    A group of young innovators is looking to bridge the distribution gap, ultimately driving down the prices of fresh food.

    Grant Brooke, the founder of distribution network Twiga Foods, believes his company, which runs on the back of a mobile application connecting businesses to each other (business to business, B2B), believes they have found a solution for the problem.

    Twiga runs a fleet of small, three-wheeled vehicles (tuktuks) which can easily reach small vendors in densely populated areas.

    “A vendor simply logs into the app, generates their order for goods from a fully stocked back-end grocery supply, and those goods get delivered to their shop the following morning on credit and for much lower prices. When they’re done selling for the day, and ready to place the next day’s order, they M-Pesa (sending by mobile money) their payment for the previous day’s stock and place the next day’s order,” said Brooke.

    Brooke and his team at Twiga believe their network will drive down the prices of products for the consumers.

    “The banana which cost 63 cents a pound in a grocer to a wholesale price of 12 cents a pound,” he said.

    A recent research by the KPMG group suggests that Twiga could be onto something. The report shows that food dominates African consumers’ spending and Brooke and his team could be flirting with a perpetual opportunity.

    “The African population presently remains heavily dependent on cheap staple foods,” said the KPMG report.

    The World Bank says such ICT initiatives as Twiga’s retail network have been successful in part because “real economic value was added either because of savings resulting from the use of ICT or an increase in revenue or profitability.”

    The importance of ICT in agriculture is so enormous that in 2011 the International Fund for Agricultural Development (IFAD) called for policy innovations to make technology the main driver of African agriculture.

    Farmers and retailers looking to sign up with Twiga can reach them through This email address is being protected from spambots. You need JavaScript enabled to view it.

     

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