News and knowhow for farmers

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 [email protected]

 

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