Retailers are aware of the market potential in sub-Saharan African countries outside South Africa – and many are working to exploit the opportunity. For example, Shoprite will in the first half of 2015, will have invested R1.5bn into expansion in Africa with 30 new supermarkets opening. Other companies such as MassMart, Pick n Pay, Choppies, Pepkor all see the potential of Africa as an “engine for growth”. They see the increasing purchasing power and the potential for formalisation (e.g. A recent report estimated that the number of informal food retailers in Nigeria amounted to 745,000*).
Despite, this appetite for growth, the challenges of succeeding in these markets are substantial.
There are examples of retailers struggling to maintain a profitable business or exiting a market. One common barrier for fresh produce categories is the availability of locally-sourced crops. Where retailers have developed local supply chains they can reduce costs, improve quality, improve government relations and build resilience.
At ImpactAgri, our experience shows there are several key elements to project success in developing local supply chains in Africa for retailers:
- Finding and securing new project opportunities. Among other tasks, this involves engaging with land-owners/rights holders, review existing capacity to produce and review infrastructure
- Building a preferred input supplier club to deliver these opportunities. This includes bringing together the right combination of seeds, fertiliser, irrigation, and monitoring companies
- Organising finance. This includes drawing from an investor pool as well as drawing on development finance where appropriate
- Supporting implementation. This involves developing a farm management team that can be trusted to deliver to the standards, volumes, prices required