With over 20 percent of Sub-Saharan Africa’s GDP coming from agriculture, and more than 60 percent of the population engaged in agricultural activities, agriculture matters on the African continent.
Yet, Africa’s agricultural potential remains untapped, as the continent struggles with supply chain inefficiencies and a fragmented market. Poor infrastructure contributes to high food wastage, and many intermediaries are driving up prices.
Kenya-based Twiga Foods sees technology as a solution to agriculture’s fragmented market problem. The business-to-business (B2B) ecommerce company was founded in 2014 by Peter Njonjo and Grant Brooke. Twiga is connecting farmers with customers by building a commodities marketplace and replacing traditional open markets. The ecommerce platform aggregates vendors’ demand, saving them a trip to the market by delivering produce to their doorstep.
Product range and scale
It started with a since product: bananas. Today the company provides a full basket of goods ranging from fruit and vegetables and has since diversified its product range into consumer goods. It is the largest distributor of basic food staples in Kenya, servicing a network of 17,000 farmers and 8,000 vendors.
Farmers send an SMS to alert Twiga of their produce, and field staff book the produce when it’s ready for collection. Twiga uses this data to determine the value of commodities, thereby making prices more visible and predictable.
Transportation and infrastructure
Twiga delivers products to vendors within 18 hours of ordering. To better navigate Nairobi’s notorious congested traffic, the company first tested tuk-tuk deliveries. But Twiga has since moved to vans, as it provides increased load capacity and reduces the return trips needed to the warehouse.
Beyond transportation, Twiga has invested in warehouses and cold chain, including a modern state-of-the-art cold rooms that control the natural ripening process by managing temperature and humidity.
Africa’s fragmentation challenge
Africa’s agricultural supply chain is highly fragmented, and the market is disorganised. Agriculture produce passes through many intermediaries before it reaches the market. It is often the intermediary brokers that are the largest beneficiaries and not the farmers.
The continent’s retail modernisation is still in the early stages of development, and more than 90 percent of African commerce occurs in informal markets or at micro retail level. A good example is Nairobi: Kenya’s capital city of six million people is served by 100,000 retailers and vendors.
Africa’s long supply chains create delays, and produce often gets spoiled or loses its value. It is estimated that 30 to 50 percent of fresh produce is lost through poor handling and limited cold chain facilities. This leads to increased prices, passed on to consumers in urban centres, who consume 80 percent of food produced.
The many intermediaries and limited technology, create poor visibility in the supply chain, and farmers rarely know the price of their produce before the sale. It makes them reluctant to invest in agriculture beyond their personal needs, as they are unsure they will make a return on their investment.
Beyond domestic consumption, exporters face many challenges with a long complex supply chain and creaking infrastructure. Grant Brooke’s early research showed the difficulties exporters face, trying to export their products to major Western markets. For example, the price of a banana in Nairobi, sourced from Meru in Eastern Kenya, less than 250 km from the capital; is the same as a banana in London, purchased from Guatemala in Central America.
Twiga Foods sees technology as a way to solve some problems — by connecting farmers with vendors, reducing prices for consumers, and increasing the value of produce for farmers.
Twiga Foods is looking to increase its vendor base and plans to expand to more Kenyan cities, including Mombasa. They are also targeting Pan-African expansion by the end of 2020.
The company is considering providing micro-credit to customers. Mama mbogas or vegetable traders in Kenya have limited capital and access to finance. Twiga can use their data to score vendors and calculate how much credit to offer to cash-strapped vendors.
They are also testing blockchain to improve traceability and accountability, and recently teamed up with IBM to deploy a decentralised ledger system across its supply chain.
Benefits of technology
Twiga’s improved supply chain, cold chain and material handling have reduced high food wastage in the market. According to the company, they have cut the market average food waste by 70 percent.
They are saving vendors time and hassle, as they no longer have to walk to large-scale open-air markets at 4 am, and haggle with traders for lower prices. Instead, Twiga delivers quality products at low prices to their doorsteps.
By connecting farmers with micro retailers, Twiga’s technology has reduced prices for consumers, and brought predictability and efficiency to an agriculture market rife with uncertainty.