This page contains excerpts from a conversation between Melt Van Schoor, a supply chain professional working in international produce supply in Europe, and Nuevva Director Matthew Bader. The full conversation is accessible through the LinkedIn Group All Things Africa – All Things Business, dedicated to connecting people that have a common interest in doing business on the African continent.
Melt Van Schoor -
Do you have any ideas how the supermarket sector will develop and expand in Africa in the next decade? I see Walmart has already made a move in South Africa.
Matthew Bader -
That’s a very interesting question and one that we have actually done some work on at Nuevva. As you are aware the most challenging issues for supermarket chains in Africa are logistical. Few internal African markets are prepared for the efficient import supply chains upon which strong supermarket ventures depend. And bound up in the logistics issues are of course questions around price. Great logistics cost effort and money in Africa, that needs to be reflected in the retail pricing levels, and therefore will ultimately affect the customer base of the entity.
Over the next ten years, the supermarkets that will profit the most from Africa will be those who a) understand and make the appropriate high-level administrative linkages to facilitate their incoming supply chains and b) work to augment their importation with solid local sourcing options. The latter is of course especially important in produce and meats.
The first mover in developing and solidifying local and regional fresh food supply chains, sorting out the regional logistical advantages (there are many tax benefits for local and regional endeavors within Africa) and establishing a distribution network will see massive growth for the foreseeable future.
Melt Van Schoor -
I think it is clear that the African demographic is going to completely change over the next 30 years and that the foundations for this change are being laid now. The next 10 years or so will establish how successful this change will be. The consolidation and expansion of the middle class consumers are vital and supermarkets will play a big role.
You hit the nail on the head with your comments on the logistical situation and local and regional sourcing. But this needs to be backed up by – the very least – regional political and administrative cooperation and agreements. Regional economic blocks will be essential to achieve this. Countries within Africa need to start trading with each other, but there needs to be a bureaucratic change to facilitate this. And this needs to be backed by a more transparent and less corrupt official culture.
I really think that the private desire for all of this is there, but that the goverments are lacking behind in vision, practical implications and resources a lot of the times. Because of this, do you think that we will get a situation where it will be private and not public money driving the logistical and economic integration of Africa – at least on a regional level? And that the big supermarkets will invest and play a big role in this?
Matthew Bader -
You have made some interesting and insightful comments, and I do certainly agree that private and not public money will be responsible for ‘driving’ things forward and leading the way towards the best possible outcomes.
There is also a lot of “hybrid” money starting to encourage real change on the continent, meaning a combination of public and private funds. The public funds are engaged in recognizance of the necessary governmental role in regulatory environments and setting the right stage. If the governments are not included in the debate and actively involved in the necessary changes, the private sector cannot flourish. The private sector’s role is to push things forward, to continue to request innovation that can encourage a positive business environment. Ultimately, the involvement of both sectors is necessary as governments have just as much responsibility to protect their citizens as they do to encourage business.
An often-overlooked aspect of Africa’s current situation is the missing link between a vital business and private sector and a strong and proactive government. In many countries, one exists without the other, or the skills flow from one side to the other with the changing electoral cycles; leaving little time to build collaboratively.
For instance, regional economic blocks do exist all over the continent, as do free-trade zones. In many instances these were set up years ago. The issue is implementation and productivity, where businesses are not engaged (or organized) enough with governments to demand regular and consistent implementation of the benefits that such structures imply.
As an example, the Economic Community of West African States (ECOWAS) ensures a tariff-free structure for goods produced in the zone and moving between the member states. This legislation has been approved for years. However the application of the legislation is fraught with challenges, as currently each applicable import or export must be subjected to a separate documentation and application process. The same is true of other economic zones. Imagine the impact on a grocery business of having to conduct a 14 day administrative process post harvest in order to ensure that your grapes could get to your supermarket duty free. The de facto reality is that businesses (shortsightedly) currently see more work than reward and they do not work together to make the government streamline these processes. However, as African markets continue to grow, businesses will be able to make salient cases for more determined action. Their continued pressure on governments will help to move African countries forward.
Melt Van Schoor -
The next question then has to be: who is getting and controlling this hybrid money? Mostly international NGOs?
Matthew Bader -
Normally the hybrid money is applied for by consortiums. This often means that, for instance, a humanitarian organization and a business entity work together on a business plan or a grant proposal through which to leverage the funds. Typically these funds are earmarked for ‘development innovation’, ‘impact investment’ or something similar that ensures that the funds not only create sustainable profit but also positive development impact.
So the quick answer to your question is no. It is actually a myth that international organizations like NGOs have ever received a particularly significant share of ODA (
). Most of such funds have always been disbursed through investment and business promotion vehicles. Most recently like those described above, but also through traditionally in export credit projects, trade promotion, etc.
To conclude, there is a real opportunity here, and the technology and best practice already exist to help turn that opportunity into profit for a business that has the right insight and that is dedicated to sticking the course.