Opportunities • With low projected growth in the US and EU • Renewed interested in Africa. It is a continent with enormous potential with some of the fastest growing economies on the planet. • However, for any company new to the African continent, there are a number of challenges to consider.

Challenges • Infrastructure • Distances– African commercial centers far apart, increasing cost and making economies of scale difficult to achieve. • Fragmented markets – Modern trade (e.g. Shoprite supermarkets) in African countries (with the exception of South Africa, Zambia and Kenya) is still in the very early stages of development and the contribution is in the low single digits. Reaching large numbers of traditional outlets (e.g. Mom & Pop, Dukas, Sooks) is difficult and costly business.

Distributors– Finding the right distributors to reach the vast numbers of traditional outlets is difficult (if not impossible) and it requires enormous development and training. As with many emerging markets, the outlet base keeps evolving as outlets open and close. Keeping the outlet list up to date can be a difficult undertaking. • Access to capital – Finding a good distributor is just a start as sources of capital are limited. Many organizations need to support their distributors and partners during the start up phase and in many cases also provide loans or bridge capital to support their cash flows.

Risks – As recent events in Nigeria have demonstrated, there is still significant political risk in a number of African countries. Some of these countries, including Nigeria, hold significant potential in a number of sectors. However, companies need to have a good understanding of the political risk and potential impact on their business. • Technology – When navigating the business landscape in Africa, you realize that most companies operate on a combination of software (e.g. EPP), Excel, pen and paper. Mobile technology holds great potential, but few companies have viable commercial models. Finding the right solution for your company will take time, money and innovation.

Electricity challenges– In many countries electricity is in short supply and power cuts are common during peak periods. Even more advance economies such as South Africa are experiencing major challenges. In some countries (e.g. Guinea) the generator remains a major source of energy and energy cost can be a major consideration. • Lack of visibility – Poor information technology also leads to a lack of visibility in the supply chain with increased out of stocks (OOS). Increasing visibility can take time and might include a combination of technology and manual processes.

Lack of an organized Third party logistics (3PLs) and skills gaps – In many countries organized 3PLs revolve around independent transporters with limited number of vehicles. Many 3PLs might also lack the required skills and professionalism. Normally, ongoing training and support are required. Due to poor remuneration, staff turnover is high, and this will also have a negative impact on cost. • Incentives – Many distributors and 3PLs also lack the required incentives schemes to motivate workers. Companies sometimes need to play an active part in setting incentives and rewarding partners.

Warehouse / Cold storage – Many warehouses for rent are also poorly designed, with poor yard management, ventilation and equipment. Finding a professional warehouse operator can be a daunting experience. • Cold Chain Management – Huge challenges • Counterfeit and parallel imports – For many organizations, counterfeit and parallel imports remain a major concern. African markets remain a dumping ground for many importers and exporters that buy expired (or close to expired products) from European retailers. Large trading groups, operating out of the Middle East (e.g. Dubai), are normally a great source for importers. Pharmaceutical companies are also fighting an uphill battle against counterfeit products on the continent.

Corruption - bribery • Cross border bureaucracy and customs procedures (and bribery)

However, even with all these challenges, Africa holds great potential and companies ignore the continent at their own (and shareholders) peril. A number of multinationals and large numbers of SMEs have overcome or mitigated these challenges. And as the saying goes, if it is easy to do business, it is probably too late for entry.. Tielman Nieuwoudt – Supply Chain Lab

Conceptual presentation of agric. value chain Agricultural product supplies Demand: markets Transaction costs Market requirements • Population • Income • Preferences • Time • Quality • Food safety and traceability • Appearance • Packaging • Price • Etc

Conceptual presentation of agric value chain Agricultural product supplies Demand: markets Transaction costs Market requirements Sustainable supply • Security of land tenure • Security of water entitlements • Sound institutional arrangement • Market information - – ability to understand market forces • Recordkeeping – training • Technical knowhow – training • Basic economic principles • Financial knowhow – training • Availability of finances • Bankable business plan – and use it • Etc • Population • Income • Preferences • Time • Quality • Food safety and traceability • Appearance • Packaging • Price • Etc

Conceptual presentation of agric. value chain Agricultural product supplies Transaction costs Demand: markets Market requirements Mentorship Market barriers • Security of land tenure • Security of water entitlements • Sound institutional arrangement • Market information - – ability to understand market forces • Recordkeeping – training • Technical knowhow - training • Financial knowhow – training • Availability of finances • Bankable business plan – and use it • Etc • Compliance cost • Transport • Availability of information • Legal aspects • Levies • Tariffs • Customs – cross boundary challenges • Etc • Time • Quality • Food safety and traceability • Appearance • Packaging • Price • Etc

Know your consumer/customer Sales rep in Middle East trying to sell Coke. Was he successful?? Remember he did not speak the language so he decided to use graphics to make the sale.

Know your consumer/customer Sales rep in Middle East trying to sell Coke. Was he successful?? NO!!! The Arabs read from right to left!!!

What Sort of Value Chain? Ideal:Short Fast Transparent Seamless Collaborative Too Often: Complex Price-driven Confrontational Disjointed

Developing regional value chains for strategic agricultural commodities, is essential for African countries to enhance their agricultural transformation and global competitiveness (AU, 2006). This can be done in the context of the AU/NEPAD Comprehensive Africa Agriculture Development Programme (CAADP), which offers a platform for joint action by African governments, regional organizations, farmers, private agribusiness and development partners (UNECA, 2007).

Start to work!!!

Thanks

Contents

Contents

Presentation Transcript

Contents

Contents

Contents

Contents

Contents

Contents

Contents

CONTENTS

Contents

Contents