Crop storage and cold-chain solutions in Africa hold significant business potential
Several entrepreneurs and investors have identified the storage and preservation of agricultural produce in Africa as an area with compelling opportunities.
- In Ghana, maize farmers often sell their full yields immediately after harvest. Because of the mechanics of supply and demand, this is not always the best time to make the product available, as the prices drop when the market becomes saturated. Herein lies an opportunity, according to Ben Kemetse, co-founder of M&B Seeds and Agricultural Services. It is one he has considered pursuing himself. “Our market structure is such that if the price falls so much, the farmer may not make any money at all,” he explains. Warehousing with appropriate technology and processes in place to maintain the integrity and quality of the grain would solve a problem for the farmers and provide a potentially lucrative opportunity for the player offering that space, Kemetse argues. [Profit-making idea: Providing grain storage space for Ghana’s maize farmers.]
- David Owino, founding partner at East African private equity firm Ascent Capital, is also bullish about the opportunities in crop storage: “We’ve been looking at a business that is building silos; this is interesting to us because you can add value to farmers by enabling them to choose when to sell their crops. If farmers have a bumper harvest, they could store their cereals and sell them when the market is right. In Africa, farmers lose about 40% of their harvest due to inadequate storage space.” [Our full interview with Owino: Investor reveals East Africa’s most attractive opportunities]
The United Nations’ Food and Agriculture Organisation estimates over 40% of food in sub-Saharan Africa perishes before it reaches a consumer. This can be as high as 60% for fresh produce, pointing to unmet demand for temperature-controlled cold-storage warehouses and transportation services.
- The manufacturing of cooler sheds for storing perishable agricultural produce is an untapped opportunity in Uganda, according to Lilian Nakigozi, founder of Women Smiles, a company that sells vertical farms used to grow crops in areas where there is limited space. “Currently, Ugandan smallholder farmers lose up to 40% of their fresh produce because of a lack of reliable cold-storage systems. Providing a cheap and reliable 24/7 system would dramatically reduce post-harvest losses for these farmers.”
- In neighbouring Rwanda, businessman Jean Bosco Nzeyimana, CEO of Habona, recognises the potential. “There is a major issue. We have so many farms but a lot of harvest is wasted. I also do organic farming and when you do not have immediate customers to buy your crop, it is wasted. There is a massive demand for competent companies that specialise in the storage of agricultural produce.”
- Edward Isingoma Matsiko, managing partner of East Africa-focused investment firm Pearl Capital Partners is keen to back the long-term growth of businesses active in post-harvest crop handling and the cold chain. [Matsiko highlights lessons learnt from investing in East African agribusiness companies.]
There are a number of reasons why cold storage is underdeveloped in many sub-Saharan African countries, including a lack of local manufacturers of cooling technology, inadequate financing options and poor electricity. But some businesspeople are tackling these challenges:
- InspiraFarms designs and supplies cold-storage solutions for fresh produce companies in Africa. It has a wide variety of clients, from small-scale farmer groups to large agricultural enterprises. InspiraFarms has developed prefabricated, modular cold-storage technology. The units are portable and can easily be removed or relocated. They are also relatively easy to install in rural areas. To make this more affordable, InspiraFarms presents its clients with a variety of financing options.
- Nigeria-based ColdHubs provides solar-powered walk-in cold-room solutions aimed at farmers, retailers and wholesalers. The cold rooms are installed at major food production and consumption centres, such as markets and farms. ColdHubs offers farmers a pay-as-you-store subscription model; they pay a daily flat fee for each crate of food they store. [Read our earlier interview with ColdHubs CEO Nnaemeka Ikegwuonu.]
- After suffering a significant financial loss from transporting chicken in a malfunctioning refrigerated truck, Nigeria’s Ope Olanrewaju started Kennie-O Cold Chain Logistics, which provides cold-storage solutions to fresh produce farmers. “In Nigeria, over 45% of our fresh food and vegetable production is wasted annually because of the lack of suitable facilities. Seventy per cent of Africa’s food is supplied by smallholder farmers and they are losing so much money because of the post-harvest losses in our fresh food and vegetables. We bridge that gap by helping these smallholder farmers transport it to other temperature-controlled environments,” says Olanrewaju. [Find out more how Olanrewaju capitalised on an opportunity in cold chain logistics for the agriculture sector]
- Cold Solutions Kenya, a portfolio company of private equity vehicle ARCH Cold Chain Solutions East Africa Fund, last year announced it will invest KSh 7.5 billion ($70 million) to construct state-of-the-art, temperature-controlled warehouses in Nairobi and Mombasa. The company’s flagship facility will be built in the Tatu City Special Economic Zone in Nairobi and has been designed to cater for numerous temperature ranges from +26°C to -40°C across multiple product ranges, from fresh fruit and vegetables, pharmaceuticals and vaccines to meats, poultry and frozen foods.