Profit-making idea: Cold chain solutions in East Africa

The problem: 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.

Even though fruit and vegetable production is a fast-growing sector in Kenya, and it bears considerable local and international market potential, the post-harvest losses of horticulture crops are far higher than those of cereal crops. Due to a lack of cold chain solutions in Kenya, most crops are only seasonally available with price variations between peak harvest and low season reaching up to 500%.

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.

The opportunity: Temperature-controlled cold storage warehouses and transportation services.

Who is taking advantage of this opportunity? Cold Solutions Kenya Limited recently announced that it will invest KSh 7.5 billion ($70 million) in constructing state-of-the-art, temperature-controlled cold storage warehouses in the country. The cold storage facilities will be located in Nairobi and Mombasa. The company’s flagship facility will be constructed in the Tatu City Special Economic Zone in Nairobi.

Utilising a combination of local and international specialists, Cold Solutions Kenya’s facility at Tatu City is expected to be operational in 12 to 18 months. It has been flexibly designed to cater for numerous temperature ranges from +26 to -40 °C and multiple product ranges, from fresh fruit and vegetables, to pharmaceuticals and vaccines, meats and poultry and frozen foods.

Cold Solutions Kenya is a portfolio company of private equity vehicle ARCH Cold Chain Solutions East Africa Fund. The fund intends to spearhead the development and operation of large scale energy efficient cold chain solutions facilities and end-to-end logistics throughout five countries in East Africa covering Ethiopia, Kenya, Rwanda, Tanzania and Uganda.

Another company active in this industry is InspiraFarms, which 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 its offering more affordable, InspiraFarms offers a variety of financing options to its clients.