Everyone agrees that agribusiness holds the key to the development of most of African countries. Then the question arises what holds that industry back, when there are abundant raw materials to be processed. More than that, there are teeming millions to be employed in that sector.
The reasons are not far to seek, poor value chain for the agri products since most of the perishable agricultural products cannot be either kept in proper cold chain or cannot be transported to the processing centers due to poor supply chains . To compound that is the inadequate finances to help companies to set up processing units.
Twiga Foods, the Kenya-based food logistics startup, had overcome these difficulties. The firm has raised US$23.7 million in a Series B round led by US investment bank Goldman Sachs. The existing investors TLcom Capital, International Finance Corporation and Creadev had also chipped in. In addition to the equity funding, the company also raised US$6 million in debt and is also gearing up for an additional debt funding of US$ 10 million.
Twiga help retailers to order fresh produce from local farmers through its mobile-based marketplace (Platform). Once that transaction takes place, it helps the retailers to move the products through its logistics arm, reducing waste and improving efficiency. Currently, the firm distributes food to over 8,000 retailers across Kenya. The company is now making forays into the international market using the funds raised from the market. In the first phase, the market expansion will be in the Francophone West African countries, where there is a steady demand for food materials since average family expenses on food articles are relatively higher in this region.
In the next phase, it will expand into Nigeria, Africa’s most populous country and largest economy, where inefficient farming practices held back agricultural production. It will also provide tech based solutions to the Nigerian small holdings, creating a niche for itself both in the forward and backward linkage of agribusiness.
Twiga, however, will not have a cakewalk. There are imponderables that the firm would have to address. Foremost is the financial crunch being faced by the retail informal sector, which is struggling to obtain bank loans. Most of the governments in Africa are very vocal about easy farm loans. But analysts say that it is a different ball game on the ground. To overcome this, the firm is creating a strong database of retailers, who have reasonable financial standing to do business with. The other area the company is focusing on is micro-lending. Last year, it partnered with IBM on a blockchain based short term pilot scheme to help administer loans to retailers in Kenya.
