Africa eCommerce Dialogue: Let’s Fix the Basics!

Written by Evid Araka Sibi, Managing Director, Value Chain Factory, Kenya

A smallholder milk farmer in Kenya earns just thirty percent of his milk market value, while a consumer pays four-fold for the same milk. Both parties are discouraged from participating in the value chain, resulting in depressed employment of the factors of production and under development.

Both the farmer and consumer can be found on WhatsApp, they have Mobile and Internet Banking accessible on their phones. Africans use technology just like the rest of the world. The only difference is that we have more structural challenges that technology should be used to solve.

Over the last couple years, my team and I have been on a journey to determine what ‘value’ means to most Kenyans working in different sectors of our economy.  We had one goal and that was to discover the fundamental challenges to be fixed in order to achieve inclusive development. We concluded that the structural challenges holding Africa back from achieving sustainable and inclusive development are the following:

  • Inefficiencies and informality along various supply/value chains
  • Inherent risk in key sectors of the economy deterring investment
  • Falling productivity, often caused by inadequate investment in physical and human capital

For Africa to achieve high inclusive development, we must not only address the structural challenges above, but leverage technology to drive efficiency, entrench productivity growth, manage risks and sustain competitiveness in key sectors of the economy.

As a team of software engineers and economists, we set out to develop a generic framework and technology solution that would address structural challenges in African economies. In particular, we focused on solving the on-farm and off-farm supply chain inefficiencies that can cause the milk to sell at four times the price paid to the farmer. Our objective review of a functional and efficient milk supply chain demonstrated that when taking all value-add activities into account, the price to the final consumer should not exceed twice the price paid to the farmer. As such, the main focus of our team is the unbundling and optimizing every value-add activity so as to lock in the true value of a product or service.

By rooting out the inefficiencies in the value chain we discovered that a dollar can achieve more in Africa than possibly anywhere else in the world. By employing technology to formalize most value-added transactions, the resulting transparency reduces risks throughout the value chain.

As a young African, I am excited by the chance to fix our structural challenges because we possibly understand them much better than anybody else. Technology provides us with the chance to leapfrog the excruciating process that change demands of time. To achieve inclusive growth in the coming years, we have to disrupt the very foundation of our existence. Since most of our challenges are self-inflicted, their solutions are within our reach.

As we work to build the future by fixing the past, our digital economies will rise as a side effect. When we are as competitive in production and distribution as more developed continents, our incomes will grow and naturally we will spend more time shopping online.

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