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Traders secure over $1.6M in working capital deals to promote food security

Published on April 18, 2019

The USAID Hub facilitated access to $1,659,400 of working capital for 14 firms in Kenya and Uganda to promote staple food trade across East Africa. The firms, most representing grain traders and allied services, received access to the financing as a result of a Hub grant to Financial Access Commerce & Trade Services (FACTS) Africa. These deals are expected to demonstrate the viability of lending to grain traders, increasing the risk appetite of FACTS and other financial services to lend more to an underserved sector.

The recipients include firms across the grain value chain. Hi-Tech Farm Supplies Limited of Kenya, for example, provides quality agricultural inputs and services to farmers for greater production. Mubende Agro Supply and Processors Limited in Uganda procures grain directly from farmers, offering them a ready market for their products. Uganda’s Namirembe Offspring Limited also purchases grain, which is then sold in domestic and regional markets, while Kenya’s Logistics Link Ltd manages the collection and movement of shipments. With short-term finance to improve their operations, these companies, along with 10 others, will generate greater grain trade, providing benefits along the value chain, from grain farmers to consumers.

Access to finance remains a significant barrier to regional staple food trade. Traders, millers and warehouses struggle with the documentation required to obtain working capital from banks as many do not have high-quality business plans, financial models, accounting records or evidence of corporate governance structures. Without additional capital, traders are limited in their purchasing; they can only buy using the money they have on hand. If traders had working capital, however, they could purchase larger volumes and then pay financial institutions after selling the grain. This would allow larger volumes of staple foods to move from surplus to deficit areas, providing a solution to food insecurity in the region.

In addition to the working capital deals, FACTS has led four “Ignite My SME” seminars in Kenya, Uganda and Tanzania where SMEs learned tools to enhance their access to finance. These seminars reached over 250 participants, expanding knowledge throughout the region and better positioning SMEs to obtain working capital through various sources. These efforts will contribute to increased regional trade for greater economic growth, food security and resiliency.

New on Our Knowledge Center: Africa’s Pulse 2019

Published on April 16, 2019

Africa_Pulse.JPGAfrica’s Pulse 2019 is a biannual analysis of the near-term macroeconomic outlook for the region, published around the World Bank/IMF Spring and Annual meetings each April and October. This issue looks at how fragility is holding back sub-Saharan Africa, costing the region over half a percentage point of growth each year, and how the digital economy can help move the continent forward by unlocking inclusive growth and job creation. 

Growth in Sub-Saharan Africa has been downgraded to 2.3 percent for 2018, down from 2.5 percent in 2017. Economic growth remains below population growth for the fourth consecutive year, and although regional growth is expected to rebound to 2.8 percent in 2019, it will have remained below three percent since 2015.

"The digital transformation can increase growth by nearly two percentage points per year and reduce poverty by nearly one percentage point per year in sub-Saharan Africa alone. This is a game-changer for Africa," said Albert Zeufack, World Bank Chief Economist for Africa.

New on Our Knowledge Center: UNCTAD Rapid eTrade Readiness Assessments of Least Developed Countries

Published on April 16, 2019

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The United Nations Conference on Trade and Development (UNCTAD) report on Rapid eTrade Readiness Assessments of Least Developed Countries (LDCs) examines the readiness of LCDs to engage in e-commerce and concludes that they are inadequately prepared to capture the many opportunities emerging as a result of digitalization. The digitalization of economic activities is a reality in today’s world economy. All countries face, though at different levels, challenges to adapt to this fast-evolving technological environment and adopt smart, forward-looking policies to fully participate in e-commerce, moving from offline to online commerce (O2O). Given the cross-cutting nature of e-commerce, better synergies and cooperation between development partners and governments are needed to accompany the implementation of the recommendations contained in the assessments.

Kenyan flowers attract U.S. buyers’ interest

Published on April 11, 2019



Eight Kenyan exporters of cut flowers made 78 linkages worth an estimated $259,000 at the World Floral Expo in Dallas, TX, USA. The firms were part of a delegation led by the Kenya Flower Council, a USAID Hub grantee. Their trip to the U.S. allowed them to connect with U.S. buyers to further efforts to expand Kenya’s share of the U.S. cut flower market.

“Today we met with potential wholesalers and from my observation a lot needs to be done in enlightening them on logistics. Their preferred terms of payment is CIF [cost, insurance and freight] and not FOB [free on board]. We are grateful for this great opportunity,” said Irene Nkatha, Sales Manager of Red Lands Roses.

Kenya is the leading global exporter of cut roses to the European Union with a market share of 38 percent. Yet, the country only has a 1 percent market share in the U.S. where it competes against major suppliers such as Colombia and Ecuador which have lower logistics costs and shipping times. With high-quality flowers, a strong trade association and large U.S. market, however, there is an opportunity for Kenya to expand duty-free exports of flowers to the U.S. under the African Growth and Opportunity Act (AGOA).

The exporters’ participation in World Floral Expo advanced recommendations in the Kenya National AGOA Strategy and Action Plan, 2018-2023, designed to increase exports in the cut flowers sector. During their trip to the U.S., Kenya Flower Council and the firms were able to gather market intelligence, establish relationships with U.S. stakeholders and raise awareness of the Kenyan flower brand – all actions that will enhance Kenya’s ability to penetrate the U.S. market. Higher flower exports will also contribute to Kenya’s goal of raising exports to the U.S. by 20 percent annually to reach $744 million by 2022, while also bringing more diverse options to meet U.S. consumers’ demand.

“This is a very potential market for Kenya considering the number of visitors who are serious and willing to do business with us.  We look forward to having more of such opportunities since this serves as a platform to market the Kenya flower brand,” said Boaz Chemweno, Sales Manager of Mzurri Flowers.

The Hub’s grant with Kenya Flower Council aims to increase Kenya’s share of the U.S. market for cut flowers by December 2019. The Hub and Kenya Flower Council work together to raise cut flower exports by boosting the visibility of Kenyan flowers in the U.S. market through targeted product promotion activities and by building the capacity of exporters to meet U.S. packaging and market entry requirements.

New on Our Knowledge Center: Promoting Investment in the Sustainable Development Goals

Published on April 10, 2019

Promoting_SDGs.JPGPromoting Investment in the Sustainable Development Goals is a publication by the United Nations Conference on Trade and Development (UNCTAD) that recommends that governments leverage the marketing capacities of their investment promotion agencies (IPAs) to better compete for the estimated $2.5 trillion annual global shortfall in investment for the Sustainable Development Goals in developing countries and to increase the pool of available capital, including foreign direct investment (FDI). In particular, IPAs could help mobilize underexploited sources of finance and expertise, such as multinational enterprises (MNEs) operating in the development of hard and soft infrastructure, development finance institutions and special development programs, as well as investment guarantee schemes to mitigate investment risks. Prerequisites to effectively engaging these new partners in the generation of more goal-related investments are that IPAs first understand (a) their governments’ objectives for the Sustainable Development Goals and targets, (b) how different types of investment can contribute, and (c) which role the IPAs can play.

New on Our Knowledge Center: East Africa Economic Outlook 2019

Published on April 09, 2019

EA_Econ_Outlook_2019.JPGThe East Africa Economic Outlook 2019 is a follow-up report to the African Development Bank's Africa Economic Outlook report launched in January 2019. It analyzes economic growth, its drivers and its implications for social development, including poverty, employment and inequality as well as progress in regional integration in East Africa.

East Africa is leading the continent with gross domestic product (GDP) growth estimated at 5.7 percent in 2018. Economic growth across Eastern Africa will remain at a robust 5.9 percent in 2019, making it a promising investment and manufacturing destination. Within the region, Ethiopia has the fastest growing economy with a predicted 8.2 percent growth for 2019, followed by Rwanda (7.8%), Tanzania (6.6%), Kenya (6%), Djibouti (5.9%) and Uganda (5.3%).

The report finds that there are numerous drivers of—and hence opportunities for—regional integration in East Africa, including considerable unexploited potential in trade, underexploited cross-border transport corridors between landlocked and coastal member countries, endorsement by 44 African countries of the agreement to establish the Continental Free Trade Agreement, the necessity of regional peace and security that emanates from the large number of fragile states in the region, the recent discovery of natural resources, and substantial informal cross-border trade. Yet, there remains a lack of complementarities in trading, low competitive position of countries to supply goods in the region, institutional capacity weakness to advance regional integration, and failure to address political issues related to regional integration. East Africa will need to address these areas to benefit from regional integration and to advance intra-Africa trade to promote sustainable economic growth and development in member countries. 

New on Our Knowledge Center: Overview of the Cotton, Textile and Apparel Sectors in East Africa Region and Benchmarking with Sri Lanka and Bangladesh

Published on April 04, 2019

Globally, the cotton, textile and apparel (CTA) trade is one of the most lucrative businesses. It involves massive investments and generates significant foreign earnings while contributing to direct and indirect employment, especially for producing and exporting countries. However, it is a highly competitive industry where a mix of product, quality, delivery and price ultimately determine who will dominate a particular market segment.

Overview of the Cotton, Textile and Apparel Sectors in East Africa Region and Benchmarking with Sri Lanka and Bangladesh is a USAID Hub report that serves as a reference for businesses looking to source from East Africa. It provides easily searchable and mapped information on sector players that could be used to identify textile, apparel and apparel accessory producers who can supply products to local and regional clients and U.S. buyers. It also benchmarks the business climate for apparel-related trade and investment in six East African countries (Kenya, Uganda, Tanzania, Madagascar, Mauritius and Ethiopia) against two global apparel producing competitors in Asia – Sri Lanka and Bangladesh – to provide a basis for the selection of suitable sourcing and investment for local and global buyers as well as policy improvements and interventions by East African governments.

 

New on Our Knowledge Center: Economic impact of smallholder farmers in East Africa

Published on April 03, 2019

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Economic impact of smallholder farmers in East Africa is an infographic by the Exchange Tanzania that breaks down statistics on smallholder farms in the East African Community (EAC). It is part of the paper's "the Indicator" series, which also includes an infographic on EAC exports.This week's indicator was 19,675,110, the estimated number of smallholder farms in EAC countries. The infographic points out that within the EAC these smallholder farms contribute roughly 30-40% of gross domestic product (GDP), employ roughly 70-80% of citizens, and produce approximately 70% of the food that people in EAC countries consume every day. Despite their impact, smallholder farms continue to be among the most underserved markets in the world.

East African agro-processors purchase U.S. technologies at ProFood Tech

Published on April 02, 2019

Food x-ray scanners, labelling machines and specialized storage bottles account for some of the $167,020 in technology purchases made by the 11 East African agro-processors who attended the ProFood Tech Show 2019 in Chicago, IL, U.S. as part of a USAID Hub delegation. The show exposed the firms to advanced technologies that can lead to increased agro-processing efficiency in the East Africa region while introducing U.S. companies to new markets interested in adopting their equipment.

Ese Urwibutso, an award-winning Rwandese agro-processing company, purchased a labelling machine valued at $2,420 from Dispensa-Magic Label Dispensers, a company based in Missouri, U.S. “This will greatly increase our labelling speed and, in turn, efficiency in comparison to what we currently use,” said Sina Gerard, the company’s Managing Director. Gerald Muthomi of Meru Greens Limited in Kenya and Robert Okodiaa from Wimrob Bees Company Limited in Uganda shared the same sentiment after buying technologies at the show. They expressed that it was an eye-opening experience and that they now had linkages for future purchases.

The agro-processing industry is a significant contributor to sustainable economic growth, food security and poverty reduction in the East African region. The ever increasing demand for value-added food and agricultural products, both domestically and globally, presents an opportunity for the sector to make an even greater impact in East Africa. The annual retail value of food and beverages consumed in sub-Saharan Africa is set to rise to $1 trillion by 2030, up from around $300 billion in 2010, according to figures from the World Bank. To meet this need, the agro-processing will need to grow, and that growth can fuel higher employment and incomes.

U.S. technologies have an important role to play in supporting the expansion of East African agriculture. In the past year, the Hub supported 17 East African agribusinesses to attend the Global Cold Chain Expo and Conference 2018 in Chicago, IL, U.S., which introduced East African buyers to advanced post-harvest technologies. The East African buyers had varying levels of experience in technology sourcing, ranging from a Kenyan company run by a couple that employs over 6,000 agribusiness technology innovators to companies looking to begin sourcing cold chain technology from the U.S. Thanks to the trip, buyers were able to meet with the top cold chain technology sellers and see the newest technologies in the market firsthand, gaining insights into innovative and efficient food security-enhancing production processes. With this knowledge, East African buyers are better equipped to expand their sourcing of U.S. cold chain technologies.

These shows create opportunities to bring East African and U.S. businesses together for mutual gain. East African businesses receive technological solutions to agricultural challenges and U.S. companies expand their consumer markets. The USAID Hub facilitates these linkages to support the introduction and adoption of international technologies to increase the efficiency of agricultural markets and to improve food security in Eastern Africa, thereby advancing the U.S. Government's Feed the Future objectives.

Uganda and Kenya negotiate a breakthrough in non-tariff barrier on poultry

Published on April 02, 2019

On March 27, Uganda and Kenya agreed to remove a non-tariff barrier (NTBs) related to sanitary and phytosanitary (SPS) measures and resume the trade of Ugandan poultry. This marks a win for intraregional trade following advocacy efforts informed by USAID Hub policy analysis and technical assistance.

In January 2017, citing SPS measures, Kenya placed a ban on Ugandan exports of poultry following an outbreak of avian flu. Kenya retained the ban even after the outbreak was contained, opening market access to only three Ugandan farms in August 2017 following an official assessment of biosecurity measures on select farms. With the ban in place, Ugandan poultry producers experienced significant losses. According to Uganda Poultry Farmers’ Association, its members lost an estimated $6.9 million per month since the ban was instituted (Daily Monitor). Even the farms that did have access to the Kenyan market experienced losses; they could not reach pre-ban export levels due to uncertainty surrounding the policy. With fewer exports, some Ugandan farms had to downsize or even close operations.

Kenya implemented the ban as an SPS measure to protect human and animal health. To an extent, the ban followed international guidelines, such as the Terrestrial Code, yet the government did not fully make use of provisions within the code that provided avenues to facilitate trade between the two countries and monitor the interventions put in place to contain the spread of the virus without closing off trade in poultry products. As a result, the ban became an NTB, limiting Uganda’s poultry exports.

The USAID Hub provided technical support for the bilateral talks in Mombasa that led to the breakthrough in negotiations. The Hub’s support, however, extends farther back to 2017, when the Hub prepared and disseminated reform memos to public and private sector stakeholders that were used to push the governments to remove the bans. The Hub also supported Kenya Private Sector Alliance (KEPSA) to hold public private dialogues on the NTBs, bringing together stakeholders to discuss their compliance with the commitment to the free movement of goods under the East African Community (EAC) Common Market Protocol.

Several NTBs exist among the EAC Partner States, but the lifting on the ban on Ugandan poultry demonstrates that progress is achievable through advocacy. With the removal of this restriction, Uganda and Kenya are liberalizing the movement of goods to create environments more conducive to trade and investment.

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