April 22nd, 2021

FSD Kenya partnered with Virtual City (a technology company that develops and delivers supply chain automation solutions in East Africa), and Parijat Chakrabarti from Princeton University to undertake a study to better understand the value chains of fresh produce in Northern Nairobi. The purpose of the study was to understand the operations of the packhouses (aggregators who add some value to produce e.g., grading, repacking etc.) by answering questions around finances, market information, constraints, barriers, and opportunities.   

The study was guided by three hypotheses.

– Financing constraints are an important obstacle to the efficiency of agricultural value chains affecting all players in the chain.

– Financing constraints are primarily caused by informational asymmetric, which in turn limit trust amongst players and opportunities to expand markets beyond existing trade networks.

– Informational and financing constraints could be addressed through digitization of value chain data and establishment of data platforms.

 

Gmaurich Insights, a research firm undertook the two studies in Northern Nairobi. The 2019 study started with mapping of users of packhouses (382 of hotels, restaurants, institutions, groceries were visited to get contacts of their suppliers), then identifying packhouses through 60 face to face interviews with suppliers.  The second phase included a 30-day data collection from 4 packhouses (those that sort/grade, willing to use a digitized system and with a turnover of KShs, 800,000+, USD 8,000+).

A repeat survey was conducted in the year 2020 to understand the preliminary impact of COVID-19 on their operations, to gain a deep qualitative insight into the workings of the market, and to provide insights to developers of digitization solutions that target this segment.

Results from the two studies highlight some major inefficiencies in the sourcing of supplies by packhouses, difficulties in accessing working capital and managing the inherent supply chain risks. Whereas the opportunities for digitization were identified, caution must be applied to ensure that sufficient incentives exist for packhouses to digitize their operations. The solutions must also be simple and directed to addressing the specific business challenge(s). Both the financial and non-financial constraints are important business risks to addresses to make the fresh produce value chains efficient.

The 2020 and 2019 reports below, offer more insight:

a) Understanding the value chains of fresh produce in Northern Nairobi – A case study for Packhouse (2020): A follow up survey with COVID-19 impact mapping

b) Understanding the value chains of fresh produce in Northern Nairobi – A case study for Packhouse (2019

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