Nairobi – May 4, 2020 – Governments across Africa have put in place policies to stop the spread of COVID-19 with the first lockdowns resulting in significant restrictions on the movement of people and goods. But the disruption of intermediary businesses in agricultural value chains could have the most consequential impact on food security and livelihoods.
This includes reduced supplies of caloric staples and other nutritious foods to consumers (many of whom already spend up to 50% of their income on food), loss of jobs in food processing, and – for those who are farmer-allied – lower incomes and support to smallholder farmers who contribute to more than 80 percent of agricultural production in Africa.
Intermediary businesses can include producer cooperatives, aggregators, processors and vertically integrated brands. These linchpin firms are now struggling with COVID-19 related challenges that imperil their continued operation, according to a coalition of international practitioners who support these businesses with capital and technical assistance comprising Bain & Company, TechnoServe, Partners in Food Solutions, Land O’Lakes Venture37, Acumen and Root Capital.
A TechnoServe survey of over 100 food processors spanning sub-Saharan Africa, shows that over 60% of these enterprises do not feel adequately prepared, including having limited liquidity, for meeting the challenges presented by COVID-19:
- For those that have been deemed essential services and can continue to operate, normal levels of production is hindered by COVID-19 related challenges for labour to get to work and operate safely.
- There are broad disruptions to demand, with shifting buying habits from stockpiling and reduced consumer incomes, while markets are closed and school feeding programmes halted.
- Logistics across the value chain have been affected as curfews and lockdowns are restricting movement of people and goods.
As a result, some food processing businesses are shutting down and, according to TechnoServe, only 31% of companies are retaining their full workforce, with the majority putting workers on leave and 17% already making layoffs.
“Some companies are trying to pivot,” says Jeff Dykstra, CEO of Partners in Food Solutions, “but the expected slowdown in business is limiting investment at a time when innovating for this new operating environment is critical. Also, without sufficient liquidity and working capital, these businesses will not be able to continue making payments to suppliers and investing in farmers by maintaining extension services or providing farmers with credit.”
Food processing businesses advance socio-economic development by providing nourishment, jobs and incomes in Africa, while building more resilient local food systems. They help smallholder farmers withstand global fluctuations in the markets and, where appropriate, reduce reliance on imports.
“Supporting these firms and smallholder farmers – which our research shows many of whom are in the ‘missing middle’ where affordable commercial financing is not readily available and have already struggled with a capital gap pre-COVID-19 – is also necessary to strengthen the longer term ability of Africa to feed itself, build more resilient food systems and harness the economic potential of African agriculture and food. All of which are critical to Africa’s economic development,” says Christopher Mitchell, a partner at Bain & Company and leader of the firm’s work in African Food Systems.
The international donor community and African governments have an opportunity to act now to mitigate against a food security crisis arising from the pandemic and to set a path toward food system transformation that would yield greater nutritional, economic, societal and environmental benefits for decades to come:
- First, African governments need to ensure their COVID-19 response supports food supply chains. This includes declaring agriculture, food processing, logistics, and food retailing essential businesses, and ensuring the availability and distribution of personal protective equipment (PPE) and even soap and hand sanitiser to all workers across the food system.
- Second, the full range of capital from public funds, grants from the donor community, debt to equity from investors is required to ensure intermediary businesses such as food processing have the liquidity to continue operating and invest in necessary innovations, such as digital platforms that more efficiently match farmers to markets and support farmer productivity. Capital provision must be coupled with advisory support and technical assistance for business continuity planning. Investment across a range of commodities, including staples such as cereals, legumes, roots and tubers, fresh fruits and vegetables, dairy and even export oriented cash crops such as tea, coffee and nuts, are all critical for farmer livelihoods, to feed local populations and generate foreign exchange reserves.
- Third, NGO implementers and the private sector can provide critical beyond-capital assistance. For example, TechnoServe and Partners in Food Solutions along with private sector partners are providing remote technical assistance to hundreds of food processors in Africa and have published guides on safe operations for workers and food production. Business advice for these processors, on topics such as cash- flow management, contract renegotiation and product adaptation, is also critical to survival. In Malawi, Land O’Lakes Venture37 is providing face masks, hand sanitiser and hand washing stations to dairy cooperatives to ensure that Ministry of Health protocols around COVID-19 prevention can be properly followed and fresh milk continues to be delivered daily. The private sector, particularly large brewers and soft drink companies, have supply and distribution networks that can be leveraged for upstream and downstream logistics to help facilitate a stable, safe food supply.
Editor's Note: To arrange an interview, contact Nicola Wilson at email@example.com or +27 71 155 9834
About Bain & Company
Bain & Company is a global consultancy that helps the world’s most ambitious change makers define the future. Across 59 offices in 37 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition and redefine industries. We complement our tailored, integrated expertise with a vibrant ecosystem of digital innovators to deliver better, faster and more enduring outcomes. Since our founding in 1973, we have measured our success by the success of our clients. We proudly maintain the highest level of client advocacy in the industry, and our clients have outperformed the stock market 4-to-1. Learn more at www.bain.com and follow us on Twitter @BainAlerts.