How are businesses in Africa learning from China?

22 April 2016. The Economist. Intra-African business. By The Economist Intelligence Unit

Platforms for change

Table of contents

• INTRODUCTION
• POWER, TRANSPORTATION AND INTERNET
• East African Cables: Lighting up the continent
• Ethiopian Cargo: Connecting inland regions
• Smile Communications: Leaping to high speed
• DIGITAL PLATFORMS FOR MODERN SUPPLY CHAINS
• Africa Courier Express: Lower-risk routes into West Africa’s consumer markets
• Mezzanine: Transforming service delivery models through mobile tech
• Bidco Africa: Modernising agricultural supply chains

Bidco Africa, founded as a garment manufacturer in 1970, is now one of East Africa’s largest manufacturers and distributors of fast-moving consumer goods, sourcing from more than 30,000 farmers, operating in 16 countries. Its focus is on edible oils and related products. Vimal Shah, the firm’s CEO and son of its founder, Bhimji Depar Shah, is bullish on the prospects for Africa’s agribusiness sector and consumer market: in early 2015, he announced the intention to quadruple Bidco’s sales between 2015 and 2020. 

Bidco’s resources and counsel on precision farming, as well as market information, are all available to farmers on digital platforms. Information also flows in the opposite direction, meaning that both sides have much greater visibility on supply, demand and prices. This direct connection between producer and buyer also leads to safer, more reliable contracts. Having advised a farmer on which crop they should grow, Bidco then offers to buy a pre-agreed amount at a pre-agreed price, as long as the quality is right. Electronic payments also reduce the risks of delay or theft.

Together with urbanisation and the rise of the middle class, which are driving demand for processed food and personal care products, the Internet is changing everything about African consumer behaviour. “There are a lot of thought leaders out there now,” observes Mr Shah. “Consumers see stories online, for instance about the negative health impacts of sugar, and that informs their decisions. You have to adapt your range of products and their nutritional value to the changing demand.” Mr Shah believes that thanks to the Internet, younger people in Africa are now growing up in a different paradigm and are more empowered consumers as a result.

The other challenge, according to Mr Shah, is unfair competition from businesses in the informal economy, where taxes are not paid and smuggling is rife. As one of the continent’s most successful players in the formal economy, it is perhaps not surprising that Bidco would like to see the government clamp down on the many smaller players in the informal economy that can undercut it on price. But the emphasis, says Mr Shah, should not be on making life more difficult for small businesses. “We need to reduce the enormous number of different taxes and duties that people pay, and make policies that are conducive—not an impediment—to business.”