Entrepreneurship Zone: 03 October 2023 :: Zambia: Rethinking the traditional open-air fruit and veg market

Tue Oct 3 11:07:31 CAT 2023

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Entrepreneurship Zone:  03 October  2023 ::  Zambia: Rethinking the traditional open-air fruit and veg market

The majority of fresh fruit and vegetables in Zambia are grown by small-scale farmers and sold through informal open-air markets. These congested markets have few food safety measures and lack cold storage facilities, leading to food spoilage. Farmers’ produce is sold by third parties that work on an opaque commission structure. Farmers are not allowed to enter the markets and therefore don’t know the prices their produce is being sold for; they also don’t have information on how much goes to waste. They end up losing a significant portion of their produce’s value through exploitative commission structures and food spoilage.

Savenda Capital has identified a business opportunity in this inefficient and unfair system and is currently in the process of establishing a modern, purpose-built fresh produce market in Zambia’s capital Lusaka. The 6,400m2 ZAMBIAFresh Lusaka Market will feature cold storage and ripening rooms to reduce losses and ensure produce is fresh when it reaches end consumers. Through transparent market rules and the use of a trading software system, ZAMBIAFresh aims to offer both buyers and sellers fair prices for fresh produce. The market will implement strict food handling and hygiene standards while all produce will be traceable back to its original producer.

To get the venture off the ground, ZAMBIAFresh has secured a US$7.5 million loan from the US International Development Finance Corporation and a $2 million commitment from InfraCo Africa.

Business model

ZAMBIAFresh’s salaried agents will sell the produce on behalf of farmers and the company will earn a commission on each sale. “It is in our interest to ensure the farmers are getting the best possible prices,” says Sean Moolenschot, managing director of Savenda Capital, adding that it cannot push prices too high, otherwise buyers will resist.

Fruit and vegetables will be brought to ZAMBIAFresh in the same manner it finds its way to the existing open-air markets. ZAMBIAFresh agents will then receive the produce and assign a unique code to every batch. “Each one of those consignments is identified from the minute it arrives in our facility to the point where it is sold … We will know exactly to whom it is sold and at what price, and how that price relates to the average market price, which we will report back to the farmer,” Moolenschot explains.

Farmers will be incentivised to sell their produce through ZAMBIAFresh because of its lower and more transparent commission structure. Access to cold storage facilities means farmers will also lose much less produce as a result of spoilage.

Moolenschot, however, expects it will take a while for farmers to get acquainted with ZAMBIAFresh’s food safety requirements. “We are going to implement food safety standards that currently are not adhered to. It will take time for them to be able to absorb those and it may take time for us to reach [our desired] trading volumes as a result of imposing those standards.”

Target market

While Moolenschot anticipates that formal supermarkets, hotels and restaurants will purchase from ZAMBIAFresh owing to its food safety standards, the biggest buyers are those that distribute to small shops and informal traders. “The formal retail sector is a fraction of the informal reselling market and we hope to capture a fair amount of this particular buyer segment.”

Growth opportunities

Construction is expected to start by October this year, with trading to commence in the fourth quarter of 2023.

Moolenschot wants to open at least another three markets in Zambia and is eyeing expansion to Kenya, Uganda and Ghana. “The intention is to use Zambia as the proof of concept … and then we plan to execute a big roll out of the model … All of the sub-Saharan African countries operate informal markets in respect of horticultural products.”

 -Howwemadeitinafrica

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