This is the first time that fresh African avocados have been exported to China on a large scale. On August 26, 45 tonnes of Kenyan avocados arrived in Shanghai, on their way to their next stop in major Chinese cities, such as Beijing and Guangzhou. Kenya’s fresh avocados were approved for the Chinese market in June, making it the first African country to export the fruit to China.
In fact, the Chinese company Greechain had an agreement with its Kenyan counterpart, Sunripe, to facilitate the shipment of fresh avocados. This agreement follows the signing by the two countries in January of two protocols aimed at encouraging bilateral trade in avocados and aquatic products. According to a report released by the China-Africa Business Council (CABC) on August 23, China’s Investments in Africa 2022: China-Africa Cooperation from a Supply Chain Perspective, in recent years, Chinese companies have s are actively engaged in building the supply chain in Africa, supporting the continent in meeting supply chain challenges.
An agricultural supply chain
The Chartered Institute of Purchasing and Supply describes the supply chain as “the activities within an organization to convert raw materials or components into finished products or services to customers”. There are five key elements: production, inventory, location, transport and information. Greechain is an innovative company covering these five elements, providing Chinese consumers with quality African agricultural products through processing, exporting and selling.
As the main partner of the Kenyan government avocado project, Greechain made great efforts to develop the Kenyan market in 2019, resulting in the first container of frozen Kenyan avocados shipped to China in July 2019. Moreover, the company brought fumigation technology from the Netherlands to Kenya and worked with agricultural experts to formulate standards to meet local conditions and Chinese customs requirements.
“We are currently working with seven avocado farms in Kenya, four of which are exclusive, with around 500 farmers in total. We are targeting 20 more avocado farms in the future,” Greechain President Lv Cuifeng told CHINAFRICA. According to her, the processing is done at the local level, with the factories covering the main production areas of nuts and avocados in Kenya, where there are extensive cooperations in purchasing, R&D and investment with VAL, the largest avocado processing factory in Kenya, which was established in 1972.
The digital economy in Kenya, made possible by telecom giants, such as the Chinese company Huawei, opens up new prospects for Greechain’s activities. Its future digital system will track the entire life cycle of each batch of avocados, including origin, growth time, ripening, picking, production and transportation.
Beneficial policies have given a boost. A “green corridor” to facilitate access of African agricultural products to the Chinese market was set up following the 8th FOCAC Ministerial Conference at the end of 2021. “The official export of Kenyan fresh avocados marked a decisive step in Chinese import of African agricultural products,” added Wu Peng, director general of the African Affairs Department of the Chinese Ministry of Foreign Affairs.
A significant role
Trade and investment are two key factors to promote supply chain development, the CABC report finds. For African countries, integration into the global supply chain involves trade with the rest of the world, as well as capital flows – foreign direct investment (FDI). These have a dual role to play: flowing into sectors where the supply chain is already working very well, such as manufacturing, and boosting the supply side – FDI can improve logistics and connectivity in the construction sector, and increase the production and distribution of goods in the manufacturing sector.
According to the report, the establishment of the FOCAC in 2000 has accelerated China-Africa supply chain cooperation through continued growth in trade and investment. In 2021, China-Africa trade has increased 20 times compared to 2000, and China has become Africa’s largest trading partner since 2009.
Records from the China-Africa Research Initiative at Johns Hopkins University show that Chinese FDI flows to Africa have exceeded those from the United States since 2013. This makes it the fourth largest investor in Africa. According to the Ministry of Commerce, in 2021, China’s FDI to Africa amounted to $3.7 billion, a year-on-year increase of 26.1%. FDI from China covers several sectors, such as construction, mining, manufacturing, financial services, leasing and business services, as well as scientific research and technological services.
The Chinese company Humanwell Healthcare is a good example. In 2013, the company, in collaboration with the China-Africa Development Fund, invested $56.5 million in Bamako, capital of Mali, to establish Humanwell (Africa) Pharmaceutical, which then built three production lines: parenteral high volume (LVP), syrup and tablets. With 95% of employees being locals, the company has annual sales of over $15.4 million, with an annual production of 30 million bottles of syrup and 40 million bottles of LVP, available in the nine West African countries. Prices of LVP and oral liquid products have decreased by approximately 40% in Mali, greatly facilitating access to essential medicines, and helping to address the shortage of LVP supply in Francophone countries in the region.
Regarding Africa
First African port in number of containers, first automotive hub on the continent but also first African logistics area, Tanger Med, in Morocco, has evolved over the years to become a true concept of port logistics. Its originality lies in the creation of specialized zones by sector. The Tetouan park is dedicated to logistics and light industrial manufacturing activities for very small businesses (TPE) and SMEs. The Logistics Free Zone mainly includes delivery companies such as DHL. Bosch and Huawei have built warehouses there. Renault Tanger Med Zone, specifically assigned to the French automotive group, produces 400,000 vehicles per year. Tanger Automotive City brings together 50 companies, including the Korean company Hands. China is also present with ZTT.
As the example of Tanger Med demonstrates, Africa is now an attractive market for partners seeking investment in supply chains. The CABC report concluded five key factors to explain this phenomenon. The continent’s growing population makes it an ideal market for investment, especially the fastest growing youth population in the world. The continent will have a market of 1.7 billion consumers by 2030 from 1.2 billion in 2018. Africa is also home to some of the fastest growing markets in the world including Rwanda and Mauritius.
In addition, a number of African countries are already attracting global supply chain investments. This is the case of countries in North Africa, with an industrial capacity that already constitutes attractive options for European or European-oriented manufacturing. Mining is another growing sector.
Despite all these advantages, multiple challenges still remain. At present, Africa’s position in the global supply chain is mainly supported by the supply of raw materials. The proportion of trade between African countries in the continent’s total trade is 16-18%, much lower than in Europe (60%) and Asia (55%), said Silver Ojakol, chief of staff of the Secretariat. of the African Continental Free Trade Area (ZLECAf). To address the challenges, the report proposes eight intersecting action plans for supply chain development in Africa (see box).
As the “artery” of socio-economic development, the supply chain has been disrupted in the past two years by the spread of the pandemic, superpower clash and regional conflicts around the world. This particularly affects African countries in supply chain development, Wu Peng said. In his view, the continent still holds great long-term hope, thanks to its rich natural resources and large population. “The AfCFTA will accelerate supply chain integration and regional economic development, bringing new opportunities for China-Africa cooperation,” Wu said.
Eight Cross Action Plans for Supply Chain Development in Africa
1. Eliminate tariff and non-tariff trade barriers and promote regional economic growth in Africa.
2. Localize mining and supply chains to improve the added value of products.
3. Improve the quality of continental and regional infrastructure and improve regional trade.
4. Develop local production capacities, particularly in the field of public health.
5. Integrate foreign and local enterprises into the supply chain process and form strong complements.
6. Prioritize training centers and promote local participation.
7. Provide African businesses with adequate financing and close the financing gap.
8. Adopt more digital solutions to fuel supply chain growth.
SOURCE : CHINA-AFRICA BUSINESS COUNCIL
