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Underdeveloped logistics chain of agric-marketing viable for investors

Underdeveloped logistics chain of agric-marketing viable for investors
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The underdevelopment that surrounds the logistics system of marketing agricultural products across the country could be repelling but investors who understand the economy controlled by the growing number of mouths waiting to be fed could look above it for value, experts say.

BusinessDay findings revealed the challenges signpost opportunity in raising an enterprise that can effectively ease the flow of produce from sources of production to the point of need, especially in urban centres.

Institutionalising a logistic initiative that can focus on providing storage facilities or build reliable cargo services for players in the production and processing aspect of agricultural is a viable venture as the space is currently undersupplied, according to Taiwo Oyaniran, PwC head of Agric Business.

Logistics management lies at the heart of marketing but when poorly handled, could trigger post-production loss, scarcity, price volatility and even shorten shelf lifespan. Owing to the fact that the local transport system is still largely led by pockets of individuals who care less about protecting product integrity, many producers find it difficult getting their products sustainably from point of origin to point of demand without compromising value in the process of supply.

“Anybody that is willing to play around providing storage such that wastages are reduced will be a right investment. What we have is few transporters providing these services but if there are dedicated companies, like how Uber has institutionalised transport, then logistics will grow.”

About 50 trucks of tomatoes, for instance, leaves Kano in peak seasons of production to supply markets in Lagos, Port-Harcourt, Benin and Abuja among others. For a farmer, hiring a truck in periods when there is less competition with other products, the average rate is N350,000. That amount excludes N150 charged by those who harvest the tomatoes per 50 kilogramme and N50 by those who lift it on the head to the roadside (since there are no motorable road networks to link the farms to the roads).

In the week preceding the gubernatorial election, for instance, Sanni Yadakwari the secretary of Tomato growers association of Nigeria told Businessday that truck hiring surged as high as N500, 000. And when there is competition with other produce, truck drivers leave them stranded, increasing the rate of perishing which is already estimated at 50 percent.

In Lagos, movement of livestock products, particularly meat from slaughterhouses to markets remains a challenge despite the state government’s introduction of a cold-chain scheme to prevent contamination and preserve quality. Some still convey them in weak sacks on motorcycles.

These logistics gaps exist in the various points of production across the country, needing a robust system for operational efficiency.

But like the risks associated with most investment decisions, it is also important for investors to arm themselves with workable strategies latching on the opportunities in logistics.

In the area of warehousing, for instance, Oyaniran pointed attention to the fact that getting robust facilities to preserve produce could be capital intensive because spending will not be limited to facilities but will equally extend to guaranteeing stable electricity supply. Such investor, he said must also consider the nature of produce in order to determine the kind of storage that will suit them.

“Such an individual is becoming more or less like an aggregator, getting stuff in bulk from people and storing them,” Oyaniran explained.

According to Taiwo Ajibola, MDS Logistics chief executive officer, the strategy of an investor should be conscious of the type market targeted to be serviced and the locations where the demand resides.

This implies a logistics firm conveying tomatoes from Kano in a healthy cold-chain system that retains the quality should not focus on the same market serviced by the regular transporters to avoid loss. Rather, he believes such investor must carefully select consumers like the Grade A hotels, supermarkets or restaurants who their policies on standards encourage them to easily appreciate the quality produce, even when at a higher cost.

“The target market of those you are going to serve is what you should consider. But If at the end of the day, people are not willing to pay for such services and there is an alternative where they can meet their need at a lower price, it becomes difficult,” Ajibola explained.

“Taking the same fresh produce to Mile 12 and not hotels would mean you have to contend with those who are delivering the same service with a non-cold-chain compliant system.”

For an investor considering the cold-chain system, Ajibola’s opinion is that the cooling system is the most relevant, which cost a lot more than purchasing a regular vehicle. The capacity in terms of tonnage is also important. Depending on the brand, a cold-chain vehicle could cost as much as N17 million

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