African food markets continue to reshape Micro, Small and Medium Enterprises
One of the most critical invisible trends in African economies is the extent to which food markets are shaping the operations and growth pathways of Micro, Small and Medium Enterprises (MSMEs). MSMEs keep changing in form, knowledge intensity and character in ways that external actors like financial institutions, development organizations and investors need to master.
Agriculture-related MSMEs now comprise people from different literacy levels, ranging from academic to technological and professional, university graduates and many others. Pensioners and those previously formerly employed are also found in the agricultural-related MSME sector. Also notable are improvements in the adoption and customization of appropriate technology. For instance, there are now entrepreneurs producing small scale processing equipment and manufacturing of different products.
Agricultural-related MSMEs can be classified into the following categories:
- Aggregators who buy large volumes of commodities from farming areas and sell to wholesalers.
- Wholesalers with permanent stalls where traders from other markets come to buy.
- Retailers who break bulk.
- Vendors and those who sell from stationary or mobile push-carts.
- Transporters of all sizes – from one to 30 tons.
- Food processors such as those in chips making, peanut butter processing, licenced restaurants, mahewu and maputi processors.
- Metal fabricators and carpenters who support the agriculture sector from production to the market through producing weighing scales, scotch-carts, cultivators and ploughs.
- Those into semi-processing and packaging equipment like wooden crates and baskets weaving.
- Transportation MSMEs – those producing push cuts and recyclers.
- Specialists in punnetting food into small ready to use menues.
How do financial institutions finance such an industry that is in transition and defies traditional characterization?
The first task is legitimizing most MSMEs, most of whom are considered illegal. Even if they are trained, you might find that location is a problem for most MSMEs. You can give them finance but external factors outside their control like location can affect them. Evidence can be more powerful in legitimizing SMEs although necessity is a major driver. If you finance someone in the food industry, you are supporting necessities because food is always available and needed.
To the extent most farmers are turning their commodities into commercial enterprises, they are becoming part of the MSMEs. This is what is happening in Zimbabwe where production zones like Mutoko, Honde Valley, Chipinge and others are now producing excess vegetables, fruits and field crops.
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