Letters

Value-addition key to competitive edge in global markets

fish

Value addition: Ekal Meyan, and other workers at Value Villages Food and Leather Limited at Loropio in Turkana County during processing of fish on December 14, 2021. PHOTO | JARED NYATAYA | NMG

Summary

  • KFC disclosed that it has not been sourcing for potatoes locally because of quality standards.
  • Adding value to a product is an important strategy as it provides incentives to buyers to purchase products that in turn increase sales to the business.
  • More than 80 percent of agricultural commodities in developing countries are consumed locally in their raw state.

Over the past few weeks, Kenyan folks raged with anger at the American fast-food chain Kentucky Fried Chicken (KFC) for not buying local potatoes despite experiencing a shortage of supply.

KFC disclosed that it has not been sourcing for potatoes locally because of quality standards.

Value is not added to our potatoes or perhaps the potatoes grown locally are not the variety that maximises profit, or worse still, the fertilisers used locally are probably not the type they would prefer used, these and many more could be the reasons why the majority of locally produced goods cannot go beyond our borders.

Adding value to a product is an important strategy as it provides incentives to buyers to purchase products that in turn increase sales to the business. Carefully thought-out value addition can benefit the customer while increasing market visibility for the business.

Value-addition activities include processing, drying, use of modern farming methods, use of fertilisers, refrigeration, preservation, eco-packaging, transportation, using precision analytics to make on-farm decisions, branding or generally transforming a product to globally suitable and acceptable standards.

More than 80 percent of agricultural commodities in developing countries are consumed locally in their raw state. Our products must attain the required global standards of production to sell abroad.

Value-addition focuses on production or manufacturing processes, marketing or services that increase the value of primary agricultural produce, perhaps by increasing appeal to the consumer.

Kenya’s trade deficit lately grew to a record Sh1.24 trillion as of November 2021.

This is simply because we import more than we export.

Increasing our export trade is important in allowing Kenya to increase its productivity, competitiveness, and value addition.

According to the World Bank, increased intra-African trade and global investment through African Continental Free Trade Area (AfCFTA) can impact the lives of ordinary citizens by facilitating job creation and greater competitiveness of micro, small and medium-sized enterprises.

According to the Kenya National Bureau of Statistics, during the 2020/21 fiscal year, exports declined 2.9 percent to Sh596.7 billion, while imports increased by 2.4 percent to Sh1.8063 trillion. As a result, the balance of trade deteriorated by 5.2 per cent to a deficit of Sh1.2097 trillion.

Local supply chains should take advantage of the emerging AfCFTA market and export more for a favourable balance of payment.

According to the International Trade Centre, potential advantages of AfCFTA include increasing economies of scale and access to cheaper raw materials and intermediate inputs, better conditions for regional value chains and integration into global value chains, catalysing the transformation of African economies towards greater utilisation of technology and knowledge — facilitating both intra-African and external direct capital flows to African countries, creating a labour market and demand-pull throughout the continent.

Kenya must increase value-addition activities in its agriculture production system for sustained global competitiveness.

OECD says, any value addition to a product adds a percentage of increased financial value to the produce and has the effect of improving the incomes of the local farmers. According to FAO, the full potential of agriculture in terms of economic benefits is mainly hidden in the value addition component of the production process.

It is in this segment of the production chain that more jobs can be created; foreign exchange can be expanded as a result of export of finished products and the national output of the economy can be enhanced.

The World Bank has projected that by 2030, the size of the food and agribusiness industry in Africa will reach a 1 trillion United States dollars’ worth. It seems to be an opportunity for Africa to have its size of economic continuum. But interestingly, this will mainly have to do with value addition to the food-related produce coming from the farms.

Unlike Asia, Europe, and North America, Africa does not have an economy that acts as a trading hub. It's only South Africa that operates somewhat, as a hub for southern Africa, for which it is also a key supplier of intermediate goods.

South Africa is a top-five trading partner for 14 African countries. At the same time, it is integrated, mostly upstream (forward integration), in global value chains with China, the United States, Germany, and India.

The rest of Africa lacks a systemic global exporter that also imports value-added from the rest of the continent