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    Success out of Africa

     

     
     
    © International Trade Centre, International Trade Forum - Issue 4/2004 
     

    Photo: R. Carter Rachel Carter, CEO of Southken, a small South African company which stocks and exports blankets for aid agencies, says business has increased by 50% as a result of participating in ITC's programme.

    Providing relief supplies is big business. Donors and international aid agencies spend billions of dollars annually. The door to the aid market, traditionally considered complex and inaccessible, has been all but closed to countries in Africa, for example. ITC's programme, Buying for Africa from Africa, has contributed to changing this. As its success grows, other regions are following suit.

    Development dollars go further when buyers buy for Africa from Africa. Consider that in the United Nations (UN) system, agencies spend more than US$ 5.08 billion on goods and services every year, of which 60% is destined for humanitarian relief or development assistance to African countries. However, according to the Inter-Agency Procurement Services Agency, just 10% of total UN procurement in 2003 was supplied from African sources.

    With support from the government of Norway, ITC's programme, Buying from Africa for Africa, has boosted this share and as a result, several aid agencies have modified their procurement practices to promote regional sourcing. 

    Preliminary approaches to aid agencies were unsuccessful. Preoccupied with their core business - providing disaster or humanitarian relief, when and where it is needed - they did not view themselves as participants in private sector development or in the business of promoting exports.

    What opened the door? Persistence, followed by a relatively simple formula: breaking down misperceptions on both sides and building capacity through technical cooperation.

    "We continued to be persistent. Agencies believed that Africa exports only a few primary commodities and that producers are unable to supply high-quality materials at competitive prices," explains Hendrik Roelofsen, Director of ITC's Division of Technical Cooperation Coordination. "Firms believed that the market was too complex to access and that aid agencies did not want to procure from African sources."

    Both were proved wrong.

    A vast and expanding market

    The procurement activities of UN agencies are steadily expanding. As non-governmental organizations (NGOs) and specialized institutions become increasingly active in this field, their procurement needs are also growing. The market is diverse, covering a wide range of goods and services, including:
     

    • Food
    • Pharmaceutical supplies and medical equipment
    • Vehicles and industrial equipment
    • Computers and software
    • Shelter and housing
    • Water supply equipment, communications equipment and chemicals
    • Transportation
    • Office equipment


    Through market research ITC determined that some important product categories sought by international aid agencies are available in several countries. In eastern and southern Africa, for example, the supply of cereals, pulses, blended food, mosquito nets and seeds is abundant.

    International aid agencies tend to disclose very little information on their procurement requirements and issues, while companies do not regularly communicate commercial information on their products. There were very few face-to-face encounters between agencies and African enterprises. Most fairs and exhibitions dedicated to the aid market are held in developed countries, making participation by African firms difficult.

    To match Africa's supply capacity with the aid market, technical cooperation was needed for enterprises to develop the required skills. Even the aid agencies that were convinced it was in their interest to source locally were not always equipped to identify prospective suppliers.
     

    ITC initiative takes off

    ITC's Buying from Africa for Africa programme aimed at increasing Africa's participation in aid procurement through a series of strategic actions. Identifying sectors for which there is considerable demand from aid agencies and sufficient production capacity in Africa was followed by a trade flow analysis to identify the countries with a net export capacity for these products.

    Local institutions undertook supply-and-demand surveys to document practices in the sector and the countries concerned. Companies were audited to ensure they met quantitative and qualitative requirements of international aid agencies. Advisory services were provided when needed.

    To date, five subregional buyers-sellers meetings have been organized in Africa, with the participation of key firms and aid agencies from 24 countries. Two meetings were held for firms in eastern and central Africa in Nairobi, Kenya in November 2001 and August 2003. Exporters from western, central and northern Africa attended an event in Dakar, Senegal in June 2002. Finally, two meetings, held in Midrand, South Africa in October 2003 and October 2004, included suppliers from southern and eastern Africa.

    These events provided a meeting place for almost 600 participants to explore regional business opportunities, including 267 African companies that had been visited, audited, advised and carefully selected by specialized consultants. Ninety-eight representatives of aid agencies contributed by providing technical guidance and offering detailed information on current and future needs.

    At each meeting, ITC published documentation, including a Product Profile Forms book, a regional directory providing contact details and general characteristics of the products offered/requested by each enterprise and agency attending the events. Key to the programme's success are strong involvement by local trade support institutions and providing African companies with advice on how to follow up on contacts made during business events.

    A win-win situation for African companies

    By entering the humanitarian aid market, African companies become familiar with inter-national standards and the procedures and business practices under which products should be offered and marketed. Spinners & Spinners, a Nairobi-based company that supplies blankets, is ISO certified. Managing Director Chandu Dodhia, who attended ITC's buyers-sellers meetings in Nairobi and Midrand, says contact with several high-profile relief agencies proved invaluable.

    "We have now started getting direct inquiries for goods from their field offices, which in the past used to come through relief agents only," he explains. "This direct contact will result in saving time on logistics and deliveries, but will also be more financially viable for the NGOs. The amount saved can be used to supply more relief goods to refugees."

    Southken, a small import-export company in Durban, South Africa, which stocks and exports blankets, including Spinners & Spinners blankets, increased business by 50% in 2002 as a result of participating in ITC's programme. The company accessed buyers (senior managers of aid agencies who were previously inaccessible), obtained specific information on what aid agencies needed and garnered insight into the competition.

    "We changed our way of doing business, permanently stocking relief blankets in our warehouse and registering with 14 aid agencies in the region," says Rachel Carter, Chief Executive Officer. "This generated new sales to charities, hospitals and other donors, and doubled our blanket turnover."

    The company also expanded its services using ITC's regional directory, which Ms Carter says is unique in the region.

    Contacts made and information exchanged at buyers-sellers meetings have prompted several African companies to modify their products, such as the new collapsible jerrycan developed by a Ghanaian plastic kitchenware manufacturer. Others have modified their commercial offers, such as adapting to the financial or, as in Southken's case, stocking conditions of some agencies. This has strengthened African competitiveness.

    When agencies buy from the countries in which they operate, they contribute to sustainable development and the growth of local economies, which in turn reinforces the expertise and skills of the local people and reduces a community's vulnerability to future man-made or natural disasters.

    Mr Dodhia is sure this win-win situation will encourage manufacturers within Africa to invest and produce more to meet the relief demand of the continent. "Indirectly, this will increase employment and decrease poverty," he adds.

    Agencies benefit

    As the UN and other aid agencies are increasingly discovering, there are many advantages to sourcing goods and services locally, including reduced transportation costs, shorter delivery lead times, fewer contingency needs and lower life-cycle costs.  Following the Nairobi meeting in 2003, George Fenton, Logistics Manager of the World Vision Africa Relief Office, acknowledged the valuable role that ITC played in vetting a large number of potentially useful suppliers.

    "We have been in contact with mosquito net, soap, blanket, jerrycan and other manufacturers," he said. "We purchased supplies from Kenya for Liberia, which demonstrates that Kenya is a very good source for relief supplies for the whole of Africa."

    In response to UN General Assembly resolutions and Executive Board decisions, UN agencies are making serious efforts to diversify sources of supply, particularly from developing and transition countries. By buying in Africa for Africa, UN agencies and NGOs are upholding their international commitments to ensure a broader geographical distribution of procurement.

    Dominique Leclercq, who works in Uganda for the World Food Programme (WFP), says the Nairobi meeting proved very useful: "We would like to contribute further in preparing and carrying out events like these. Not only are they useful for WFP's procurement activities, they also contribute to the development of the local and regional economy."

    A blueprint for success?

    The success of the Buying from Africa for Africa programme prompted ITC to organize a buyers-sellers meeting on food, agricultural products and construction materials and equipment in Almaty, Kazakhstan in June 2003. A total of 63 participants, representing 48 firms from Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, and 14 procurement professionals, representing 12 aid agencies operating within the subregion, benefited from a session on regional supply-and-demand trends, followed by a series of one-on-one business negotiations.

    Organizing a buyers-sellers meeting in Central Asia was a considerable challenge, due to reluctance by both parties to participate. However, the meeting dispelled their initial reservations and participants agreed it was a very cost-effective approach, allowing buyers to meet with a good number of potential suppliers in a short time frame, and allowing sellers to interact and become accustomed to the procurement practices of aid agencies.

    Following the meeting, firms predicted business deals of about US$ 12 million and agencies expected to make purchases worth between US$ 4 million and US$ 5 million. But while it is too soon to measure concrete results from the meeting in Kazakhstan, Mr Roelofsen and ITC consultant Catherine Taupiac see it as an example that confirms the programme can work in other parts of the world.

    Ms Taupiac, who worked in the field with ITC as Regional Trade Promotion Adviser in the Buying from Africa for Africa programme, says that if local specificities are taken into consideration, there is no reason why this blueprint will not work for other developing countries and economies in transition.

    "There are unfortunately numerous regions that experience natural or man-made disasters and for which relief goods and equipment are often required, such as Central and Latin America. Further east, regions such as the Middle East and Asia could also be candidates for this type of programme," she says. "Of course there are challenges, but they are outweighed by the opportunities a programme such as this can deliver."

    Writer: Dianna Rienstra