COLEACP’s Kenya survey – April impacts of COVID-19
COLEACP is conducting a monthly survey of Kenyan horticultural companies to measure the evolution of the impact of the pandemic over time. Our first brief report, in April, summarised the impact of COVID-19 on operations in March. Here we present preliminary findings for impacts in April, based on survey responses from 26 Kenyan companies (40% of those benefiting from COLEACP’s programmes).
Impact on trade
The crops most often cited as affected by the crisis are fine vegetables: French beans (69%), and also snow peas, sugar snaps and baby corn. Avocado is mentioned by half of the respondents, passion fruit by 27%, and fresh herbs by 23%. As in March, most negatively impacted markets are in Europe, although the Netherlands has overtaken the UK as the most negatively impacted market.
In April, 46% of respondents stated they had not been able to honour existing contracts due to logistical challenges directly linked to COVID-19, down from 79% in March. However, more respondents reported that prospective clients are reducing requested volumes (77%) and that existing customers have reduced orders (69%).
Logistics, particularly airfreight, has been a major bottleneck. 92% of respondents stated that high cargo costs are having an impact on their operations. Cargo costs have increased significantly for airfreight, and exporters’ transit times to destination markets have increased due to fewer available routes. 89% of respondents said disruptions to domestic logistics (e.g. curfews and checkpoints) are having a medium to high impact on business.
Almost half of respondents suggest that non-exported produce goes to waste (including dumping and composting). A third are not buying from their suppliers as a result, pushing the losses down the value chain. Only a minority of SMEs are able to sell excess produce on domestic markets (24%) or other international markets (8%), or to achieve value addition through processing (5 respondents).
Total lost revenue due to the crisis for April, for all 26 companies, is estimated at 217,130,000 KES (€1.9 million); for a single Kenyan horticultural SME, lost revenue for April is likely to be around 5 million KES (€43,518).* Estimated losses for April are lower than for March, although the median value differs only by 500,000 KES. Total combined losses for March and April, for all companies responding (19+26), add up to 507 million KES (€4.45 million).
As for the March survey, for two-thirds of respondents this means a loss of more than 50% of initial projected revenue for April. While most SMEs (67%) considered prices in March 2020 to be comparable to those in March 2019, 50% of respondents now mention a change in prices for April 2020 compared with 2019.
Most respondents are not receiving any support from their buyers to ease the impact of the crisis. Some companies mention better payment terms (e.g. quicker payment turnaround); only 2 companies said clients are sharing increased cargo costs.
Impact on outgrowers and employees
Eighteen respondents had planned to source from a total of 8,738 outgrowers (median 200) in April; actual sourcing was done from only 2,520 outgrowers (median 50), a reduction of 6,218 outgrowers (71% decrease). Most companies responding (78%) are unable to guarantee a market for their small-scale suppliers, and 55% are already scaling down on new planting schedules. Around 40% of respondents are unable to pay their outgrowers, who have no other options for selling their fresh produce. Some growers are neglecting the fields as they cannot invest in crops if they are not paid.
Most companies have implemented adequate measures that allow them to continue operations, mainly at packhouse level (79%) and on farms (67%). Five respondents (21%) suspended all operations in April. Respondents reported a 46% reduction in casual workforce employment in April, worse than in March (40%). Regarding permanent employees, 40% of respondents still have all their permanent workers on board, although some SMEs are encouraging paid leave (23%) and unpaid leave (33%). Five companies (19%) have had to lay off permanent staff in April.
Financial management
Despite all the measures taken to cut costs and secure revenues, almost 70% of respondents stated that their company did not financially break even in April.
The fresh produce sector in Kenya is seasonal, with peak season during the European winter. However, many Kenyan companies operate all year round: the avocado season (second to French beans in export volumes) runs from February to September.
Most respondents (77%) have taken measures to protect their workforce, and 58% have had to change daily operations to adapt to COVID-19 measures (such as logistics). Almost a third of respondents have implemented a business continuity plan, sought financial assistance, halted the supply of specific crops, or implemented virtual systems to address restrictions due to the crisis.
Most respondents highlight cashflow management and the lack of working capital as key financial challenges. In general, sales have plummeted, production and transport costs have increased, and curfews and COVID-19 measures have reduced working hours and productivity. 69% of respondents face challenges in covering commitments (repayments) to financial institutions, up from 42% in March.
Fifteen respondents had a grace period/moratorium for the repayment of loans; six mentioned improved payment terms; five had delayed payment of taxes; and four had a temporary suspension of lease payments for infrastructure. The overall response rate for this section of the survey was lower, probably because most respondents were technical staff rather than financial management.
* Based on median value, which is a more accurate representation than the average given the wide variance in size of companies responding.
COLEACP’s first Self-Assessment in Somalia
Despite COVID-19 restrictions, COLEACP’s Fit for Market programme has acheived its first Sustainability Self-Assessment in Somalia, working with Jubba Agro, an importer and supplier of farm machinery, farm accessories and inputs. COLEACP expert Dr Virginia Kimani provided online remote assistance to the technical team and Managing Director of Jubba Agro, Mr Hamir Gedi. COLEACP’s Self-Assessment tool includes a checklist to record current practices, and a set of indicators to measure key factors such as soil health, water and energy, enabling companies to monitor and provide evidence to clients of their sustainability progress over time.
Calling agrofood entrepreneurs
How can entrepreneurs help revive the economy in their sector after COVID-19? The Food Bridge, which represents African diaspora agrofood entrepreneurs, is organising an online seminar on Friday 29 May, when COLEACP’s DG Jeremy Knops will speak about the expertise and support COLEACP can provide for agrofood entrepreneurs.