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Cold chain development in Africa

Written by © Eamonn Ryan | Cold Link Africa

All photos © Eamonn Ryan | Cold Link Africa

The second annual GCCA African Cold Chain Conference was held on 2-4 August in Cape Town. A panel discussion was moderated by Greg Laurin, chairman of Global Cold Chain Foundation, to discuss the current state of the cold chain in South Africa and Africa as a whole.

The panel discusses opportunities and challenges faced by the cold chain in Africa.
The panel discusses opportunities and challenges faced by the cold chain in Africa.

A diverse group of panellists with extensive experience in the industry provided valuable insights into the challenges and opportunities being faced by the cold chain over the past six to twelve months and the coming six to 18 months.

The panel consisted of:

  • Newton Matope, president of BigCold, a company which has been investing in Kenya’s supply chain for the past 30 years, with a specific focus on cold chain for the last 16
  • Chris Creed, managing director of Vector Logistics, with 17 years of industry
  • Owusu Akoto, CEO and founder of FreezeLink, a Ghanaian with a background working with companies in the consumer goods sector tackling the 50-60% wasted and lost in African food value chains.

Matope highlighted one significant trend as the rise of cold storage startups that offer solutions to farmers. To address high start- up costs, the region had seen a new model of ‘cooling as a service’ (CaaS) helping farmers store their produce after harvest, avoiding reliance on middlemen who often take advantage of price fluctuations and leave farmers with little profit. This trend is expected to grow in the coming years.

Akoto had observed an increase in export projects focusing on fruits and vegetables in countries like Ghana, Benin and Togo. However, there is a lack of expertise in engineering and cold chain management, making it challenging to deliver the required services. At the other end of the value chain, there is a growing demand for cold chain solutions in the hospitality industry, particularly tourism in Ghana and more broadly throughout West Africa, where the big international fast-food chains like Burger King have started moving in, requiring reliable supply chains. In East Africa, the push for cold chain was similarly being applied by supermarket chains.

Creed has noted investments in cold chain infrastructure as well as consolidation, particularly in those African countries with growth potential. BigCold outlined the challenges faced by the industry. The lack of understanding and acceptance of cold storage, unreliable and costly power supply, and the complexity and lack of expertise in maintaining cold storage facilities are some of the challenges – with a consequent widespread acceptance that a percentage of food supply is naturally lost. Furthermore, the cold chain is dependent on other infrastructure, such as roads and electricity, which also pose challenges, said Matope.

Akoto described Ghana as somewhat of a “graveyard” for donor-sponsored cold chain projects over the past 20 years. “The skills and expertise to run such projects, especially in rural Africa, is lacking. They build cold chain facilities but thereafter cannot maintain them to keep them running – and this is not easy to fix in the short term,” he noted. “There is a psychological barrier to outsourcing logistics, as customers need to be comfortable with the idea of relying on external providers.  In order to provide end-to-end cold chain solutions, we need access to reliable transportation and storage facilities, which can be expensive and difficult to secure. Overall, power supply, infrastructure and the reluctance to adopt cold storage practices are the main challenges we face in Africa’s cold chain industry.”

Owusu Akoto, CEO and founder of FreezeLink, with a background working with companies in the consumer goods sector tackling the 50-60% wasted and lost in African food value chains.
Owusu Akoto, CEO and founder of FreezeLink, with a background working with companies in the consumer goods sector tackling the 50-60% wasted and lost in African food value chains.

Despite these challenges, the panellists expressed optimism about the future of the cold chain in Africa in the next six to 12 months. Factors such as power generation improvements in South Africa, investment opportunities in cold storage infrastructure and the rise of the middle-class point to the potential of the market are noted. East Africa is expected to see growth in countries like Ethiopia, Tanzania, Rwanda and Uganda. Partnerships with the private sector and consolidation of distribution systems are also important for success. Additionally, there is increasing interest from global logistics companies and investment firms in supporting agricultural projects in Africa.

This means more patient capital for the industry. Matope said that governments in Africa are prioritising food security and understand they have no business managing a cold chain, which underpinned confidence in an outsourced private sector led cold chain market such as CaaS. Creed noted: “However, we should remain cautious and wait to see how things unfold. Infrastructure, particularly water sanitation, is currently a major challenge for us. If we were to experience a national grid failure, it would have significant implications for our warehouses and operations while water infrastructure collapse would be catastrophic. Additionally, factors such as fuel prices, food inflation and global events like the Ukraine war impact our market and affect consumers.”

East Africa (in particular) has seen a lot of interest and investment from development institutions, private equity funds and international companies. Matope noted that power supply capacity and renewable energy in Kenya present growth opportunities. “The rise of the middle class, increased travel and the need for food safety and preservation also contribute to the potential of the market. In terms of investment appetite, there is a strong interest from impact investors, development finance institutions and international logistics companies. Looking ahead, Africa is a new frontier with a population of 1.4 billion people, providing ample room for growth. In the next five years, I believe the cold chain market in Africa will continue to expand, driven by factors such as the safe supply of vaccines and medicines.”

The panel emphasised the need to acknowledge that the cold chain in Africa requires a unique business model, different to North and South Africa, particularly when it comes to addressing post-harvest losses. This presents a significant opportunity for innovation. “For instance, we are exploring the idea of offering cold storage assets to exporters on a revenue-sharing basis. Overall, I believe there is a bright future ahead for our industry,” said Akoto