By Nancy Kinyanjui
Across Kenya, regions that once sold mostly raw produce are working to sell more finished goods. Meru is a strong example. In February, the Meru International Investment Conference and Consumer Fair will bring investors, buyers and businesses together at Meru University of Science and Technology. Avenews recently joined business leaders at the Kenya National Chamber of Commerce and Industry’s pre-conference dinner in Meru to talk about what that growth will take.
The ambition is clear: keep more of the value of what the region grows at home. Meru’s dairy union already processes about 640,000 litres of milk a day. Businesses across Meru, Embu and Tharaka Nithi are moving into avocado, macadamia and processed foods. Similar shifts are under way in Kisii, Nakuru and beyond.
Factories, packhouses and processors draw the headlines. But they only work if the businesses around them can supply them consistently. That makes working capital part of the plan.
Processing stretches the cash cycle
Sourcing produce from the open market usually means same-day payment for suppliers. However, supplying processors, packhouses, or supermarkets introduces longer payment cycles lasting several weeks. While moving up the value chain secures larger and steadier buyers, it also requires managing extended waiting periods for cash flow.
Consider a regional aggregator supplying a processor with produce worth Sh1.5 million a week. It pays its own suppliers on collection, covers transport and handling, and waits 30 days to be paid. By the time the first payment arrives, it has funded about Sh6 million of deliveries. The better its relationship with the buyer, the more cash it must carry.
Multiply that across feed stockists, collection centres, transporters and distributors, and the scale of working capital that value addition calls for becomes clear.
Unlocking cash already earned
For many of these businesses, the money they need is already theirs. It sits in invoices for goods delivered to reliable buyers. Through invoice financing, Avenews advances up to 85% of an approved invoice’s value, for periods of between 7 and 60 days. When the buyer pays, the advance is settled and the balance goes to the supplier.
Used well, it lets a supplier say yes to the next order without waiting for the last one to be paid. Used carelessly, it adds cost without solving anything. The difference lies in the numbers: the true cost in shillings, the repayment date and whether each order is profitable before financing.
What investors should look for
Investors will ask about land, water, power and roads. They should also ask about the businesses in the middle of the chain. Can aggregators, stockists and distributors fund larger volumes? Do they keep records a lender can read? Do they have financing partners who understand how agricultural trade works?
At Avenews, we have financed more than 750 agribusinesses across over 35 counties, and we work with more than 40 partners nationwide, from input stockists to the buyers our suppliers serve. That experience points to one lesson. Value addition succeeds when finance follows the rhythm of trade: buying stock, waiting on buyers and paying suppliers.
Three steps for suppliers
. Map your cash cycle. Count the days between paying for goods and being paid for them.
. Get your paperwork investor-ready. Delivery notes, invoices, buyer confirmations and statements are your strongest evidence.
. Talk to your buyers. Prompt invoice approval is often the cheapest working capital there is.
Kenya’s regions have the produce and, increasingly, the plants to process it.
How much of that value they keep will depend on cash moving through their supply chains as reliably as goods. The next opportunity should not have to wait for the last invoice to be paid.
The writer is the Managing Director of Avenews Kenya, an agri-fintech licensed by the Central Bank of Kenya as a Digital Credit Provider
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