Tuesday, December 12, 2017

NSENENE AND THE PUSH FOR A MIDDLE INCOME

The Nsenene (grasshopper) season is in full flight (forgive the pun).

I read fantastic stories last week of how sacks of the insect are criss crossing the nation. The major supply areas seem to be the central region, where in a given night you may see contraptions made of iron sheets, drums and high intensity light being used to trap grasshoppers.

Friends of mine who have been following the market say that a few weeks as the season was just getting started a tumpeco (half-liter mug) of nsenene was going for sh20,000! And a sack of nsenene was selling for up to sh500,000. She thinks the season has peaked as the same quantities are now going for sh3,000 and sh20,000.

The snacky treat is prepared by stripping it of wings and legs and frying it in its own oils.  I am told one can add tomatoes and even garlic to taste.

There are two nsenene seasons around April and November, the latter being the major season.

So if one got to thinking, what would it take to rare nsenene and therefore ensure a year around supply? Would the market demand fall off because as they say familiarity breeds contempt? Maybe we can export the treat, what would it cost to break into those foreign markets?

That last lesson is key to our quest for transformation of the economy.

It is not a secret but to take our economy to the next level – surpass the $1000 per capita magic number, we need to export stuff, the higher up the value chain they are the better.

"As it is now total world trade is estimated at $24trillion shared between goods and services $18.5trillion and $5trillion respectively. Drilling down further of the goods traded $13trillion were manufactured goods, $3trillion natural resources and $2trillion agricultural products....

The low proportion of the global figure assigned to agriculture explains why the continent accounts for less than $5 in $100 dollar of world trade and therefore why poverty stalks us.

Beyond doubling or tripling the number of bags of coffee we export a year, in an increasingly competitive market – Vietnam now offloads four times the amount of robusta coffee we do onto the world markets, the attendant increase in land under the crop may be hard to sustain.

Maybe when we attain those volumes we may be able to seriously consider adding value to our coffee and grit our teeth to try and break into the processed coffee market, already in the stranglehold of non-coffee producers from Europe and the US. We will grind our teeth to the gum before we can even cause a dent in that market.

Same maybe said for our tea, cotton and even sugar.

The sensible thing to do would be to squeeze ourselves into the trade in manufactured goods. This may not be as daunting a prospect as it may have been in the last century.

No one makes all the components of all they produce any more. For instance Apple has more at least a hundred suppliers mostly in South East Asia but also in Israel, Ireland, Mexico, Austria and the US of course.

The same can be said for Mercedes Benz or Sony or Boeing.

The trick to inserting ourselves in these value chains would be a productive workforce, and most especially cost effective, reliable and efficient infrastructure.

"You can imagine the coordination of a global supply chain needs a high level of efficiency, especially since manufacturers don’t want to spend more than what is absolutely necessary on storage. They have taken Just in Time (JIT) delivery – where suppliers are integrated in the manufacturing process to the point that they only deliver when a component is needed, to another level....

It therefore makes sense for us to be seeking to push our power and transport costs down, necessary if we are to have half a chance of inserting ourselves in these multi-billion dollar networks.

Companies in South East Asia are doing a rip roaring business delivering switches to Apple or seat belts to Nissan or door handles to IKEA or valves to GE.

To illustrate when Apple launched its iPhone 8 it sold about 10 million units in the first week, imagine if each screen costs $10 and one supplier had the whole deal it would have pulled down $80m (sh300b)! in that first week.

It has been true for a long time. To continue to sell raw commodities to the world market is a losing strategy.

"We have no choice but to go up the value chain. However the markets are not open for us to just walk in. We need to prepare for a fight like we have not seen not only for trying to add value to our traditional commodity exports but also to break into the value chains of the world where the real money is being made.

For starters we need to stop working as if we exist in silos. Power generation is not only the business of the energy ministry but of the manufacturers, tourism industry, education and health sectors. As is the Standard Gauge Railway or the oil roads or the valley dams or fishing issues on our lakes.

Back to our nsenene.

While it may serve to provide seasonal income for some nifty grasshopper trappers it is unlikely to help vault the country into middle income status. If the foreign markets are our target a taste for Nsenene is not universal – some even gag at the idea of eating it.

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