Want to export? Get your facts right
In 2007, Mr Wilberforce Ngugi stepped into Sheria House along Harambee Avenue in Nairobi to register Roypack Entreprises, a company through which he intended to export beans to the UK and the Netherlands. But it wasn’t until 2015, some nine years later that Ngugi started making money from his export firm.
He had worked for other export companies before, mainly as a field officer from the time he left high school in 2002. Most companies he worked for supplied fresh vegetables and fruits to countries abroad. In other firms, he worked as an account officer, handling top clients abroad and tracking containers that were shipped to the clients.
“In my first job after I left high school, I worked for a firm that exported Asian vegetables to the UK. As a field officer at the firm, I toured farms in Meru to ensure that contracted farms were doing well,” he says, adding that his pay at the export company was Sh150 a day.
But the meager pay didn’t sway him from his ambition to learn the ropes in the export market. And as Roypack Enterprises lay idle, Ngugi did research about market dynamics in different countries, the biggest importers of different kinds of fresh produce, and what was required to grow a thriving export company.
“As an employee in other people’s export firms, I gained all the experience I needed. It was also a good platform to establish personal links with some of the clients who I knew would give me referrals once I started my own export company,” he says.
Rules of the game
Ngugi has learnt that hacking it in the export market goes beyond adhering to requirements of the Global Good Agricultural Practice (GAP), a sector that sets standards for the certification of agricultural products around the globe.
“What I consider as most important in hacking it in the export trade is doing your homework very well and knowing your aspirations and strengths in terms of whether you can meet demand, how to handle conniving clients, and who to hook up with in the industry,” he says.
Research on commodities and the market
Ngugi faults overambitious novices in the export market who enter the industry without prior research into the market dynamics.
“Export market is a very lucrative venture but it only works for those who are patient enough to learn the ropes. Unfortunately, there are impatient people who are more inclined to part with lots of money to have the registration and certification done for them thinking that is all they require,” says Ngugi.
For anyone with an ambition to go into the export of agricultural products, Ngugi recommends at least a year of research into a suitable market and crops on demand.
“It took me nine years of intense research and learning from other people in the field. A year or so of research to get things right will save you millions you are likely to lose if you enter the industry blindly,” he urges.
He adds: “Let’s say you want to start exporting beans. In your research, it helps to understand which varieties are consumed where, best propagation practices to end up with quality produce and importantly, where to get acceptable boxes for packaging.” The best way to identify a market is through thorough research and through attending trade fairs.
Globally, Kenya is a major exporter of avocados, mangoes sweet pea, runner beans, Asian vegetables, and some of the highest quality green beans.
In April this year, China opened its market to Kenyan avocados, meaning Kenyan farmers will now access more than 1.4 billion potential consumers in China. China is the leading consumer of Kenyan avocadoes followed by the United Arab Emirates.
The UK, Netherlands and France are Kenya’s biggest markets of fresh products.
Other countries in the European Union that import Kenya’s fresh produce include Germany, Switzerland, Belgium and Sweden. Export of fresh fruits and vegetables in Kenya is regulated by AFA Horticultural Crops Directorate (HCD) which is charged with the responsibility of promoting the development of horticultural crops, licensing exporters, and disseminating information on horticultural marketing.
Through Kenya Meat Commission, farmers can also access the export market for quality meat products to countries in East Africa, Central Africa, North Africa and the Middle East.
Certification and legal considerations
It should cost you a minimum of Sh200,000 to have all the inspections and certifications done and to be cleared to start export produce to other countries, Ngugi says.
“On certification alone, you can spend up to Sh80,000 that is paid to relevant certifying bodies if you are farming your own produce. You also need to invest in an agronomist or a technical manager who understands your product,” he says.
Those running bigger export companies, he says, spend millions on registration, certification and inspections before they are allowed to operate.
An export certificate is issued by the HCD to an exporter of fresh fruits, vegetables, plants and other horticultural products.
Safety compliance certificates include food hygiene license, export health certificate and the certificate of radioanalysis, issued by the Radiation Protection Board issues to ascertain that commodities are free of radioactive elements.
Others include standardisation market permit provided by the Kenya Bureau of Standards (KEBS) and the free genetically modified organism (GMO) certificate.
Fish exporters require a dry and live fish movement permit from the Kenya fisheries Service (KFS) to start moving fish and fish products from one part of the country to another.
To sell as an individual or as a joint venture?
Do you want to sell directly to the clients you have identified or do you want to do it a joint venture with someone else? Still, other people use sales agents.
Ngugi has been in the export business long enough to understand the good and bad of each channel of export trade.
“I would recommend working as an individual to anyone, any time. In fact, that is what I am doing. I have worked jointly with people who ended up stealing my clients while others took off when we experienced losses,” he says.
But to succeed as an individual, he says one must be sure to shoulder all the responsibilities including supplying the required volumes and shouldering all losses. In the export market, one experiences losses when a client fails to pay for the product or when perishable fresh produce delays on the way and arrives in poor condition.
What worked for Ngugi, he says, was the fact that he had the market abroad which he landed from several years of working with other export firms.
Beware of thieves
“I had the market and they had the money. So we would enter a deal that I get between 15 and 20 per cent of all the sales we made plus monthly upkeep,” he says.
Ngugi says he has had terrible experiences at the hands of dishonest clients while he exported flowers to the Middle East.
“I have exported flowers to the Middle East and I can say 80 per cent of all clients over there are dishonest. In fact, most of them are people from other countries who have gone to the United Arab Emirates and taken Arab names to fool unsuspecting sellers,” he says.
On many occasions, Ngugi travelled to the UAE to be there with the client before the containers ferrying the flowers arrived. He says the conniving buyers pay the first 50 per cent with a promise to clear the rest in a week or two.
“When you follow the containers to the UAE, they pay you only 50 per cent as you to wait for the remaining amount. And because accommodation in the UAE is very expensive, you opt to go back home and ask them to wire you the remaining amount. But when they know you are gone, that’s when they start taking you in circles and eventually never pay at all,” he says.
He adds: “To date, my Sh2 million is till lying in the UAE.”
In 2016, he lost She 16 million in what he calls conning by a renowned shipping company. His firm was picking up in 2018, another Sh48 million sank in faulty logistics at his client in Belgium where he had supplied five containers of avocado.
“First, they told me that the product manager had gone on vacation and that there was no one to track my export. Then later, they told me that my account manager had been fired and that my containers couldn’t be traced,” he says.
In the export market, it helps that beginners understand incoterms which refer to a set of rules published by the International Chamber of Commerce (ICC) that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts.