Retail Expansion in Zambia: Implications for the Fruit and Vegetable Processing Secter

The recent expansion of retailers into Africa does not only spur changes in the local food market but also offers a possible outlet for locally manufactured food products. Zambia is one of the countries in Southern Africa that has experienced a boom in retail presence in the past couple of years. While retailers and their value chains which connect producers in the South with markets in the North, have been extensively investigated, little has been researched on regional value chains with end-markets in developing countries.

This thesis uses a global value chain approach to explore and explain how international retailers and their procurement system influence the Zambian fruit and vegetable food processing industry. The supermarkets introduce a, for the Zambian context, new way of retailing based on centralized procurement, preferred supplier programs, and private standards. This is assumed to create struggles for the local processors due to factors in the institutional environment such as an inefficient market structure, poor infrastructure, and a weak regulatory framework. Our research question to guide this investigation is thus to what extent is the Zambian fruit and vegetable processors’ value chain participation influenced by the interrelation of international retailers’ value chain governance and the institutional environment?

In order to answer our research question, we have conducted an intensive study of the Zambian fruit and vegetable processing sector. The processors add value to fruits and vegetables and supply their products to one or more of the three largest retailers in Zambia: Shoprite, Spar, and Pick n Pay. There are many hurdles to overcome in order to become a supplier, the most prominent being the compliance to quality and safety standards posed by the retailer. However, also demands on year-round delivery to a consistently low price are challenging for local producers. What enhances this struggle is the lack of support from the institutional environment. The Government of Zambia has failed to establish a regulatory framework conducive to manufacturing in general and to processing of horticultural products in particular. Neither are there policies addressing issues such as local content for the supermarkets chains. Furthermore, there are no domestic organizations to bridge the gap between the required standards and that of the actual industrial standard in Zambia.

Local NGOs, often supported by donor-organizations, are to the most part focusing on smallholder farmers and not manufacturing as such. However, the presence of retailers has contributed to the establishment of a local outlet with room for higher-valued products. This has encouraged investments into food production, including fruit and vegetable processing which has led to a growth of the sector. The manufacturers who manage to become suppliers have experienced process and product upgrading, and are forced to continue to learn and increase efficiency and product quality in order to stay in the value chain.