Ethiopian fruit company’s vision is more than a quick buckFollow @MadeItInAfrica
It proved difficult to pin down Irish businessman David O’Halloran for a telephonic interview before he left for Ethiopia the next day. “I am just back from travelling and off to Ethiopia again tomorrow so will be unavailable for ten days. Can we try and discuss this during the week after next?” he wrote in an email earlier in the day. With the determination of a journalist with a fast-approaching deadline, I, however, managed to speak to him later that evening.
The reason for O’Halloran’s trip to Ethiopia was to visit his company BusinessMinds’ passion fruit venture, called africaJUICE, about 150 km to the south-east of the capital Addis Ababa.
Before starting the Ethiopia project in 2007, BusinessMinds only advised companies on sustainable business development. O’Halloran and his partners – all of whom have considerable experience of working in Africa – however felt the need to get involved in their own projects. “Advisory work has its place, but you don’t get the same excitement as you do when you are developing your own business,” says O’Halloran.
africaJUICE was started as a result of global supply problems in passion fruit production. O’Halloran says that passion fruit suffers from boom-bust cycles. Most growers are not involved in the processing. When prices for passion fruit go too low because of over-planting, growers simply stop planting, which causes a shortage of supply and prices to rise again. “Imagine if you are a fruit juice manufacturer and you don’t know whether your passion fruit concentrate is going to cost US$3,000 a ton or $14,000 a ton. You are going to be reluctant to commit to passion fruit as part of your blends,” explains O’Halloran.
africaJUICE rehabilitated and expanded an existing fruit farm in Ethiopia and constructed a new processing facility that enables the company to supply fruit juice to Europe, the Middle East as well as serve the growing local market.
“We want to move away from this boom-bust cycle by being involved in the growing as well as the processing of fruit. We are one of the few players in the world that can enter into long-term supply agreements with the main traders, blenders of juice and finished product manufacturers.”
Socially responsible to be profitable
The traditional African investment mindset is that you have to make your money very quickly to reduce risks such as land expropriation, a famine outbreak or even war. O’Halloran dismisses this approach as short-sighted. “If you have that attitude you are missing out on the fact that you could be making merely slightly smaller amounts of money for a much longer period of time.”
It is for this reason that the company has a strong focus on building a long-term sustainable business that looks after local communities and the environment. “The idea behind this is that sustainable development is not a zero-sum game, as is sometimes thought, whereby any money spent on the environment or the community is money deducted from the shareholder returns. A more complete sustainable approach will lead to better social, environmental and financial returns over the long term,” says O’Halloran.
At africaJUICE the local community is an equity shareholder in the project. “This is a little bit different than allocating a share of your profits to the community, in that once you’ve allocated the equity to the community, you can’t take it back.” An outgrower scheme, which gives smallholder farmers the opportunity to sell their produce to the processing facility, has also been established.
africaJUICE’s environmental strategy involves everything from using locally available building materials to creating a favourable natural habitat for bees.
O’Halloran explains that not taking care of the environment and local population will eventually have a negative financial impact on a business. “If I pollute the water it is going to affect the communities living further downstream. If I arrive at my facility one day and the community has destroyed my land or blocked my entrance because of the social or environmental impact of my farm, then I also lose out on profits. A simplistic example but eventually all these things come back to bite you.”
Doing business in Ethiopia
O’Halloran notes that from a technical point of view, Ethiopia has a good growing environment. One of the key advantages of the Upper Awash valley is that it can produce fruit all year round. “It is the right altitude and right latitude to grow this particular crop.”
He is also generally positive about Ethiopia’s business environment. “We have benefitted a lot from the interest that the Ethiopian government has to attract investment from credible investors. They’ve streamlined processes to establish a business. You get attention from key ministers who tell you what you need to do to set up a company. They’ve also explained the investment incentives available.”
The country, which plays host to next year’s World Economic Forum on Africa, is, however, not without its challenges. africaJUICE has to deal with various supply chain issues, for both imports and exports. “You have to accept the longer lead times required to get things organised. Just to get containers, for instance, or to get bookings on boats, take longer than if you are used to work in Europe.”
Finding and retaining good management staff can also be problematic. “There is quite a lot of churn in the marketplace for good people. It is hard to find a good person, and when you do it is easy for them to move on to the next opportunity,” explains O’Halloran
He says that although investors can expect higher returns in Africa than in other places, those returns also come with greater risk. “There are many more people looking at Africa now than there has ever been. However, there are still risks when investing in Africa, and you have to accept that if you are going to invest here, but the challenge, return potential and ability to have a sustainable long-term positive impact all make it more than worthwhile.”