International retailers becoming more dependent on African produce
The world’s supermarkets are slowly but surely becoming more dependent on Africa as a source of agricultural produce, says Geoffrey White, CEO of UK-based pan-African investment company Lonrho.
“Historically Africa has always been dependent on the rest of the world. The balance is slowly changing where we are seeing the biggest retailers in world saying, ‘we’ve got a whole list of produce that we need to source from Africa because we know that in five years our shelves will be empty if we don’t engage with African agriculture‘. And that is them coming to Africa, rather than the other way around,” said White during a session at the recent 2012 World Economic Forum on Africa.
Lonrho operates in a variety of industries in Africa, including agriculture, transportation, infrastructure and hotels.
Although the continent is still some way off from becoming a competitive manufacturing destination for global exports, White said that producing products for the local African market is “quite attractive”.
White noted that it is very challenging to manufacture goods in Africa for export internationally. “It is still the most expensive place in the world to deliver logistics and to bring in raw materials to set up manufacturing plants …”
He added that “west Africa is still the most expensive place on the continent to land a 40-foot container.”
Despite this, White said Lonrho is engaged in what he calls “quasi-manufacturing” of agricultural produce. Value is added to fruit and vegetables, which are then exported to international retailers.
“The added value is done in Africa. So if you go to my facility in southern Africa, one day it looks like Tesco, the next day it looks like Marks & Spencer. Within Africa we are date stamping it, pricing it, if you want it chopped and made into a fruit salad, we can do all that within Africa. That is very different to maybe ten years ago when all Africa exported was whole fruit and veg … and then added value [such as] chopping and packing was done outside of Africa. All that added value is now done within the continent. I think you will see more and more of that as the economy grows,” he explained.
Jay Ireland, General Electric’s president and CEO for Africa, who also participated in the session, said that Africa’s weak power infrastructure and significant delays at the ports are impediments to manufacturing.
Although GE wants to expand its “service shops” on the continent, Ireland said he doesn’t foresee “anytime soon when we are going to be making jet engines or heavy duty gas turbines in Africa”.