Want to invest in African agribusiness? Nine specific opportunitiesFollow @MadeItInAfrica
There has been much talk about the potential for investment in Africa’s agribusiness and food industries. But what are the particular opportunities? In a recent report the United Nations Development Programme (UNDP) revealed nine specific investment options for business people and entrepreneurs.
1. Fruit juice concentrate processing facility in Nigeria
Around 90% of the fruit juice produced in Nigeria is based on concentrates imported from abroad. Nigeria’s fruit juice market is projected to be worth more than US$2 billion per annum. Interested investors could have discussions with established fruit juice producers such as Coca-Cola Nigeria and Chi-Nigeria to investigate their quality specifications, volumes and potential prices.
2. Cassava value chain investment
While cassava is one of Africa’s main staple foods, the opportunities for the crop in ethanol, bio-fuel, processed foods, industrial starch and pharmaceutical applications have not been exploited. There is a huge market for starch in Nigeria and other countries, with strong demand from textile and food processing companies. Currently Nigeria’s local textile industry and food companies import over 90% of their starch requirements.
“One weakness along the cassava value chain is the absence of in-country large-scale cassava processing facilities, which could turn cassava from subsistence use into industrial use,” notes the report.
3. Cultivation of soya bean and other oil seed plants
“Soya bean has become a strategic commodity for sub-Saharan African countries,” says the UNDP. The crop’s importance in the food, animal feed and edible oil industries have grown in recent years. Sub-Saharan Africa however contributes only 0.2% to global soya bean output.
Africa presently has a large demand for soya bean related products – including soya cake and soya oil. BIDCO, a company with a presence in a number of east African countries, could process an additional 30,000 tons of soya beans using its existing processing capacity.
According to the UNDP, the demand for crude palm oil is even higher than that of soya beans.
4. Sorghum production
Sorghum has evolved from a commodity for subsistence farmers into a popular household and industrial crop. East African Breweries, Nigeria Breweries and Ghana Breweries have started using sorghum for beverage production. The report notes there are currently opportunities for the private sector to invest in sorghum production expansion and mechanisation.
East African Breweries is currently seeking farmers to produce sorghum on contract to reduce its reliance on more costly barley. It is expected that by 2015, demand in Nigeria for domestic use and exports to neighbouring countries will reach over 980,000 tons.
5. Intensive production technologies for fresh vegetables
The growth of modern supermarkets in Africa coupled with urbanisation and a rising middle class, has led to a high demand for quality vegetables that can be obtained using intensive production technologies.
Earlier this year How we made it in Africa reported that in some places in Africa, fast-food giant Kentucky Fried Chicken (KFC) doesn’t serve lettuce on its burgers. This is not to save on costs or due to a difference in local tastes, but rather because there are no local lettuce producers who can supply the quantities and quality required by KFC.
The use of intensive production technologies has transformed the horticultural industry in Kenya. West Africa holds considerable potential for the introduction and commercialisation of intensive vegetable production systems.
“The investment opportunity does not only reside in production but a strategic and integrated approach to market production equipment, transfer technologies and provide market linkages for producers,” says the report.
6. Production of milk powder in west Africa
West Africa Milk Company (WAMCO) currently imports 90% of its milk powder. Imports of milk powder into west Africa is estimated to be over US$2 billion per year.
Milk yields are low, quality is poor and supply is inconsistent. Processing facilities are required to process fresh milk into powder and provide the intermediate product (powder) imported by the multinationals for tin milk production.
“Nigeria alone imports over US$900 million worth of fish annually. Ghana and Senegal spend over $100,000 annually on fish imports. Almost every country in west Africa is embarking on aquaculture and incentives packages have been designed to attract investment. Investors have immediate domestic and regional markets to supply,” says the report.
CHI Limited has started with a large aquaculture project in the Nigerian city of Ibadan although this project will account for less than 2% of the country’s total demand.
8. Equipment leasing
One of the greatest challenges facing African farmers is a lack of farming equipment.
A solution is a private sector led centralised equipment hiring model – especially for tractors. Although governments have been involved in such initiatives in the past, it has in many cases not proved very successful.
“Such operations led by the private sector are expected to ensure sustainability, efficiency and free government funds for infrastructure development. Private sector agribusiness men in Nigeria are keen on investing into such a model,” says the report.
9. Market centre infrastructure investment
Whereas the larger players have the necessary infrastructure and logistics for their operations, many smaller agribusiness and food companies don’t have access to quality warehouses, cold store facilities and loading machines. This has resulted in fire outbreaks, high post-harvest losses and food safety concerns.
This situation provides an opportunity for the private sector to get involved in the modernisation of local market centres.