African agriculture: New avenues for business opening-up

Agribusiness companies should think outside of the box and consider the opportunities opening-up on the back of the continent’s mineral resources boom.

Paul Runge is managing director of Africa Project Access, a specialist firm that provides consulting services and information regarding projects in Africa. He says many mining companies are establishing farming projects as part of their corporate social responsibility initiatives. “The problem is that illegal miners can make more money in one day from illicit mining than from taking part in tomato growing social investment projects for over a year. So why don’t you guys help them? Think of that as an avenue for business,” Runge explained at a business briefing for agricultural companies organised by South Africa’s Agribusiness Development Corporation.

Africa’s new oil hotspots, such as Uganda and Ghana, also present opportunities for food production and related agriculture projects. Runge used Uganda’s Lake Albert region, the centre of the country’s oil industry, as an example. With the first oil expected to start flowing in the next few years, large numbers of people will descend on the Lake Albert region as well as the Hoima District, the proposed location for a refinery. Runge said that a conglomeration of people around a resource creates all kinds of needs, which in turn leads to business opportunities.

An area such as Tete in Mozambique, the hub of the country’s burgeoning coal mining industry, also holds considerable potential. “It is like a gold rush there. You cannot get a hotel room, because all the rooms are taken,” Runge said.

Pan-African supermarket groups such as Pick n Pay and Shoprite that are expanding across the continent provide another channel that agricultural companies could pursue. South African retailer Pick n Pay, which recently opened its second store in Zambia, has made a commitment to the Zambian government that 50% of its turnover would come from local suppliers, including farmers. Runge suggested that agribusiness firms could get involved in these local production initiatives.

Companies looking to land contracts on the continent need to realise that they are competing with entities from across the globe. “It has globalised incredibly. You are playing on a world stage,” Runge explained.

During his presentation, Runge highlighted Tanzania as a country with good potential for business and investment. The Tanzanian government has allocated a large chunk of its budget to the agriculture sector. He is also impressed with how Malawi and Botswana are managing their respective agriculture sectors. Malawi has introduced a greenbelt initiative and identified areas around water resources as growth nodes. In Zimbabwe, a country often shunned by investors due to perceived political risk, the Commercial Farmers’ Union of Zimbabwe has come up with a scheme to finance agriculture projects. Zambia also has significant areas of land available for farming, whereas Rwanda is gaining ground in positioning itself as an agriculture hub with investor-friendly policies.

Areas within the agriculture sector where there are currently projects available include dairy production, the establishment of abattoirs, fertiliser manufacturing as well as biofuel plants. Companies should be on the lookout for opportunities to locally manufacture products that are currently being imported. One such product is concentrated tomato paste, for which there is a high demand on the continent. Large volumes of tomato paste are currently being imported from Italy, which according to Runge “just doesn’t make sense”.

Certain value-adding industries also hold potential. “I was recently sitting at a street café in Abidjan (Côte d’Ivoire) and there were all these mangos lying around, just basically rotting. I asked the people why they don’t dry their surplus mangos and they said they have never heard of dried mango. Dried mango is one of my favourite foods,” Runge noted. He said that if value-addition technology could be unleashed in Africa it would have phenomenal effects.

He advised his audience to steer clear of corruption, which is still a problem in Africa although the situation is improving. “Once it is known in the system that you are corruptible it is going to spread like a bush fire. It is a very dangerous thing to do. Rather walk away from the business,” Runge said.