SIFCA remaining positive despite losing CEO in Ivory Coast violence
The SIFCA group, part owned by Singapore’s Olam International and Wilmar International, is one of Africa’s biggest agro-industrial firms, employing more than 25,000 salaried employees and working with 60,000 farmers in Ivory Coast, Ghana, Nigeria and Liberia. The Abidjan-based company, founded in 1964, has just announced annual profits of US$114.3 million for 2010, thanks to high natural rubber and palm oil prices. But despite the strong performance, the last few months have been difficult. The company lost 24 employees in the recent Ivorian conflict, including its CEO, Yves Lambelin. SIFCA’s new CEO, Bertrand Vignes, spoke to How we made it in Africa.
Give us a brief overview of the SIFCA group?
Our main activities are rubber and palm oil. We are also involved in sugar but that is only about 10% of our turnover and is just in Ivory Coast, for the local market. Rubber is for export, specifically to European industries and we have a strategic partner in Michelin tyres.
We want to develop rubber in Ivory Coast, Nigeria, Ghana and Liberia. The problem with natural rubber is that it takes very long to generate a return on investment, so it means that we have to take advantage of the good current circumstances to invest. Today the price is high so it means we have a strong cash flow to invest and expand.
Our other main activity is palm oil. Currently we only produce palm oil in Ivory Coast through our subsidiary Palmci. We work with market leader Wilmar and also another Singaporean company Olam International. We would like to have a balance between these two crops.
SIFCA recently suffered great losses during Ivory Coast’s post-election crisis. Do you still feel positive about Africa’s business climate?
Our existence shows that we believe in the region. We are concentrated in West Africa because we really believe this is where the opportunities are. Nevertheless, we are in countries where things are not always easy. In Ivory Coast we have just gone through a difficult crisis, so people who want to come to Africa need to understand all the particularities of the countries where they will be operating.
How secure are land rights for your farms?
Historically, companies here had concessions that were given by the government. Today, the land rights situation has changed. Some countries still function with a concessions system. If Liberia, for example, wants to attract new investors, they would ask investors to invest in concessions with certain commitments to providing social services. In Ivory Coast, where there is already a dynamic agricultural sector, things have evolved. Here individuals acquire land rights and can then sell them on. So, if you want to create a farm, you need to have an agreement with the landowner. We work with the landowner to lease land to develop industrial plantations and parallel to that, we support the development of village farms with the same group of people. So it is a harmonious development between industrial and village farms.
A lack of financing for agribusiness projects is a major challenge in many parts of Africa. Are you getting enough support from the banks?
We have excellent relations with our banks and investors because the group is well managed and that gives us the opportunity to finance our growth. Where we have it more difficult is to convince the banks to support the farmers. As far as we are concerned there are more opportunities for development at the level of the farmer. For us it would make a big difference because they are our partners who will supply us with crops. So we are ready to support them with finance but we also need the support from the banks. It is, however, difficult because we are talking about thousands of small-scale farmers and the difficulty in getting guarantees. But we are moving forward, there are some new projects on the horizon and I think we will find a solution to this.
What advice do you have for those thinking of moving into the African market?
There is a real problem with fraud; the authorities need to make sure the business laws are respected. That would give more guarantees to investors that they can operate in an environment where the rules are respected. The second thing is to understand that you operate in a different social context from, for example, Europe. All our activities need to take into account the economic and social development needs of the population. You just cannot do business or increase your profits without also having a significant impact on the community and improving things like health and education levels.
What regulatory reforms would most help your business?
Respecting the rules, as I said before, is important. Secondly, we encourage countries to speed up reforms to modernise land rights. For example, Ivory Coast already has a fairly recent land law, but putting it into practice has been a very slow process. In our business we are conditioned by the status of land rights. The day that farmers have secure land rights, they will have easy access to finance from the banks. So this is clearly important. But above all, there needs to be a respect for rules and secure borders. If there is Brazilian sugar or Asian oil that is smuggled into the West African market, we will find it difficult to be competitive. We know that the Economic Community of West African States (ECOWAS) free trade rules will be respected as soon as we get control of the smuggling problem to stop goods coming into the zone illegally.
Richard Miles is How we made it in Africa’s correspondent in Abidjan