South African agriculture related businesses are increasingly looking at opportunities in the rest of Africa, according to Hennie Heymans, managing director of DHL Express South Africa.
“We have noticed that the source of the calls and the enquiries that we get are a lot more agriculture focused than what they were in the past so it is absolutely clear that there is a new and intensified focus from the agricultural sector in South Africa to further expand into Africa,” said Heymans in an interview with How we made it in Africa.
He added that a lot of this growth in DHL’s business is seen through the transportation of agricultural equipment from South Africa to other countries in Africa, particularly in the movement of spare parts. “Then also a lot of documentation as [South Africans] decide to set up businesses abroad,” Heymans continued. “So we see a lot of document flow from the sector.”
In line with the general growth of many of these African markets, Mozambique in particular has become a popular destination for the transportation of agriculture related business for DHL. Ethiopia, Kenya, Ghana, Nigeria and Uganda have also seen increased movement in this sector.
“I think there are a couple of reasons driving this trend,” said Heymans. “I think the whole issue in South Africa around property rights is something that is hot on the table at the moment. The second part of it is that there is a lot of arable land available all around Africa, as well as water.”
Furthermore, Heymans explained that many African governments have a high regard for the skills and expertise of South African agricultural companies. “Africa has sort of a huge appreciation for the skill of the agri sector in South Africa, so they are pretty much welcomed wherever they go across the continent,” he continued.
Africa’s potential for agriculture
According to the World Bank’s estimates, sub-Saharan Africa has 60% of the world’s uncultivated arable land and with worldwide food security increasingly becoming a topic of discussion, the continent has the potential to not only feed its own growing population, but the rest of the world too.
“Africa as you know is the last [frontier] for growth in the world and therefore everybody is trying to get a piece of Africa at the moment. South Africa is the best position for that. In fact, this year South Africa is the biggest foreign direct investor into Africa [on the continent],” emphasised Heymans.
“At the moment the agriculture industry in Africa is around US$313bn and we definitely have the potential, across sub-Saharan Africa certainly, to take that to a trillion dollars or more. Firstly because of the arable land and the water resource that is still available, and secondly simply because of the consumer demand and spend that is becoming available. It’s no secret that the middle class is on the rise in Africa and that’s also going to be driving a lot of the growth that we are going to see for the next 15-20 years on the continent.”
Where should South African companies look in Africa?
Heymans said South African agricultural companies could potentially follow the investment trail and expansion of Shoprite in the African market for business opportunities. The South African retailer has been expanding rapidly across the continent in recent years with a presence in 16 African countries. The opportunity to ensure the flow of fresh produce to Shoprite in many of these countries should be something South African agriculture companies look into, according to Heymans.
He also advised South African businesses to do adequate research on the African markets they are considering entering, as each country is unique and comes with its own set of opportunities and challenges.
“I think Africa by its very nature is a complex market,” explained Heymans. “My advice to the small and medium enterprises is to always choose markets very carefully. They shouldn’t start with those complex markets; they shouldn’t start with French West Africa for a couple of reasons. The first and probably the most obvious one is the language. They should choose a country where English is still the main language because it more than often means that that the legal system is based on the English or Dutch legal system which is something that we as South Africans are pretty familiar with. Then the second part of that is to make sure that you choose your partners really, really carefully before you venture into Africa.”
He added that DHL believes the South African agricultural sector’s interest in Africa will continue to grow, but this growth is not only limited to this industry.
“We are seeing a lot of growth in the mining industry. We are seeing a lot of growth in the IT industry. And then also in the medical field there is a lot of [interest]. So we are certainly experiencing growth across these sectors at the moment and the agri sector is certainly the latest one that has joined the list of growth sectors for [DHL’s business],” said Heymans.