Olam International, a global trader and processor of agricultural commodities, started operations in 1989 in Nigeria by exporting raw cashew nuts to India. Today the company has diverse operations throughout the world, including 25 African countries.[hidepost=9][/hidepost]
In addition to exporting raw commodities from Africa, Olam also has food processing and packaging businesses on the continent that cater for both the African and international market. Olam’s locally produced brands, such as Tasty Tom tomato paste and Cherie Noodles in West Africa, contend with imported processed food from China and India. Cashews and cocoa are some of the food processed in Africa that is exported to the international market.
MD Ramesh, Olam’s president and regional head for southern and eastern Africa has been at the company almost since its inception. In 1992, Ramesh left India to join Olam’s operations in Nigeria, and has spent the last 22 years in various leadership positions within the company, many of which were geared towards the business’s African expansion.
How we made it in Africa asked Ramesh to share some insight into how to successfully expand a business in Africa.
Discovering new markets: speak to local businesses
“It’s important for companies expanding to Africa – and looking for new markets here in Africa – to understand that it is not always possible to get statistics and data on every African market,” said Ramesh.
To get an accurate insight into the opportunities that exist in a country, Ramesh suggests that companies speak to local businesses that have a better understanding of the market. He added that foreign companies will also benefit from partnering with local businesses. “It’s essential for them to rely on those partnerships rather than the raw data, which may not even be available.”
Local partners might also be able to assist in the solution to challenges. For example, Olam’s cashew processing factory in Mtwara, Tanzania, has the capacity to employ thousands, but finding enough skilled workers in the region proved to be a problem. According to Ramesh, Olam decided to partly outsource first level processing to small and medium enterprises in the region, which became responsible for training and managing workers.
“The challenge of handling workers, training them… was no longer completely ours. It belonged to the factory owner who was a Tanzanian small and medium enterprise.”
Investing along the entire supply chain
Over the last 25 years, Olam has invested close to US$1.7bn across the continent, with considerable investments in rubber, palm, coffee, rice, cotton and edible nuts, to name a few. In 2013 the company reported that it had roughly three million smallholder farmers in its network.
To ensure a steady supply of raw agricultural produce for its operations, Olam has invested significantly in developing its smallholder farming networks. The company provides support in the form of interest-free microfinance, agricultural inputs like fertiliser and seedlings, farmer training, and social investments such as health centres and schools.
Ramesh said it is important to have a long-term investment perspective, especially regarding skills development.
“In a country like Ivory Coast or Mozambique, where we have pretty large cotton plantations, farmers need to be trained from scratch in agronomical practices to plant cotton, to grow cotton, to ensure that the yields are good… That kind of scheme is necessary.”
Finding and developing local employees
“It is essential for the continent, as it is essential for the longevity of the business, that you find local Africans in the area you are doing business in,” emphasised Ramesh.
One way to find local talent is to target graduates coming out of African business or agricultural schools, and developing them within the company.
“We have learnt with our experience over time that there is significant value to invest in a lot of talent coming out of education institutions, and growing them in the business. So we have programmes in the Ivory Coast, in Ghana, in Nigeria, in Kenya, in Zimbabwe, in South Africa and Tanzania where we pick fresh talent.”
Ramesh explained that developing home-grown talent can also result in committed, long-term employees. “They kind of bond with the organisation that developed them from scratch, and over time the company can benefit because they grow up to become a significant [asset] to the business.”
Dealing with bureaucracy
“When I go to conferences, I often hear a lot of talk about corruption and bureaucracy and so on. Honestly, when comparing Africa to other parts of the world, I am not sure that we are so much worse off.”
Ramesh said that local authorities and governments in Africa want a win-win, where both the business, economy and local community benefit from investment. He added that if foreign companies communicate their needs and goals – as well as listen to the needs of local authorities and communities – governments will generally be happy to assist business expansion in the region.
For example, in countries like Côte d’Ivoire and Mozambique, the government gave Olam a mandate to grow cotton in large tracts of land. In return, Olam creates employment and has taken responsibility for training farmers in good agronomical practices.
Ramesh noted that government bureaucracy is less likely to be a problem if foreign companies establish “long-term business partnerships that benefit both sides”.