Global Companies to Exploit Africa's Food Potential30 October 2013
AFRICA - Global companies hold the key to realising the potential of sub-Saharan Africa in the food and agriculture sector, accoprding to a report from Rabobank.
While Sub-Saharan Africa is often seen within the F&A community as having significant untapped potential – both from an agricultural and a food sector perspective – a gulf remains between the continent’s potential and the current situation. Much agricultural production is still subsistence-based, the F&A value chain remains underdeveloped, and a growing number of African countries have become dependent on food imports - all in a region that is abundant in both land and water.
In a new report, How global companies can help Sub-Saharan Africa reach its F&A potential, Rabobank looks at the ways F&A companies can increase their engagement with the region, by acting as significant catalysts in Africa’s F&A development.
Time to act is now
“F&A companies outside Africa that have built up appreciable levels of know-how, have established some level of leadership in their existing markets, and have demonstrated the capabilities, resources and ambition to build their businesses beyond their home markets, are in the best position to apply their skills in Africa,” says report co-author, Justin Sherrard.
The time to act is now, the report’s authors conclude, explaining that there are an increasing number of examples of global F&A companies acting as critical catalysts for the transformation of Africa’s F&A sector.
“There seems to be a growing recognition in Africa that it must accelerate the emergence of viable, globally and regionally competitive F&A value chains with the cooperation of local, regional and global F&A companies, governments, non-government organisations (NGO) and multilateral institutions,” explains report co-author Bill Cordingley.
“For too long, global F&A companies have considered the African market too difficult and indeed have often had better opportunities for growth elsewhere in the world. As a result, Africa has been either ignored or the subject of only half-hearted or sporadic efforts by the global commercial agribusiness sector. Global F&A companies need to take another look at Africa, with a fresh mind-set, a realistic long-term perspective, and a willingness to partner with regional and local players to make the investments that will help the continent more rapidly realise its unquestionable F&A potential. In return, global F&A companies who make this commitment and get it right have much to gain,” he added.
Big and small
While the report highlights global multinational food and beverage companies and agribusinesses – including Nestlé, Unilever and Coca-Cola, as well as Syngenta, AGCO, Cargill and Ecom – as prime examples, given their resources, skills and current levels of engagement with the continent, it also points out that companies do not need to be global giants to make a difference in Africa.
“Local or regional F&A companies from around the world that have unique capabilities are also getting involved. Specialist F&A companies like ICM Agribusiness from Australia or Jain Irrigation from India are on the ground, working with the local supply chain to make a difference and close the production gap in Africa. Many others from both developed and emerging markets have the unique resources, skills, flexibility and focus to play a critical role. No matter the size of the company, important attributes for being successful in Africa include the ability to bring unique capabilities, sensitivity towards the local setting and a long-term commitment to succeed,” Mr Sherrard said.
A number of drivers, both direct and indirect, suggesting that now is the time for global F&A companies to push harder than ever to make their mark in Africa are identified in the report. These are:
- Rapid urbanisation leading to consumers’ growing and changing needs
- Enormous untapped agricultural potential unmatched in the rest of the world, and the opportunity to develop indigenous F&A value chains to capitalise on this potential
- Global food system requiring Africa to produce more, particularly key export commodities, e.g. coffee, cocoa and palm oil, and
- Global F&A companies needing access to Africa’s new consumers to sustain growth rates.
- Longest run of political, social and economic stability, improving investor interest and opportunities
- Emerging trade deficit and declining competitiveness of F&A
- Alignment of interests by governments and other stakeholders to address Africa's need to move from subsistence to sustainable agriculture, and
- Governments and other stakeholders recognizing need for private sector investment of capital and know-how, alongside sensible policy and regulatory reform, to enable Africa to meet its potential.
Steps to succeed
Before F&A companies can succeed, however, many will need to change their mindset and take steps to commit to Africa on a long-term basis. In both helping Africa reach its F&A potential and addressing the increasing requirements of Africa's emerging urban consumers, global F&A companies will need to adapt their business models to the circumstances on the ground. But there are some overall principles, which the report's authors identify both in terms of where global companies should focus their efforts and the keys to how they can deliver a successful outcome.
According to the report, there are four zones of opportunity where global F&A companies should focus:
- Increase production sustainably – address the yield gap in existing farming operations, expand operations where possible and develop new land resources
- Add value by building sustainable supply chains for all players – reduce risk, improve productivity and access to capital and markets; minimise waste and locate processing close to production
- Become regionally and globally export competitive – utilise market access and insights; unblock infrastructure bottlenecks. In particular, Rabobank identifies export opportunities for African cocoa, coffee, cashew nuts, palm oil and sugar, and
- Address African consumers' increasing and changing requirements – the local market will be key to success.
The report also outlined five crucial factors that the authors believe will, in part, determine a global F&A company’s ability to successfully exploit the opportunity in Africa: adopting an inclusive approach, making a commitment, establishing supply chain partnerships, delivering value via unique capabilities, and reducing risk and securing finance.
"For global F&A companies, developing and implementing a viable strategy for entering the African market is not straightforward, nor can it be done swiftly or cheaply - they should expect the unexpected," said Mr Sherrard.
He added: "Success will depend on their ability to identify the opportunities that fit with their capabilities and ambitions, to find the right partners and to adopt an Africa-centric approach to the market. It will also require confidence in the view that developing a presence in the African market will be worth the time, effort and capital required. The rewards will come and it will take time, but now is the time to move."TheMeatSite News Desk