Opportunities and Challenges for Africa’s Food Industry
Africa’s domestic feed market will increase threefold from USD 313 billion today to USD 1 trillion by 2030, says the World Bank.
Agribusiness banker Rabobank agrees, but says international food companies need to commit to the African market – “How global companies can help sub-Saharan Africa reach its F&A potential” http://www.cnbc.com/id/101120923 .
In brief, there are enormous opportunities and challenges for the food industry in Africa.
“The more challenging step is to identify specific value chain opportunities and credible local partners who can co-invest or become a supplier. Nothing works in Africa without partnerships or supply chain alignment. But for those companies that get it right, the rewards will be considerable.”
Rabobank is worth listening to. This is a global financial institution specialized in agriculture and agribusiness financing. Its roots are embedded in the Dutch cooperative farming movement. Through its division Rabo Development, the bank has formed strategic alliances with banks Mozambique, Rwanda, Uganda, Tanzania and Zambia, as well as China, Brazil and Paraguay.
Rabobank believes that food companies entering the African market need to focus on some basic steps:
1. Understand consumers’ needs and wants:
As elsewhere in the world, the first step is understanding exactly what the consumer wants, and then establishing how your company’s capabilities can meet those needs.
Rabobank says that the trends driving the global food industry over the past three decades are also visible in sub-Saharan Africa: consumers are looking for higher-quality Western and international-style food.
“As households change and out-of-home employment increases, consumers have more money and less time for traditional food purchases and preparation.”
Rabobank understands that the African middle class has less money than in many other parts of the world. Companies targeting these consumers need to “balance the consumers’ desires for the latest Western convenience with the reality of what they can afford and what they actually need”.
For example, there is a growing opportunity for “nutrient-rich packaged food in smaller package sizes African consumers can afford”. Fast food restaurant chains are expanding in urban areas, and they will need modern food chains.
2. Build sustainable supply chains:
Supply chains reduce risk, improve productivity, improve access to capital and markets and they help to reduce waste. Rabobank advises to locate processing close to raw material production, and ensure that production increases in a sustainable manner.
For example, there is no point in building a state-of-the-art food processing and packaging plant in an African country if raw material supply is in doubt.
3. Be regionally & globally export competitive:
By aiming high enough to be competitive in regional and global markets, food companies will raise their standards and ensure their long term success, even if the bulk of their products are sold on local markets. Rabobank identifies significant export opportunities for African cocoa, coffee, cashew nuts, palm oil and sugar.
Agribusiness and food processing in Africa is in fact just ‘emerging’. Basic agricultural production still accounts for more than 60% of the entire value chain, says the World Bank, compared to 22% globally – the balance is off-farm value addition.
