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[August 17, 2014]
SINGAPORE - AFRICA - How Africa can feed the world [African Business]
(African Business Via Acquire Media NewsEdge) What are Olam's current operations in Africa? We currently have operations in 25 African countries, and these extend right across the value chain from seed to shelf. We have upstream palm and rubber plantations in Gabon, rice farms in Nigeria and coffee in Tanzania and Zambia.
We continue to source products including cashew, cotton, cocoa and sesame from our network of approximately 3m smallholders.
At the mid-stream level processing level our operations include wheat mills in Ghana and Nigeria, with two more coming on line in Senegal and Cameroon, as well as cocoa, cashew and palm oil processing plants in various countries. Finally, we have our downstream Packaged Foods Business, selling consumer staples such as Tasty Tom Tomato Paste and Cherie Noodles. We continue to invest in our smallholder producer networks, supporting farmers through field schools, interestfree micro-finance, inputs such as fertiliser and seedlings, and social investments such as health centres and schools.
By collaborating with the NGO sector we have been able to advance social and environmental best practice. For example, this is our sixth year of leveraging our extensive networks and partnerships with GIZ (Gesellschaft für Internationale Zusammenarbeit GmbH) and EngenderHealth to support programmes for the prevention and treatment of HIV/AIDS across Africa.
How much have you invested in Africa to date? Our commitment to the African region runs deep: Olam started sourcing our first product - cashews - from the farm gate in Nigeria 25 years ago. Since then, Olam has invested $1.26bn in support of our operations across the continent.
How do these investments fit in with your global strategy? Our global strategy can be best understood as a series of interrelated steps of adjacent product, geographic and value chain expansion, with each step building on prior initiatives without losing focus of our core supply-chain trading business.
This has led to our strategy of selectively integrating into high value upstream and mid/ downstream segments of the value chain - and nowhere is this more apparent than in Africa.
Which are the major growth markets for agribusiness in Africa? We see opportunity in local value addition in African supply chains, and we have developed 25 tier one processing plants in the region including units for cashew, rice, cocoa and sesame among others. Processing crops in-country has a number of advantages - not only does it provide employment, reduce transport costs and emissions, but it gives farmers confidence that there is a ready buyer for their harvest, knowing we will commit to a fair price.
Africa is also increasingly a destination market, and not just an export market. Olam has invested in processing units for imports such as tomatoes and wheat to support growth in our packaged foods business.
Africa is set to become the region with the fastestgrowing consumer market, with McKinsey predicting an imminent boom in African consumer spending of $1.4 trillion by 2020, of which approximately 46% will be on food and consumer goods. Naturally Olam is keen to be part of the expansion in this sector. We are already the second-largest producer of branded tomato paste in West Africa, selling through three brand names: Tasty Tom, De Rica and Festin.
How big is the packaged foods market in Africa? What are your most popular brands? Our portfolio currently counts six key brands that are marketed to more than 10 South and West African markets, and we now have leading positions in most of the categories that we participate in.
This has been achieved through a strong distribution set-up that reaches to the smallest towns and villages in each of our target markets.
We are concurrently making significant investments in brand building and in developing deep insight into African consumers' needs and wants. This, we believe, will be a source of enduring and powerful competitive advantage for us. Our popular products include tomato paste, pasta, biscuits, edible oil, instant noodles and beverages.
What are the major challenges for investing in Africa? Olam's deep experience in emerging markets and our long heritage in Africa means that we are able to adapt our operations in challenging and often unstable environments, and can successfully mitigate the associated risks.
In terms of challenges on the ground, poor infrastructure is the most significant issue as it creates bottlenecks and inefficiencies. This issue is common to many of the emerging markets where Olam operates, and the company is well practised in meeting this challenge through the development of roads, warehouses and alternative transport networks.
For example, in the area surrounding our rice nucleus in Nasarawa state, we have constructed over 40km of roads to facilitate access and egress at the farm.
How do you ensure that the Olam philosophy runs through all your operations? Today, our "Rite of Passage" programme (which is known at Olam as 'Sunny's MBA') sends our management team to some of the most physically, socially and demographically challenging geographies within our business footprint.
This embeds the entrepreneurial spirit which permeates the Olam culture, and gives these individuals perspective, teaches them respect for each role within our organisation and within a community, and creates an appreciation of what growing responsibly really means.
Transparency and fairness have always been key watchwords and remain part of our commitment to long-term growth and investment.
As an international corporation working in challenging markets, we have always focused strongly on good governance as well as unlocking value for our farming communities economically, socially and environmentally.
Developing local talent and building capacity throughout operations is vital to Olam's durability in local markets. Initiatives such as the West Africa Trainee programme help to bridge the skills gap in management.
Nigeria's President Goodluck Jonathan recently toured your rice plantations in the country. Nigeria still cannot produce anywhere near the rice it consumes. How are you trying to close the gap? Olam is enhancing Nigeria's domestic food security through scaling up rice cultivation in the country. Our rice farm and integrated mill in Nasarawa state are supporting the government's ambitions to reduce the levels of imported rice consumed in Nigeria, by producing and processing home-grown, high-quality rice at a large scale.
Olam's 6,000ha rice farm is the largest in West Africa, and will provide 36,000 metric tonnes of milled rice to the domestic market, thanks to the four varieties of high-yield rice that have been developed with the West African Rice Development Association.
From this central rice farm 'nucleus' we are operating a highly scalable outgrower programme, whereby surrounding rice-growing communities are supported by Olam with training, prefinance and agri-inputs in order to improve their own paddy yields. There are currently 3,000 smallholders engaged in the programme, with a target of 16,000 by 2018. Ultimately, 20,000 smallholder farmers will supply 30-40% of the mill's capacity. It is our hope that other players will replicate the success of Olam's rice farm both in Nigeria and elsewhere to support the ongoing effort to scale up production of food staples in Africa, for the African market.
During his recent visit to the Olam rice farm, President Goodluck Ebele Jonathan commented: "Our goal of making Nigeria a net exporter of rice will be achieved faster by encouraging large commercial farms that will complement our small-scale farmers. Large mechanised rice farms like Olam's 6,000-hectare farm will not only boost food production but also provide significant opportunities for jobs in rural areas. These mills are producing high-quality local rice that meets international standards and competes well with imported rice." I believe you started in Africa and are now in charge of operations there. What is so special about Africa? Africa will always hold a special place in my heart - it is a unique and hugely diverse continent that holds so much energy and so much potential. It is a very exciting thing that today Africa has the youngest population in the world. The next generation must be equipped to seize the opportunities that are on the horizon in the next 30-40 years, and that are already right under our noses. Quite simply, Africa is the place to be - and the best is yet to come.
How far is Africa from achieving a sustainable Green Revolution and what does it need to do to get there? When you look at comparative productivity for the African region with the rest of the world, the yield gap is stark. Sub-Saharan Africa's actual crop yield is estimated at 25% of potential yield, compared to East Asia at almost 90%.
I see a huge opportunity for sub-Saharan Africa to catch up and even overtake other regions as a global agricultural powerhouse.
If Africa could double its yield to 50%, the continent would be able to not only feed itself, but also become a net food exporter. ¦ 'We continue to source products including cashew, cotton, cocoa and sesame from our network of approximately 3m smallholders' (c) 2014 IC Publications Provided by SyndiGate Media Inc. (Syndigate.info).
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