FARM NEWS

Agribusiness in Africa: Investor reveals which areas hold the most potential

Published

4 years ago

September 24, 2020

witnessradio.org

Chris Isaac, chief investment officer of AgDevCo

by Betsy Henderson

Agribusiness in Africa: Investor reveals which areas hold the most potential

AgDevCo is an impact investment firm specialising in agribusiness in sub-Saharan Africa. It has a portfolio consisting of over 40 active investments throughout the continent. How we made it in Africa speaks to Chris Isaac, chief investment officer at AgDevCo, about the continent’s agribusiness opportunities and the investment lessons he has learnt.

Which agribusiness sub-sectors in Africa are you most enthusiastic about from an investment perspective?

We’ve been involved in many ventures over the past decade. We’ve learnt a lot of lessons from our investment mistakes and successes, which has led us to focus on a few areas where we see the greatest potential.

The first is tree crops, particularly avocados and macadamia. There is significant – and still growing – global demand for these crops, and if you can provide the right quality into the international supply chains, then it’s a good business. There are some risks, as there are major new plantings happening in Africa and around the world because prices are good at the moment. However, there are advantages to having export crops that bring in dollar revenue. Southern and East African countries have the possibility of being globally competitive because they can hit particular seasonal windows, they’ve got the right agro-ecological conditions, and you can build profitable new industries, as we’re seeing developing in Mozambique and Malawi.

Another area is livestock for supply to domestic markets, which plays into Africa’s demographics with an emerging middle class, increasing affluence, and a switch towards more protein-based diets. We’re doing quite a lot in poultry, including some innovative work that provides improved breeds to small-scale farmers. We also have investments in pig breeding.

The third sub-sector would be high-quality, competitively-priced basic foodstuffs. African consumers will buy good quality, locally-produced products if you can come in at the right price point. We’re currently involved in maize meal processing and groundnuts. You can find success in this area if you can assure the consumer the food is safe and if it’s well-packaged and well-branded.

Are there any areas you would be hesitant to invest in?

We’ve found you really need to know what you’re doing if you are going into large-scale production of commodity crops – like maize, soya or rice. These are relatively low-margin commodities where there is global competition and significant economies of scale (especially if you look to South America or Asia), so you really need to be sure that you can be an efficient producer and you’ve got the necessary scale. You are also sometimes dealing with unpredictable policy environments, where there may be intermittent export bans or changing tariff regimes, so primary production of low-value commodity crops is really difficult. It can make sense as part of a strategy where you’re vertically integrated and you’re also involved in the processing, but we’ve found it very challenging to make a success of doing straight primary production of those crops.

A similar challenge is if you move into, say, tomato processing or cassava starch – again, you’re taking on global suppliers who often benefit from subsidies, which makes it very difficult to get the cost of production below that of imports. It can be very tough to make those models work.

Explain the long-term impact of Covid-19 on Africa’s agribusiness industry.

We don’t know, is the honest answer. So far, the agriculture sector in Africa seems to have weathered the storm reasonably well. As one of our non-executive directors, Sir Paul Collier, has said, we are operating in a situation of “radical uncertainty”, and so all you can do is try and design strategies that will be more or less robust regardless of the pandemic’s outcome.

Initially, there was quite a lot of obstruction to logistics – borders closing, congestion at ports, supplies not going in or out – which seems to have eased. I would be surprised if we were to see further lockdowns. We were concerned earlier in the year that this was really going to hit our portfolio quite hard; we haven’t seen that yet, but I don’t think anyone knows what is going to happen over the next year or so. Hopefully, growth in the agriculture sector will be able to continue, as it has done remarkably well relative to other parts of the economy thus far.

In a sense, we are dealing with this type of uncertainty in agriculture all the time. You never know if a harvest is going to fail or if prices are going to collapse, so it’s one reason why you need an investment approach that is long-term, flexible, and that allows you to ride out the bumps that will inevitably come.

Covid-19 has focused attention on the fact that the continent is a net importer of food products, which needs to be reversed. It accelerates the trend toward orientating businesses to cater for growing demand in local and regional markets. That said, I don’t think it completely changes the game, and we’re not expecting a complete breakdown in international supply chains. You still have to focus on being internationally competitive and be able to deal with the fact that chicken can be imported from Brazil to southern Africa at very low cost and rice processing costs in Asia are a fraction of what they are in Africa.

Various stakeholders have highlighted the potential for African agribusinesses to tap into the global health and wellness trend by exporting organic products from Africa to Western markets. Do you agree that this is a good opportunity?

At one level, yes. There is value if you have full traceability back to the farmer who supplied the product, and can be sure that banned chemicals haven’t been used, coupled with sustainable and equitable trade relationships with farmers.

For example, we’re involved in sourcing organic cocoa from farmers in Sierra Leone. This achieves a premium in the market, allows us to share more value with the farmers, and it’s a good business. You could see this happening in coffee, tea, and some of the other traditional export crops, which are otherwise very low margin. If you can show consumers they’re getting a quality product and they know the farmers are getting a fair deal, I think there is a willingness to pay for that.

However, if you shift focus to niche crops – such as superfoods and that sort of thing – the challenge that you face is how big the market demand really is and to what extent you can supply that market and earn a reasonable margin without having to invest in a sophisticated marketing operation. Some people do this brilliantly, but they are really marketing businesses rather than farming businesses.

We’ve found that in order to be successful in these markets, you need a certain scale to be able to build a network of farmers and suppliers, and ensure that the company is going to be sustainable, profitable, and therefore able to maintain those relationships with farmers over time. There is a risk with new crops where the level of demand is not proven yet, and we’ve seen too many businesses spring up for a few years, but then don’t manage to achieve long-term sustainability, which risks farmers being left without a market.

What other agribusiness trends are you seeing in Africa?

Besides increasing domestic demand for better quality food and more protein-based diets, we’re seeing companies realising they need to think about vertical integration. The more successful players are becoming involved all along the supply chain in order to ensure end-to-end quality and consistency of supply. Currently, you can’t always rely on there being a steady supply of raw materials – for example, quality feed, if you are involved in the livestock sector. As markets mature, I think you’d see more specialisation again, but right now vertical integration – either through companies building it themselves or acquiring complementary firms – is a sensible strategy.

Which African country are you most optimistic about?

One country that is perhaps under the radar but where we’ve had great success is Malawi. It has a relatively small economy, but a history of commercial agriculture in tobacco, sugar, and to some extent tea, and an investment climate that is very good for agriculture. There’s also a strong overall supportive environment; Malawi has a solid legal system, it’s relatively painless dealing with the authorities, and you can get things done. We started investing there about eight years ago and have businesses in poultry, macadamia, sugar and peanuts that are all doing well.

Describe one of the investment lessons you have learnt over the years.

Perhaps the key lesson as an investor is getting the balance right between sensible caution and being decisive. In the early days of my career, there was perhaps a tendency to see every opportunity as exciting and I might have been tempted to give benefit of the doubt to a business plan. But then as you get more experience, you see more, and you become a little more sceptical. The thing is to not go too far in that direction – it’s too easy to start saying “no” to every opportunity. There are always risks and at some point you have to take the plunge and say “yes”.

One thing that is challenging in the African agriculture sector is that you have to make decisions without perfect information. We are often backing companies that are doing pioneering things and who are the first movers. So, you’ve got to do your due diligence and you can try to look at things from every angle, but at the end of the day, you do have to be decisive and trust your judgement. You won’t get it right all of the time. You are most likely to succeed if you build a team with experienced people who have seen what works and what doesn’t on the ground. We’ve also found that, as an entrepreneur, it’s important you have a business model that incorporates flexibility and allows you to course correct as you go along in order to manage uncertainty.

Original source: How we made it in Africa

FARM NEWS

National Coffee Forum Petitions Parliament Over UCDA Merger

Published

2 months ago

February 29, 2024

witnessradio.org

Coffee stakeholders through National Coffee Forum say UCDA merger will disrupt the coffee sub-sector. Coffee is one of the leading sources of foreign exchange for Uganda

Coffee stakeholders through the National Coffee Forum – Uganda (NCF – UG) has petitioned Parliament through the Speaker over the proposed mainstreaming of Uganda Coffee Development Authority (UCDA) into Ministry of Agriculture, Animal Industry and Fisheries (MAAIF)

The government plans to merge a number of Agencies to the line Ministries in a move aimed at saving about Shs1 trillion annually. If the move succeeds, UCDA will be taken to MAAIF.

However, coffee stakeholders through NCF – UG say that they find the proposal to take UCDA to MAAIF untenable and detrimental to the coffee sub-sector.

NCF-UG is a private foundation whose membership includes farmers, processors, exporters, roasters, brewers and researchers, among others.

The Forum Chairperson Francis Wakabi says that mainstreaming the entity will negatively affect the achievements Uganda has attained in coffee production and export.

“This decision will negatively affect our access to the international market and will stunt Uganda’s economic growth opportunities by distorting the functions of UCDA that have stabilized the industry over the years,” said Wakabi in a petition dated February 21, 2024. The petition was copied in to the Chairperson of Parliament’s Committee on Agriculture, Animal Industry and Fisheries as well as all MPs.

He adds that Uganda should not risk its achievements by tampering with UDCA that is the main contributor to our coffee success story.

“Mainstreaming it would therefore disrupt the many livelihoods that depend on the industry and adversely affect the badly needed foreign exchange for the country,” the petition reads in part.

As a result of UCDA coffee regulation, Wakabi says that Uganda’s competitiveness was elevated on the global market, ensuring high quality Uganda coffee and enabling Uganda’s coffee to displace that of Brazil and India in Italy and UK coffee markets.

“… World over, coffee is supervised and regulated by a specialized body like UCDA for purposes of institutional memory and specialized focus. Experience from Ethiopia and Kenya who disbanded their specialized coffee authorities and mainstreamed them back into the relevant ministries had to reverse their decisions after registering negative outcomes,” said Wakabi.

The Forum further says that the European Union (EU) buys over 60% of Uganda coffee, making it the biggest market for Uganda.

“The EU has introduced a new regulation called the EU deforestation regulations (EUDR) which bans export of coffee from deforested land, taking effect from 2025. This calls for farmer traceability and the EU commission in Uganda is already working with UCDA to implement the said regulations. They require a country to constantly monitor deforested areas and map all the farmers for purposes of implementation of the farmer traceability program to maintain a high standard of quality. It was reported that Uganda has achieved most of the requirements under the EUDR and required a few steps to be declared compliant. Monitoring and implementing the scheme for the millions of farmers is a tedious activity which requires a specialized unit that can be best implemented using the already established structures of UCDA. Disrupting the current UCDA structure will not only halt the progress made in achieving compliance, but also risk reversing the gains made,” added Wakabi.

He avers that UCDA has been able to greatly contribute to Uganda’s improved Coffee quality through implementation of programs such as certification of Coffee nurseries to ensure quality of planting materials, Provision of Coffee specific extension services and agronomy to improve production and productivity, Provision of technical expertise in Coffee rehabilitation, post-harvest handling practices and pest and disease management and provision of coffee processing equipment like wet mills to farmers and cooperatives to improve quality and promote value addition. The coffee stakeholders are worried that once UCDA is taken to MAAIF which is loaded with many crops and projects, coffee, a key source of foreign exchange for Uganda may not get the necessary priority. Coffee stakeholders argue that if indeed Parliament is a people-centred institution, it should listen to the views of farmers and other stakeholders and retain UCDA as a semi-autonomous agency.

“Given the above position with the attendant reasons, the NCF advises that the proposed mainstreaming of UCDA into MAAIF should not be implemented and that the proposed Bill No. 30 (part VII) be dropped in order not to disrupt the industry and the progress made under the stewardship of UCDA. All coffee stakeholders are unanimously in agreement with this position,” reads the petition in part.

Source: businessfocus.co.ug

FARM NEWS

Govt to import 10 million vaccines to control cattle disease

Published

2 months ago

February 13, 2024

witnessradio.org

Entebbe, Uganda. Government is set to import 10 million doses of vaccines to enable scaling up of ring vaccination as the fight to eradicate Foot and Mouth Disease (FMD) in Ugandan cattle enters a new phase.

Cabinet chaired by President Yoweri Museveni on Monday also proposed that once ring vaccination is complete, farmers start paying for the FMD vaccines in a compulsory vaccination scheme, and thereafter, trade in animal products, will be restricted to those adhering to the plan.

Minister of Agriculture, Animal industry and Fishers Frank Tumwebazwe on Monday shared the resolutions after Cabinet laid out strategies to contain the disease that has hit 36 districts.

Cabinet agreed to create a revolving fund to enable procurement of sufficient FMD vaccines to facilitate compulsory bi-annual vaccination of the susceptible domestic animal population. It also approved a plan for farmers to pay for the vaccines while government covers other costs.

“Vaccination is to be made compulsory. Proof of vaccination will be a precondition for any farmer to sell any animal products,” said Minister Tumwebazwe.

“I appeal to fellow livestock farmers and stakeholders to understand and appreciate these effort as we steadily move to eradicate FMD in Uganda just like other animal diesases like rinderpest wre eradicated.”

Ntoroko veterinary disease surveillance team conducting FMD surveillance and sample collection

The 36 districts currently affected and under quarantine are Budaka, Bukedea, Bukomansimbi, Bunyangabu, Butaleja, Fortportal City, Gomba, Ibanda, Isingiro, Kabarole, Kasanda, Kayunga, Kazo, Kiboga, Kibuku, Kiruhura, Kumi, Kyankwanzi, Kyegegwa, Kyotera, Luuka, Lwengo, Lyantonde, Mbarara, Mbarara City, Mityana, Mpigi, Mubende, Nakaseke, Nakasongola, Namisindwa, Ngora, Ntungamo, Rakai, Rwampara and Sembabule.

All districts neighboring the affected districts are at high risk, under strict surveillance, and the authorities have been advised to remain vigilant.

These include Apac, Amolatar, Bugiri, Bushenyi, Butaleja, Hoima, Iganga, Jinja, Kabale, Kaberamaido, Kaliro, Kamuli, Kamwenge, Katakwi, Kasese, Kibaale, Kiboga, Kyenjojo, Mbale, Masindi, Mayuge, Mukono, Namalemba, Nakapiripirit,
Palisa, Rukungiri, Sironko, Wakiso and Soroti.

Tumwebaze assured farmers that in the next one or two months, his Ministry expects to receive and dispatch 2.3 million doses of the FMD vaccine to the affected and susceptible districts for ring vaccination scale-up.

He told parliament earlier that as a way of increasing availability of Foot and Mouth Disease vaccines in the country,
Uganda’s National Agiculture Research Organisation (NARO) has started the process of formulating and developing an FMD vaccine for Uganda.

Source: The independent

FARM NEWS

Farmers losing Shs4 trillion due to livestock diseases

Published

3 months ago

January 31, 2024

witnessradio.org

ScienceDirect has revealed that farmers in Uganda lose more than $1.1b (Shs4.1 trillion) in aggregated annual direct and indirect loss due to the rising spread of tick-borne animal challenges, with the commonest and economically damaging tick-borne disease being the East Coast Fever.

The livestock industry in Uganda and its productivity continue to be threatened by a number of diseases many of which are tick-borne related.

This, Dr Anna Rose Ademun, the Ministry of Agriculture commissioner animal health, said results from arcaricides that have become resistant, thus the need to ensure collaboration and get solutions to the problem.

“There are ongoing efforts by the Agriculture Ministry, in collaboration with the Food and Agriculture Organisation to support diagnosis of tick resistance to acaricides at regional laboratory centres but this is not enough,” she said during the livestock industry key stakeholders meeting in Kampala, which had been convened to discuss and prioritise areas for tick control.

The stakeholders included veterinarians, extension staff, farmers, processors and government representatives.

Ministry of Agriculture is already working on the Managing Animal Health and Acaricides for a Better Africa Initiative, which seeks to, among others, provide sustainable solutions to enable small-scale farmers maximise the potential of their cattle by developing and practicing methods that can successfully manage tick infections in cattle.

During the meeting, the TickAcademy App, which will support farmers in managing tick infestations was also pre-launched.

By the end of January, farmers and extension workers will be able to access the app’s educational content, which includes simple-to-watch films, to help them become knowledgeable about tick control.

Mr Enrique Hernández Pando, the GALVmed head of commercial development and impact, said the Managing Animal Health and Acaricides for a Better Africa Initiative will be important in tackling acaricide resistance challenges as well as help farmers and animal health officers to access creative methods of addressing the problem of acaricide resistance.

During the meeting, stakeholders jointly agree to train and sensitise field staff and farmers about tick management strategies that work, as well as strengthen the diagnostic infrastructure and testing capabilities for tick resistance and other animal health-related concerns.

Others will involve making it easier for farmers to obtain credit from savings institutions run by farmer groups at a reasonable cost so they may purchase specialized equipment for applying pesticides.

Mr Nishal Gunpath, the Elanco Animal Health country director south and sub-Saharan Africa, said they will support the Initiative to drive livestock in a better direction, noting that it will also help small-scale livestock farmers to maximise their potential.

Original Source: Daily Monitor