East Africa's Role in GCC Food & Agribusiness and Future Prospects
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An overview of East Africa's Food and Agricultural trade and how East Africa can supply the affluent and high growth GCC consumer food market.
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East Africa's Role in GCC Food & Agribusiness and Future Prospects
- 1. MANAGING DIRECTOR, FARRELLY & MITCHELL EAST AFRICA’S ROLE IN GCC FOOD & AGRIBUSINESS AND FUTURE PROSPECTS 21 May 2019 AFTI East Africa Agri Food Trade & Investment Summit Malachy Mitchell NAIROBI, KENYA
- 2. Agenda 1 2 4 Overview of East African Economy Agri-Food Production & Trade Trade Potential Addressing the Opportunity GCC Market Potential 3 5 Disclaimer: The information in this presentation is intended to give information in general nature, great efforts has been exerted to ensure the accuracy of this data at the time the presentation was drafted. Farrelly & Mitchell Business Consultants Ltd. and its Branch offices or affiliates does not provide any implicit or explicit guarantees on the validity, timing or completeness of any data or information in this presentation. Also we assume no responsibility on the appropriateness of the data and information for suiting any particular purpose or reliability in trading or investing. Please note: Unless provided otherwise and in writing from us, all information contained in this presentation, including logo, pictures and drawings, are considered property of Farrelly & Mitchell Business Consultants Ltd
- 3. 3 AFTI East Africa Conference OVERVIEW OF EAST AFRICAN ECONOMY 01
- 4. 4 AFTI East Africa Conference East Africa’s Economy is Continuing to Expand… Growing at almost double the average rate of other African countries Source: World bank East Africa Region by 2024 160USD Bn Anticipated based on historic trends AGRI GDP 650USD Bn Expected to grow at CAGR 7% from 2017 GDP (CURRENT) 495Mn Expected to grow at CAGR 7% from 2017 POPULATION
- 5. 5 AFTI East Africa Conference …However, Agri Production is Slower than Population Growth The region is mostly self sufficient Cereals Roots and Tubers Fruits Dairy Vegetables Pulses NET DEMAND BY AGRI PRODUCTS, 2017 Cereals, Roots and Tubers, Fruits and Dairy accounts for 87% of total demand 205 Mn tonnes in 2017 34% 10% 6% 4% 2% 31% 13% 0% 0% AGRI PRODUCTION, 2013-17 Production grew by half the rate of population in the region 189 194 193 193 196 184 186 188 190 192 194 196 198 2013 2014 2015 2016 2017 Units in Mn Tonnes Source: FAO CAGR 0.9%
- 6. 6 AFTI East Africa Conference Select Products are Exported Cereals dominate imports while nuts, pulses, fruits and vegetables are exported AGRI PRODUCTS DEMAND OVERVIEW, 2017 Units in Mn Tonnes Source: FAO
- 7. 7 AFTI East Africa Conference Under Developed Supply Chains Lack of appropriate funding is hindering supply chain development in Africa • Development Finance Institutions • Private Equity • Local Banks • Government Programs • Developed / Cash Positive Projects • Smallholder Farmers • Agro-processing • Greenfield / Brownfield Projects • Primary Production • Limits Scaling • Increases production costs • Limits technology application • Hinders integration FUNDING SOURCES PROJECTS IMPLICATION
- 8. 8 AFTI East Africa Conference AGRI-FOOD PRODUCTION & TRADE 02
- 9. 9 AFTI East Africa Conference Ethiopia, Tanzania, Malawi, Kenya and Uganda accounts 70% of the Production … Cereals, roots and tubers are the main stream products accounting for 50-80% among all countries Units in Mn Tonnes Roots and Tubers Cereals Fruits Dairy Vegetables Others ETHOPIA 0 5 10 15 20 25 30 TANZANIA 0 5 10 15 20 25 30 MALAWI UGANDA 0 5 10 15 20 25 30 KENYA 0 5 10 15 20 25 30 OTHERS 0 5 10 15 20 25 30 0 5 10 15 20 25 30 Source: FAO
- 10. 10 AFTI East Africa Conference … But Production is Concentrated Ethiopia and Tanzania are by far the largest producers Source: FAO Ethiopia Tanzania Malawi Kenya Uganda Others PRODUCTION BY COUNTRIES, 2017 196 Mn tonnes in 2017 23% 18% 11% 10% 8% 30%
- 11. 11 AFTI East Africa Conference Import of Agri Products Wheat and rice account for 60% of total imports Source: UN Comtrade Others include Madagascar, Uganda, Tanzania among others Kenya Sudan Mozambique Mauritius Zimbabwe Others IMPORTS BY COUNTRIES, 2017 Kenya, Sudan and Mozambique accounts 60% imports USD 9.1 Bn in 2017 30% 8% 25% 20% 10% 7% Others include Roots and Tubers, Meat, Eggs, Treenuts Cereals Dairy Pulses Meat Vegetables Fruits Others IMPORTS BY CROPS, 2017 Imports are mostly limited to Cereals which account 75% share USD 9.1 Bn in 2017 9% 75% 6% 3% 3% 3% 1%
- 12. 12 AFTI East Africa Conference TRADE PARTNERS FOR CEREALS, 2017 Agri Import Trade Partners for Cereals Russia, Pakistan and Argentina as key trade partners Source: UN Comtrade WHEAT RICE MAIZE RUSSIA 37% ARGENTINA 15% CANADA 7% PAKISTAN 38% THAILAND 25% INDIA 14% MEXICO 35% SOUTH AFRICA 25% UKRAINE 4%
- 13. 13 AFTI East Africa Conference Nuts Cereals Pulses Vegetables Fruits Others Others include Meat, Dairy, Eggs, Roots and Tubers USD 4.3 Bn in 2017 14% 22% 12% 8% 11% 33% EXPORTS BY COUNTRIES, 2017 Tanzania, Kenya and Uganda accounts near 65% exports Others include Madagascar, Uganda, Tanzania among others Tanzania Kenya Uganda Sudan Mozambique Others USD 4.3 Bn in 2017 33% 10% 11% 22% 18% 6% EXPORTS BY CROPS, 2017 Cashew nut and Pulses exports from Tanzania accounts 30% of the total exports Export of Agri Products Nuts and Pulses are the major products exported Source: UN Comtrade
- 14. 14 AFTI East Africa Conference Agri Export Trade Partners India and Vietnam are key trade partners Source: UN Comtrade Trade Partners for Exports, 2017 NUTS CEREALS, INTRA-TRADE PULSES VIETNAM 44% INDIA 36% USA 9% KENYA 32% SOUTH SUDAN 17% TANZANIA 8% INDIA 37% KENYA 18% PAKISTAN 10%
- 15. 15 AFTI East Africa Conference AGRI-FOOD TRADE POTENTIAL 03
- 16. 16 AFTI East Africa Conference …Strong Export Product Mix from Tanzania and Kenya Cashew Nuts, Avocadoes and Pigeon Peas are promising products considering global market dynamics Source: UN Comtrade, FAQ, Farrelly & Mitchell IMPORTS EXPORTS Scale within the Product High Medium Low Tanzania Kenya Sudan Mozambique Mauritius Cereals Dairy PulsesNuts Vegetables Fruit Wheat, grain & rice Wheat Rice & wheat Milk powder & cream Milk powder & cream Milk Powder, Cream, Cheese and Curd Uganda Cashew nuts Dried Pigeon Peas Dried Green Gram & Pigeon Peas Fresh Beans and Peas Avocado & Mango Banana
- 17. 17 AFTI East Africa Conference …Further Scope for Global Market Penetration Target Asia for cashew nuts and pulses - Europe and NA for fresh produce Product Global Trade, USD Mn, 2017 Tanzania’s Share Kenya’s Share Imports share by Region Key Importers Cashew USD 8.7 Bn 7% -- Vietnam – 30% USA – 18% India – 17% Avocadoes USD 6 Bn -- 1% USA – 45% Netherlands – 9% France – 7.3% Mangoes USD 2 Bn -- <1% USA – 24% Vietnam – 8% Netherlands – 8% Pulses – Dried Pigeon Peas and Green Gram USD 1.3 Bn 4% <1% India – 50% Japan – 9% Indonesia – 6% Vegetables – Fresh Beans & Peas USD 1 Bn -- 4% USA – 15% Spain – 13% France – 12% 50% 20% 20% Asia NA EU 48% 40% Asia NA EU 22% 38% 28% Asia NA EU 2% 25% 70% Asia NA EU 82% 6% 3% Asia NA EU Source: UN Comtrade, FAQ, Farrelly & Mitchell
- 18. 18 AFTI East Africa Conference GCC MARKET POTENTIAL 04
- 19. 19 AFTI East Africa Conference Demographics trends One of the fastest growing regions and youngest demographics in the world…. GCC EU Population growth (CAGR 2010-2015) 3.3% 0.2% Average Age 2015 29 Years 42.6 Years GDP / Capita 2015 (USD) 26,666 35,100 Consumer Spending / Capita 2015 (USD) 11,307 17,585 Protein Consumption per Capita 2013 90g / capita / day 104g / capita / day Source: UN Population Division, World Bank, IMF, National Statistics Authorities, Farrelly & Mitchell
- 20. 20 AFTI East Africa Conference An increasing shift towards protein Angola Bermuda Cyprus Liberia Lithuania Luxemburg Nigeria NorwayPortugal Ghana Saudi Arabia India UAE USA 0 20 40 60 80 100 120 140 160 - 20,000 40,000 60,000 80,000 100,000 120,000 Oman Kuwait Per Capita Protein Consumption (g/Capita/Day) STRONG RELATIONSHIP BETWEEN RISING INCOME AND DEMAND FOR PROTEIN GDP Per Capita (USD) Source: IMF, FAO, Farrelly & Mitchell (2013 data)
- 21. 21 AFTI East Africa Conference Important to understand that demand is not homogenous Significant expatriate population provides number of niche opportunities BREAKDOWN OF GCC POPULATION BY NATIONALITY 2016 Population by Nationality (%) 63% 11% 46% 12% 54% 30% 37% 89% 54% 88% 46% 70% KSA UAE Bahrain Qatar Oman Kuwait Citizens Expatriates Source: National Statistics Authorities
- 22. 22 AFTI East Africa Conference Economic reforms are also opening doors for in-country partnerships and joint ventures GCC members plan to invest USD 968 billion over the next 10 years This investment includes 1,638 projects The oil-rich countries plan to direct from 2011 to 2020, USD 79 billion for rail, including trains, subways and trams The most ambitious project, valued at USD 30 billion, is the railroad that will connect all the countries of the GCC For roads construction, investments are put at $18 billion
- 23. 23 AFTI East Africa Conference ADDRESSING THE OPPORTUNITY 05
- 24. 24 AFTI East Africa Conference GCC Market Entry: Checklist An extensive market needs analysis to be undertaken to fully understand market dynamics and opportunity ….. Clear strategy01 Market contacts & cultural understanding02 Formal contacts established03 Halal registration & certification04 Distributor in place05 Localised product range06
- 25. 25 AFTI East Africa Conference What should companies address to capitalise on the opportunity? Certifications and securing buyers are important pillars to develop sustainable business Source: Farrelly & Mitchell Research 01. Certifications 03. Value Chain 02. Differentiators • Halal • Global GAP • BRC • IFS • FSSC22000 • SQF • Organic • Social and Environment compliance (GRASP and SIFAV certification) • Secure buyers • Partner with global buyers and processors • Strengthen cooperatives 05. Promote 04. Essentials • Quality • Packaging • Labelling Develop campaigns in international market
- 26. 26 AFTI East Africa Conference Farrelly & Mitchell Global Specialist in Food & Agribusiness 200+ Sector Specialists Global Reach & Experience Established Over 15 years Clients Corporate & Government Strength Operational & Strategic Value Chain Farm to Fork
- 27. THANK YOU www.farrellymitchell.com Our Thinking - Presentations
- 28. 28 Malachy Mitchell Managing Director Unit 5A Fingal Business Park Balbriggan Co. Dublin Ireland K32 EH70 Tel: +353 1 690 6550 Fax: +353 1 883 4910 Mobile: +353 86 806 0843 Email: mmitchell@farrellymitchell.com Saudi Arabia Najeeb Alhumaid Regional Manager Al-Rusais Building Suite 510 Olaya Main Road 6468 Al Ulaya - Al Ulaya Riyadh 12211 - 3857 Kingdom of Saudi Arabia Tel: +966 11 4634406 Mobile: +966 54 338 7199 Email: nalhumaid@farrellymitchell.com www.farrellymitchell.com Europe Farrelly & Mitchell empower some of the world’s most ambitious companies and agencies to make the right decisions. With expert insight, local market intelligence and solid recommendations, we build and implement sustainable strategies that allow our clients to restructure, transform and grow. We have the hands-on industry experience and expertise, which we combine with local market insight and contacts to help our agribusiness, food and beverage clients to increase profits and improve efficiencies. About Farrelly & Mitchell © Farrelly & Mitchell 2019 Middle East and Africa Chaitanya GRK Senior Manager Al-Rusais Building Suite 510 Olaya Main Road 6468 Al Ulaya - Al Ulaya Riyadh 12211 - 3857 Kingdom of Saudi Arabia Tel: +966 11 4634406 Mobile: +971 551991356 Email: cgrk@farrellymitchell.com
Editor's Notes
- Thank you Chairman. Good morning ladies & gentlemen – I am delighted to be speaking with you today. Over the next 15 minutes or so I want to provide you with an overview of East Africa food & agri trade and importantly how you can supply the affluent and high growth GCC consumer food market. The GCC or General Co-operation Council is made up of the 6 oil rich countries of the Middle East, namely Saudi Arabia, United Arab Emirates, Oman, Qatar, Bahrain & Kuwait.
- Thank you Chairman. Good morning ladies & gentlemen – I am delighted to be speaking with you today. Over the next 15 minutes or so I want to provide you with an overview of East Africa food & agri trade and importantly how you can supply the affluent and high growth GCC consumer food market. The GCC or General Co-operation Council is made up of the 6 oil rich countries of the Middle East, namely Saudi Arabia, United Arab Emirates, Oman, Qatar, Bahrain & Kuwait.
- While the population is growing at around 2%, food production grew at 0.9%. At this rate, import dependency of commodities may increase in future. Wheat and Rice are already major contributors of imports into the region While the region is import dependent for cereals, it also exports select and niche products to global markets. Cashew nuts, dried beans and peas, fresh sugar snaps and snow peas, avocadoes and mangoes are key products which are exported Key products in each category Cereals – Maize (63%), Sorghum (16%), Wheat (12%). Others – Barley, Millet, Maize Roots & Tubers – Cassava (50%), Sweet Potatoes (27%). Others - Potatoes, Yam and Taro Fruits – Banana (54%), Mangoes (14%), Citrus Fruits (6%), Pineapple (5%). Others – Orange, Tropical, Avocadoes, Papaya
- While the population is growing at around 2%, food production grew at 0.9%. At this rate, import dependency of commodities may increase in future. Wheat and Rice are already major contributors of imports into the region While the region is import dependent for cereals, it also exports select and niche products to global markets. Cashew nuts, dried beans and peas, fresh sugar snaps and snow peas, avocadoes and mangoes are key products which are exported
- Lack of structured risk capital is a major limiting factor on the development of agri-food chains in Africa
- Production is concentrated in 5 countries – Ethiopia, Tanzania, Malawi, Kenya and Uganda. However, each country produces a different product mix. Although cereals and roots and tubers are main stream, each country has different 2nd stream products which could be a major differentiator for each country. For example, Fruits and Vegetables in Tanzania is higher compared to others. Dairy is considerably higher in Ethiopia
- Production is quite concentrated among few countries. Focused efforts in developing infrastructure, technology, policies could promote the agriculture further Although cereals and roots and tubers are main stream, each country has different 2nd stream products which could be a major differentiator for each country. For example, Fruits and Vegetables in Tanzania is higher compared to others. Dairy is considerably higher in Ethiopia
- Although Wheat and Rice accounts majority of cereals imports in the region. Dynamics are a bit different for each country, for example Wheat accounts over 75% of cereal imports into Tanzania (77%), Sudan (90%) and Malawi (78%) Rice dominates in few countries Madagascar (98%), Mozambique (51%) Maize accounts 35-40% of cereal imports in countries like Kenya and Zimbabwe. Changes in trade partners Wheat – Historically Australia, Canada and Ukraine were major suppliers after with Russia. However, Argentina took over the former list and stands as 2nd largest supplier after Russia Rice – India accounted 24% share in 2014, but it lost its share to China and Mynamar by 2018 Maize – Mexico emerged as market leader in 2018 by eating into South Africa’s share (53% in 2014)
- Although Wheat and Rice accounts majority of cereals imports in the region. Dynamics are a bit different for each country, for example Wheat accounts over 75% of cereal imports into Tanzania (77%), Sudan (90%) and Malawi (78%) Rice dominates in few countries Madagascar (98%), Mozambique (51%) Maize accounts 35-40% of cereal imports in countries like Kenya and Zimbabwe. Changes in trade partners Wheat – Historically Australia, Canada and Ukraine were major suppliers after with Russia. However, Argentina took over the former list and stands as 2nd largest supplier after Russia Rice – India accounted 24% share in 2014, but it lost its share to China and Mynamar by 2018 Maize – Mexico emerged as market leader in 2018 by eating into South Africa’s share (53% in 2014)
- Cashew In general, Africa accounts for almost 43% of global cashew production, but it mostly sells unprocessed to India and Vietnam. Both countries sell processed cashew into global market. Many attempts made to process cashew in Africa with limited success. India and Vietnam has over capacity to process than actual production. Also the market demand for lower grades is acceptable in these markets while there is limited demand for cashew in general in Africa. Recent challenge in Tanzania – Dependency on traders led to limited visibility on market demand created a crisis. Hence, developing a strong value chain is important for sustainable growth of cashew business. https://www.africanews.com/2019/02/22/cashew-pile-up-burdens-tanzania-govt-after-unilateral-purchase/ India, Vietnam, China, Brazil and EU companies are investigating investments in Africa – This could possibly improve local processing industry in future Pulses Only 16% of the global pulses production is traded. Africa is becoming an attractive supplier of pulses to the global markets due to relatively high yield. For example, average yield in India is around 650 Kg/Ha while it is around 1440Kg/ Ha in Ethiopia. Further mechanization and secured sourcing could improve East Africa position in the global pulses trade
- Cashew In general, Africa accounts almost 43% of global cashew production but it mostly sell unprocessed to India and Vietnam. Both countries sell processed cashew into global market Many attempts made to process cashew in Africa with limited success. India and Vietnam has over capacity to process than actual production. Also the market demand for lower grades is acceptable in these markets while there is limited demand for cashew in general in Africa. Recent challenge in Tanzania – Dependency on traders led to limited visibility on market demand created a crisis. Hence, developing a strong value chain is important for sustainable growth of cashew business. https://www.africanews.com/2019/02/22/cashew-pile-up-burdens-tanzania-govt-after-unilateral-purchase/ India, Vietnam, China, Brazil and EU companies are investigating investments in Africa – This could possibly improve local processing industry in future Pulses Only 16% of the global pulses production is traded. Africa is becoming an attractive supplier of pulses to the global markets due to relatively high yield. For example, average yield in India is around 650 Kg/Ha while it is around 1440Kg/ Ha in Ethiopia. Further mechanization and secured sourcing could improve East Africa position in the global pulses trade
- East Africa has a unique and differentiating product mix to compete in the global market. Cashew – Tanzania is one of the largest producer Pulses – Pigeon peas and green gram/beans. Tanzania is the 2nd largest exporter of Pigeon peas. Fruits – Avacado and Mango. Kenya is the largest producer of avocadoes in Africa Dried Beans include Kidney beans, red beans, broad beans, faba beans among others. Peas include chick peas, pigeon peas, cow peas among others Fresh Beans include green beans, french beans among others Peas include snow peas and sugar snap peas
- This slide is to understand the scale of global trade of surplus products exported from East Africa. Then map the contribution of Tanzania and Kenya which are the key producers and see what is the scope for further penetration. Once we establish the fact that their contribution is limited, the next step is to give a direction on which regions/countries they should target to increase exports Tanzania and Kenya are placed in a USD 12 Bn market of select products. They currently account for around 4% share but has strong potential to increase it further Target focus Fresh produce – Avacadoes, Mangoes, Vegetables: NA & EU should be the prime focus. Within these regions USA and Netherlands should be targeted in specific. For example, Netherlands is the key import and reexport hub for the entire EU Dried produce – Cashew and Pulses: Asia should be the prime focus. Within Asia, India and Viet Nam should be the targeted in specific. However, for long term benefit it is import to develop processing industries within the region for value creation. For example, estimated margin at the farmer level for cashew is around 30%. Forward integration of this to shelling and processing could bring in another 15% margin. By this way, it benefits the industry in two ways – 1. Creates an holistic business environment and supports farmers with assured local buyers 2. Contributes to the growth of local economy. For more information on cashew nuts - https://www.cbi.eu/market-information/processed-fruit-vegetables-edible-nuts/cashew-nuts/europe