Nov. 5, 2015
Editor's note: Africa is a rising star in the agrochemical market and a hot land to be developed by agrochemical companies, which is a less-known emerging market. From multinationals' strategic deployment over recent years, we can see signs of their move into African market. With the global market being saturated from time to time, Africa - the large and populous continent which is relatively in poverty but with increasing demand for food and technology shows great potentials to agrochemical enterprises. AgroPages had the honor to invite Mr. Mahmood Tauhid from CropLife (Nigeria), Syngenta, BASF, Dow AgroSciences, Wynca, Shandong Kesai Eagrow Co., Ltd. and Indian SDS Ramcides CropScience to a workshop for discussion of the present development and the future prospects of African agrochemical market as well as the African market exploration experience of these enterprises.
Statistics reveals a pesticide market value of $1.7 billion in Africa at present time accounting for only 3% of the global market value, which is expected to grow at 5% each year in the years ahead with a market potential to reach $10 billion.
The main pesticide market in Africa includes Nigeria, South Africa, Morocco, Ghana, Algeria, Egypt, Kenya and Ivory Coast. The pesticide market value of these 8 countries accounts for about 60% of the total of Africa. The crops which are pesticide applied include cotton, cereal, vegetable & fruit, corn and rice according to the sequence of pesticide sales volume.
With the stabilized demand in the conventional market, several leading multinationals turned eyes to Africa to treat Africa as their new source of growth. For generic pesticide export countries like China and India, they exported already their products to Africa long years ago. The African market with a great potential has started to ascend the arena of history.
Driving force for growth
Africa has a vast land, diversified climate and large varieties of crops. There are 56 countries and regions in Africa, accounting for 20% of the world’s total area. Africa has a population of 1 billion accounting for 15% of the world’s total population. African economy relies on agriculture to a large extent, where 70% of populations live on agriculture. Except for 11 countries including South Africa and Libya, other African countries are backed up by agriculture which is the major industry of the country, where usually 2/3 of population is rural population. In half of these countries 80% or above is rural population. In many countries, food supply is not even self-sustained and they wish to have international cooperation to improve their agricultural production level and to raise food production capacity.
Additionally Africa has huge potential arable land. According to estimation by FAO, there is 700 million hectares of usable land in south Sahara for planting purpose. Guinea has 600 million hectares of grassland, but so far only 10% is put in use for agricultural production.
African food crops mainly include corn (35 million hectares), sorghum (26.50 million hectares), cassava (14.20 million hectares), rice (10.93 million hectares) and wheat (10.08 million hectares); commercial crops mainly include coffee, cocoa, sugarcane, tobacco and cotton. Africa food crop output has a shortfall and need to import food, but its commercial crops are much developed and are sold mostly to developed countries. Diversified crop varieties indicate that there is demand for diversified pesticide, but African industrial foundation is very weak and is not able to produce technical product and formulation product on its own. So there is a dependence on pesticide import.
“The development potential of Africa agrochemical market is huge and limitless basically because Africa's greatest comparative advantage lies in agriculture and this traversed the whole length and breadth of the continent. More than ever before African states governments have realized that the necessary support for the growth of the agricultural sector is imperative.” said Mr. Mahmood Tauhid from CropLife (Nigeria).
In view of the above, the demographic dividend, potential arable land and the weak industrial foundation provide great potentials for development of agriculture and agrochemical industry in Africa. The board chairman of Dow, Andrew Liveris said in 2011 on the occasion of the establishment of Algeria and Ghana Representation Office that Africa has 1 billion populations and has maintained high speed of growth over the last 10 years. Government administration and policy transparency are being improved, now it is an optimum time to develop African market.
Challenges to market exploration
A sharp contrast to its great market potential is the problems existing with the market, such as unstable political situation, complicated population structure, unstable energy supply and poor infrastructure. So far as agricultural industry of Africa is concerned, its agricultural production level is at a lower side, illegal pesticide trading runs furiously, farmers are much decentralized and are not very knowledgeable about pesticide application. “Africa is patronized by millions of small scale farmers scattered all over the continent. The agrochemical market is price-sensitive leading to unhealthy and intense competition amongst players, in here, generic products are more preponderant than branded products.” said Mahmood.
Africa has vast land. Agricultural production is closely linked to climate change. Extreme weather has occurred over recent years, such as the uncertainty brought to crops by the EI Nino phenomenon. Meanwhile government’s input into agriculture and fluctuation of international farm product price and demand are affecting the crop planting area. Therefore to companies exploring African market, not only attention should be paid to market risk but also training of farmer’s safe and proper use of pesticide should be emphasized.
Strategic deployment of multinationals
In 2012, Syngenta’s CEO Mike Mack announced at Camp David G8 Summit a commitment to invest over $500 million and hire 700 people with the aim of driving a step change in agricultural productivity in Africa. This commitment reflects our company’s belief that Africa has the resources not only to feed its growing population, but also to become a major world food/feed exporter.
Syngenta has structured itself for sustainable growth. Last year, we expanded our dedicated sales and technical teams to Zambia, Nigeria and Tanzania. The growth in Africa is primarily based on production for local markets of both staple food crops (eg. corn) and cash crops (fresh vegetable). “The imperative is to sustainably increase production to supply the growing demand. We believe that by working closely with farmers and partners, we are able to offer them solutions to the challenges they face through our integrated seed, seedcare and crop protection products – and through training them on how to use these products effectively and safely, which will help them enhance their yields in a sustainable way. Nowhere is this more important than in Africa, where over 80% of the farmers are smallholders working on less than two hectares of land.” said Jan Suter, head of Africa Middle East of Syngenta.
“Being present in Africa since many years, we also recognize that the African agricultural environment is complex. Farmers are dispersing, they face challenges in accessing markets for their different crops and financial support. Additionally, there is little harmonization between the trade corridors but also at agricultural policy level across the continent. Partnerships are key for progress in African agriculture since a comprehensive approach is required. Syngenta believes very much in working in partnership with local governments, research organizations, financial institutions, development NGO’s and donors and of course farmers themselves to meet the many needs in the farming ecosystem. Good collaboration can be effective in serving farmers and empowering them to reach their potential.” concluded Jan.
“It is significant to note that Africa will grow from 530 million to 1.5 bn in 2030(OECD), and 48 percent of that population relies on agriculture for their livelihood. Technology can be an important way to improve food self sufficiency in essential crops such as rice, maize, and cereals, with crop yields still being lower than in Asia. The use of crop protection products is still low, except for a few export crops, which makes for good potential to help customers.” said Jean Francois ROLLAND, MEAF Marketing Director of Dow AgroSciences.
With there being approximately 75 countries in the Turkey Middle East & Africa region, it is known that 15 countries represent over 70% of the crop protection market potential. ( Turkey, Egypt, Iraq, South Africa, Kenya, Ethiopia, Zambia, Morocco, Algeria, Tunisia, Ivory Coast, Ghana, Nigeria, Mali, Cameroon). Dow AgroSciences is focusing on these countries and is putting in place resources to be closer to market needs and support national or local distributors.
“For now, we are doing well and have a strong presence in cereals, vegetables, fruits, export flowers and are increasing our presence in rice.” said Jean.
“In comparison to other regions, Africa has with over 60% of the world's unexploited crop lands the biggest potential for agriculture worldwide. For the future, we foresee a moderate growth due to increasing intensity, governmental policies and smallholders rising.” said Dirk Hartmann, Director Business Management Crop Protection Africa & Middle East of BASF.
“BASF is committed long-term to growing crop protection business with all our customers in Africa sustainably, taking all its market specifics into account - a sound and consequent approach with clear priorities and the support of local partner is the prerequisite for our future success.”
Market exploring strategy of generic companies
To speed up West African market exploration, Wynca acquired 70% stakes of Ghana Sunshine Agric Products and Trading to start business presence in African market. Over 5 year’s development, sales of Wynca Ghana reached $ 50 million from the less than $ 5 million, which is now a 10 times growth in 5 years’ time. Based upon Ghana, Wynca set up successively 3 African representation offices – Ivory Coast, Nigeria and Mali, as well as setting up a first modern pesticide production plant in Ghana. The leading product glyphosate
has captured 30% local glyphosate market share. In the future, the company will continue its presence in East Africa and South Africa where considerable demand is foreseen.
Speaking of market exploration, Mr. Yan believes that African market exploration should first fit company’s own characteristics taking into account the business capacity and international marketing capability. An enterprise can set up its own sales channel and representation office to operate the business locally. It can be also in the manner as Wynca did to acquire or participate in an agrochemical enterprise existing in local market, thus to allow a quick landing in the targeted market. Of course it is a wise way to cooperate with local import chamber or a Chinese partner who are already present in the market to utilize the established channel.
Shandong Kesai Eagrow Co., Ltd.
West Africa is an important part of African market, which has attracted our attention over recent years. EAGROW started deployment in West Africa in 2010 as backed up by its strong research and production capacity. Mr. Zhao Hui said that West Africa has a weak pesticide industry foundation relying on import. The market volume is big, population is growing, pesticide demand is increasing, registration requirement is not too high and multinationals’ captured market is low. All these factors are in favor of Chinese companies to explore the market. Of course there are always risks accompanying opportunities. The unstable political situation increases trade risk, local economy is more often affected by international situation causing fluctuated exchange rate and inflation risk. Furthermore, more branches are being set up there which will result in more intense competition.
As one of the earliest Chinese enterprises setting up a branch in West Africa, EAGROW has gained valuable experience in market exploration – differentiated product to avoid single-variety product so as to better serve local agriculture with mixture product; use of localized management to establish a local brand image; optimization of sale channel to raise the anti-risk capacity; better communication with local government and bankers to prevent political risk and exchange risk.
SDS Ramcides CropScience
SDS Ramcides CropScience enters African agrochemical market for many years, it is now operating business in many African countries, such as Kenya, Zambia, Ghana, Ivory coast, Nigeria and Egypt. They mainly sell insecticides: pyrethroids & DDVP, herbicide glyphosate and also plant patented specialty fertilizers with heterocyclic compounds.
Africa market is mainly a ready to use - goods market and is growing very well. Cultivable land keeps expanding more and more and still so much to explore. Awareness of using agrochemical and affordability of farmers are increasing day by day. All above are the reasons why more and more agrochemical companies invested in this market.
“Our company is planning to grow to 8 million USD in the next 3 years. We have been working in Africa consistently for the last 5 years on registration and field development for our specialty fertilizers.” said R. Gopal, managing director of SDS Ramcides CropScience.
Talking about the advantages for Indian companies exploiting Africa market, Mr. Gopal said that: “Indian companies have good image amongst African consumers. Consistency in quality of products supplied from India continues to be better compared with many products in the market and this has an edge. Besides, comparatively, Indians have better access and knowledge of African Markets, as there are many Indian Agronomists employed in African Agricultural farms. Also many Indian settlers are in agrochemical business there.”