Entrepreneurship Zone: 06 February 2025 : Agribusiness and food opportunities in Africa – chilli, catfish, cassava and more
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Entrepreneurship Zone: 06 February 2025 : Agribusiness and food
opportunities in Africa – chilli, catfish, cassava and more
<https://www.firstcapitalbank.co.zw/>
Here is a selection of potential agribusiness and food opportunities in
Africa that came across our desk in 2021.
1. Rwanda has competitive advantages in chilli production. The production
of fresh and processed chilli in Rwanda has the potential to capture
significant demand for these products in markets such as the European Union
and China. This according to a study by Manufacturing Africa in
collaboration with various Rwandan government agencies. European demand for
chillies is roughly 1.5 million tonnes per annum, which translates to about
$2.7 billion, while China requires about 78,500 tonnes at a value of $56
million. The main African countries currently supplying these markets are
Morocco and Uganda. According to the study, Rwanda is well positioned to
capture this demand
2. Southern and east Africa’s food industry requires local packaging
solutions. In several southern and east African countries, there is a
shortage of quality, locally-produced packaging material, which means
companies often have to rely on imports or settle for subpar solutions. In
Zambia, one of the main problems for food processors is the lack of
packaging solutions. For companies targeting supermarkets, there is low
availability of higher-grade packaging that meets the strict requirements of
formal retailers. In Malawi, too, packaging suppliers are not meeting the
demands and specific requirements from new and growing businesses in the
country. According to Victoria Mwafulirwa, founder of Homes Industries – a
processor of sunflower seeds, groundnuts and rice – this means companies are
turning to imports to find what they need to get their products packaged and
ready for the market.
3. Growing market for locally produced fish. Aqua-Spark’s new Aqua Insights
report shows the continent will consume up to 29 million tonnes of fish
annually by 2050, up from the current 10 million tonnes. On the menu is
farmed tilapia, a freshwater fish, which according to Aqua-Spark, offers a
scalable, sustainable and affordable means of feeding the region’s growing
population. “Due to overexploitation, wild catch can’t be increased and thus
won’t be able to meet the additional demand. We believe that aquaculture
production will have to accelerate and have identified tilapia to be the
fish to do so: it’s scalable and it’s healthy, sustainable and affordable.”
4. Industrialisation of cassava in East Africa. Agriculture-focused private
equity firm Pearl Capital Partners sees growth potential in the cassava
value chain in Uganda. The firm recently invested $2.5 million in cassava
producer Pura Organic Agro Tech Ltd. The funding will be used to set up a
vertically integrated cassava processing plant to produce high-quality
cassava flour, tapioca starch (an industrial input used in the packaging
industry) and sago (an edible starch delicacy popular in India). “Uganda,
and East Africa as a whole, imports almost its entire starch requirement.
There is a big market opportunity to replace these imports and bring in new
knowledge and technology to produce cassava starch and sago,” notes Wanjohi
Ndagu, partner at Pearl Capital Partners.
5. Export of niche fast-moving consumer goods (FMCG) from West Africa to
the United States. The African Growth and Opportunity Act (AGOA) provides
eligible sub-Saharan African countries with duty-free access to the US
market for a wide range of products. Michael Clements, head of the West
Africa Trade & Investment Hub, a USAID-funded initiative, believes exporters
should consider niche FMCG products, like dried mango, various fruit jams,
sugar-free chocolate, and canned catfish. “West Africans living in the US
love canned catfish and it is flying off the shelves; there are not many
American companies producing this product,” he notes.
6. Supply of frozen baked goods to Kenya’s hotels. The lack of a consistent
supply of quality products has meant many hotels, restaurants and catering
companies rely on expensive imported goods. It is estimated that last year,
Kenya imported 2.5 billion in food products, many of which can be produced
locally. Hotels in Kenya are increasingly outsourcing activities such as
baking because large kitchens take up space that could be used more
profitably for beds and conference facilities. Steven Carlyon, president of
SimpliFine Foods, says Kenyan hotels import large volumes of frozen baked
goods – such as bread and croissants – from Europe and the Middle East
because there are very few local companies producing frozen baked items of
consistent quality on a large scale.
7. Crop storage. The storage and preservation of agricultural produce in
East Africa is an area with compelling opportunities. David Owino, founding
partner at East African private equity firm Ascent Capital, is bullish about
the opportunities in crop storage: “We’ve been looking at a business that
builds silos; this is interesting to us because you can add value to farmers
by enabling them to choose when to sell their crops. If farmers have a
bumper harvest, they could store their cereals and sell them when the market
is right. In Africa, farmers lose about 40% of their harvest due to
inadequate storage space.”
8. Supplying food and other goods to Uganda’s oil industry. Uganda’s
nascent oil and gas sector is expected to create downstream business
opportunities for those who can provide products and services required by
the hydrocarbons industry. One company poised to benefit from the
anticipated influx of oil workers to Uganda’s Lake Albert region is Pure
Grow Africa, which will supply them with fruit and vegetables. The region’s
oil camps are predicted to host over 160,000 people once the production and
development phase begins.
9. Packaged foods and snacks in Nigeria. Roughly 51% of Nigeria’s
population is urban and with one of the highest urbanisation rates in the
world, consumption patterns here are rapidly changing. “People now look for
more convenience and seek out packaged foods, which is different from what
they would eat in rural areas. There is a huge opportunity to invest in
companies able to produce a packaged food product at the right price point,
which is key because many consumers in the region are price sensitive,” says
Mezuo Nwuneli, managing partner and co-founder of private equity firm Sahel
Capital. “We invested in Polyfilm Packaging in 2019, which produces the
packaging material that wraps food and consumer products, to capture value
from the growth of companies within this sector. The company has exceeded
its business plan in the two years since we invested.”
10. Tapping into demand for poultry in Angola and Mozambique. “Poultry is a
large market and in the context of Africa, chicken is at the top of the
list,” says Henri de Villeneuve, founder of SAPA, an investment vehicle that
supports the entry of European agribusiness groups into East and Southern
African markets. To be successful in poultry, he notes, producers must be
integrated and control the value chain, starting with the feed. The cost of
the feed often accounts for about 70% of the price of the chicken.
“Secondly, don’t produce chicken for local consumption close to the sea,
because you could be impacted by imports from Brazil or elsewhere. Instead,
produce chicken away from the coast as high inland transport costs create a
barrier to entry for competitors,” De Villeneuve explains. “It also helps to
be aware of abnormal situations or gaps for increased demand. In Angola,
everyone wants chicken at Christmas. They will charter 747s to import
chicken to meet local demand over this period; if you know this and are
ready to act, it can be a great investment opportunity.”
11. Production of essential oils in East Africa. Maxima Nsimenta, CEO of
Livara – a Ugandan brand that manufactures natural and organic products for
hair, skin and body – believes there is potential for essential oils
processing in East Africa. “We import quite a lot of essential oils, yet it
is possible to produce locally. We grow flowers in Uganda and Kenya but
mainly for export to Amsterdam and Europe. We do not go the extra mile of
using parts of these plants to extract essential oils. For example, lavender
is a beautiful flower, very rich in oils; we could extract the lavender
essential oil. A small bunch of lavender sell for around 15,000 shillings
(about $4) in Uganda; however, 20ml of lavender oil will go for around $40.
There are many local industries that require essential oils. They are used
in pastries and drinks, as well as everyday cosmetics such as lotions,
creams, hair products and perfumes. Some small-scale industries – like those
that manufacture scented candles – also use essential oils.”
—Howwemadeitinafrica
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