Entrepreneurship Zone: 13 February 2025 : Industrialisation of cassava in East Africa: Investor identifies gaps in the market

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Entrepreneurship Zone: 13 February  2025 : Industrialisation of cassava in
East Africa: Investor identifies gaps in the market

 


 

 


 <https://www.firstcapitalbank.co.zw/> 

 


 

 


 

 

 

 



Wanjohi Ndagu, partner at Pearl Capital Partners

 

Agriculture-focused private equity firm Pearl Capital Partners, manager of
the Yield Uganda Investment Fund, 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). How we made it in Africa spoke
to Wanjohi Ndagu, partner at Pearl Capital Partners, about the opportunities
in the cassava industry.


Explain what makes you bullish about the cassava industry in Uganda.


Firstly, the availability of the raw material. Uganda is one of the main
sources of cassava in Africa, producing about 3.5 million metric tonnes a
year, with the crop consumed largely at a household level.

Uganda has a natural advantage when it comes to the production of cassava,
in terms of its soil and its climate. The opportunity presented to Yield
Fund was to commercialise and industrialise cassava and, in the process,
uplift the living standards of smallholder farmers in Uganda with around 1.6
million households dependent on cassava for their livelihoods. We want to
play a role in changing cassava from a food security crop into a cash crop.

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.


What has been Pura’s core business to date?


Pura, incorporated in 2011, is a producer of cassava on its nucleus farm in
the Nakasongola District in central Uganda. It is aiming to put 250 hectares
of land under cassava production, with 110 hectares already established.

The company is now in the process of building its factory that will house
the processing equipment. The plan is to begin production at the end of the
first quarter of 2022. The company also has a mother garden where it
cultivates cassava cuttings that are disease- and drought-resistant. This
will be supplied to the smallholder farmers who form part of the supply
chain.


The Yield Uganda Investment Fund’s investment into Pura is positioned to
support the installation of a cassava processing plant to produce three
products: high-quality cassava flour, tapioca starch and sago. Discuss the
market opportunities for each of these three products.


High-quality cassava flour is for the domestic Ugandan market, targeted at
confectionery businesses for the baking of bread, cakes and biscuits.
Globally, the trend is towards more health-conscious consumers. This
provides an opportunity for cassava flour as a gluten-free, high-nutrition
alternative. Cassava flour is also consumed in northern Uganda as a
stand-alone product where they use it to make ugali, a type of stiff
porridge.

We intend to focus on the B2B market in the confectionery subsector but
where the flour is consumed at household level for ugali, we want to partner
with distributors and supermarkets. Pura has no intention to go directly
into retail. It will be sold to distributors in 10kg to 20kg sizes. These
distributors can, in turn, repackage and sell to smaller retailers in rural
and even urban centres.

Tapioca starch is used primarily in the packaging industry as an adhesive
for soft boards, in corrugated cardboard boxes, in partitioning in houses,
and fittings of wardrobes. The region imports almost its entire starch
demand from India and Thailand. This creates a big opportunity for Pura to
supply locally produced starch to Kenya, Uganda, Tanzania, Rwanda and South
Sudan.

This product will carry the Pura brand and sales will be B2B. The end
customer is medium- to large-scale industrial companies, typically
industries or factories that manufacture corrugated cardboard and soft
boards for construction. The product will be packaged and sold in 50kg sacks
or bags. While the end consumer of the final cardboard product may not know
that Pura starch was used in the manufacturing process, the company can
build its brand as a supplier to the B2B clients.

We are in discussions about possible supply to some of the large industrial
consumers of starch in the region. They have expressed a preference to use
locally sourced starch because of price and availability. It will enable
them to procure smaller quantities at a time than those required when
importing, freeing up cash flow.

Sago is a breakfast food staple in India and Pura’s sago product is aimed
at the export market. The company has had discussions with off-takers, some
of whom are our technical partners in this project. We have already signed
off the entire expected production for the year 2022.

Pura’s main partner in India is already a producer of sago and has a market
share in the country. We plan to sell the product in bulk and our partner
will portion it in India into family-sized portions. They will then sell it
under their own brand name.


How much of Pura’s cassava raw material will come from its own land versus
the outgrower farmers?


Initially, Pura intends to source 30% of the raw product, the fresh cassava
root, from its nucleus farm. That is about 2,000 of the 7,000 tonnes. The
remaining 70% is sourced from the outgrower scheme. By the fifth year, we
expect to be processing about 28,000 tonnes of raw material. Of that, just
15% will be sourced from Pura’s farm and 85% from the outgrowers. Therefore,
it is crucial that from the outset, the company supplies these farmers with
around one million to three million disease- and drought-resistant cuttings
a year.


In your opinion, which of these product lines will contribute the most to
Pura’s business?


I estimate 60% of the growth will be from the tapioca starch as there are
almost no local producers. The industries we are targeting with this
industrial ingredient continue to grow, whether driven by real estate
development, food packaging or other products that require corrugated
cardboard. Regionally, Uganda is strategically located to serve the markets
of our neighbouring countries that don’t have any substantial producers of
starch.


What is a likely exit avenue for this investment?


As investors in this region, we usually have few options. We have exited
investments in the past through prominent industrial players in the same
sector, such as one from India who wants to expand geographically. We also
have experience with buy-outs from the original promoters and larger funds
wanting to take the business to the next phase of growth. I expect the most
natural exit option for Pura would be a much larger fund looking to take the
company to the next level.

—Howwemadeitinafrica

 

 


 


 


 

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