Entrepreneurship Zone: 18 November 2021 :: Selling chicken in Uganda: Investor sees gap to formalise the low-income market

Thu Nov 18 07:22:58 CAT 2021

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Entrepreneurship Zone: 18 November 2021 :: Selling chicken in Uganda: Investor sees gap to formalise the low-income market

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The Yield Uganda Investment Fund recently announced an investment of $1.8 million in Sekajja Agro Farms (SAF), a Ugandan poultry business that operates a commercial chicken farm and abattoir as well as a chicken feed manufacturing unit. Jeanette Clark spoke to David Wangolo, investment manager at Pearl Capital Partners – which manages the Yield Uganda Investment Fund – about opportunities in East Africa’s poultry industry.

Why are you enthusiastic about the poultry industry in Uganda?

There is a definite market for cheaper protein in Uganda and the region. Poultry is the cheapest to produce, for two reasons. Firstly, the time to raise poultry at a broiler farm for meat processing is short, only five to six weeks. Secondly, the manufacture of quality poultry feed in Uganda is not expensive because of easy access to affordably priced maize.

For the Yield Uganda Investment Fund, the key consideration for this investment was to improve access to affordable, quality protein for the Ugandan population.

What will the funding be used for?

With this investment, SAF will be able to execute on its expansion plans to become a fully vertically integrated company involved in the production of feed and raising broiler chickens for processing, as well as engaging with smallholder suppliers. It will also improve the company’s slaughter facilities, cold storage facilities and distribution.

We will build a new feed mill to produce quality pelleted feeds and plan to set up additional poultry shades to increase volumes. Expansion through more sites helps with biosecurity issues as chicken-rearing should be managed with safe distances to reduce farm-to-farm contamination risk.

We will also install a larger modern and automated abattoir and improve the cold chain system, including additional trucks and blast freezers. With proper cold chain equipment and facilities, SAF will be able to hold on to its inventory a bit longer and this will be a game-changer. In the absence of proper cold rooms, producers of poultry for meat often have to increase the period that they feed the chickens before slaughter until the customers are ready to purchase. With these cold-storage facilities in place, we can manage the inventory to market and ensure better profits.

Ultimately, we are increasing SAF’s production and processing capabilities four-fold.

We will also grow the footprint of SAF’s Abbas Chicken branded retail outlets.

How soon will SAF be able to increase production?

The commissioning of all the buildings will take approximately six months and we hope to start producing at the level the investment demands within a year.

A selection of products produced by SAF under the Abbas Chicken brand.

With the short turnaround time required for rearing poultry for meat, it will be important to have our market penetration sorted out and new distribution networks in place. SAF has its own distribution network – including the branded retail outlets, agents and direct supply – and we will build on that in low-income areas to ensure we can sell poultry products under the Abbas Chicken brand to this segment of the population.

On the B2B end, we will be supplying to catering companies, for example.

If we start moving into the higher income segment, we might consider developing a specific brand for this market, but, at the moment, our primary goal is to serve the lower-income segments.

Tell us more about the potential you see for the new feed mill.

The feed mill will supply enough for SAF’s production, as well as for smallholder poultry producers. We are an impact fund, and the smallholders are an important element of our journey. Having the feed mill to provide them with quality pelleted feed for the chicks, will also ensure supply for us.

Uganda is blessed with two harvest seasons for grain and there is very little competition between animal and human consumption for the crop. We will source raw materials such as maize, soya and silverfish locally, but some of the premixes or supplements we will have to import.

Do you see opportunities for export into the wider East African region?

Yes. Uganda is perfectly situated to supply food to the region and neighbouring countries that cannot support themselves in terms of poultry from domestic production. We are looking at eastern DRC, South Sudan and northern Tanzania specifically.

Many of the large corporates in the region, like mines, hotels and catering service companies, source from as far as Brazil.

What are some of the challenges the poultry industry faces in Uganda?

For SAF, a challenge would be to convert an informal market into a formal market for processed poultry. Almost 80% of poultry products are informally consumed, where customers buy live birds to slaughter themselves. That is our main competition.

For the industry as a whole, a challenge would be the supply of day-old chicks. There is a lack of breeding facilities to increase this supply; fertilised eggs are currently mostly imported and hatched locally. There are a few local suppliers and they have been hard hit by Covid-19.

Another challenge that a vertically integrated business would be able to address is sourcing consistent high-quality feed. However, we will have to continue monitoring the quality of raw materials like maize to make certain there is no contamination or infection that happens post-harvest before it gets to our feed mill.

Would SAF ever consider going into the production of eggs as well?

There are other players in the production of eggs; it is a different economic cycle with a longer turn-around time. There are certainly opportunities and through SAF’s distribution network, we retail the eggs the farmers bring us, but we will not focus on producing them directly.-Howwemadeitinafrica

David Wangolo, investment manager at Pearl Capital Partners

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