Investing along the value chain is essential for agricultural producers operating in Africa, according to African agriculture investment firms and consultants.
Zeder Investments, which owns majority stakes in a range of different food and agriculture businesses in Africa, is the majority owner of Agrivision Africa, the agribusiness company that recently acquired a Zambian maize and wheat milling operation as part of an integration plan.
Agrivision aims to scale up its operations by increasing the amount of land under cultivation and by completing the vertical integration of its milling operations. The company also wants to ensure it has a transport fleet to bring down the costs of transport, and to invest in sales and marketing of its end products which are sold under the Mpongwe brand.
“The agriculture industry is very efficient in the developed world and producers often have the luxury of choosing which link in the chain to dominate,” said Normal Celliers, chief executive of Zeder. “But dependency on support services is a big risk in developing countries, making vertically-integrated business models often the more stable and sustainable option across Africa.”
James Cairns, associated director at Savills International Farmland, the land surveyor and advisor, agrees that without an existing value chain “you have to develop your own in order develop a viable business; this is especially so in livestock and good examples can be seen in Zambeef [an integrated agribusiness in Zambia] and to an extent Mozbife [a vertically-integrated cattle ranching and feedlot business].”
“The infrastructure needed to achieve vertical integration is significant and expensive but the ability to brand and control a supply chain is hugely powerful in a market such as Africa where the population is developing and nothing like this exists,” added Cairns, who has worked across Africa as a government and private consultant since 2010.
Vertical integration is also essential for agro-processors that are faced with the challenge of ensuring they have sufficient supply of adequate quality. “In a number of cases, the larger ones have to envisage either supporting producers or integrating the production of their feedstock in their business models,” said Daniel Mouen Makoua, founder and chief executive, Bwamanga, an African asset management firm.
Agrivision Africa aims to expand the reach of its food brand beyond Zambian borders and is already selling produce in the Democratic Republic of Congo and eyeing assets elsewhere in southern Africa.
“We are taking it one step at a time but we would like to see the company grow into an eminent and well-recognised regional player across Zambia, the DRC, Tanzania, Ethiopia, Kenya, Zimbabwe and Mozambique,” he said. “We will buy assets strategically and opportunistically.”