Agro-processing in Africa: how to make it work… Michiel Arnoldus

Agro-processing in Africa: how to
make it work…
May 2012, World Bank, Washington
Michiel Arnoldus
M a k i n g
s e n s e
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d e v e l o p m e n t
Agro-processing: issues and
opportunities
M a k i n g
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The timeline of economic development
Processing
Industrial
Clusters ?
Local &
Fresh Produce Regional
Markets
Exports &
Niche markets
Production
2000
1
2005
2010
2015
The holy grail of development…
Fresh produce export to EU and US
But fresh produce export has a downside…
Vulnerability to rising
transport cost
What to do with 2nd,3d & 4th grade?
1
Political instability & perishable
produce…not ideal
Fresh produce = low added value
Advantages of processing
Spreading risk
More value
added in
country
Longer Season
More
turnover to
cover
overheads
1
Using waste
& by
products
The 2 most common myths
There are mountains of unused
raw material
1
The market is
huge
Market is leading, not supply…
Traditional development model
There are tons of
pineapple..lets use it
Lets build a juice
plant for export
Help, we can’t
sell! Some
market
research?
Alternative model (medium term)
Market
research
pineapple
products
Pineapple
surplus
Strategy
Supply,
processing
marketing
Ideal scenario if there is time…
Competitivity
analyses
1
Choose
products
Sector
strategy
Implementat
ion
A competitive processing industry makes
efficient use of all grades
Fresh export
Local & regional
Fresh market
High value processed
product
Medium value
processed
product
1
And waste inside the factory
Main product
Waste
Waste product
Cassava starch
Waste fiber
Cattle feed
Timber
Sawdust
Particle board
Vanilla
Pods after extraction
Vanilla specks for ice-cream & yoghurt
Dried mango & IQF
Pulp on pip & over ripe pieces &
offcuts & peels
Dried mango rolls & juice
Compost
Pine apple juice
Skins, cores, crowns
Fiber, cattle feed, compost
Meat
Bones, meat on head & bones,
intestines, hides
Glue, sausage & processed meat products,
leather
Soy bean oil
Press cake
Poultry feed
Waste products are often not profitable but help cover fixed
costs..
1
Which technology & scale do you invest in?
Easy to manage
Pro-poor
Many beneficiaries
Economies of scale
Professionalism
Not scalable
market access
Promoting talent to
semi-industrial
Economies of scale
Managable by local
entrepreneur
Market access
Product quality
Not possible for
every product
Beware of
opportunists
Finding right
technology
Professionalisation
Finding talent
Finance
Cottage industry
Semi - industrial
Fully industrial
1
Large invesment =
Easier to finance
Large impact possible high volume & scale
= difficult to manage
in short time
Politicians get
involved
Complex technology
in Africa:
maintenance,
repair, handling
Selection of beneficiaries: considerations
Cooperatives & women’s groups
• Nice story but serious business or social activity?
• Slow decision making & very limited professional capacity
Large corporation with hired mgt
• Involvement and sence of urgency of mgt ?
• Very professional, but profitable?
Small & Medium size entrepreneur
• Dynamic and involved, but often risk averse
• Willing to change and professionalise?
Selection criteria for technology in Africa
Trustworthy
supplier
Robustness
Easy to
operate
1
Operating
cost
Scale
Effect of
Power cuts
Energy
source
Local
presence
supplier
Complexity
Mainte
nance &
repair
Price
Technology suppliers: a dilemma
Good quality but
expensive
Very cheap, but quality?
Service? Warranty?
Quality, compact, Africa
proof, reasonable price, but
smaller assortment. Service?
Simple, sturdy, cheap,
but bulky. Service?
Warranty? Efficiency?
?
Introduction & testing of new
equipment
The best test is a working machine in a real company
Public money is useful to reduce risk for early adopter, if
results are public
Never 100% for free: Make sure everyone feels the pain
of failure
Public organisations are ill equiped for small purchases
Matching grants for selected entrepreneurs
1
Case Study: Mango processing in Mali
and Burkina Faso
M a k i n g
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Mali and Burkina Faso Context
1 large
industrial
juice & pulp
plant
Donor
darlings
1
100,000s of
small
orchards
Limited
industrial
base
Cottage
industry of
drying &
juice
Large
volumes of
non
exportable
mango
Organic &
fair trade
doctrine
150 drying
facilities
Francophone
Land locked
complex
expensive
transport
Situation in 2009
Dried mango export crashed from 600 ton to 150 ton
Total lack of innovation in drying technology
No pulp export from large high tech plant DAFANI
High local demand for juice; DAFANI popular but not profitable, small
guys limited by packaging issue
Question: what is the problem with export?
Which Product, for which Market with which Technology ?
1
Plan of attack
1
2
3
4
5
6
1
Analyse EU, US, ME & local markets
Analyse local production
Find right equipment for local context, customer
requirements & price level
Define strategic options:
Product + Market + Technology
Define pilots
Implement pilots
Dried mango
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What consumers, retailers & importers tell
us about dried mango
• Burkina product is chewy, sticks to
teeth, brown, limited flavour,
inconsistent quality
• South Africa is market leader and
best quality
• EU market is growing slowly
• 2008 importers overestimated
demand
• No market in Middle East
• Local demand limited by quality &
price
1
Causes of quality issues in dried mango
•
•
•
•
Outdated small ovens & no innovation in 15 years
No pre-treatment, poor storage & transport conditions
General hygene issues in production
Stuck in organic-fair trade
You can’t find a single principle
of mango drying in these oven’s.
(South African expert)
They are baking the
product, not drying (SA
market leader)
We don’t have a proper oven to
work with. And each one is
different ! (Entrepreneur)
1
Finding the right drying technology…
•If South Africa is market leader, let’s copy them!
•
•
•
•
•
1
2 small local manufacturers make specific mango ovens
Simple & robust technology
Obvious choice: Dryers for Africa container dryers
One oven replaces 12 local ovens
Better quality @ lower cost
Pre-treatment, storage & transport…
Finding the optimal combination for cost & quality
• Pre-treatment: Asorbic & citric acid for organic,
Metibysulfate for conventional
• Cold Storage & refrigerated transport
• Packaging under Nitrogen & co2
1
Pulp & Other products
M a k i n g
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What pulp importers, juice & dairy
companies tell us
• India dominates with Alphonso (1200$/ ton) and
Totapuri (600$ ton)
• Many competitors in low segment (Peru, Brazil,
Mexico)
• Some intermediate varieties (800-1000$/ ton)
• BF-Mali varieties unknown
• Growing market but low end is saturated
• Middle East buys lowest quality from India 
uninteresting
• US buys from South America
• Opportunity: Individually Quick Frozen cubes in EU!
1
Issues in local juice & pulp production
• Small producers are limited by packaging : too small
for Tetra Pak & plastic, new glass too expensive
• DAFANI
• Uses high tech equipment for juice on local market
 not profitable
• Insufficient control of supply & processing
• No real market knowledge & no partners to market
new varieties
1
Strategic options
• Conventional & organic dried mango for EU and US market
with South African tunnel dryers
• Pulp for EU market and juice for regional market with DAFANI
• IQF for European market
• Mango bars for local market
1
Pilots
1. Adaptation kit for current Atesta ovens
2. SA tunnel dryers, preferably in JV with SA company with
local entrepreneurs who pay 50% of investment cost
3. Pre-treatment, storage & transport
4. Feasibility study mango bars local market
5. Support DAFANI with market research to asses demand
and value of local varieties
6. Feasibility study IQF for EU market
1
Implementation
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Procurement of tunnel dryers…
How difficult can it be?
1. Language barrier
2. Cultural barrier
3. World Bank procedures & local interpretation
4. Transport & payment
5. Adaptation to local context needed (electricity usage)
 But 6 dryers are arriving now in Mali and BF!
1
Making a joint venture between
competitors
Hi, I’m your competitor, can I see your factory & cost price?
Dawid van den Berg, LVA: 450
ton/ year in 3 factories in South
Africa
1
Youssouf Coulibaly, Kene Yiriden,
30 ton/ year in Mali
Visiting each other’s factories
1
Building mutual trust
1
How competitors are complementary
1
South Africa
Mali & Burkina Faso
More demand then production
capacity
Lack of demand & mkt capacity
Lack of mango
Mountains of mango
Right Technology & know how
Outdated technology & lack of
knowledge
Season: December – April
Season: April - August
10kg fresh = 1kg dry
17kg fresh = 1kg dry
1500kg dry mango per employee per
season
450kg per employee per season
More equipment but lower
depreciation per kg
Mango & labour are 1/3d -1/2 the
price of SA
The outcome: a production agreement
• LVA: training, HACCP support, lab testing and equipment
procurement support, marketing
• 3 Mali and 3 BF entrepreneurs: will produce and sell product
wholesale to LVA
• Fresh mango exporter Fruiteq: quality control, cold storage
and logistics to EU customers from LVA
1
Local oven 2.0: a lesson in innovation
South Africa
Time invested: 6 months
15 years
Budget: €5000
€ millions
1 artisan, drying equipment
manufacturer, 1 local expert
CEAS, exporters, universities,
manufacturers, EU engineers
Result: premium quality, 2x
capacity, ½ gas, HACCP, safe
Result: 0
A lesson in innovation
1
1
Mali & Burkina Faso
Feasibility study Mango bar for local
market
Hypothesis: A product with cheaper ingredients is more affordable
for local people
Consumer focus groups:
• Quality is bigger issue than price
• South African mango rolls from waste pulp are perceived as
premium product!
Next steps:
• Pilot local production
• Calculate cost, wholesale &
retail price
• Consumer tasting panel
1
IQF feasibility study
1.
1.
2.
3.
4.
1
Market research to confirm demand,
competitors, buying criteria & CIF price
Establish feasibility of frozen transport
chain
Find suitable equipment & calculate cost
price
Test if local varieties can be cut
Present samples to importers to test
acceptibility local varieties
Questions?
M a k i n g
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