Africa, and particularly sub-Saharan Africa, has rapidly gone from an emerging market play to a must-be-there business opportunity for many of the world’s largest companies and most active business sectors.
However, despite increasing awareness of the huge opportunity in Africa, many still think the region is just "too hard".
This year marks Olam’s 25th anniversary and we have the distinction of being both “born” in Africa and now a global company operating in 25 countries across the continent. Africa continues to loom large in Olam’s focus, with a presence from Ghana to Gabon, from Cameroon to Côte d’Ivoire and from Senegal to South Africa.
We know from our experience that Africa needs foreign investment, technology and expertise. But what is also sought are empathy, understanding and the creation of mutual value. True, deep, sincere and diligent stakeholder engagement is not only important for managing risk effectively, it is fundamental to growth and business success.
“Must invest” or “Too hard”?
There is real potential for true partnerships in Africa, including with people on the ground, communities and governments, originating from Asian economies.
Take Nigeria for example, with a population in excess of 170 million and annual economic growth of up to 7 per cent. In 2012, the country, now Africa’s largest economy, ranked 61st among Singapore's trading partners. Yet its government clearly sees the potential to rapidly move up that ranking.
At the recent commissioning of our integrated rice mill in Nigeria, the largest in Africa, the country’s President, Goodluck Jonathan, reinforced the country’s drive to encourage more value-adding partnerships.
“Let me assure you that my administration will continue to promote public-private sector partnerships to drive Nigeria’s holistic transformation and our agriculture, to greater heights, until we fully unlock our potential as a nation, and achieve our dream of becoming an agricultural power house,” he said.
At last year’s Nigeria-Singapore Business and Investment Forum, Nigeria’s Minister of Industry, Trade and Investment, Olusegun Aganga, commented that the country is looking for "productive" rather than "extractive" investments.
His comment underscores a shift in thinking about the type of opportunities Africa offers. As several countries on the continent enjoy strong economic growth and a rapidly emerging middle class, the potential for “extractive” industries is now being paralleled by opportunities to value-add and tap domestic markets.
Over the years, Olam has been focused on one commodity asset class - agri-commodities. Yet we have diversified across products and the value chain from upstream to downstream - from cocoa, cotton, sesame and cashews to wheat milling and packaged foods. And we have rapidly added domestic consumption opportunities with an export-oriented focus.
So from our perspective, Africa is squarely in the “must-invest” category rather than the “too-hard” basket – knowing that any market with the potential for double-digit returns will always require hard work.
Genuine partnerships mitigate risk
No new market in Africa is without risk. And it is certainly true that stories abound of foreign companies setting up operations in Africa only to find that issues, for example, around land ownership, are far from resolved. At a World Bank conference last year, it was said that 45 per cent of land investments fail in Africa due to community conflicts. This, in turn, adds to the perception of Africa being too hard.
But in many cases, the perception of risk in Africa is disproportionately high to the realities of the opportunity. Risk factors that exist can be mitigated through sound risk management along with social and environmental due diligence.
Our experience in Nigeria and in many other countries in Africa demonstrates the potential to establish partnerships and achieve responsible growth on a significant scale. To grow and prosper, investments must go beyond the financial to align with the legitimate national agenda, to build strong local relationships with stakeholders that include farmers, local communities and governments.
Doing well by also doing good cannot be an abstract commitment in Africa, it must be central to business models. That has been and still is the basis of our Africa opportunity.
We have focused our efforts on developing livelihood opportunities for farmers and their families to ensure mutual value is derived by all key parties. By reinforcing these relationships, we not only help farmers to improve crop yields, we ensure security of supply for Olam and create a strong impetus for future generations to go into farming as a viable career.
In Mozambique, we have provided more than 70,000 cotton farmers with pre-financing for seeds and crop protection methods.
In Ghana, we worked with expert environmental partners Rainforest Alliance and the Ghanaian cocoa communities to launch the world’s first verified ‘climate-smart cocoa’. This involved training farmers in climate change mitigation practices, while helping them to improve yields and diversify incomes.
In West Cameroon, with the support of the Douwe Egberts Foundation, we have seen green bean coffee increase from 480kg per farm (average 2009 and 2010) to 660kg per farm (average 2012 and 2013). These actions have been beneficial to our business, to the local economies and to local communities in equal measure.
In Africa, companies need to keep in mind that growing responsibly means engaging beyond a pure business focus – to genuinely becoming an active part of the communities where we operate. It is this engagement that both contributes to growth and can reduce risk in critical aspects of business.
The NTU-SBF Centre for African Studies in Singapore will provide a great opportunity for Olam and other Singapore and Asia-based companies looking to Africa to share experiences and to learn from each other. We have much to share – and still more to learn.