Session 4: How does the private sector view agropoles and ... · land allocation, to production and marketing - PPP (51% Republic of Gabon –49% Olam), world class execution-Its

Creating value is our business |

Session 4: How does the private sector

view agropoles and agrozones ?

15:30-16:30

22 March 2016, Abidjan

0


Agenda

1. Olam in Africa: harnessing outgrower programs

2. Our experience in developing agrozones in Gabon

1


A leading global agribusiness player Strong footprint in Africa

Olam International, a global agribusiness player with a unique

experience in Africa

2

US$20b revenues

N°1 global trader

Cocoa

N°1 global supplier

Cashews


Rice


Tropical Lumber

Founded in Nigeria

Direct presence in 28 countries

US$3b revenues


Olam in Africa

3

• Began in Nigeria sourcing cashew

in 1989

• 25 years later we are in 23

countries managing 18 products

• Committed to pioneering

collaboration, working with

farmers, cooperatives and

communities to help secure

livelihoods for future generations

• Total fixed capital investments of

S$1.8 billion (US$1.3 billion) up

until FY14


Olam has built a unique footprint built on long term commitment in

Africa

4

In addition to smallholder supply chains, our heritage in Africa coupled with

deep local knowledge and global reach, means Olam is in a unique position

to focus on four strategic areas:

• Africa as a cost-competitive producer

• Africa as a growing consumer of food staples

• Africa as a growing consumer of branded packaged foods

• Africa infrastructure development (warehousing, logistics, port, etc.)

2.8m

farmers

12,000 full

time

employees

20,000

seasonal

workers

1.9m Ha

upstream

25 tier 1

processing

units


Farmers are trapped in a spiral of low productivity

5

Availability of improved varieties

Availability of infastructure

Pests, disease

Weather, topography, soil minerals…

Soil degradation

Low revenues

Low productivity

Low productivity

Low reinvestment


Why do we engage in smallholder schemes?

6

We need:

Farmers to grow the crop

Farmers to sell to us

Access to niche markets

Farmers to produce more

Farmers to produce better quality

To maximize asset utilization

Mar

ket

Mot

ivat

ion

Ski

lls, M

eans

Mar

ginVol

umes

RO

A


Olam is progressively making stronger linkages to smallholders to

transform supply chains

7

Simple,

informal

contracts and

provides few

or no

services

Indirect

Intermediary

sources from

farmers and

may or may

not provide

services

Informal

Simple,

informal

contracts and

provides few or

no services

Direct

Buyer sources

directly from a

large number

of farmers, and

provides some

level of support

Nucleus

estate

Buyer sources

from own farm

and plantation

as well as

contracted

farmers.

Buyer may

provide

support

Multi-partite

Multiple

parties with

various

arrangements

e.g. joint

ventures

Types of outgrower model


Example #1 – Direct models developed by Olam

The Olam Livelihood Charter

8

1. FINANCE: offer farmer groups short and long-

term finance at 0% interest for crop production,

purchasing, and asset investments

2. IMPROVED YIELD: invest in training and

support farmers by the supply

of inputs

3. LABOUR PRACTICES: educate farmers on

child labour, safety, gender and financial issues

4. MARKET ACCESS: offer farmers a fair and

competitive price

5. QUALITY: encourage farmers to produce good

quality to enable best prices and premiums to

be paid

6. TRACEABILITY: ensure products can be

tracked to source and certified

where required

7. SOCIAL INVESTMENT: support rural health,

education and infrastructure

8. ENVIRONMENTAL IMPACT: are improving our

environmental footprint across the supply chain

OLC figures for FY14 in Africa

• Total smallholders: 281,114

• Total hectares: 547,918

• Interest-free finance granted: US$166 m

• Seeds distributed: 7,892 MT

• Bags of fertiliser distributed: 419,204

• Model farms: 796

• Training days for Good Agricultural Practices

and Business Skills: 10,789

• Premiums for certification & quality: US$13m

Global target: 800,000 farmers

by 2020 in OLC programs


Example #2 - Nucleus estate models developed by Olam

Rukubi rice farm, Nasarawa State, Nigeria

9

4,017

outgrowers

producing

11,250 MT

of paddy rice

Ave profit per

farmer previously:

$70 to $100/Ha

Now $300 to

$500/Ha

Partners:

USAID

Chemonics

training

1,000 people

employed on

farm and 950 at

the mill in peak

season

10,000 Ha nucleus farm

in line with Gov’s

Agricultural Transformation

Agenda for rice self sufficiency

Integrated mill producing 36,000

MT

milled rice per annum

Total investment = more than

18 billion Naira

Seeds

developed

with West

African Rice

Dev. Ass


Example #3 - Multi-partite models developed by Olam (1/2)

Palm in Gabon – “GRAINE” program

10

GRAINE (i.e SEED) Program: 200’000 Ha of

which 128’000 Ha for smallholder cooperatives

One of its kind Program by:

- Its scale: 200’000 Ha, > USD 3b

investment, 20’000 smallholders to be part

of the program

- Its execution model:

- Holistic support of smallholders from

land allocation, to production and

marketing

- PPP (51% Republic of Gabon – 49%

Olam), world class execution

- Its sustainable approach: comprehensive

rural development, respect of the

environment

- Its support of both export and domestic

crops including palm, as well as food crops

(e.g. banana, cassava, pepper, tomato)

Most ambitious

smallholder program

in Africa


Example #3 - Multi-partite models developed by Olam (2/2)

GRAINE: sustainable livelihood for each of the 20’000 smallholders

11

2 to 7 ha distributed for agriculture

0.5 ha for individual use

Housing Kitchen garden

+

A sustainable livelihood for each

of the 20’000 smallholders

A sustainable livelihood

> 5’000 USD of

revenue per year

per family

+

Olam provides rigorous training in

Good Agricultural Practices as well

as market access to distribution

networks by buying produce based

on a transparent pricing formula.


Agenda

1. Olam in Africa: harnessing outgrower programs

2. Our experience in developing agrozones in Gabon

12


Agriculture as a development priority for Africa: need to valorize rich

endowment to answer key challenges of the continent

13

Huge potential

• 60% of unexploited

arable land worldwide

• Increasing local demand

Food security

• Reliance on imports

• Large food bill (US$-38b

in 2011)

Job creation

• Labor intensive sector

• Variety of skills through

all the value-chain

Agriculture as a priority for Africa, notably in the context of high demography


Governments are determined to develop both farming and

agribusiness activities

14

Farming

• Increase agricultural land

• Modernize and increase productivity

Agribusiness

• Strong local transformation

• Move up the value chain

1

2

Execution in partnership with the private sector

Strong public will to develop the

agriculture sector


Many large-scale farming initiatives announced across Africa

Example of palm plantations

15

1

> 2m Ha of new projects

announced since 2000

• Singaporean leading

agribusiness group

• 25’000 Ha plantation

in Nigeria

Example of projects

• Chinese leading

agribusiness group

• 100’000 Ha

plantation in RDC

• Owned by Herakles

Capital

• 60’000 Ha plantation

in Cameroon

Large-scale palm oil plantations development

Non exhaustive mapping


Strong obstacles in executing large-scale farming projects –

Example of palm plantations

16

1

Review of last 10 years major setbacks in Palm Oil

development in Africa

ZTE 100 000

ENI 70 000

SIVA 100 000

Sinarmas/GVL

SIVA

300 000

100 000

Simedarby

170 000

200 000

200 000

Cargill

Simedarby

9 000

Herakles

50 000

60 000

200 000

SIVA

30 000

EPOL

Palmco 100 000

SIVA

SIVA

Announced size

(in hectares)

Main deals aborted or

on hold (country/Cies)

5 main reasons for setbacks

• Difficulty in securing large

land banks

• Social issues with local

communities

• Environmental impact

issues

• Unbalanced deals with the

Government

• Poor Doing Business

environment

2,21,9

20142000

+1%

Palm oil production (in m MT)

Production stagnation


Example of the cotton industry

Moving up the value-chain does increase value locally…

17

Production

Cotton seed

Deseeding

Cotton fiber

Spinning

Cotton yarn

Weaving

Fabric

Making

Clothing

14,6

7,5

2,31,00,5

ClothingFabricCotton yarnCotton seed Cotton fiber

Value added US$ for 1kg equivalent of cotton fiber

Moving towards packaged goods increases value created locally

2


… justifying the recent development of agropoles in Africa

18

2

Staple Crop Processing

Zones – Nigeria

SAGCOT – Tanzania

Bukanga Agropark –

RDC

National Agropole

Program – Cameroon

Bagré Agropole –

Burkina-Faso

Meknès Agropole –

Morocco

>15 countries leading the agropole

development front

Non exhaustive map


Agropoles and Agrozones execution still face many obstacles

19

2

Let’s build momentum !

Typical pitfalls in Agropole design,

development and management

• Excessive focus on national /

local markets

• Lack of sector / industry

specialization

• Focus only on tax benefits,

ignoring key private sector needs

(e.g. access to inputs,

appropriate regulation, lean

administrative process)

• Inadequate infrastructure (e.g.

insufficient electrical power,

limited access roads)

• Inadequate human resources

(e.g. lack of marketing /

promotion skills, poor

management / execution skills)

Dr. Akinwumi Adesina, President AFDB

Dakar Speech, October 2015

“Agriculture is not a development or

social sector, neither is it a way of life:

Agriculture is a business. And we

must take a full value chain approach

[which] requires greater investments by

the private sector”


My experience

20

Agribusiness

player

Agropole

manager

2 points of view

Creating value is our business | 21

Rubber plantations

28’000 Ha

Palm plantations

50’000 Ha

In Gabon, Olam is a major agribusiness player with ~280’000 Ha

under development…

GRAINE Program

200’000 Ha


… already reaching key achievements

22

Palm plantations

32’387 Ha planted

Rubber plantations

7’233 Ha planted

GRAINE Program

1’388 Ha prepared

• CPO production already

started

• Better yields than expected

• Planting started late 2012 –

first harvest by 2020

• 75 Ha world class nursery

• Massive multi-channel

communication campaign

• Already 13’800 subscriptions


Olam is a also a SEZ developer with the Republic of Gabon, with a

focus on wood industry

23

Wood industry

agropoleNkok SEZ multi-product industrial park

GSEZ Furniture Cluster


Nkok SEZ is already a commercial success…

24

87 investors from 18 countries in less than 4 years

US$411m invested

US$1.7b committed


Sawn timber Sawn timber & Kiln dryer

Sawn timber Veneer & Plywood

Sawn timber Sawn timber

Furniture Sawn timber

4 factories in production 6 factories under construction

Catalyst of Gabon wood processing industrialization process

(1st and 2nd transformation)

… specifically 10 factories for wood transformation now hosted in

the zone


Gabon Wood Industry: exclusive furniture for local market and export

Gabon Wood Industry furniture factory

Exclusive furniture

• Timber and related products factory,

with kiln drying facilities

• Export of seasoned wooden battens

to meet demand in European market


6 key success factors for a successful agropole…

… but too often people just get first 2 ones right !

27

Legal and Fiscal

framework

1

Infrastructure2

Customer-centric

mindset

3

Access to inputs6

Patient capital4

Human capital5


Attractive legal and fiscal framework

28

1

Single window

clearanceNo red tape

0% tax

income

SEZ Law 2011


World-class infrastructure: multimodal connectivity and

reliable and competitive utility

29

2

Reliable and competitive

utility

Exports

Inputs Supply

Multimodal connectivity

Reliable and affordable


4 additional factors to consider: subtler yet critical for success

30

Legal and Fiscal

framework

1

Infrastructure2

Customer-centric

mindset

3

Access to inputs6

Patient capital4

Human capital5


Customer centric mindset: More than infrastructure, it’s

about services

31

3

Dedicated GSEZ team to attract & take care of the

customer

Customer satisfaction as the priority target

Private / public / PPP… whatever the framework,

clients should be kings


Patient capital: Solving the chicken and egg dilemma

32

4

Need for patient capital (state

support, DFIs)

• Set up common infrastructure

• Offer attractive / low risk package

for “pioneer” 1st investors

Agropole requires patient capital to pave the

way for a profitable venture

Profitable venture after ~5-year

• Up and running agrozone with

functioning ecosystem

• New investors willing to pay

Phase 1 Phase 2


Human capital: attracting, developing and retaining local and

international skills

33

5

GRAINE program –

Gabonese already sent in

Malaysia for training

Furniture Cluster – ENSAD

ready to set up Sister school

in Gabon


Access to inputs: without secured and competitive access to

inputs, an agropole is like a car without fuel

34

6

• Guaranteed access to

high quality wood:

- Dedicated forest

concession for large

investors

- Partnerships with local

forestry players

• Export ban on:

- Logs

- Some precious wood if

not transformed into

furniture

Gabon ongoing successful move

towards local value addition


Assembling the 6 key success factors enables the creation of a

dynamic and competitive ecosystem

35

Patient capital

Legal and Fiscal

framework

Human capital

Access to inputs

InfrastructureCustomer-centric

mindset

1

2 3

4 5

6


Our conviction: agropoles – if executed right – can support Africa

much needed Green Revolution !

36

Strong ambition for replication and

world-class execution

Increasing interest for GSEZ successful

track-record

Macky Sall, President of Senegal

Alassane Ouattara, President of Cote d’Ivoire

Patrick Achi, Minister of Infrastructure of Cote

d’Ivoire

Isidore Mvouba, Minister of Infrastructure of

Congo

Other visitors…

Isabel Dos Santos, Business woman and

daughter of President of Angola


Thank you !

Documents

Session 4: How does the private sector view agropoles and ... · land allocation, to production and marketing - PPP (51% Republic of Gabon –49% Olam), world class execution-Its