KEVIN BELLAMY, Global Strategist – Dairy at Rabobank: Sub-Saharan Africa – opportunities with the correct strategy

Kevin_Bellamy_180Last few years has seen increasing interest in the opportunities in dairy presented by Sub-Saharan Africa (SSA). However, it is important to not look at SSA as one region, rather a complex web of diverse countries with their own subtle characteristics. If ever there was an example of ‘one size doesn’t fit all’ – SSA would be it.

One broad distinction that can be made is the difference between the west and east of SSA. Concentrating on the west, countries such as Nigeria, Ghana and Senegal have seen dairy demand grow substantially. This demand has been almost exclusively satisfied through imports; either finished goods or bulk products that are then re-packaged through local facilities. The local market has largely been geared to the consumption of milk powder, often in small pre-packed measures. Within the large urban centres, fresh products such as yoghurt are also making an entrance.

The key to success here has been the ability for investors to quickly gain control and develop logistical networks. This is important as while importing into the main seas ports is relatively straight forward, getting product into the rest of the country and neighbouring land-locked countries can be problematic without local knowledge.

The East of SSA provides a completely different set of challenges although the potential for opportunities across the whole value chain. Unlike west SSA, there are much higher import tariffs. This means that unless you can tie up with a Government aid scheme – direct trade is expensive. Instead, we are seeing investors looking to develop supply chains within the region. In Kenya, Ethiopia and Uganda – investments are being made in farm businesses and also acquisitions in local processing. This is to cater for a market that, unlike west SSA, largely prefers liquid milk that is then used in the home to make other products.

One challenge to those looking to develop east SSA is the amount of informal milk, produced locally from 1-2 cow herds, and then sold direct to the consumer at local markets. This form of consumption is very popular, particularly outside of the major urban centres. To counter this, product development that can’t be replicated at home is needed. Again, local knowledge/partnerships together with Government support are required.

Although the current low oil price has hampered growth, Sub-Saharan Africa will remain a key dairy demand region in the future. However, to get the most out of it you must tailor your strategy.

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