making sense of development may 2012, world bank, washington michiel arnoldus agro-processing in...
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M a k i n g s e n s e o f d e v e l o p m e n t
May 2012, World Bank, Washington
Michiel Arnoldus
Agro-processing in Africa: how to make it work…
The timeline of economic development
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Production
Fresh Produce Exports & Niche markets
Processing Local & Regional Markets
Industrial Clusters ?
2005 2010 2015 ?2000
But fresh produce export has a downside…
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Vulnerability to rising transport cost
Political instability & perishable produce…not ideal
What to do with 2nd,3d & 4th grade? Fresh produce = low added value
Advantages of processing
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Spreading risk
Longer Season
Using waste & by
products
More turnover to
cover overheads
More value added in country
The 2 most common myths
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The market is huge
There are mountains of unused raw material
Supply MarketProcessing
Market is leading, not supply…
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There are tons of pineapple..lets use it
Help, we can’t sell! Some
market research?
Lets build a juice plant for export
Traditional development model
Pineapple surplus
Market research
pineapple products
StrategySupply,
processing marketing
Alternative model (medium term)
Competitivity analyses
Choose products
Sector strategy
Implementation
Ideal scenario if there is time…
A competitive processing industry makes efficient use of all grades
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Fresh export
Local & regionalFresh market
High value processed product
Medium value processed product
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 & juiceCompost
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
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Waste products are often not profitable but help cover fixed costs..
Which technology & scale do you invest in?
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Economies of scaleProfessionalismNot scalablemarket access
Easy to managePro-poorMany beneficiaries
Economies of scaleManagable by local
entrepreneurMarket accessProduct quality
Easier to financeLarge impact possible
in short time
Promoting talent to semi-industrial
Finding right technologyProfessionalisationFinding talentFinance
Large invesment = high volume & scale = difficult to managePoliticians get involved
Not possible for every productBeware of opportunists
Complex technology in Africa: maintenance, repair, handling
Cottage industry
Semi - industrial
Fully industrial
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
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Robust-ness
Mainte nance &
repair
Trust-worthy supplier
Effect of Power cuts
Energy source
Easy to operate
Price
Scale Operating cost
Local presence supplier
Complexity
Technology suppliers: a dilemma
Good quality but expensive Simple, sturdy, cheap,
but bulky. Service? Warranty? Efficiency?
Very cheap, but quality? Service? Warranty?
Quality, compact, Africa proof, reasonable price, but smaller assortment. Service? ?
Introduction & testing of new equipment
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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
M a k i n g s e n s e o f d e v e l o p m e n t
Case Study: Mango processing in Mali and Burkina Faso
Mali and Burkina Faso Context
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Large volumes of
non exportable
mango
Land locked complex
expensive transport
1 large industrial
juice & pulp plant
Franco-phone
Limited industrial
base
Cottage industry of
drying & juice 100,000s of
small orchards
150 drying facilities
Donor darlings
Organic & fair trade doctrine
Situation in 2009
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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
Question: what is the problem with export?
High local demand for juice; DAFANI popular but not profitable, small guys limited by packaging issue
Which Product, for which Market with which Technology ?
Plan of attack
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1Analyse EU, US, ME & local markets
3Find right equipment for local context, customer requirements & price level
2Analyse local production
4Define strategic options:
Product + Market + Technology
5Define pilots
6Implement pilots
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
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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
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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)
Finding the right drying technology…
• 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
•If South Africa is market leader, let’s copy them!
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Pre-treatment, storage & transport…
• Pre-treatment: Asorbic & citric acid for organic, Metibysulfate for conventional
• Cold Storage & refrigerated transport• Packaging under Nitrogen & co2
Finding the optimal combination for cost & quality
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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!
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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
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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
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Pilots
1. Adaptation kit for current Atesta ovens2. SA tunnel dryers, preferably in JV with SA company with
local entrepreneurs who pay 50% of investment cost3. Pre-treatment, storage & transport 4. Feasibility study mango bars local market5. Support DAFANI with market research to asses demand
and value of local varieties6. Feasibility study IQF for EU market
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Procurement of tunnel dryers…
1. Language barrier2. Cultural barrier3. World Bank procedures & local interpretation4. Transport & payment5. Adaptation to local context needed (electricity usage) But 6 dryers are arriving now in Mali and BF!
How difficult can it be?
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Making a joint venture between competitors
Dawid van den Berg, LVA: 450 ton/ year in 3 factories in South Africa
Hi, I’m your competitor, can I see your factory & cost price?
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Youssouf Coulibaly, Kene Yiriden, 30 ton/ year in Mali
How competitors are complementary
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More demand then production capacity
South Africa
Lack of mango
Right Technology & know how
Season: December – April
10kg fresh = 1kg dry
1500kg dry mango per employee per season
More equipment but lower depreciation per kg
Mali & Burkina Faso
Lack of demand & mkt capacity
Mountains of mango
Outdated technology & lack of knowledge
Season: April - August
17kg fresh = 1kg dry
450kg per employee per season
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
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Local oven 2.0: a lesson in innovation
A lesson in innovation
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Time invested: 6 months
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South Africa Mali & Burkina Faso
15 years
Budget: €5000 € millions
Result: premium quality, 2x capacity, ½ gas, HACCP, safe
CEAS, exporters, universities, manufacturers, EU engineers
Result: 0
1 artisan, drying equipment manufacturer, 1 local expert
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
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IQF feasibility study
1. Market research to confirm demand, competitors, buying criteria & CIF price
1. Establish feasibility of frozen transport chain
2. Find suitable equipment & calculate cost price
3. Test if local varieties can be cut4. Present samples to importers to test
acceptibility local varieties
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