To 5 growth sectors in Nigeria's economy

As global investors look to Africa for growth opportunities, the focus on Nigeria (Africa's largest and most populous economy) is increasing, and for good reason. Data released this year shows the West African nation's is far more diverse than previously understood. Sectors such as agriculture and trade are actually quite large and fast-growing, and could soon near the worth of the oil sector.

But there are deep-seated and well-known challenges in Nigeria that can potentially stifle government's ambition for inclusive growth. Latest concerns about terrorism and poverty are worrying and overshadowing the other side of Nigeria that brims with opportunities and promise.

A new report by McKinsey Global Institute examines the country's economic potential and finds that with the right reforms and investments, it can become one of the world’s leading economies by 2030.  

“What people overlook is Nigeria’s extraordinary advantages for future growth, including a large consumer market, a strategic geographic location, and a young and highly entrepreneurial population,” says Reinaldo Fiorini, director and location manager of McKinsey’s Lagos office.

The results of Nigeria’s progress have not been spread evenly across its economy. More than 40% of the population live below the nation’s official poverty line and 130 million (74% of the population) live below the MGI Empowerment Line - a level of income and access to vital services that provides a decent standard of living.

The reasons for Nigeria’s persistent poverty include low farm productivity due to limited access to fertilizer and mechanized tools, and inefficient markets. At the same time, urbanization has not raised incomes the way it has in other developing economies.

According to the McKinsey report, Nigeria has the potential to expand its economy by roughly 7.1% per year through 2030, raising GDP to more than $1.6-trillion. This could make it a top-20 global economy - with higher GDP than the Netherlands, Thailand, or Malaysia in 2030. What’s more a large consuming class is developing in Nigeria, with potentially as many as 160 million members by 2030, more than the current populations of France and Germany combined.

This upside scenario is based on a bottom-up analysis of the potential for five major sectors of the Nigerian economy:

Trade

Given the expansion of the consumer class, we project that consumption could more than triple, rising to almost $1.4-trillion a year in 2030, an annual increase of about 8%. This would make trade the largest sector of the economy and provide a particularly good opportunity for makers of packaged foods and fast-moving consumer items such as paper goods, categories that could grow by more than 10 percent a year.

Agriculture

Improvements on several fronts could help raise both the volume and the value of Nigeria’s agricultural production in the next 15 years. The economic value of agriculture, already the largest sector of the economy, at 22% of GDP, could more than double, from $112 billion a year in 2013 to $263 billion by 2030

Infrastructure

On average, the value of a nation’s core infrastructure—roads, railways, ports, airports, and the electrical system—represents about 68 % of GDP, but in Nigeria it is only about 39%. Between core infrastructure and real estate, total infrastructure investments in Nigeria could reach $1.5-trillion from 2014 to 2030. This would make building infrastructure not only a major contributor to GDP but also an enabler of growth across the economy.

Manufacturing

Though growing rapidly, manufacturing in Nigeria contributed just $35-billion to the economy in 2013, or about 7% of GDP. If Nigeria could match the performance of nations such as Malaysia and Thailand when their manufacturing sectors were expanding rapidly, output could reach $144-billion a year in 2030.

Oil and gas

While the oil-and-gas sector is expected to grow by 2.3% a year at best, its success is still vital to Nigeria’s economy. With the right reforms, we estimate that liquids production could increase from an estimated 2.35 million barrels a day, on average, in 2013 to a new high of 3.13 million by 2030. Oil and gas would then contribute $108-billion annually to the economy, compared with $73-billion in 2013. However, this estimate of potential output assumes renewed investment to reverse the production declines of recent years.

Nigeria’s government has put in place clear strategies and plans for various sectors, and the most important step that it can take now is to improve its ability to deliver its programs and services. The country can also capitalise on several favorable trends such as rising demand from emerging economies, growing global demand for resources, and the spread of the digital economy.

“By capitalising on its strengths and positioning itself to take advantage of emerging global trends, Nigeria could potentially triple its GDP by 2030,” says Acha Leke, a director in McKinsey’s Nigeria office. “This adds up to a huge opportunity for inclusive growth that should not be missed.”

Guide to investing in Côte d’Ivoire

Free download: Gain expert insights into the economy and investment opportunities in Côte d’Ivoire.

Frontier markets have garnered a lot of attention, as international investors continue to search for new growth opportunities. 

One frontier market with immense potential is Côte d’Ivoire. Situated in West Africa, the country is the top producer of cocoa beans in the world, and is one of the most diversified and fast-growing economies in Francophone Africa.

GDP growth of 9.8% is expected in 2014, from 9% last year.

Download the "Investing in Côte d’Ivoire" report to get expert insight on this market.

The report covers:

• Côte d’Ivoire’s reinvention journey, from a conflict-ridden country to rising star in West Africa

• The top four sectors with the best potential for investment and growth

• The business and investment climate

Click on this link to get the report.

 Brought to you in partnership with Developing Markets Associates.

Guide to doing business in Nigeria

Download Frontier's complimentary eBook and learn how business is conducted in Nigeria.

Nigeria is one of Africa’s powerhouses with the potential to be a key player on the global platform, thanks to its huge population, a fast-growing economy (the second largest in Africa), an expanding middle-class that wants to spend money, substantial natural resources, and diplomatic influence.

As one of the largest producers of oil in Africa, it has attracted significant investment into the sector. Current policy initiatives indicate government’s commitment to overcome existing challenges and to diversify the economy. Diversification, for example transforming the agriculture sector, can bring double-digit growth rates by next year, which would put Nigeria’s growth rate ahead that of Brazil and Russia, and slightly behind India and China.

The explosion of sectors such as mobile telecommunications and construction drove growth in the past decade, with many non-oil foreign businesses making profitable investments and often in partnership with reputable indigenous companies. Rapid economic growth is expected to continue; Nigeria aims to be one of the 20 largest economies of the world by 2020.

Crude oil exports dominate the economy and account for about 90% foreign exchange earnings and 70% of budgetary revenues. Other exports are rubber, cotton, cocoa, timber, palm oil, groundnuts and ginger. Major imported goods include machinery, chemicals, equipment, food and live animals. China is the largest import partner followed by the U.S., India, The Netherlands and South Korea. The top three largest exporters to Nigeria are the U.S, India and Brazil.

The country has many investment and business opportunities available to companies seeking growth in fast-growing frontier markets. There are generally no restrictions on foreign investment. However, a few areas are strictly regulated, for example, defence, supply of uniforms for officials of the executive arm of government, and narcotics. Various sectors, for instance, oil and gas, may have specific investment.

Download a complimentary Frontier Market Network eBook on Nigeria and learn:

• How to set up a business 
• Taxation
• Investment climate
• Legal system
• Intellectual property
• Incentives
• Human resources
• Employment law
• Useful facts

8 top agriculture investment opportunities in Malawi

Malawi provides potentially lucrative investment opportunities for foreign investors in agribusiness sector.

Malawi has vast untapped agribusiness potential. The Southern Africa country has good transport connections for exports to regional and international markets. It also has preferential access to major markets represented by COMESA, SADC, LOME IV and AGOA.

The agriculture sector has seen hard times in the recent past due to drought and political instability. Government’s reaffirmed commitment to democracy and good governance and significant flow of international development funding are helping to resolve historic problems.

There are a few good news stories for agriculture coming out of Malawi, including the resumption of peanuts exports after a long lull, and high level political support for agricultural development initiatives.

Investment opportunities

Cotton production

Malawi has been a cotton growing country since the colonial era. The cotton sector was vibrant for many years but started to slump in the early 1990’s due to the decline in global prices for cotton and the increasing cost of cultivation, which eroded the profitability of the crop for many smallholder farmers.

More recently, things have been looking up. Agricultural research institutions in the country have developed cotton varieties suitable for local climatic conditions and yields are improving. It is hoped that, with the introduction of foreign investment and expertise, yield levels can be increased from a current estimated 800 kg/ha to as much as 3,000 kg/ha in coming years.

Investment opportunities exist in the commercial cultivation of cotton through contract farming, village adoption, cooperatives and associations. These help to improve the production and quality of cotton with the objective of providing raw materials to the textile industry for its preferential markets under the African Growth Opportunity Act (AGOA), and the EU.

There are also larger-scale opportunities, such as the call for an investor to establish a second spinning, weaving and knitting plant in the country – to meet the demand of garment manufacturing companies operating under Export Processing Zone (EPZ) status. The investor will address the issue of inadequate raw materials, particularly of knitted fabric.

Increasing capacity and moving up the value chain are two major issues for the cotton sector in Malawi. With existing ginneries using only 25% of their ginning capacity, there are opportunities for investors to help increase productivity and add value to the cotton crop by converting it from raw cotton into other cotton products.

Tea production and processing

Tea is the second most important export crop for Malawi and it contributes around 8% of total export earnings. Tea is exported to European, Asian and American markets. Since tea is a major foreign exchange earner, additional investments are necessary through joint ventures with Malawian companies in the processing of tea and other byproducts and also in the actual farming of the crop. New opportunities also exist in the processing of green tea for East Asian markets. The Tea Association of Malawi coordinates information on the production and processing of tea in Malawi

Macadamia nuts processing

Macadamia is among the most important cash crops in Malawi. The nuts have a variety of uses, ranging from usage in confectionery products, eaten raw or roasted as dessert nuts. They are also used for household oil extraction and cosmetic manufacturing. Macadamia products are exported to both Asian and European markets. The current total area under macadamia cultivation is 2,200 hectares. Production of macadamia nuts is by both smallholder farming and large-scale estates. The cost per hectare in Malawi is very low. So far, macadamia bodies have been established and two processing plants are already operating. However, due to increasing demand for the product, more foreign investment is being sought to boost the production and processing of the nuts into various

Arabica coffee production and processing

Arabica coffee is the fourth most important export crop in Malawi. Exports are made to European markets, Asia markets and American markets. Coffee offers more profits than most other crops.  In order to boost production, the government has privatised the Smallholder Coffee Trust, which empowers smallholder farmers to control coffee production. Opportunities for investment exist in form of joint ventures in production and processing of coffee into marketable products.

Soya bean processing

Malawi produces more than 35,000 metric tons of soya beans per year. Most of the soya bean is exported raw and little is processed for food domestically. Malawi’s soil is very conducive to soya bean cultivation and farm gate prices are internationally competitive. There is a growing demand, both locally and internationally. The government is encouraging increased growth, production and utilisation of soya beans. As such, investment opportunities exist in the processing of soya beans into soya milk, soya oil and other secondary products.

Cut flower production

Investment opportunity exists in the production of cut flowers exclusively for the export market in Europe. There are already some firms that are successfully exporting to Europe and additional investment in this sector will create economies of scale and hence make Malawi’s cut flower industry more competitive on the international market. Malawi has a favourable climate and weather for the production of cut flowers. Since flowers do not do well in cold seasons in Europe, Malawi has an advantage over producers in Europe during the festive cold seasons of November-February in Europe. Investments are likely to yield high returns and an initial investment capital might be no more than US$2m. Sufficient labour is readily available for such a project within the city of Lilongwe and surrounding districts where cut flowers can be directly exported by air to Europe.

Fruit processing and canning plant

Malawi currently has no processing plant using local fresh fruit. The country has a favourable climate for the production of a wide range of fruits that include pineapples, tangerines and mangoes. The local market for these products is good and there are export opportunities to South Africa and other regional markets. An investment opportunity exists to set up a fruit juice processing plant in the southern region of Malawi. The estimated project cost is US$5mn and the expected return on investment is 33%.

Sesame processing

Sesame is used in Malawi both for consumption purposes and as a cash medium in some rural areas. It is used in confectionery products, for seasoning side dishes, and in soap making and cooking (including sesame oil). The crop grows along the lakeshore, in the Shire valley and on the warm plateau areas of Lilongwe, Mzimba, Rumphi and Chitipa. Estimated annual production has averaged 205 tons over the past 10 years. Opportunities exist in production and processing of sesame oil into marketable products.

Source: Developing Markets Associates

Visit www.frontiermarketnetwork.com to view business and investment opportunities in the agriculture sector.

7 business trends to watch in Ethiopia

Trend #1: Investment in infrastructure 

Ethiopia’s economy grew significantly in the past decade, driven mainly by major activity in the infrastructure and construction sectors. Annual per capita growth could increase by 3.8% if the country can get its infrastructure up to the quality of facilities found in Mauritius or South Africa. The Ethiopian government has an ambitious infrastructure development plan that will see to the delivery of adequate power, road, air, rail and telecommunications facilities. The plan will quintuple power generation capacity (to 10,000 MW) by 2015, according to the Growth and Transformation Plan; triple the capacity of the road network to 136,000 km, build new 2,000 kms of railway and facilitate mobile phone operators’ quest to increase the number of subscribers. Additionally, the national carrier, Ethiopian Airlines, plans to expand facilities to become the largest airline in Africa. These programs and others such as the ones that were designed to enable the country fulfil the Millennium Development Goals (MDGs) present huge opportunities for private companies. The key to identifying the opportunities lies in understanding the inputs the government requires to implement various development projects.

Trend #2: An agricultural revolution

Agriculture accounts for 40% of Ethiopia’s GDP and 60% of exports. Despite the lingering perception of the country as famine-struck, there is immense unexploited agricultural potential. The varied agro-climatic and altitude differences allow farming of a wide variety of crops including coffee, tea, oilseeds, pulses, cereals, which are the traditional crops grown, and newer crops such as fruits, vegetables, sugarcane, and palm. Ethiopia is a big exporter of floricultural products, fourth largest sesame exporter in the world, and top ten in the production of oilseeds like linseed and a wide variety of pulses. The livestock sector has the largest base resources in Africa but is grossly unexploited. The high value horticulture sector is likely to overtake floriculture in the coming years as an export earner. Future growth in the agribusiness sector will be driven by improved production by small-scale farmers and further foreign investment in commercial farming and agriprocessing. Some foreign companies are already invested in agri-procesing, for example, beverage production. It is likely that the sector will attract more investment especially in agriprocessing.

Trend #3: Growing market for consumer products

Ethiopia’s population of 93.8m, a rapidly expanding economy (% figures), high urbanisation rates and a young population – 73% of population is under 30 years of age – supports the case for investing in the Fast Moving Consumer Products (FMCG) sector. Foreign investors have recognised this potential, with Diageo buying a minority stake in state-owned brewery, Meta Abo, in 2011 for $225m, while Heineken bought two smaller breweries for $85m and $78m respectively. Diageo is looking to complete the acquisition soon, as it seeks to increase its market share. UK company, Duet Group followed the beer giants in Ethiopia by acquiring a 41% stake in Dashen Brewery for $90 million. Interest in the beer industry has continued with greenfield investment projects such as Raya Brewery and Habesha Brewery taking off. The beer market is expected to grow more than 10% each year to 2015 amid the country’s rising economic growth, which is expected to reach 8% by 2015, according to the IMF.

South Africa’s Tiger Brands acquired majority stake in East African Holdings’ FMCG operations, which is the largest manufacturer of household goods in the country. With industrial parks under construction and government-focus on the development of the light manufacturing sector, the sector is set to take off.

There will be interesting opportunities for smaller companies who aim to supply products and services to big investors. In the barley-malt-beer value chain, for instance, one can see opportunities, from contract farming, distribution and marketing, to advisory services, packaging, and input supplies. In the broader FMCG industry, interesting opportunities exist for expansion of market outlets such as supermarkets, distributions systems, and wholesale/retail operations. The next drive in the growth of FMCG sector may see expansion into regional markets of Somalia and South Sudan.

Trend #4: Unparalleled regional trade expansion

Ethiopia’s trade with neighbouring countries is likely to present a major business and economic opportunity in the near future. This will be made possible by bilateral and multilateral trade agreements under the auspices of COMESA and IGAD. However, a more important factor are the planned transport corridors in the region. There are established road linkages with Ethiopia Djibouti, Sudan, Kenya and to parts of Somalia. New projects are on the way to link the country to the emerging market of South Sudan, which operators in Ethiopia can also reach via river transport on the Baro. Perhaps the most interesting project is the Nairobi-Addis Ababa highway. When complete, it will represent one of the largest business opportunities in Africa, linking Ethiopia’s over 90m population with 130m consumers in the East African Community. There are talks of building a rail transport network, which will link with West Africa, perhaps from Senegal to Djibouti.

Trade figures are growing despite the current inadequate infrastructure - in 2010, Somalia and Sudan were Ethiopia’s fourth and seventh largest export markets, registering more than $200m in value. Imports from the Sudan and Somalia have also reached significant values at 4.5% and 6.6% of total Ethiopian imports respectively. Ethiopia has started supplying power to Djibouti and the Sudan and with additional multi-million dollar agreements to supply Kenya and South Sudan. Kenya in the meantime is developing the port of Lamu, with the aim of supplying South Sudan and Ethiopia. This region is likely to benefit further from a planned railway project connecting Ethiopia and Kenya along with South Sudan.

People are moving freely between Kenya and Ethiopia, while trade between Djibouti, Sudan and Ethiopia is tariff free. Any FMCG business with a good foothold in Ethiopia is thus also in a good position to supply these countries. The emerging interconnection of the East African and Horn of Africa trading blocks will represent some of the best opportunities for investment and value addition.

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Five top investment opportunities in Ghana

Ghana one of Africa's high-growth markets. Real GDP is projected to grow on average 5.16% per annum over the next five years. The West African country has maintained positive FDI trends in the recent past and has immense investment and business opportunities.

Power generation and supply

Ghana’s power sector has close to 2,500MW of installed capacity. Demand could exceed 5,000MW by 2016, driven by strong economic and industrial growth, population increases and government’s goal to be a major energy exporter into the West Africa Power Pool. Independent power producers are contributing to the current capacity, and are important in government’s bid to achieve its energy objectives.

Demand for energy is growing at a rate of 10% to 15 % yearly, but supply is not catching up. The government is consequently diversifying  the energy mix to ensure security, and is reportedly looking for investment into renewable energy projects to the tune of US$1-billion in the next eight years.

The renewable energy potential lies in wind, solar and hydro resources. More than 50% of installed capacity is currently provided by the large Akosombo and Kpong hydropower projects. Biomass also makes a significant contribution to the energy mix. West Africa’s second-biggest economy plans to increase the contribution of wind and solar power to 10% of the capacity by 2020 and enacted a Renewable Energy Law to enable the investment goals. 

It is estimated that, about US$9-billion is required in the short-term to finance the numerous initiatives in the energy sector, including oil and gas activities, which alone require over US$5.5-billion.

Companies can find a number of opportunities in generation, transmission and distribution of electricity, and supply of street lighting, energy-monitoring equipment to meet increasing demand for power monitoring and tariff analysis, and solar energy products and systems to off-grid communities.

A few foreign companies are planning big power generation projects in the country.

UK-based renewable energy investment firm, Blue Energy, announced it would construct a photovoltaic (PV) solar power plant in Ghana at a cost of US$400-million. Installation of more than 630,000 solar PV modules will begin by the end of 2013, and electricity generation will start early next year, with sections coming on stream as they are completed.  Blue Energy expects to power 100,000 homes when the plant reaches full capacity by October 2015, and claims it will be Africa’s biggest PV solar power plant.

Another recent big investor in Ghana’s solar energy space is Canadian solar company Siginik Energy Ltd, which plans to build a 50MW ground-mounted solar power installation in northern Ghana. It signed a power purchase agreement worth over $280 million, for 25 years, with the Electricity Company of Ghana Ltd., Ghana’s second largest utility.

Meanwhile Chinese Energy Company, Shenzhen Energy, is proposing to build a 700 megawatts coal-fired power plant that will cost US$700-million. Shenzhen, through its local unit Asgoli Power, entered Ghana in 2006 to build a 200MW plant that provides affordable energy to consumers.

Mining

With its political and social stability and strong mining infrastructure and services, gold-rich Ghana is a high-class target for mining investment.  As one of the most important producer nations for the global market – it is Africa’s second-largest gold producer, behind South Africa – mining is a major source of revenue for Ghana.

The country has diverse mineral resources, but the revenue balance is skewed towards gold. 14 of the 16 major mining companies operating in the country are extracting gold. Gold fields, AngloGold Ashanti, Golden Star and Newmont account for more than three-quarters of gold production. Other resources that are currently being mined include diamonds, manganese and bauxite. Deposit of Kaolin, silicon, limestone and other minerals exists.  The government is promoting the potential in these other areas with the hope of drawing interest from investors.

Gold prices soared in 2012, attracting attention to Ghana’s  deposits from big and small companies. This has also significantly increased illegal mining, which is now encroaching on the territories licensed to the majors, and using harmful methods to the environment.  

The falling prices of gold  could shift focus to other resources like limestone and bauxite. Limestone production would be potentially lucrative – the rising demand for clinker by the manufacturing and mining sectors (one million metric tons per year) could provide a ripe market locally and internationally.

Investment opportunities in the sector include production of industrial minerals for local and international markets, processing, provision of support services, e.g. contract drilling, contract mining, laboratories and geological services, manufacturing plants to produce key inputs and machinery for the mining industry.

Real estate and construction

Ghana’s growing population, buoyant economy and favourable investment environment make its real estate market increasingly dynamic. In spite of complicated issues over local lending and land ownership, demand for housing spans the entire spectrum of the population, from wealthy Ghanaians and a growing number of expatriates through a rising middle class to lower-income groups.

The current housing market boom began in the early 1990s when the financial sector was liberalised, and the sector’s expansion has since gone hand-in-hand with that of the economy as a whole.  With Ghana as one of the fastest-growing countries in the world, investors and authorities alike are realising the potential of the nation’s real estate sector.

Ghana has an encouraging framework for real estate investment, with freely-transferrable capital and profits, but projects have generally concentrated towards the middle and the top of the market, where margins are bigger and demand has remained relatively stable. As a result, a shortage of affordable housing is one of the biggest challenges facing the country. While the gap between supply and demand is most acute at the bottom of the income scale, there is also rising demand in the middle- and high-income segments, in which local and international developers are showing increasing interest.

One of the most significant drags on residential real estate growth has been the difficulty of obtaining a mortgage. But there is a growing willingness among banks and other lenders to provide home loans, whether through traditional mortgage structures or other forms of periodical payment.

Agriculture

Despite the changing demographics due to increasing urbanisation and industrialisation, agriculture still represents one of the largest GDP contributors in Ghana. The country is a major producer of a wide variety of cash and stable crops, including cocoa (second largest cocoa-growing country in the world), palm oil, maize, rice and cassava. Though maize and rice are primary staple crops, domestic demand has outpaced local supply in the past decade. Increasing production is a key part of the government’s long-term development plan.

A number of government- and private sector-led programmes could help boost production in the coming years. The World Bank, IMF and several pan-African NGOs are actively involved in the sector. The government continually engages major financiers to secure easier access to credit for farmers, which should decrease the amount of funding needed from international aid organisations and government sources.

The country is a major exporter of fruit and vegetables to EU markets. Other leading processed agricultural export products include tuna, cut fresh pineapples and tomato paste.

There are many opportunities for investors to get involved in Ghana’s agriculture sector such as commercial farming of crops and flowers, processing of produce and dairy products, supply of inputs, equipment, agrochemicals, veterinary drugs and animal feed, manufacturing of agri-chemicals packaging materials, cold chain systems and factory building and irrigation technology. Other opportunities include  capacity building for management and market-oriented enterprises, market intelligence research and development of agricultural finance and insurance. 

Insurance

The insurance sector in Ghana has grown rapidly in recent years. The fast growth and low entrance requirements over the past decade have resulted in a top-heavy sector, dominated by a handful of large firms and brokers. Competition is fierce, with over 40 insurance companies and 42 insurance brokerages. Corporates bring in the most business firms, but Ghana’s rising middle class is expected to boost the retail side. As new segments open up and the market continues to mature, smaller, more undercapitalised insurance companies are merging with competitors. 

The challenges facing the industry include under-pricing of policies and bad debts, which has badly affected insurance companies, forcing them to make significant underwriting losses.

The opportunities for strong companies and well-positioned new entrants are many. Micro- insurance initiatives in particular are set to tap into a massive, previously untouched market. The oil and gas sectors are expected to continue bringing in substantial amount of new business to insurance firms. The underinsured agriculture sector is another area.

The overall penetration is currently at almost 3%, and Ghana could play a leading role in the West African insurance market where total penetration is less than 1% in most countries, according to a report by international re-insurer, Munich Re. There are opportunities for companies to expand into the region.

Click here to view more business opportunities and investment projects in Ghana.

Eight emerging agriculture opportunities in Africa

Do you want to invest in Africa's agriculture sector?

Download Frontier's free report on eight specific agricultural opportunities with strong potential for growth.

The prospects for agribusiness in Africa are bright, and according to the World Bank report “Growing Africa: Unlocking the Potential of Agribusiness, farmers and agribusinesses could on the continent could create a trillion-dollar food market by 2030 if they can get more capital, electricity, better technology and irrigated land to grow high-value nutritious foods.

The sector will play a big role in Africa's determination to maintain and boost the current high growth rates. More governments are putting in place proper policies and attractive incentives to private investment into the sector.

There are many business and investment opportunities along the value chain, from farming and processing to retail. 

Download this free report to learn more about eight emerging and potentially lucrative agricultural opportunities in Africa.

Click here to access Frontier's comprehensive database of investment projects and business opportunities in Africa's agriculture sector.

What and how to export to Sweden from Africa

There are great opportunities for fruit and vegetable exporters to sell to Swedish stores.

Sweden is a rich country with a well-educated and sophisticated population, but its supermarkets don’t have all the quality products that consumers want. Agricultural producers in Africa - particular in the food and beverage sector - have a great opportunity to export to the Scandinavian country and to its Nordic neighbours.

The Nordic region (Scandinavia plus Iceland) has a population of about 25 million, most of whom share tastes in food, have high incomes and long life expectancies. With the Swedish market for food alone being worth about $1-billion, there clearly are incentives for African exporters to sell their products into the region.

But barriers for entry into the European Union are high. Health and safety standards are high and consumers are discriminating in terms of quality. However, the rewards are great for farmers and food manufacturers who can get their products accepted. 

Swedes spend about 14% of their income on food, and many of them, about 34%, live alone so there are that many more people buying the groceries than might be the case in a society where large families are the norm.

Charlotte Kalin is the CEO of Chamber Trade Sweden. Speaking at an investment conference in November, Charlotte pointed out that every kilogram of coffee consumed in the country is imported, as are large percentages of the country’s fruit (95%) and vegetables (60%).

“That represents a big opportunity”, says Charlotte. She noted that a delegation of South African stone fruit producers had recently visited Sweden. “They know what Swedish companies are looking for when they import from SA”.

And what Swedish companies are looking for apparently is high-quality goods, and choice.  She pointed out that shoppers in South Africa have great variety when it comes to fruit and vegetables. “In your shopping here, you have a very sophisticated diversification in what consumers can buy. Shopping here is so much fun, there is so much to buy, you could really revolutionise the consumer choice, be it in spices, be it in fruits…”

Charlotte expanded on the shopping experience for a Swede in South Africa - which was something of a surprise for the South Africans in the audience!  Said Charlotte, “Shopping here is like in California, you just have it all, I am very impressed actually“.

Charlotte made a specific call to African exporters, “There is a lot you can do in engaging the Swedish consumer in persuading them to buy new brands.”

Trends in Swedish food retail

In encouraging African agri-producers to export to Sweden, Charlotte pointed out that there are certain key trends that are guiding the food market now. These trends are for;

• Exotic foods (including spicy sauces)

• Organic foods

• Gluten-free foods

• Energy bars and drinks

• Ready-to-eat dishes

A member of the audience at the conference, a Swedish manufacturer, suggested that exporters had a real chance to make inroads into the ready-food market, what with lower input costs for the packaging of food in Africa. South Africa, with excellent refrigeration facilities, has a particular advantage.

Retail specialist Nils Tunebjer, of strategic brand and design agency BAS, pointed out that exporters must also have something to distinguish them from the rest of the pack.

“There must be something more,” said Nils. “If you just come with a product and regular packaging, you will have a tough time!”

“South Africa is a premium country for fruit and vegetables and food and you can answer the question, ‘What should I use when I step in?’”

He stressed that Swedish consumers are very quality-aware and urged potential exporters to tell their story, be it of the process that goes into making the product or the story of the people involved in the making the product.

“Be transparent and open about what you are doing, tell your history,” says Nils. “It can be online, or it can also be in the packaging, which is an important touch point between the retailer and the customer.”

Sweden represents really ‘tough competition’. “The big retailers appreciate if you give them something more: how you merchandise in the store, how you interact with the consumer, how you give information. There must be something more!”

Continuing on the theme of trends as mentioned by Charlotte, Nils pointed out that there is a pizzaria and a sushi store in just about every village in Sweden. “There is great interest in foreign foods and new ways of consuming.”

He mentioned Asian and Thai speciality stores that sell spices like cardamom and saffron. In the health market, South African tea brand Rooibos is very popular. Nils loves Rooibos but complains because he can’t get his favourite tea in the morning. “In our office, even though we have 50 different kinds of tea, I can’t get English Breakfast! Swedes love lots of green teas, red teas, all sorts …”

Other trends highlighted by Nils that are driving customer choices in Sweden are:  

• fair trade

• ecological quality

• openness and information

• interesting back stories.

Nils pointed out that South African wines had created a lot of trust in the Swedish consumer, and generally Swedish consumers were very educated about the country they are importing from.

Price is still important according to Nils, but if producers are able to differentiate their product in one of these ways, then they will increase the chance of success.

Free export advice

Open Trade Gate Sweden is a section of the National Board of Trade of Sweden that offers a one-stop information centre for exporters interested in the Swedish market. It helps traders and aims to increase exports from developing countries to Sweden. Open Trade Gate Sweden specialises in trade rules and regulations, covering areas such as labelling, packaging, health and sanitary requirements and customs procedures.

The organisation has its headquarters in the Swedish capital, Stockholm.

If problems occur in the process of exporting, Open Trade Gate Sweden investigates and acts to overcome the problem. Open Trade Gate Sweden’s services are free of charge.

In 2003 the Swedish parliament decided that the entire government shares the responsibility to contribute to the objective of achieving an equitable and sustainable global development. All future policies would take into account the effect of policies on developing countries.

As outlined by Open Trade Gate Sweden, ‘within the area of international trade it [the policy] specifically says that the Swedish government should work for improved market access for developing countries and remove trade barriers to facilitate trade and try to increase exports from developing countries to Sweden.’

Information about Open Trade Gate Sweden services and general information about exporting to Sweden and the EU can be found on the website www.opentradegate.se

Visit www.frontiermarketnetwork.com to access a database of distributors, agents, importers and exporters in Africa. 

Top trends in agriculture

Demand shifts 

Climate has a big effect on agricultural revenue. Equally, world and local economic cycles have a profound impact on the revenue streams of agriculture. This is especially true now that agriculture has been integrated in to the value chain, and it is no longer just focused on primary production. In analysing GDP growth above inflation, huge demand shifts have been predicted, with almost no growth in demand expected in developed countries - and major growth potential being shown in developing countries.

Production to outstrip demand in short run: The agricultural sector will not be in a position be to take advantage of the demand gap. This is because Latin America and Africa have the potential to increase agricultural production by 300%. Growth in production will therefore outstrip the growth in demand. This will keep commodity prices in check and limit production margins. 

To survive, farmers will have to continue to become more productive through the adoption of new technology and the utilisation of economies of scale. If they do this, they can remain competitive. South Africa can also expect more competition from the rest of Africa, as the growth in agricultural production will come from a variety of countries.

Soft commodity prices to soften and move sideways: Prices of soft commodities increased substantially during the last decade. This was mainly the result of an increase in demand in developing countries: good economic growth (above inflation) resulted in consumers becoming richer; thus their spending on food and fibre increased.

Prices were further supported by the creation of new markets for agricultural products in the form of renewable energy.  Higher commodity prices stimulated investment in the agriculture sector, with a resulting increase in production. This, combined with a slowdown in economic growth (demand) after the financial crisis led to prices flattening and, in some instances, even declining.

Given the expected growth in production, it is expected that soft commodity prices will move sideways. The only potential counter to lower commodity prices is the creation of new markets for agricultural produce like the biofuel market.

Agriculture investment opportunity: At present, interest rates are at a 36-year low and are expected to remain low over the next few years, creating the ideal opportunity for capital investment to gain economies of scale and/or to improve productivity.

This explains the continued acceleration in the consolidation of farming units as well as record sales for tractors and implements. This is in spite of an increase in the cost of capital, due to the financial crisis in 2009, as well as a decline in investor confidence due to the downgrading of South Africa’s credit rating. 

The predicted continuation of the drought of the last two seasons may have a negative impact on future investment, as this will impact negatively on the reparability of the industry in the drought-stricken areas.

In general, agriculture is doing well and still remains one of the few save havens for investors looking for capital growth. Property prices are expected to continue to grow by at least 10% per annum due to the profitability of the agricultural industry, and due to external investment from lifestyle buyers. A third reason to support the idea that property prices will continue to rise can be found in the government programme of buying land for restitution and redistribution. 

China, Brazil and South Africa will continue to drive investment in Africa.

To view business and investment opportunities, sector analyses and companies operating in Africa's agriculture sector, click here.

Top 10 trends to watch in Africa

The African Development Bank has projected a growth rate of 5.3% next year, from 4.8% in 2013. This growth, the bank says in its latest economic outlook, confirms Africa’s ‘healthy resilience to internal and external shocks and its role as a growth pole in a distressed global economy’.  

The robust economic growth, expanding market size and various reforms have improved the attractiveness of the continent to investors; foreign Direct Investment (FDI) inflows increased by 5% to US$50-billion in 2012, even as global numbers fell, according to the 2013 World Investment Outlook.  

So, what are the trends to watch if you are looking for growth opportunities in Africa in 2014?

Download our list of top trends for the year to find out exactly where the opportunities are.