Africa: Poultry and eggs are the winning proteins, with demand for feed and genetics expected to rise sharply
Following a short slowdown caused by economic volatility in mineral- and oil-dependent countries in 2016, the Dutch bank said it has seen an acceleration of poultry investments in Africa since 2017, with Eastern Africa and parts of Western Africa, like Nigeria and Ghana, attracting greater interest from local and international investors.
Several international companies have developed their positions in Africa, including modern retail and restaurant chains continuing their expansion, animal nutrition companies strengthening their positions throughout Africa, breeding companies establishing a more pan-African supply system and equipment suppliers building distribution networks, found the report: Time for Africa: Opportunities Remain Wide Open for African Poultry.
Production is still dominated by local companies, and internationalization is managed by a few large African investors, said Rabobank. But early international investors are taking positions to leverage the future growth path of Africa – one of the world’s largest pending growth markets - around 15% of the upcoming 20-year growth in global poultry, it added.
“The middle class in Africa is expected to continue growing, as the population doubles and more people move to big cities. These core fundamentals, together with the untapped potential of local feed grain production, offer an attractive investment opportunity,” said Nan-Dirk Mulder, senior animal protein analyst, Rabobank.
Ongoing market growth and modernization at all stages of the value chain create an increasingly interesting platform for international investors, he said.
“The growing demand and modernization of the supply chain will create additional demand for all input manufacturers, like equipment, animal nutrition, genetics, and animal health. Companies in these sectors also need to position themselves to serve Africa’s rising demand better,” said the analyst.
Investors, said Mulder, need to realize that conditions in Africa can be challenging and require a very strategic investment assessment that takes all major factors - business climate, market growth, supply, and infrastructure - into consideration.
“If this is done well, the potential upside is big.”
Rabobank perspective on Africa’s egg industry
Africa’s egg industry is growing by 3.9% per year. Nigeria is the biggest market in Sub-Saharan Africa, with an ongoing growth of 3% to 5% predicted for the period 2017-2027f, making eggs the preferred protein in Nigeria.
The South African egg industry has also seen solid growth over the last year, but it was hit by avian influenza (AI) in 2017, which killed more than 10% of the laying flock in South Africa.
In other regions of Sub-Saharan Africa, markets are recovering from a slowdown due to the economic volatility of the last three years. Eastern African markets like Ethiopia, Tanzania, and Uganda especially have shown solid growth, although disease outbreaks have at times impacted trade between regions, like Uganda-Kenya trade recently.
The ongoing expansion of the Sub-Saharan African egg industry will increasingly challenge current supply chains. Imported products from Europe and South America have been challenged by exchange rate volatility. Investors are increasingly looking into developing local breeding value chains with PS and GPS farms to establish a regional supply chain with a more stable supply of genetics and less dependence on trade.
Investments in the region are accelerating
The Rabobank report finds that:
- Breeding is growing significantly, and more modern genetics are gradually being used in growing markets. Meanwhile smallholder producers are increasingly shifting to multi-purpose breeds, making their businesses more productive.
- Equipment is growing in line with investments. Feed milling, hatchery, and farming technology are in the lead, but processing equipment is growing gradually.
- Animal nutrition is one of the earlier industries to benefit from growth in Africa, with the rising use of compound feed and, indirectly, feed ingredients, including premixes and concentrates.
Enhancing the value chain
However, Rabobank sees that the Sub-Saharan African poultry and egg value chain needs further upgrades:
- On the grain side, skills and knowledge need to be improved, while more and better inputs - equipment, seeds, fertilizers – are required. Grain sector infrastructure, distribution and storage all could be enhanced, according to the analysts.
- On the feed side, bigger and more modern feed mills are required.
- There needs to be a gradual shift from traditional to modern distribution, starting with 1,000 to 4,000 birds/hour, more cold storage opportunities and further processing facilities.
