World Grain - February 2014 - 8

from the editor-in-chief

As a different food
industry unfolds

elpful insights may often be garnered
from examining the way an industry
like food manufacturing and even
grain milling evolves in different parts of the
world. That includes a region like sub-Saharan Africa, which might seem at first glance
totally beyond any relationship to what is
happening in advanced economies. Yet, a
close look reveals valid points of comparison that provide guidance for U.S. and European food companies, either in taking steps
domestically or in looking abroad in searching for investments outside of at-home markets. The search for opportunities in Africa is
happening more often as almost the capstone
on the long time the huge area of that continent lying south of the Sahara Desert has
been pointed to as a good place for a foreign
trial of advanced food manufacturing.
Relative slowing of the overall economies
of North America and Europe has as much
to do with this wave of interest in Africa
as does the promise of a new market. Thus
far at least, it's not so much the hundreds
of millions of Africans who do not have an
adequate diet that are the attraction. Instead,
it's improvement in downtrodden economies
that causes people to look to retail stores for
their food.
Investment interest focuses on food manufacturing, largely because it stands out as a
bright spot in the growth of business in developing nations that have governments and
legal systems favoring private enterprise. A
few large investments have been made over
the years by both American and European
entities which grasped the chance for success in the food business. That is especially
so in African nations enjoying domestic
prosperity because of natural resources and
freedom from the internal conflicts that may
make business in Africa especially difficult.
Coincident with expanding foreign interest in entering one phase or another of the
food business in Africa has been the rapid
growth in domestic participants. Africa's
richest man, Aliko Dangote, built his wealth
with Dangote Flour Mills, followed by entry into sugar refining, and from these food

operations into oil production and refining,
fertilizer and construction. Just in the past
year, Mr. Dangote sold his milling business
to Tiger Brands, South Africa's largest food
maker which has expressed a continent-wide
interest in flour milling, bread baking and
other aspects of food making. Mr. Dangote's
singular power in Nigeria is not necessarily
replicated in other nations. For instance, a
listing of the five most powerful families in
Tanzania showed three of the five operating
flour milling businesses, as well as making a
range of finished food products like biscuits
and pasta.
Tanzania provides a superb example of
the way a change in government promotes
the expansion of locally-owned businesses
with regional ambitions. After operating for
years with state ownership of every company, Tanzania gave up on socialism in the
1980s. The latter included the sale to private
owners of flour mills that had been built by
the government. While freeing the domestic
economy from government ownership was a
plus undertaken several decades ago, it still
required the further opening of the nation to
competition from outside investors to stimulate domestic and foreign investing in food.
This in turn leads to pride in the quality of
domestic mills and factories.
Even as food manufacturing has expanded
in many parts of sub-Saharan Africa, the land
mass is still hugely deficient in producing raw
materials. In Mr. Dangote's Nigeria, weather
prevents wheat from being a viable crop, and
the government's answer has been to require
inclusion of a minimum 10% of cassava flour
in each loaf. Reality limits cassava use to less
than 3%, which starkly contrasts with the official long-term goal of 40%. Similar problems
rule in other regions. This explains why food
manufacturing in Africa is following a different course from what occurred in the Northern
Hemisphere where plentiful domestic crops
provided the foundation for the modern grainbased food industry.
Morton I. Sosland
Editor-in-chief

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WORLD GRAIN (ISSN 0745-8991) Volume 32, issue 2,

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World Grain - February 2014

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