Processing Plants Reap More Benefit for Africa

Olam's processing plant in the Ivory Coast

Singapore’s largest soft commodity and logistics company is targeting its growth projections on wheat, rice and cashew projects throughout West Africa.

A constant jumble of cashews travels along a conveyor belt, accompanied by an arrhythmic clattering. Appraised by lasers for size, the nuts are then knocked into various side channels by sharp puffs of compressed air, filling receptacles of different sizes. The grading machine lies near the very end of a mechanised chain that sorts, shells, dehusks, cleans and packs cashews, processing around 30,000tn a year.

The dance of the digital eye, surely, is the technological summit of Olam’s new cashew-processing plant in Bouaké, Côte d’Ivoire. “No, no, this is actually quite a widespread technology,” explains Ravi Pokhriyal, Olam’s regional head for West Africa. “The really revolutionary part is the automatic cutting process, which keeps the nut whole when removing the shell”.

Currently, about 40,000tn of West Africa’s cashews are processed by hand, with the remainder of the 800,000tn crop shipped to facilities in India. Brazil grows 200,000tn per annum and processes the entire crop locally. Reviving Nkrumist dreams of greater processing capacity based in Africa, Olam has plans to open another four factories: two more in Côte d’Ivoire, one in Nigeria and one in Ghana, bringing Africa-based processing capacity up to 125,000tn per year. There will be a tax holiday before Côte d’Ivoire receives its share of the exported goods value, as per the country’s investment code.

$148m Olam International 6-month profits to Dec 2011

As part of its drive for vertical integration in the soft commodity business, the Singapore-listed commodity trader, with global revenues of $12bn, is launching a battery of projects across Africa. In November 2007, the company bought into the Ivorian oil palm sector through a joint venture with Singapore’s Wilmar International.

The company is developing a 6,000ha rice plantation in Nigeria’s Benue State. It is investing more than $130m in a rice project in Mozambique’s Zambezia Province. And it is also keen to maintain momentum in commodity processing.

Olam opened its first Ivorian cashew-processing plant, a manual unit that can process 5,000tn per year, in Dimbokro in 2005. Now the much larger Bouaké plant will be joined by two similar ones in Korhogo and Bondoukou.

In early February, it announced its intention to buy Nigerian biscuit and candy manufacturer Titanium Holding Company for $167m. Whereas previously Olam had targeted Africa with tomato paste made in Italy to become West Africa’s second-largest player in the sector, it began building a factory to produce tomato paste in sachets in Nigeria in 2010.

Economic backbone 

Olam has been present in Africa since 1989, but it is only now attracting a great deal of attention from politicians who recognise that though agriculture represents two-thirds of the continent’s gross domestic product, governments are not doing enough to support the sector. At the inauguration of Olam’s $60m 150,000tn per year wheat mill at Tema, Ghana on 24 February, President John Atta Mills said: “Agriculture is the backbone of our economy. Oil is just the cherry on the top.” A large part of the flour produced is for the local market.

Fair pay received at the farm gate has been key to Olam’s acceptance by farmers. Julien Gonnet, who works at RONGEAD, a French sustainable development NGO that disseminates market prices for cashews in Côte d’Ivoire via mobile phones, says Olam has encouraged its activities, “which have added $20-$100 per farmer per harvest.”

Though there may be an element of election-year instrumentalism to the praise, firms that put patient capital into African agriculture are clearly more welcome than speculative companies that profit from price spikes. “They [Olam] started off just trading,” says Ghana’s trade and industry minister Hannah Tetteh, “and now they are investing.”

Cotton is a particular priority for Tetteh, who says “If we are going to transform the fortunes of northern Ghana, it is going to be through cotton.” Yields had fallen from 40,000tn in the late 1990s down to just 5,010tn in 2010. When the Ghana Cotton Company (GCC) collapsed in February 2011, the government allowed three companies – Armajaro, Olam and Wienco – to take up GCC’s production capacity. Between them, they drove an increase in production from 5,010tn in 2010 to an estimated 21,000tn in 2011.

A similar pattern is developing in Côte d’Ivoire, says Julie Greene, Olam’s branch manager in the country: “The net income of farmers has doubled since the 2008/2009 season, and we are getting in new varieties that give better yields. People are really coming back to cotton.”