Unlocking the Food Belts of Asia and Africa

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Asia

AgriBusiness Forum

Unlocking the Food Belts of Asia and Africa

Government of India

February 4-6, 2014

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Unlocking the Food Belts of

Asia and Africa

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Executive Summary 1. Introduction

2. Cereal Production

3. Horticulture

4. Plantations

1 3

1.1. Agriculture global perspective 4

1.2. Importance of agriculture in Africa 5

1.3. Importance of agriculture in Asia 5

1.4. Key agriculture sub-sectors in both the continents 6 7 2.1. Status of cereal production and consumption - Global 8

2.2. Overview of cereal sector in Africa 9

2.3. Overview of cereal sector in Asia 13

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3.1. Fruits and vegetables - A global perspective 20

3.2. Fruits and vegetables - profile of Africa 21

3.3. Fruits and vegetables - profile of Asia 27

33

4.1. Status of plantation crops - Global 34

4.2. Role of plantation crops in Africa 35

4.3. Role of plantation crops in Asia 40

Agriculture and agribusiness are at the top of the agenda for economic transformation and development in Asia and Africa. It is due to the fact that agribusiness plays an important role in initiating the economic development through promoting agro-based industries and creating additional employment. In addition to economic development, investment in agribusiness stimulates the development of new markets which, in turn, develop agriculture activities and makes agriculture a commercial enterprise.

Agriculture has been a focus sector in the Asian and African countries for decades, but the major attention was towards increasing production and productivity. In the current scenario, where the agriculture sector is growing at a remarkable rate, the need is to focus not only on increasing the production or productivity but also on promoting agribusiness.

Consolidation of both agriculture and agribusiness is important for overall development of agriculture sector. In this report, the great potential of the agribusiness sector in Asia and Africa is highlighted. The facts and various successful case studies across different countries in Asia and Africa establish that good policies, support from government, favourable business environment can promote agribusiness in both the continents. The report also highlights the significance of forming strategic partnerships (among different countries of Asia and Africa) for overall growth of the agribusiness sector. With global agribusiness sector growing at an unprecedented rate, such partnership could transform the agribusiness sector across Asia and Africa.

The report draws attention to major agriculture sub-sectors of both the continents. It provides an analysis of various sub-sectors in terms of production, demand and supply, export potential and processing capability. This, in turn, helps to identify various business and investment opportunities in the agriculture sector of both Asia and Africa.

The report also examines various constraints towards the development of the agribusiness sector. Many of these constraints are well identified while some are specific to individual value chain which needs to be addressed in a specific manner. The report discusses challenges majorly in areas like market policies, increasing agriculture input accessibility, access to finance, infrastructure enhancement, skill development, etc and probable ways to overcome these challenges.

In conclusion, the report reviews various practical suggestions for overall development of agribusiness sector in Asia and Africa. Although it broadly covers agribusiness opportunities in both the continents, the huge diversity in agro-ecology, business environment and difference in market conditions requires specific adaptation according to local requirements.

Executive Summary

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Introduction

1

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1.1. Agriculture – Global perspective

In the developing countries, agriculture continues to play a prominent role in economic development. In many of these, the sector contributes as much as 30% to the gross 1

domestic product (GDP) and acts as a major source of employment. A considerable proportion of the world's population, nearly three billion people , lives in rural areas. It is 2

also reported that nearly 2.5 billion of these rural people earn their livelihood from 3

agriculture or allied activities.

Agriculture is benefiting from technological innovation and there is a growing recognition among the governments as well as the donor agencies about agriculture being the mainstay of economic growth policies. The acknowledgement of the sector's role in development and growth lays a fresh impetus for fostering investments in agriculture which will lead to a rise in productivity and income generation.

The world's most important cereal crops are wheat, rice and corn. Rice, being the source of more than one-fifth of the world's calorie consumption, assumes the position of the most important food crop. The Asian countries lead the rice production in the world. China is the largest producer, followed by India and Indonesia. Wheat, the second most important crop, covers the maximum area under cultivation. China again is the largest producer followed by India and Russia. Corn acts as a staple crop for a majority of the Sub-Saharan Africa and is a major source of carbohydrates, protein, iron and minerals. The US is the largest producer, followed by China and Brazil.

In many developing countries, the agriculture sector faces numerous challenges. Although it is an important economic activity, its growth suffers greatly due to lack of investment in infrastructure, R&D, climate change, inadequate policy formulation, etc. The lack of or weak agricultural infrastructure along with low agricultural productivity is adversely affecting agricultural growth. In addition, the current downward trend in the global economy further exacerbates the situation.

Over the last 50 years, the world's agricultural production has grown on an average of 2%

to 4% per year, while the cultivated area has grown by only 1%. Under such 4

Introduction 1

1 FAO Statistical Year Book 2013

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circumstances, it becomes imperative to increase agricultural productivity to meet the growing food demand of the population.

Agriculture, apart from supplying food, acts as a major source of income and employment to the African population. About 65% of Africa's labour force is employed in agriculture, which contributes around 32% to the total GDP. 5

It has been noted that the productivity in African agriculture lags behind compared to the other continents. The agricultural sector's weak performance is a major barrier in the development of the agribusiness sector. Agricultural productivity and growth largely depends on the physical environment, technology, policy and micro and macro-economic factors.

The availability of land for agriculture is a crucial factor for food production. The continent is endowed with 733 million hectares of arable land, which accounts for 27.4% of the total 6

arable land in the world. Currently, only 183 million hectares of land is under cultivation in Sub-Saharan Africa and approximately 452 million hectares that are suitable for agriculture still remain uncultivated. The major cereal crops of Africa are corn, wheat and rice, while bananas, pineapples and oranges are the major fruits. The major plantation crops include cocoa and coffee.

Even after having enhanced and diversified agro-climatic advantages, Africa is a net importer of agricultural products . Cereals (including rice, maize and wheat), and livestock 7

products (dairy and meat) represent more than 50% of Africa's total food imports. Africa's agricultural exports lag way behind the country's imports. 'Non-traditional' export products (flowers, semi-processed fruits and vegetables and textile products), traditional products (coffee, cocoa, tea, and spices) and tobacco constitute a significant share of Africa's agricultural exports.

In Asia, more than 2.2 billion people directly or indirectly depend on agriculture for their livelihood. The Asian countries together constitute more than 60% of the world's population and heavily depend on agriculture to meet an ever - increasing food demand.

Asia has made remarkable progress in agricultural production while dealing with an increasing population and a resultant increase in the food demand. Food production has increased at a rate higher than the growth in population. The Green Revolution, a scientific

1.2. Importance of agriculture in Africa

1.3. Importance of agriculture in Asia

5 Africa Agriculture Status Report: 2013, AGRA

6 http://philmatibeceo.wordpress.com/2011/11/07/africa-the-world%E2%80%99s-potential-food-producer/

7 Why has Africa become a net food importer? – An FAO report – Rome 2011.

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revolution with enhanced and improved seeds, better irrigation facilities and fertilizers, was the engine of this transformation.

Asian agriculture has evolved with the introduction of new high - yielding inputs for cereals.

The continent has become an important destination for the production of rice, wheat and corn. Asia is now a major supplier of rice to the rest of the world. The main varieties of fruits produced in Asia are bananas, mangoes, apples, oranges and grapes. Alternatively, the main plantation crops grown in Asia are palm kernel, rubber, cotton and tea.

The availability of land for agriculture in Asia is continuously decreasing due to its rising population. This indicates that these continuously shrinking and deteriorating land resources need to be judiciously used in order to sustain the needs of the future. Adequate policies, strategies, technologies and human resources must be put in place to meet the environmental as well as socio-economic challenges.

In Africa, major sub-sectors are horticulture, plantation crops such as cocoa and cotton.

Africa is known for production of fruits, cashew, cocoa and cotton. These are also major exporting commodities from Africa. In terms of production, oranges and bananas are the major horticultural crops of Africa. These are also the major exporting fruit crops from Africa. Apart from fruits, a substantial quantity of cashews and cocoa is also exported from Africa.

In Asia, major sub-sectors identified are cereals, horticulture, meat, palm oil, tea and rubber. These are the major producing and exporting commodities in Asia. The export is both intra continent and to international market. In terms of production, cereals are the most important sub-sector in Asia. China, India, Thailand, Vietnam and Malaysia are the major cereal producing countries in Asia. The major cereals produced in Asia are rice, wheat and maize. Rice is majorly produced in China, India, Vietnam and Bangladesh. After cereals, horticulture is the major sub-sector in Asia. China and India are the major players in fruits and vegetables sector in Asia. The other major sectors of great importance in Asia are palm oil, rubber, meat and tea.

1.4. Key agriculture sub-sectors in both the continents

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Cereal Production

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2.1. Status of cereal production and consumption - Global

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World's cereal production reached 2,589 million tonnes in 2011-12, 4.6% more than the previous year. This increase comprises a 6.0% rise in wheat, 2.6% growth in the global 10

coarse grains harvest and 3.4% increase in rice production.

The total cereal consumption in 2011-12 reached 2,309 million tonnes , 1.6% more than 11

2010-11. Out of this, approximately 1,000 million tonnes is consumed as food; 750 million tonnes is used as animal feed and the remaining is processed for industrial use.

It has been observed that the global cereal food production is catching up with the rise in population despite the slow economic recovery. This is primarily due to the investments in agriculture by the developing countries in order to boost the sector's growth.

Cereal Production 2

8 FAO Global Outlook 2011

9 FAO Global Outlook 2011

10 FAO Global Outlook 2011

11 FAO Global Outlook 2011

Figure 1: Global demand and supply of cereals (in million tonnes)

2527.1

2495.2 2474.1

2589.1

2201.5 2179.7

2272.7 2308.6

1900 2000 2100 2200 2300 2400 2500 2600 2700

2008 2009 2010 2011

Production Consumption Source: FAOSTAT, PwC analysis

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2.2. Overview of cereal sector in Africa

Reflecting on the Sub-Saharan Africa's uneven availability of land and water and its varying soil, land form and climate characteristics, its agriculture includes a widely diverse system of crops, livestock, fishing and forestry. Most farms in the continent follow mixed-cropping practices. Mixed farming in Africa generally involves different degrees of crop–livestock integration which maintains sustainability and creates an alternate source of income for the small farmers.

In addition, African agriculture is highly dependent on rains. It is also characterised by poor land productivity, minimal mechanisation, weathered soil, weak land tenure systems and inefficient markets. Although challenging, these characteristics also present opportunities in the form of unused and underused arable land with the potential to boost agricultural productivity.

Cereal production in Sub-Saharan Africa has increased by more than four times since the

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early 1960s, rising from 38 million tonnes in 1961–1963 to 164 million tonnes in 2011–2012. This increase in production can be attributed to the policy support from government agencies.

Countries including Liberia, Rwanda, Niger, Ethiopia and Sierra Leone have previously suffered low production levels due to the lack of support from government. However, following the introduction of the agriculture supporting policies, they have experienced stable production patterns. Notably, Ethiopia has almost doubled its domestic grain production (from 8 million metric tons in 2,000 to 15.6 million metric tons in 2010) and is 14

now Sub-Saharan Africa's second - largest grain producer after Nigeria. However, this production growth is projected to further accelerate in the coming years.

12 FAO stat data

13 FAO stat data

14 USDA data

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2009 2010 2011 0

5 10 15 20 25 30

Burundi

Ehi pi t o a

Ghana

eya Kn

Ma alwi e Moza

mbiqu Nigeria

Rwanda

ana ia T zn

Uganda

159.1

162.9

163.9

167.5

154 156 158 160 162 164 166 168 170

2009 2010 2011 2012

Production

Figure 2: Production of Cereals in Africa (in million tonnes)

Source: FAOSTAT, PwC analysis

Figure 3: Production of Cereals in Selected African Countries (in million tonnes)

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The above graph shows that the demand for cereals is growing at a rate higher than what can be supplied. The compounded annual growth rate (CAGR) for demand of cereals in

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Africa is 2.81% as compared to the CAGR in production which is 2.29% . This implies that in the coming years, if the African countries are not able to increase their productivity substantially, they will have to depend on the import of cereals to feed its growing population.

Currently, the major imported commodities in Africa are wheat, maize and barley. The distribution is shown below:

Figure 4: Supply and demand of Cereals in African Countries (in million tonnes)

134 141

130 144 146

163 164 167

178 182 186 191 199 205 211 217

0 50 100 150 200 250

2005 2006 2007 2008 2009 2010 2011 2012

15 FAO stat data and PwC analysis

16 FAO stat data and PwC analysis 2%

71%

25%

2%

Barley Wheat Maize Others

Figure 5: Major cereal imports in Africa in 2011

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The above graph indicates that wheat is the major importing cereal in Africa, constituting 71% of the total cereal import. The major countries that indulge in this import are Egypt, 17

Algeria, Nigeria, Morocco, South Africa, Ethiopia, Tunisia, Kenya and the United Republic of Tanzania.

The production of cereals in Africa is characterized by low productivity. The average cereal yield in Africa is below one tonne per hectare, far below the global average of four tonnes per hectare. This sluggish growth in agricultural productivity is due to the modest use of improved agricultural technologies (mainly seeds and fertilizers). Climatic and agronomic conditions in Africa also act as barriers in agricultural growth, because most of Africa is not suitable for new high-yielding crop varieties that have done well in Asia.

In many Sub-Saharan African countries, significant progress has been made by developing improved crop varieties. However, the adoption rate of improved seeds continues to lag behind. African governments and development agencies have deregulated the seed sector after recognising the critical role of improved seeds in agricultural transformation. This, in turn, has led to an increased participation by the private, local, regional and multinational seed companies. There are a number of institutional and policy bottlenecks that still hinder the expansion and smooth functioning of the seed sector.

On the other hand, the modest use of fertilizers is adding to the existing productivity issues. The use of fertilizers in Africa can be regarded as the lowest in the world, averaging only 8 kg per hectare with a range of less than 1 kg per hectare in Uganda and DRC to about 48 kg per hectare in Zimbabwe. The reason for the low fertilizer usage is the 18

increase in the cost of cultivation for the farmers. Higher costs of other agricultural inputs due to poorly developed input market and costly transportation due to lack of infrastructure, have further increased the overall cost of cultivation for the farmers in Africa.

African agriculture generally suffers due to the lack of or poor infrastructure. This includes road and rail transport, storage facilities, power availability and telecommunications. The extra cost of carrying the produce due to the delay in transportation and the wastage due to lack of infrastructure reduces domestic competitiveness. This wastage destroys around 8% of the total domestic supply of cereals. 19

17 FAOSTAT 2011 and PwC analysis

18 African Agriculture and Productivity Report by AGRA: 2011.

19 FAOSTAT data and PwC analysis

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Figure 6: Maize value chain

An indicative value chain of maize in Kenya has been provided below in order to understand the value chain of cereals in Africa:

Source: PwC analysis Input Supply

Key Stake - holders

Input supply by Government or private players

Farmers are provided with financial assistance from banks

Collection and storage by rural assemblers or brokers or traders

Trading at marketplace with market price information provided by MoA

Small - scale and large - scale food processing units for value - added products

Export and import of maize with standard certification services provided by KEPHIS

Storage and distribution by private sector player

Distribution to consumers Production Collection

and Storage Trading Processing Importing/

Ex porting Wholesale Retail

The following are the key constraints in the cereal value chain:

• Low utilization of fertilizers

• High adulteration in agriculture inputs

• Low availability of farm machinery

Agriculture services

Storage & logistic

• Increased accessibility of farm inputs and machinery

• Investment in the supply chain facilities and effective

monitoring

• Investment in water conservation infrastructure

• Lack of extension facilities

• Weak and poorly coordinated mechanisms for dissemination, and improved technology transfer

• Investment in agriculture R&D in order to increase productivity

• Investment in extension

services to farmers for effective dissemination of technology among farmers

• High post-harvest losses due to lack of adequate storage facilities and poor condition of rural roads

• Investment in the formulation of infrastructure for better storage and transportation facility

Sector Constraints Opportunities

Input

2.3. Overview of cereal sector in Asia

Asia alone produces around 90% of the world's supply of rice. The proportion of land under rice cultivation as compared to the total arable land is the highest in Vietnam, Bangladesh and Sri Lanka. The other major cereal crops grown in Asia are wheat, maize, millets, sorghum and barley.

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In the last few decades, rice production in Asia has increased by more than 100%, making it the most important crop in Asia. The major rice - producing countries are China, India, Indonesia, Vietnam, Thailand, Bangladesh, Myanmar, the Philippines, Pakistan, Cambodia, Japan and Sri Lanka. The area harvested under rice is the highest in India, followed by China, Indonesia, Thailand and Bangladesh. In terms of productivity, the Republic of Korea with 7.4 tonnes per hectare, has the highest yield, followed by Turkey with 7.3 tonnes per hectare and China with 6.7 tonnes per hectare . Though India has the largest area under 20

rice cultivation, India lags behind in terms of overall production due to comparatively low productivity.

Wheat ranks second after rice as the staple food grain in Asia. It is commonly grown in Kazakhstan, North China, Pakistan, Middle East, India and Afghanistan. China is the leading producer of wheat in Asia, followed by India, Pakistan, Turkey and Kazakhstan. India has the largest area under wheat cultivation, followed by China, Kazakhstan and Pakistan. The UAE has the highest yield of 7 tonnes per hectare, followed by Saudi Arabia which has 6.4 tonnes per hectare and China which has 4.9 tonnes per hectare. The productivity of wheat in India is lower compared to its neighbouring countries such as China, about 3.1 tonnes per hectare.

Maize is the third most important cereal crop of Asia. China is the largest producer and produces nearly 70% of the total maize production in Asia. China is followed by India and Indonesia. Apart from maize, other cereals such as barley, sorghum and millets are also grown in Asia. Major barley - producing countries are Turkey, Iran, China and India. Millets are majorly grown in India, China and Nepal. India and China also produce sorghum.

20 FAOSTAT

Figure 1: Global demand and supply of cereals (in million tonnes)

887

917

947

968

985

1011 1011 1011

820 840 860 880 900 920 940 960 980 1000 1020 1040

2005 2006 2007 2008 2009 2010 2011 2012

Cereal Production Source: FAOSTAT, PwC analysis

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The demand and supply of cereals in Asia is graphically represented below. The Asian countries are net importers of cereals. The deficit in cereals is due to the shortage of wheat and maize in Asia. The graph indicates that if the overall production parameters remain the same, the growth in production will be slower and the deficit of cereals will be much larger than it is today. Under such circumstances, the Asian countries will be heavily dependent on imports to meet the rising demands of the population.

Figure 8: Supply and demand of cereals in Asia (in million tonnes)

887

917

947

968

985

1011 1011 1011

956

974 990

1012

1029

1048

1067

1087

850 900 950 1000 1050 1100 1150

2005 2006 2007 2008 2009 2010 2011 2012

Asia is known for its rice exports in the world. Thailand, Vietnam, India and Pakistan are major exporters. India is the leading exporter of rice and exported 10.7 million tonnes in 2012. India is followed by Vietnam with 7.7 million tonnes and Thailand with 7.1 million tonnes.

Apart from rice, wheat and maize are other major cereals being exported, though their exports are majorly within Asia. Wheat is primarily exported by Kazakhstan and Pakistan and around 85% of the total export of wheat is from Asia. Maize is primarily exported by India, which constitutes more than 75% of the maize exports by Asia.

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The Asian countries largely import wheat and maize. These imports are mostly intra-Asia imports. Japan, Indonesia, Republic of Korea, Bangladesh, Iraq and the Philippines are the major importers of wheat.

Japan, Republic of Korea, China, Iran, Indonesia and Malaysia import maize.

Figure 9: Major cereals exported by Asian countries 2011

11%

13%

60%

16%

Maize Wheat Rice Others Source: FAOSTAT, PwC analysis

Figure 10: Major cereals imported by Asian countries in 2011

8%

32%

36%

10%

14%

Barley Maize Wheat Rice Others Source: FAOSTAT, PwC analysis

The value chain can be a very useful and conceptual tool while trying to understand the factors that impact the demand and supply of a commodity.

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Figure 11: Value Chain of Wheat in India

The key constraints along the cereal value chain in Asia are:

• Non-availability of essential inputs to farmers for timely sowing

• Lack of water resources in some countries

• Lack of access to farm machinery

Storage & logistic

Processing

• Increased accessibility of farm inputs and machinery

• Investment in the supply chain facilities

• Investment in water

conservation programmes and related infrastructure

• Lack of extension facilities

• Low agriculture productivity

• Investment in agriculture R&D in order to increase productivity

• Investment in extension services to farmers

• Poor post - harvest infrastructure

• Low level of processing in some major production regions

• Investment in food processing sector

Input

Primary Market or Commission Agents

Primary Market Wholesalers

Urban arket Wholesalers

M

Retail Shops

Consumer Processors, Large

Flour Mills

Small Processors

Food Corporation of India

State Civil Supply Department

Fair Price Shops Farmers

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Horticulture

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3.1. Fruits and vegetables – A global perspective

The global fruit and vegetable production has experienced an impressive growth, recording an annual growth rate of 3% over the last decade. In 2011 alone, almost 640 million tonnes of fruits and more than one billion tonnes of vegetables were produced throughout the world.

The growth in the production of fruits and vegetables has largely been driven by the growing global demand. Countries such as China have significantly increased their production capacity to keep up with the growing domestic consumption and capitalise on export opportunities. China has emerged as the world's largest fruit and vegetable producer, with global output shares of about 20% in fruits and 50% in vegetables. India is the second - largest producer of fruits and vegetables in the world, with global output share of about 12% in fruits and 14% in vegetables.

Sub-Saharan Africa and Southeast Asia have also recorded strong growth rates in fruits and vegetables. The main reason for this significant growth rate is the fact that horticulture crop production generates more income per unit of land, offering high returns to smallholders.

Apart from this, horticulture is labour - intensive farming and creates more employment opportunities.

High demand of fruits and vegetables creates opportunities for poor farmers in the developing countries of Africa and Asia. However, an efficient supply chain, low post- harvest losses and adequate infrastructure are necessary before farmers can reap the full benefits of cultivating these perishable crops.

The consumption of fresh fruits and vegetables is highest in China. Chinese customers purchase most of their fresh fruits at street retail shops and marketplaces. The trend towards fresh vegetable consumption is one indication of the population's preference, but in some parts of the world, fresh vegetables lose their market share to the processed products. Many vegetables can be processed into canned products that cater to local tastes.

Horticulture

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3.2. Fruits and vegetables - profile of Africa

Key African fruit produce includes pineapples, bananas and mangoes. Banana, the most commonly produced fruit, accounts for 25% of the total fruit production (by volume) in 2011.

Nigeria, the largest producer of fresh fruit in Sub-Saharan Africa, accounted for 22% of the region's production, followed by South Africa with 18%. Smaller producers such as Kenya have a limited range of export - oriented fruits such as pineapples, mangoes and bananas along with papayas, watermelons, plums and avocadoes that tend to be consumed on the farms or in local markets. East and West African countries, especially Ghana, Kenya, Nigeria, Rwanda, and Uganda, are Sub-Saharan Africa's largest fresh fruit consumers.

Figure 12: Global fruits and vegetables production (in million tonnes)

566 591 604 613 638

962 995 1019 1049 1090

0 200 400 600 800 1000 1200

2007 2008 2009 2010 2011

Fruits Vegetable Source: FAOSTAT, PwC analysis

70.3 73.4 73.7 75.5 78.3

85.7 88.9

0 10 20 30 40 50 60 70 80 90 100

2005 2006 2007 2008 2009 2010 2011

Fruits Production

Figure 13: Production of fruits in Africa (in million tonnes)

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Developing countries in Africa have become the main exporters of fresh vegetables to the European Union. Some Sub-Saharan African countries have increased vegetable production significantly during the past two decades. In the international market, African countries such as Kenya, Cote d'Ivoire and Senegal have become important vegetable exporting countries of French beans, green onion and tomatoes, respectively.

The domestic consumption of fruits varies from region to region. However, Africa's current production of fruits is not only sufficient to meet its domestic demand but also export it to the European nations for foreign exchange. Increase in consumer demand in the developed countries for out-of-the-season fresh fruits and vegetables has opened a niche opportunity for these African countries to produce these crops for export during the void period at attractive prices.

70.3

73.4 73.7 75.5

78.3

85.7

88.9

67.2 69.5 70.3 72.3 74.6 76.5 78.5

55 65 75 85 95

2005 2006 2007 2008 2009 2010 2011

Fruits Production Fruits Consumption

Figure 14: Supply and Demand of Fruits in Africa (in million tonnes)

Africa is a major exporter of oranges, apart from grapes, pineapples, mangoes and bananas. Namibia is the primary exporter of grapes; Cameroon and Côte d'Ivoire lead the export of bananas and pineapples; and mango exports have the most diversified origins within Africa, with countries from both East Africa and West Africa. Fresh fruit exports from East Africa tend to cater to the demand of the countries in the Middle East and South Asia.

However, West African countries export fruits largely to the European Union.

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Egypt, South Africa and Morocco are major exporters of oranges. These three countries constitute nearly 96% of the total exports by Africa. On the other hand, bananas are exported from Cameroon and Côte d'Ivoire and these two countries constitute nearly 91%

of the total exports by Africa. Mangoes are majorly exported from Kenya and Senegal and apples and grapes are majorly exported from South Africa.

Figure 15: Major fruits exported from Africa in 2011

Oranges Bananas Apples Others 52%

15%

8%

25%

Figure 16: Quantity of fruits exported from Africa (in million tonnes)

3.5 3.7

4.0 3.9

4.3

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

2007 2008 2009 2010 2011

Total quantity Exported Source: FAOSTAT, PwC analysis

It can be observed that the growth in production and exports by these African countries has not been proportional. This, in turn, shows that Africa has not fully capitalised on the

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possible export opportunities. It can be noted that the export of fresh fruits from Africa has almost been constant over the years.

The fruit processing industry in Africa is still at a very nascent stage. Thus, only a broad insight can be gathered about it, which states that in Sub-Saharan Africa, only South Africa has a developed agro-processing sector and accounts for more than 70% of the processed fruits from this region. Kenya is another major fruit processing region, but accounts for only 13% of the total processed volumes of fruit in Sub-Saharan Africa.

A considerable amount of the tropical fruits grown in Africa is wasted due to poor post- harvest handling, delay in transportation and improper storage. Therefore, processing presents an opportunity to mitigate waste, add value to crops and create a driving force for an increased economic activity in rural fruit-growing areas. While fresh fruit exports can be constrained by the costs of shipping perishable products over long distances, processing offers an alternative route to the market. Investing in processing facilities can, thus, be an important means to bring many African fruit crops to the international market.

In terms of vegetables, Africa is important for the production of tomatoes, potatoes, okra, sweet potatoes, cooking banana (plantain), cassava, yams, green bananas, African eggplants, amaranth, spider plant and African kale. Moringa, peanuts, common beans, peppers, cucumber and cassava are the staple products in Africa along with onion. These vegetables are consumed locally and sold in local markets.

58.11 61.57 62.35 64.55 65.57 70.87 70.88

0 10 20 30 40 50 60 70 80

2005 2006 2007 2008 2009 2010 2011

Vegetable production

Figure 1: Global Demand and Supply of Cereals (in million tonnes)

The most important vegetable crops of Africa are tomatoes and potatoes. Tomatoes are majorly grown in Egypt, Nigeria, Tunisia and Morocco. These countries together constitute nearly 70% of the total production of tomatoes in Africa. On the other hand, potatoes are majorly grown in Egypt, Algeria, Malawi, Kenya, South Africa and Rwanda. The share of these countries in the net production of potatoes is more than 67%. Other major

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vegetable crops include onions and okara. Onion is majorly grown in Egypt, Nigeria, Algeria and Sudan. These countries hold more than 60% share in the net production of onions in Africa. Okara is produced in Nigeria, Côte d'Ivoire, Sudan and Ghana.

Africa is almost self - sufficient in terms of vegetable production and consumption. Most of the vegetables produced are consumed locally.

58.11

61.57 62.35

64.55 65.57

70.87 70.88

58.62

61.83

63.65

65.37 66.57

70.90 70.93

50 55 60 65 70 75

2005 2006 2007 2008 2009 2010 2011

Vegetable production Vegetable consumption

Figure 18: Supply and Demand of Vegetables in Africa (in million tonnes)

Onions and potatoes are the most commonly traded vegetable crops in Africa. Together, these crops constitute nearly 70% of the trade in the vegetable segment. Onions are majorly exported from Egypt, South Africa and Niger. These countries together export more than 95% of the total exports of onions.

Egypt, South Africa and Ethiopia are major exporters of potatoes in Africa. More than 90% of the export in potatoes is from these countries.

Tomato is another major vegetable crop being exported from Africa majorly from Morocco and Egypt.

Onion Potatotes Tomatoes Others 29%

40%

16%

15%

Figure 19: Major Traded Vegetables in Africa in 2011

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• Increased diseases, pests attacks

• High cost of pesticides

• Limited funds to improve farm productivity

• Dependency on rainfall which leads to seasonality in production

• Lack of training sites for farmers

• Lack of research facilities

• Lack of access to effective transport system

• Poor post-harvest infrastructure

• Market reforms and policies to encourage investment in food processing sector

• Increase accessibility to farm inputs

• Formation of farmers organizations to access financial services

• Investment in water conserving infrastructure

• Support through research and extension services

• Investment in better and efficient transportation facilities

• Formulation of the national policy to encourage food processing sector

Input

Logistics

Storage infrastructure

Processing

An indicative value chain of tomatoes in Uganda has been provided below in order to understand the value chain of fruits and vegetables in Africa:

Figure 20: Value Chain of Tomatoes in Kenya

The major constraints and underlying opportunities in African fruit and vegetable value chain are indicated below:

Production

Inputs Trade Marketing or

Processing Consumption

Inputs supply companies

Tomato Farmers

Brokers at farm

level Retailers Private

Consumers

Brokers at

market Supermarkets Large

Consumers

Processors Wholesalers

Large suppliers

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3.3. Fruits and vegetables - profile of Asia

Asia being highly diversified in terms of climatic conditions produces a wide variety of fruits. The primary fruits produced by the Asian countries are bananas, apples, mangoes, grapes, oranges, pears, peaches and pineapples. India is the largest producer of bananas, accounting for more than 48% of the total banana production in Asia, It is followed by China and the Philippines. However, other fruits such as apples and mangoes are primarily grown in China and India. India is the leading producer of mangoes in Asia, followed by China, Thailand and Indonesia. These countries together produce more than 82% of the total mango production in Asia.

250 263 275 295 304 312 312

0 50 100 150 200 250 300 350

2005 2006 2007 2008 2009 2010 2011

Production of fruits

Figure 21: Production of Fruits in Asia (in million tonnes)

In Asia, the consumption of fruits and vegetable is in proportion to their production. The rate of consumption of fruits is increasing at a CAGR (Compounded Annual Growth Rate) of 4.9%. Stagnation in the production of fruits over the recent years has led to Asian countries importing fruits.

250

263

275

295 304 312

312

245

257

270

285

297

312

328

230 250 270 290 310 330 350

2005 2006 2007 2008 2009 2010 2011

Production of fruits Consumption of fruits

Figure 22: Supply and Demand of Fruits in Asia (in million tonnes)

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The major fruits imported by Asian 21

countries include bananas, apples and oranges. Bananas are majorly imported by Japan, the Republic of Korea and Saudi Arabia. These three countries together constitute nearly 43% of the net imports of bananas in Asia. The next major fruit being imported by the Asian countries is apple, primarily imported by Saudi Arabia and Indonesia. On the other hand, oranges are primarily imported by China, Saudi Arabia, UAE and Japan.

21 Imports constitute both intra continental and inter-continental

22 Exports constitute both intra continental and inter-continental

Figure 23: Major Fruits imported in Asia in 2011

Bananas Apples Oranges Others 35%

19%

27%

Asia is a major exporter of 22

bananas in the international market a n d t h e P h i l i p p i n e s a l o n e constitutes more than 80% of the total exports of bananas from Asia.

Other fruits such as apple are majorly exported from China. It alone constitutes around 63% of the total exports of apples from Asia. Oranges and grapes are majorly exported from Turkey.

These fruits together constitute around 67% of the total exports of fruits from Asia.

Dates Pears Pineapple Others Bananas Apples Oranges Grapes Mangoes

30%

19%

9%

7%

6%

4%

10%

Figure 24: Major Fruits exported from Asia in 2011

In Asia, the main vegetables grown include tomatoes, onions, potatoes, cucumbers, cabbages, eggplants, carrots, leguminous vegetables, garlic, chilies & peppers, beans, cauliflower, broccoli, lettuce, pumpkins, squash and gourds. Other vegetables include artichokes, asparagus, cassava leaves, mushrooms, truffles and okra.

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Tomatoes in Asia are majorly grown in China, followed by India and Turkey. These three countries together produce nearly 80% of the total tomato production in Asia. China is also the largest producer of onions (dry) in Asia, followed by India and Iran. India and China together produce more than 70% of the total onions produced in Asia. After tomatoes and onions, potato is the third major vegetable crop in Asia. It is primarily grown in countries such as China, India, Bangladesh and Turkey. China is the leading producer of potatoes in Asia.

Asia is also major consumer of vegetables in the world. China, the largest producer of vegetables, is also the largest consumer of vegetables. Due to big consumption centres in Asia, majority of the Asian countries are only self-sufficient in vegetables, with little exports. The rise in the demand of vegetables is in accordance with the rise in production.

650.2 681.2 716.1 745.7 759.7 798.9 836.1

0 100 200 300 400 500 600 700 800 900

2005 2006 2007 2008 2009 2010 2011

Production of vegetables

Figure 25: Production of Vegetables in Asia (in million tonnes)

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650.2

681.2

716.1

745.7 759.7

798.9

836.1

644.1

673.1

708.0

738.0 752.1

781.8

812.7

600 650 700 750 800 850

2005 2006 2007 2008 2009 2010 2011

Production of fruits Consumption of fruits

Figure 26: Supply and Demand of Vegetables in Asia (in million tonnes)

Figure 27: Major Vegetables exported from Asia in 2011 A distinguishing characteristic of fruit and vegetable exports from this continent is dominated by China, particularly in the intra-regional Asian market.

Currently, it is a top exporter for a majority of fruits as well as vegetables.

Onions Potatoes Tomatoes Garlic Others 24%

20%

17%

14%

25%

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Figure 28: An indicative value chain of mangoes in India is illustrated below in order to understand the existing value chain of fruits and vegetables in Asia

The major challenges and opportunities along fruit and vegetable value chain in Asia are indicated below:

Source: PwC analysis

• Lack of availability quality seeds

• Inadequate field sorting, grading and packing protocols for commodities

• Lack of maturity index for local and export markets

• Poor infrastructure (roads, bridges) and lack of appropriate transport systems; lack of refrigerated transport

• Limited availability of suitable varieties for processing

• Inadequate appropriate processing technologies

• Inadequate commercialisation of new technologies and lack of basic infrastructure

• Inadequate market infrastructure

• Investment to increase accessibility to farm inputs

• Establish sorting, grading and packing protocols for reducing losses

• Support during research and development to develop maturity indexes for different fruits

• Encourage investment from private sector and policy support from government

• Development of suitable varieties for processing

• Technology transfer from developed countries

• Establishment of pilot plants for commercialisation of new technologies

• Inadequate market infrastructure

Input

Logistics

Processing

Marketing

Consumption

Inputs Production Trade Marketing or

Processing

Input supply

companies Mango farmers

Trader or Contractor or Middleman

Wholesalers in mandis

Exporters

Large exporters

Retailers

Supermarkets

Processors

Private Consumers

Large Consumers

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Plantations

4

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4.1. Status of plantation crops - Global

The term, plantation crops, refers to crops which are cultivated on an extensive scale within a large area of land, owned and managed by an individual or a company. These kinds of crops include tea, coffee, rubber, cocoa, coconut, cotton, oil palm, cashew, cinchona, etc. Such crops are high-value commercial crops and play a vital role in a nation's economy.

They contribute to the national economy by earning foreign exchange through exports.

Plantation industries provide direct as well as indirect employment to millions of people around the world.

Cotton is the most widely grown plantation crop worldwide. The leading cotton - producing countries in the world are China, India, US, Pakistan, Brazil and Uzbekistan. The major exporters of cotton in the world are Brazil, Egypt and Greece. The major importers of cotton are Bangladesh and Vietnam. For almost two decades, cotton yields have been the highest either in Australia or Israel.

Globally, coffee is a major plantation crop. It is majorly produced in countries such as Brazil, Vietnam, Colombia, Indonesia, India and Ethiopia. The major coffee - importing countries are the US, Germany and Italy.

Cocoa is widely produced in West Africa, which produces 70% of the total world production of cocoa. The two main supplier countries within this region are the Cote d'lvoire and Ghana. Demand for chocolate products drives the supply of cocoa. If cocoa growers are to stay in business, manufacturers that use the crop must provide support to cocoa farmers by giving them fair prices.

Cashew production takes place mainly in the central and South American zones, Asia, the oceanic zone and African zones. The consumption states that the American zone, consisting of the US and Canada, is the major consumer of cashew. These countries currently import over 50% of the total cashew exported worldwide. The major cashew - producing countries are Vietnam, Nigeria, India, Côte d'Ivoire and Brazil.

Tea is a major plantation crop for Asian countries. In the global tea production and export scenario, India, Sri Lanka, China and Kenya contribute more than 75% to the production and 71% to the global exports. In addition, Vietnam and Indonesia contribute substantially towards the production and exports of tea. Vietnam, in particular, has increased its production in the recent past. As a result of the increase in production and exports from

Plantations

4

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these countries, Indian tea, which maintained its dominance both in production and exports for more than a century, has started to lose its supremacy. Increase in production in China has pushed India to the second position in terms of overall production. Increase in exports from countries such as Sri Lanka, Kenya and China has pushed India to the fourth position as an exporter of tea at present. However, the growing domestic consumption in India has largely been compensating the loss in exports.

Rubber plantations are found majorly in Thailand, Indonesia, Malaysia, India and Vietnam.

Around 48% of the global demand for natural rubber comes from China, India and Malaysia, which are the three major natural rubber - consuming countries. The most important consuming sector is the tyre sector, which constitutes around half the total rubber consumption. The demand of natural rubber depends upon several factors, including production capacity, input and processing costs as well as price differential when compared to synthetic rubber.

Oil palm is one of the most important oilseed crops in the world. Among the 10 major oilseeds, oil palm accounted for 5.3% of global land use for cultivation, but produced 31.3% of global oils and fats output in 2011. Indonesia and Malaysia produce around 85%

of the world's total palm oil. Other producer countries include Thailand, Columbia and Nigeria. High palm oil consumption countries include China, India, Indonesia, and the European Union. Global consumption of palm oil was 49.05 million tonnes in 2011.

Globally, there has been a shift in the tobacco market from developed countries where people are moving away from smoking to developing countries where sales are continuing to rise. Consequently, tobacco companies have been expanding their international operations into Eastern Europe, Asia-Pacific, Latin America, Arab nations and Africa.

Government - owned China National Tobacco is the world's largest producer of tobacco, and accounts for one-third of the global market alone. The Asia-Pacific region is the fastest - growing tobacco market in the world, with rapidly - growing markets such as Malaysia, Indonesia, Pakistan and Vietnam. The top five tobacco - growing countries are China, India, Brazil, the US and Malawi.

All major plantations crops such as coffee, tea, cocoa, palm kernel, rubber, tobacco, cotton and cashew are grown in the African continent. Among these, cocoa, coffee, cashew and cotton are Africa's most important export crops that provide income for millions of smallholder families. Tea, on the other hand, is a minor crop in terms of production, but has been of great importance to farmers in areas that have unfavourable agro-climatic conditions for other crops.

Yield levels of the three crops (coffee, cashew and cotton) are heavily dependent on the use of inputs, government policies and interventions. The impact of these can be

4.2. Role of plantation crops in Africa

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substantiated by the fact that in the recent past, delayed payments to coffee farmers in Kenya have resulted in reduced input use and a marked decline in average yields.

8.7

8.6

8.4

8.5

8.3

7.8

8.4

7.2 7.4 7.6 7.8 8.0 8.2 8.4 8.6 8.8

2005 2006 2007 2008 2009 2010 2011

Production

Figure 29: Production of Major Plantation Crops in Africa

Coffee Cashew Cocoa Palm Kernal Cotton Lint Others 11%

18%

30%

16%

12%

13%

Figure 30: Share of Major Plantation Crops grown in Africa in 2011

In Africa, cocoa is the most commonly grown plantation crop. The major cocoa producing countries are Côte d'Ivoire, Ghana, Nigeria and Cameroon. These countries together produce more than 94% of the total production of cocoa in Africa. Cashew is the second - largest plantation crop grown in Africa. Major cashew - producing countries are Nigeria, Côte d'Ivoire, Benin and Guinea-Bissau. Cotton is the third - largest plantation crop grown

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in Africa. It is majorly produced in countries such as Burkina Faso, Mali, Egypt and Nigeria.

Other major plantation crop such as palm kernel is majorly grown in Nigeria and Côte d'Ivoire. These two countries together produce more than 75% of the total palm kernel production of Africa. In Africa, tea is majorly grown in Kenya and tobacco is majorly grown in Malawi, Republic of Tanzania and Zimbabwe.

The demand of plantation crops in Africa is limited and majorly Africa is a net exporter of plantation crops to international market.

Figure 31: Supply and Demand of Plantation Crops grown in Africa (in million tonnes)

8.7 8.6 8.4 8.5 8.3

7.8 8.4

4.3 4.6 4.6 5.1 5.0 5.2 5.4

0 1 2 3 4 5 6 7 8 9 10

2005 2006 2007 2008 2009 2010 2011

Production Consumption

Figure 32: Supply and Demand of Cocoa in Africa (in million tonnes)

2.83 2.89

2.67 2.88

2.65 2.78

3.11

0.48 0.59 0.53 0.64 0.66 0.71 0.76

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

2005 2006 2007 2008 2009 2010 2011

Production Consumption

Unlocking the Food Belts of Asia and Africa

Asia

AgriBusiness Forum

Unlocking the Food Belts of Asia and Africa

February 4-6, 2014

Unlocking the Food Belts of

Asia and Africa

Table of contents

Table of contents

Executive Summary

Introduction

1

1.1. Agriculture – Global perspective

Introduction 1

1.2. Importance of agriculture in Africa

1.3. Importance of agriculture in Asia

1.4. Key agriculture sub-sectors in both the continents

Cereal Production

2

2.1. Status of cereal production and consumption - Global

Cereal Production 2

2.2. Overview of cereal sector in Africa

2.3. Overview of cereal sector in Asia

Horticulture

3

3.1. Fruits and vegetables – A global perspective

Horticulture

3

3.2. Fruits and vegetables - profile of Africa

3.3. Fruits and vegetables - profile of Asia

Plantations

4

4.1. Status of plantation crops - Global

Plantations

4

4.2. Role of plantation crops in Africa