Africa has been a fast-growing grain import market for more than a decade, and not just because its population is mushrooming. Take wheat, for example.
While the population of Africa increased by 32% between the 2007-08 and the 2018-19 growing seasons, the continent’s wheat imports increased 68% over the same period, surging to 47 million tonnes from 27.3 million tonnes, according to figures supplied by Bunge.
Explaining how consumption growth rates are outstripping population expansion, Görkem Alapala, vice-chairman of the board at Corum, Turkey-based Alapala, said, similarly to Southeast Asia, eating habits in Africa were being transformed as many countries saw GDPs expand.
“Before, Africa was mainly consuming maize because they grow so much maize here,” he told World Grain at his exhibition stand at the 29th Annual International Association of Operative Millers (IAOM) Mideast & Africa Conference and Expo, held in October in Nairobi, Kenya. “In rural areas they still consume maize, but in cities the consumption of wheat products is starting to overtake maize products so there is a lot of demand for mills and wheat flour. Pasta consumption is also definitely increasing.”
Lennart Kutschinski, managing director of Hamburg, Germany-based Mühlenchemie, another prominent exhibitor at IAOM, also confirmed the importance of eastern Africa as a growing market for the company’s products and solutions.
“The market demands are increasing, the population is increasing and here in east Africa we’re seeing a shift from maize to wheat,” he said. “As a result, people are buying new applications, they want different types of bread, the products are getting a bit more diversified. People want a loaf of bread for the family, but there is also now diversity in cereal brands and niche products. The biggest markets for us in east Africa are Kenya, Tanzania and Uganda.”
Recognizing this trend, Uzwil, Switzerland-based Bühler AG opened its African Milling School in Nairobi, Kenya, in 2015. Following this year’s IAOM MEA conference, invited guests were given the opportunity to tour the milling school.
Martin Schlauri, director of the African Milling School, said it is not only the market growth but the demand for consistent and high-quality end products that requires qualified millers.
“Bühler has maintained for many decades a close relationship with the African grain processing industry,” Schlauri said. “Many companies operate on Bühler equipment for generations, so it was the will of Bühler to support the milling companies in participating in the growth.”
African wheat import growth rates are expected to decelerate, but they will remain significant and outpace population growth over the next decade. Bunge predicts African wheat imports will reach 63 million tonnes by 2027-28, up 27% compared to now, while the population will climb at a slower rate of 21% over the same period.
Rapid wheat demand growth has also, of course, increased Africa’s importance on the world stage — the continent accounted for 29% of the world’s wheat trade in 2007-08 and by 2027-28 Bunge estimates its share will reach 33%, with sub-Sahara consumption totaling 40 million tonnes, up from just 20 million tonnes in 2009-10.
Graincorp eyeing Africa
Certainly, the potential of Africa as a destination for grain imports was writ large as over 500 delegates and more than 90 exhibitors gathered at the latest iteration of IAOM. Australia grain and logistics giant GrainCorp was, surprisingly, to the fore in marketing its wares to African customers.
GrainCorp opened a Black Sea trading office this past summer and also recently launched a joint venture in Canada. Both investments were undertaken to diversify its ability to supply wheat into markets such as Africa, where Australian exports suffer a freight disadvantage — even when exports are not constrained by drought, as they have been this season.
“We have a good footprint in Southeast Asia and origination in Ukraine, so as a company we are now developing Africa, Northern Europe and the Middle East,” said Jorn Heecks, a senior trader. “We want to be standing in front of our customers not just during the Australian marketing season, but all year round. Kenya would be new territory for us from the Black Sea region. Tanzania is also interesting and then we will need to see if we can get a foothold in Egypt.”
Steve Mercer, vice-president of communications at U.S. Wheat Associates, said Africa had long been an important region for U.S. agricultural exporters.
“Nigeria, for example, continues to be a major importer of several U.S. wheat classes, although economic circumstances and the emergence of cheaper Russian and other Black Sea exports has cut into our market share — price being the primary basis,” he said. “As in other developing countries, demand for higher quality wheat and protein increases with economic improvements. We strongly support the official effort to more actively participate in the growing demand for better food on the continent.”
U.S. Wheat Associates would not forecast future sales potential, but Mercer said the current largest customers in Africa for U.S. sellers included Morocco, Algeria, Nigeria, South Africa.
“We also see growing opportunity in Angola, Kenya and Ghana,” he added.
Another expanding market is Sudan. Nibras Hussein, general manager of Rotana Flour Mills, said the country imported over 2 million tonnes of wheat in 2017.
“Import volumes have increased rapidly in recent years from 1 million tonnes to 1.5 million tonnes and now this year it will be more than 2.1 million tonnes,” he said. “There is a lot more demand for wheat-based products from consumers and we expect this to continue.
“We use it for bread, many different types of bread, and also for cakes and donuts, but the main purpose is bread. We mainly used to import wheat from Australia, Europe and the Black Sea, but now it’s mostly from the Black Sea because it’s cheaper so it dominates. We also grow our own soft wheat in Sudan, which we blend with the imports to reduce the cost.”
Rotana Flour Mills is one of the newest millers on the Sudanese block, but Hussein said expansion was already in the pipeline even though the company only started operations two years ago.
“We already have a mill, but we have a Turkish mill coming and we are working with Alapala on this,” he added.
Sam Kanja, business development manager at Inspectorate East Africa, said ensuring quality standards were high was an ongoing challenge for importers and traders. IEA provides inspectorate services in Kenya, Tanzania and Djibouti, and Kanja said demand for services was increasing each year.
“The market has been growing in terms of being aware about the quality issues,” he said. “For all incoming grain products as well as liquid cargoes such as oil and gas commodities, you find that there is a necessity through the government regulators that the commodities adhere to a certain standard. So, for example, here in Kenya, the standard is set up by the Kenya Bureau of Standards. If it’s grains such as maize, then it’s aflatoxins levels we look at; if it is a commodity like sugar, it’s yeast content; if it is wheat, then there’s also the humidity aspect we’re looking at. So, all those parameters are checked. We assist, facilitate or support in achieving these standards.”
He said in eastern Africa, imports of some grains could fall next year due to favorable planting conditions.
“The rainfall in the whole region has been quite high so the importation of grains this year has been very minimal,” he said, speaking to World Grain in late October. “And, actually, we are on the onset of a new rainy season, so basically that’s going to have a play on how the next six months are going to be in terms of grain importation.”
He said Kenya, for example, often turns to its neighbors should domestic maize production falter but looks further afield for wheat imports.
“If it is maize, we buy from neighboring countries such as Zambia and Uganda because maize is the staple commodity,” he said. “When it comes to wheat, we have our own wheat, but we get the surplus from countries such as Argentina, Russia and Ukraine.”
Logistics challenges
Jean-Pierre Langlois-Berthelot, board member and past president of France Export Cereales, said French exporters continued to target Africa and often had longstanding contacts that prevented logistics delays at key ports such as Lagos, Nigeria, for West Africa, and Mombasa, Kenya, a key gateway along with Dar es Salaam to East Africa.
“It’s one thing to have the wheat, to have the quality, but it’s another to also have the logistics,” he said. “In France there has been for a very long time some small companies that are highly specialized to serve Africa, especially western Africa.
“They have vessels that go from one port to another port and they don’t get delayed, which is not always the case with Black Sea supplies. There are French operators that have been working there for a long, long, long, long time and they know how to meet the needs of the market.
“For example, you can have a miller who has 30,000 tonnes of storage capacity in Africa and he is importing on the basis of 25,000 tonnes. He can receive his vessel only when he only has less than 5,000 tonnes of supplies but he can’t let his storage supplies fall to zero or his competitors will take his market. So this is the adjustment needed here. You need to have good products, but you need also to have good logistics to meet the needs of customers.
“Also, in some countries you need to understand the internal logistics. If you have mills that are at the ports, that’s okay. But when you have mills that are a lot of kilometers inland, then you can have a problem with traffic, you can have issues with railways where there are railways, so logistics is a huge problem.”
Jean Charzat, director of agribusiness in Sub-Sahara Africa at Bunge, also highlighted the logistics difficulties of supplying imports to Africa. He said Mombasa, the Kenyan gateway to eastern Africa, especially landlocked Uganda, Rwanda, South Sudan, Burundi and parts of eastern Democratic Republic of Congo more than a thousand miles inland, had suffered chronic port delays two years ago that saw cargoes held up for as long as six months. Although the situation has now been resolved, he said many ports in Africa would benefit from improved storage, handling and onward distribution facilities.
“Mombasa doesn’t have big delays now, but there is limited storage and, if you think about the demand in Kenya and Uganda and other countries, and how quickly this is growing, they need to increase discharge facilities in the ports and also their storage facilities,” he said.
Western Africa faces similar difficulties.
“In Nigeria it’s more related to the fact that most of the milling industry is located inside the port of Lagos and trucks taking delivery of the flour cannot access the port without waiting a couple of weeks at the gate, which is crazy,” he said. “The port facilities are also too old.
“In many African countries you assume bottlenecks with logistics in the ports or logistics in the transportation, but there have been also some improvements in other countries. For example, there is a new port in Djibouti that is relatively efficient, so it is giving lots of improvement to the capacity of the country.
“But Africa could make a lot of improvements to its ports and land transportation and this would reduce the cost of its imports.”
