A Continent 'Poised for Growth': Olam on diversifying Africa's Industrialisation
Last year, President of the African Development Bank Dr. Akinwumi Adesina wrote that 'no region of the world has ever moved to industrialised economy status without a transformation of the agricultural sector'. As industrialisation continues to be held as the crucial step towards economic development in Africa, much energy has been poured into the potential for the Continent's manufacturing and heavy industry sectors. The conversation about Africa's industrialisation, however, cannot exclude a crucial driver of its economy – the agricultural sector.
Agriculture already contributes considerably to Africa's GDP at 15%– although this can vary significantly, ranging from 3% in South Africa to 50+% in Chad. Despite this diversity, agriculture has an enormous impact in employment, with over half of Africa's population involved in agriculture in some capacity. Yet there remains that much cited statistic, that in the face of vast agricultural potential the Continent actually imports US$35bn worth of food each year.
If in the process of industrialisation Africa embraced its agricultural sector, it would not only have the potential to feed itself - but if with the right infrastructure, the chance to capitalise on the growth of its exports. Agriculture in Africa could provide more than poverty reduction; it could be a pillar of wealth creation and self-sufficiency. Indeed, this is already the ambition held by Olam, an international agri-business which has been operating in Africa since 1989, when they established themselves in Nigeria.
Today, Olam has operations in all African regions, with a presence in twenty-five countries across the Continent. In Nigeria, the launchpad for their African endeavors, they have had a transformative effect in the country's agri-business sector – investing around US$1bn during their time there. This investment has gone into procuring and processing agricultural products, as well as rice milling and wheat milling infrastructure, and has helped drive Nigeria towards its ambitions - not just of self-sufficiency, but of becoming a global export power.
We spoke to Venkataramani Srivathsan, CEO of Olam Africa and Middle East, to find out more about the impact of their work in Nigeria, his thoughts on the role of industrialisation on the Continent – and his key advice for those looking to invest in Africa.
You're speaking on our panel, Driving Africa's Industrialisation: Now or Never. In your opinion, what role does industrialisation play in Africa's economic development?
We see three big positives. First, it directly drives job creation. Secondly, industrialisation enables greater value-add within each market by allowing it to move further up value chains. Thirdly, this in turn allows Africa to be less dependent on imports and move towards greater self-sufficiency. There is a clear multiplier positive effect at play.
I would add here that people have the misconception that industrialisation is only about machinery – we take a broader view. There are opportunities for industrialising all sectors, including agriculture which is still the biggest job creator across Africa. There are so many low-hanging fruits that if harvested, can significantly improve economic and social development.
Indeed - Olam has worked for many years building Nigeria's agricultural sector. Beyond Nigeria, are Olam looking to increase their presence in Africa?
We will always be focused on growing in Africa - Olam was born in Nigeria 28 years ago. Africa is one of the strategic pillars for Olam. Africa is at a pivotal point right now, and is poised for growth. The headwinds of the past few years have served as a catalyst for further diversification of African economies, and we believe there is a real opportunity for Africa to leapfrog past many other developing regions if macro and policy trends continue on their positive trajectory.
We have always been passionate about Africa. Africa’s unique features offers ideal land and climate conditions for companies to grow responsibly in the agricultural sector.
The African Continental Free Trade Area Agreement was established last month – do you believe this will have an effect on Africa's industrial progress?
We welcome the landmark development of the first Pan-African FTA - free and open markets will be beneficial for all. It is a tremendous opportunity that can lead to increased intra-Africa trade, higher job creation and improved trade flows. But it is crucial that Africa’s leaders are committed to fully participating in the FTA to ensure mutual growth.
What would be your key piece of advice for global investors looking to invest in African industry?
You have to be committed to Africa long-term to build a successful and enduring business. We invested some S$1.89 billion across Africa over the years – not just we believe in its opportunities but also because we want to grow together with it.
Africa is also not a singularity; it is a collective of 54 different countries – more than in Asia or Europe. You cannot simply replicate business models that worked elsewhere. Neither will success come by managing from afar - you have to have boots on the ground. Instead, think about Africa in economic clusters – coordinating a collective of near and similar economies to derive scale and synergy.
Which of our speakers at The Annual Debate 2018 are you looking forward to hearing from?
The Annual Debate brings together leaders with a wealth of experience and expertise across various fields. I look forward to hearing all their views.
To hear more from Venkatramani Srivathsan, join us at The Annual Debate 2018, where Sri will be speaking on our panel, Driving Africa's Industrialisation: Now or Never.