Even small steps toward food loss reduction can have an immense impact on African states, according to Marc Zander of XCOM Africa. His firm provides business consulting to companies that are interested in doing business in Africa. Western knowledge is especially valuable in the fight against food loss, states Zander. It is also important to identify the actual problems locally to be able to offer suitable solutions. "Goods are stored poorly, packaged poorly, processed too late or unsatisfactorily transported," the Africa expert explains in our interview. "Western companies can offer concrete support even with relatively small solutions."
SAVE FOOD: When we think of booming world regions, we think primarily of Asia – and maybe South America – but not so much of Africa. What is the state of economic growth in Africa? Is there growth? And if so, in which areas?
Zander: It's true that many medium-sized exporting companies still focus strongly on Asia. Meanwhile, however, we can see significant economic growth in Africa, which of course is still coming from a very small basis. The African states south of the Sahara, for example, are growing at a rate of five to six percent. We can also see growth rates that can reach up to twelve percent, for example in Ghana.
Where does Africa's economic strength come from?
Economic growth in Africa is still driven heavily by raw material excavation. But there are also extremely clear signs that other economic sectors are coming on strong. There's the banking sector, for example, and quite clearly also telecommunications. And not lastly the agricultural sector. One example really illustrates the growth rates in Africa: Currently in Nigeria more than 6,000 new private accounts are opened at the Guaranty Trust Bank each day. Another example is cell phones: In 2002 there were 70,000 in all of Africa – today there are 400 million.
Why is Africa experiencing an economic expansion at this time?
There are various reasons for this. There has been a noticeable reduction in violent conflicts in many countries. Then there is the increase in political stability, as well as reforms and initial victories in the fight against corruption. The expansion is of course also supported by the improved infrastructure and increased Internet access.
In which African states are these developments the most noticeable? Are there groups of states that are showing especially strong development in these areas?
We experience repeatedly that this varies heavily between the 54 African states. If you see Africa as one entity – as one country – you are definitely on the wrong track. When we conduct country analyses, we see over and over again that there are significant differences. Nonetheless there are of course positive examples. Botswana, for example, ranks number 32 of approximately 180 states on Transparency International's anti-corruption index – the best rating of any African state and ahead of many European countries or some industrial nations such as South Korea. Botswana is also among the leading states in the World Bank Group's doing business ranking. On the other hand, with a population of just over two million, Botswana does not exactly boast a large national economy. Rwanda is another flagship state, particularly for East Africa. Having just freed itself from a terrible civil war in 1994, Rwanda now shows strong economic growth and extremely high productivity. It takes 30 days on average to get electrical power in Rwanda, compared to 260 days in Nigeria. Flagship nations such as Botswana and Rwanda, however, must be regarded separately. While Nigeria may not be a flagship country regarding reforms or bureaucracy reduction, it is a market economy with 160 million potential end consumers. And that number will climb to 230 million by 2050, along with the corresponding growth of the middle class and incomes.
What role does agriculture play in the African economy?
Agriculture plays an important role. But when you begin to analyse African agriculture, you initially encounter frightening data. It's wise not to paint too positive a picture. There were times when many African states were self-sufficient. Today the food imports are very high in some areas. On the other hand, there is a growing awareness in Africa itself that something must be done about this. Nigeria, for example, has initiated specific programs with the goal of generating reforms and innovations in the agricultural sector. Generally, of course, it holds true that the climatic conditions are better for agricultural success in some African countries than in others. There are also flagship countries in this area. Ghana has come a long way in the agricultural sector over the past several years, and today we see people there using state-of-the-art methods. In Africa, much can be accomplished with little effort. In Ghana, for example, there are projects that inform farmers about current world market prices using text messages, enabling them to get better and fairer prices during sales negotiations. Many farmers had no idea what their goods were worth. In other countries there have been extremely positive experiences with microfinance, or microcredit, in the agricultural sector, for example in Kenya, Uganda and Tanzania.
What is the state of the supply and nutritional situation in Africa? Is African agriculture able to sustain its own people?
As I said, a good deal of food is still imported – in many countries as much as 50 to 60 percent.
Why is that?
For one thing, the cost of importing is often lower than the cost of producing locally. Cassava root, which is used extensively in many African states, is relatively easily perishable and must be processed quickly. It costs seven times as much to process it in Africa as it does to import processed cassava products from Thailand. There are several reasons that local production is so costly. It has a lot to do with the fact that the economies of scale are not realized in Africa. In the agricultural sector that means that they have not yet managed to farm sufficiently large areas of land professionally enough to generate appropriate sales at competitive prices.
Are there other problems in the food sector?
The whole thing is also of course affected by logistics. Many African states still have an underdeveloped infrastructure. In some areas there is no way to transport food over long distances; it takes an enormous amount of time in some cases. While we talk about food waste in Western countries, the concern in Africa is food loss. The goods never reach the people due to breakdowns in infrastructure or logistics, or due to insufficient packaging.
How can these problems be solved? Have there been achievements in the fight against food loss?
Yes, there have been. The real question for Africa is, however, how comprehensive do these solutions need to be? Or, said another way, is it possible that small solutions might help instead of large-scale projects? There is no question that building a motorway between Ghana and Nigeria would help transport food between the two states. The World Bank is financing such projects, and the Chinese are also providing millions in credit. At the same time, however, large-scale projects are still much more difficult to realise in Africa than small projects. I believe that it makes much more sense to implement small projects that can quickly have a positive impact on the people in the area. Then other measures can be planned on the basis of these smaller projects. We're talking about simple packaging solutions or cooling solutions, or about the development of local processing businesses.
Do you have an example of such solution approaches?
I am convinced that with just a two-million-dollar investment in cassava root processing, a great deal could be accomplished in the food supply chain in a country like Nigeria. If European companies, for example, would supply machines for turning roots such as cassava or yam into a powder that can be stored and transported, that would be a very good start. Another example is the mango production in several African states. Often the mangoes are neither stored and packaged nor processed properly. There are several simple starting points here. One further example: Livestock breeding is very widespread in Northern Nigeria. The meat, however, is practically unavailable to the southern part of the country, because it would spoil during transport. The same applies to the fish caught in South Nigeria. Here even the simplest packaging solutions at markets would help immensely, as would cooling solutions for transport.
These are solutions that could be offered by Western companies. Are industrial nations hesitant to invest in Africa? And is this hesitation justified?
This hesitation does exist. And it is of course partially justified. One cannot be blind to the fact that it is still rather difficult to do business in Africa. No more difficult, however, than in many other countries – certainly not more difficult than in Asia. So companies really shouldn't be afraid to invest in Africa. The problems there are no bigger than those in Asia, for example – they are just different problems.
The problems with food loss are still substantial, however. What can be done?
As I said, goods are poorly stored, poorly packaged, processed to late or improperly transported. Western companies can offer concrete support here with simple solutions. It doesn't especially have to be a complete packaging line exactly like the ones produced for the European market. The goal should rather be to identify the problems locally and then to adapt solutions from Germany and other industrial nations to African conditions. That is a goal that would enable the SAVE FOOD initiative and XCOM Africa's work to ideally complement each other. And that is exactly what we want to work on and where we can be of the most help. We can roll up our sleeves on site in Africa, find out where the biggest problems with food loss are, and then communicate to local companies how to best use their know-how.
Whether in the food sector or other areas – how can Western companies make a start in Africa?
Western companies, especially mid-sized firms, should definitely take a look at the possibilities there and select the right partners. Having the right local partners makes it much easier to overcome the cultural barriers that are undoubtedly present. German companies have an additional advantage in that Africans trust the Germans. Products "Made in Germany" are extremely popular. In fact, many African business partners trust Germans so much that they are often willing to pay 100 percent in advance. Germans have a very good reputation in Africa, which opens the door to myriad sales opportunities. The trade magazine The Economist recently published a survey on the topic, "What does Africa Need?" Machines and tools – the core products of the German middle class – were at the top of the list.
How are the Western companies faring that are already active in Africa?
Many unfortunately have no real overall concept for their involvement. This is particularly true of mid-sized companies. They deliver a machine but often cannot provide the structures for training, maintenance, repair or other services. And that's exactly where XCOM Africa comes in when we counsel our clients on their activities in Africa. We supervise our clients' projects in Africa and support them in developing service concepts. It is very important to us that our clients are able to offer their African business partners an overall concept.
How does XCOM Africa support these companies in becoming active in Africa?
We are able to conduct country analyses for the entire continent specifically for our clients. What is especially valuable here is the fact that the data is researched locally. We don't gather it on the Internet. When we discover a potential market for a company in Africa, we offer our clients the following service: We travel there with you and introduce you to the country and the market conditions right there on site. Our service also includes an analysis of the markets, development of strategies and adaptation concepts for the African market, as well as the implementation of these strategies on site. We go to the location with our clients, explain the markets and introduce them to potential partners – whether partners for IT, sales or end customers. We can also handle project management and the handling of African business proceedings after the successful market entry – from partner and customer communication to further acquisition to logistics and financial transactions.
So you offer all-round services, from analysis to implementation.
Absolutely. I think many people underestimate the value of a good analysis. That's why the analysis is always a part of our service – even if we don't make any money on it. We are convinced that companies looking to do business in Africa must understand whom they are dealing with and what potential is available. We hope, of course, that a good analysis will lead to a decision to enter into the African market. As important as the analysis is, the true added value of our services begins when we actually travel to the site with our client.
Which added value is that?
Companies can of course search for potential business and trade partners in Africa on their own. Without the necessary experience, however, it is generally extremely difficult to distinguish serious contacts from dubious ones. This is where our concept sets in: Reduce time, cost and most importantly risk.
Are you seeing more Western companies looking towards Africa?
In Europe the euro-crisis is certainly creating a climate in which many companies are thinking outside of the box and asking themselves what other markets might be worth looking into. China and Asia are known as markets and already partially developed. But the experiences that companies are having in China or India are not always entirely positive. The margins are getting narrower and the competition stronger. This also has companies looking to markets such as Africa – which perhaps appear initially as niche markets – that present themselves as a new venue for Western products, in some cases without competition.