Market Insights: Africa is the market we have just begun to discover

The impression many have about Africa is of conflict, famine and relief effort by international charity agencies. Yet it is a huge continent and while it has its problems with huge areas of drought and conflict, it has also huge potential, with great reserves of natural resources and food production capability. It is therefore a continent with huge development potential and as China and southeast Asia have already demonstrated, as economic development takes place, wealth increases and demand for western diets follows.

Ireland already exports substantial quantities of dairy, lower-value meat products and beverages or drinks to many African countries. Of course, the African continent comprises a diverse range of cultural, political and economic environments across its 54 nations. There are three key elements to be considered when considering Africa as a market for Irish agri-food exports.

1 Demographics

With a population of 1.2bn that is set to reach 2.5bn by 2050, Africa will account for half of all the world’s population growth in that period. Predictions suggest that by the end of the new decade, we are about to enter, a quarter of the world’s youth population will be African and, by 2100, Africa will account for a third of the world’s population (UN).

2 Wealth

Since the beginning of the century, the African economy has been catching up with those of mature markets fuelled by increased natural resource prices, foreign investment, technological jumps, urbanisation and a growing middle class. Between 2010 and 2023, the overall African GDP is expected to grow by an annual average of 4%, double the EU expected growth. In 2019, four of the top five fastest-growing economies in the world are in Africa (IMF and CNBCAfrica). According to the world bank, the African food market value could reach $1 trillion by 2030 if the required capital, electrical and technological support is provided.

3 Logistics

Poor infrastructure and distribution remain key constraints for business development in Africa, in particular for internal trade between countries, despite progress made through the African Continental Agreement on Free Trade Area (AfCFTA).

A growing population and growing wealth combined with an underperforming agricultural sector, storage and distribution, has led to significant growth in African demand for imported food (average +8 % per year), most notably for cereals (HS10), fats (HS15), sugars (HS17), but also dairy, meat, prepared foods and seafood. Some of the main suppliers to Africa are Brazil (sugar and meat), France (cereals, dairy, meat) South Africa (beverages), Netherlands (dairy, seafood), and China (tea and seafood).

In 2018, Irish dairy exports to Nigeria reached €77m. Fat-filled milk powder (FFMP) accounted for over 70% of dairy exports. From January to September this year, CSO export statistics indicate strong growth in Irish exports of FFMP (which have risen by 56% to €62m); SMP (skimmed milk powder), up 79% at €14.7m; and WMP (whole milk powder), up 83% at €8.2m. Ireland is Nigeria’s largest and historical supplier of FFMP, accounting for an estimated one-third of Nigerian total FFMP imports. Interestingly, FFMP is no longer regarded as a cheap substitute of WMP but has become a category of itself.

Irish dairy exports to Algeria reached €50m in 2018. The most recent export figures indicate growth of 10% driven by cheese and SMP.

As of September, cheese exports stood at just under €26.2m, accounting for close to 62% of dairy exports to Algeria. SMP exports for January to September are over €8.2m, accounting for 20% of the value of Irish dairy exports.

Cheddar is the key dairy product used by Algerian cheese manufacturers, with whom Irish cheddar enjoys a solid reputation for its quality.

The recent modification brought to the health certificate agreement for Irish dairy exports to Algeria that has provided an extra month of sales from production will further stimulate Irish exports to Algeria.

Irish dairy exports to Egypt reached €24m in 2018 in a market that was particularly affected by the devaluation of the Egyptian pound in 2017 and high butter prices.

January to September export figures indicate a strong recovery, with an 89% increase in Irish dairy exports to just under €24.4m by September this year. This strong recovery places Egypt 17th in value terms for Irish dairy exports in 2019, and the third largest African market for Irish dairy, after Algeria and Egypt, and ahead of Morocco.

Cheese accounted for half of these exports having recorded 42% growth, up from €8.5m last year to €12.2m as of September.

Exports of butter increased by 914%, albeit from a low base, to reach €4.3m by September, while SMP exports are also at €4.3m, an increase of 334%. Combined, butter and SMP account for around 32% of Irish dairy exports to Egypt.

Irish beverage exports to South Africa reached close to €15m in 2018, largely comprised of whiskey, accounting for €14m. January to September export data indicate encouraging export growth of 14%.

South Africa represents a substantial market for poultry imports at around 540,000t per annum. Ireland has done particularly well as a supplier into the market, with volume growth of over 200% from 8,200t in 2014 to 25,300t in 2018.

Growth in 2019 looks positive, with volumes already up 14% in June 2019 to 17,728t from the 15,490t recorded in the same period in 2018.

Outside of Bord Bia’s priority markets, exports of seafood are of particular importance to Nigeria, surrounding west African countries and Egypt, valued at around €56m in 2018.

For Irish suckler and beef producers, the north African market has been important for several years, though at times it is more active than others.

Irish livestock exports to north Africa and in particular to Libya are performing extremely well, with an increase in exports of 63% to Libya on 2018.

The most recent figures available (week ending 1 December) show that 8,608 head of cattle had been exported to Libya so far this year, the majority as stores (5,231) and weanlings (2,036).

The recent health certificate agreement between Algeria and Ireland opened the Algerian market to Irish cattle exporters in November, with sales of young bulls starting immediately. Algeria imports approximately 100,000 cattle, of which 75% are young bulls and 25% are in-calf heifers (mostly dairy). Currently, Algeria’s main suppliers are France, accounting for approximately 75% of their live cattle imports, and Spain at 23%.

Egypt offers a large but price-sensitive market for livestock exports, with imports estimated to be in the region of 140,000 head, of which 95% are male cattle (young bulls/steers) and 5% in-calf heifers.

Egypt’s main suppliers are Brazil, accounting for 45%, followed by Spain 22%, and Sudan 11%. Health certificates for live Irish cattle exports to Egypt were updated in April this year.

With some of Egypt’s traditional suppliers challenged due to animal disease control, there is an opportunity for Irish exporters to regain market share and resume live exports to Egypt.

In February next year, Minister for Agriculture Michael Creed will lead a delegation of Irish exporters to Algeria and Egypt.

The reason for this trade mission is to increase opportunities for Irish dairy and live cattle exports by deepening existing trade relationships and opening up dialogue with potential customers.

To support this, Bord Bia will host and facilitate technical seminars and business-to-business meetings between Irish exporters and potential customers in both markets.

The opportunity to experience the market firsthand is also highly beneficial for Irish companies, enabling them to gain deeper insights into the trading environment and business culture.

At a government-to-government level, the ministerial delegation will use the trade mission to strengthen the relationships between their counterparts in Algeria and Egypt to encourage further collaboration, consolidate the business we have and develop more trading opportunities.

Bord Bia’s strategy for Africa is focused on lead generation and business conversion, building the reputation of Irish food and drink exports and identifying value-added opportunities for exporters.

Last month, Bord Bia hosted buyers from seven Algerian and three Egyptian companies on a three-day trip where they met directly with Irish cattle exporters.

With a collective annual purchasing power of over 110,000 head, this is a priority engagement for Bord Bia to develop an alternative outlet for cattle that complements our beef industry.

The trade mission to Algeria and Egypt further supports the Irish strategy in Africa by building our reputation and fostering business collaboration in the private sector between Irish exporters and local importers.

Understanding the African continental, regional and national political, economic and cultural environment are some of the key criteria that exporters need to consider.

Bord Bia has a strong team in place to assist exporters to identify, understand and unleash opportunities in Africa with Ese Okpomo, market specialist west Africa, joining the team based out of Lagos, Nigeria, to work alongside the existing network of in-market experts Billel Haddad and Liz Whitehouse, respectively covering north Africa and southern Africa.

Ese Okpomo, Bord Bia market specialist west Africa

“In Nigeria, FFMP – a blend of vegetable oils and skimmed milk powder – is used as an affordable option in homes to make reconstituted milk and yoghurt. Nigeria is one of the world’s largest importers of FFMP ... it has evolved from being a substitute to WMP, to become a category on its own, disrupting and cannibalising trade of WMP. The demand has been driven by its lower price relative to WMP, with FFMP trading at around €1 less per kg than WMP.”

Billel Haddad, north Africa market specialist

“Algeria has a strong demand for good-quality cattle between 300kg and 350kg for fattening. We invited the top Algerian livestock importers to visit Ireland last month on a four-day itinerary including meetings at the Department of Agriculture, Carnaross Mart and a number of farms. The visit highlight was their attendance at a ‘speed-dating’, business event where we introduced them to Irish exporters looking for new markets. Our impression was that the Algerian livestock traders are keen to find alternative supplies from Ireland to reduce their dependency on France.”

Liz Whitehouse, southern Africa market specialist

“South Africa represents a substantial market for poultry imports at around 540,000t per annum. Ireland has done particularly well as a supplier into the market with volume growth of over 200% in the last five years and growth in 2019 looks positive with volumes already up 14% in June 2019 over the previous year.”

Africa is not the first place we think of when we look at markets outside the EU for agricultural produce. We have a long and successful tradition of live exports to north African countries, while factories sell many of what we would consider byproducts such as feet into west African countries. South Africa was our second biggest market for poultry exports in 2018 and dairy powders are also a long-established business and the bedrock of nutrition in many African countries.

Notwithstanding all this, it remains a continent yet to be really discovered and we should think of it as the new market of the incoming decade, just as Asia has been this decade. As their economies and infrastructure develop, so will their demand for western diets and it is a continent that business can be developed in, but it won’t drive the price of dairy or meat products in the coming weeks, month or even in the next couple of years. By the second half of the next decade it will be interesting.