How to invest in fertiliser in Africa

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How to invest in fertiliser in Africa

"The launch of the How to Invest series on IMovedBack.com aims to produce easier access to information for homegrown and diaspora Africans regarding investment opportunities in Africa." - Joy Isaac (Founder of IMovedBack.com)

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This post will be the first in our How To Invest series. I’ve written a post that listed 70 business ideas for Africa. Each week, we will do a deep dive into one idea. Today, we are starting with fertiliser.

What is fertiliser?

If you were to explain to a child:

  • The fertiliser contains nutrients that plants need to grow.
  • Fertiliser can be organic (poo) or synthetic (human-made).
  • Adding fertiliser to the soil where plants grow can make them stronger and bigger.

The more complex definition is:

Fertilisers provide mineral ions needed for healthy growth in plants. As plants grow, they absorb mineral ions from the water in the soil through their root hair cells. Over time, the concentration of these ions decreases, so farmers and gardeners add fertilisers to the soil. Fertilisers are usually sold as solid powders or granules. Fertilisers are formulations that may contain nitrogen, phosphorus and potassium compounds to promote plant growth. Fertilisers that supply all three elements are often called NPK fertilisers, after the chemical symbols for these three elements.

Organic fertilisers can be plant-based or made from animal or mineral sources. Blood meal, feather meal, fish meal, bone meal and crab meal are some examples of animal-based organic fertilisers. This type of fertiliser is often high in nitrogen, and the rate of nutrient release ranges between medium and rapid. Alfalfa, cottonseed, and soybean meals are some examples of plant-based organic fertilisers. Organic fertilisers created from mineral sources include dolomitic limestone, sulfur, greensand, rock phosphate and Epsom salts. 


What is the market size of the African fertiliser market?

According to Statista, the global market size for fertiliser is $171bn. It is forecasted to be $213bn by 2027. The African fertiliser market is projected to register a CAGR of 5.1% during the forecast period (2021-2026). Unfortunately, we could not retrieve the African fertiliser market size, but we will update this post when we can.

Currently, only 6% of Africa’s cultivated land is irrigated. Average fertiliser consumption in Sub-Sahara Africa is estimated at 17kg of nutrients per hectare of cropland (Agra 2018), which is nearly double the baseline of 8–9 kg/ha in 2006. Still, it compares with a world average fertiliser consumption of 135kg/Ha.

What countries in Africa have the biggest market?

The entirety of Africa consumes almost 7,946,000 tonnes of fertiliser each year, with UREA being the main product consumed by the entire continent. Nigeria is the biggest consumer with agricultural products like cashew nuts, cocoa beans, ginger and cotton contributing to the high usage of fertilisers. Nigeria is closely followed by Ethiopia, which consumes over 1,134,000 tonnes of fertiliser each year. 

However, it’s important to note that Ethiopia is trying to promote new fertilisers and SMEs by resuscitating blending local plants in Ethiopia.

On the 24th March 2022, President Buhari inaugurated a $2.5 billion fertiliser plant to contribute to global supply amid increasing prices following the Russia-Ukraine war. Dangote Fertiliser Plant is Africa’s largest Granulated Urea Fertiliser complex. The plant occupies 500 hectares of land in Lekki Free Trade Zone, Lagos Nigeria. It cost $2.5 Billion to build. The plant will make Nigeria self-sufficient in fertiliser and have excess capacity to export.

Tunisia is also looking to profit from the increase in fertiliser prices that have resulted from the destabilisation in Ukraine.

African Fertilizer and Agribusiness partnership created an Africa Fertiliser map for you to see a detailed breakdown of consumption and industry analysis of the continent,

What companies are the big players in this space?

Governments partner with private entities to boost fertiliser production in the region. For example, in 2016, the Ethiopian government partnered with a leading phosphate export firm, OCP, which is 95.0% owned by the Moroccan government, to construct a $3.7 billion fertiliser plant for sustainable agricultural development across Africa.

The African fertiliser market is fragmented, with many global and local players in the region. Yara International ASA, Israel Chemicals Ltd, Haifa Group, Groupe OCP, and Omnia Holdings Limited are major players operating in the region. These companies are expanding their presence by building new fertiliser manufacturing plants to boost domestic fertiliser production. The top top-five market players account for about 20-30% of the market.

Major Companies in the Sector Include:

  • Syngenta
  • Bayer CropScience
  • Basf
  • Agrium
  • DuPont
  • Dow Agrosciences

Many local players are operating in the region, mainly because of the unregulated market. Collaborations with government organisations and expansion in the market, along with product innovation, are some of the strategies adopted by the companies.

What startups are entering this space?

There is a rise of agropreneurs who continue to add value to farming and make African nations sell-sufficient food production.

Safi Organics in Kenya uses a proprietary process to convert agricultural waste like coffee husk and corn cob into nutrient-rich biochar fertiliser. Safi Organics produces fertilisers locally turning farm waste into a product called Safi Sarvi. The fertiliser is claimed to boost crop yields by an average of 30% and over time restores degraded lands by restoring their soil pH and reducing plant toxicity. Safi Organics’ western counterpart is Cool Planet, a biochar startup that has raised more than $200 million, though it started as a biofuels startup and pivoted around 2015. 

Agriprotein is an award-winning agritech company based in Cape Town, South Africa. It was founded in 2008 by David Drew and Jason Drew to upcycle local waste nutrients into protein. Its mission is to reinvent the unsustainable use of fishmeal. The company uses insects to turn food waste into proteins. For example, it breeds black soldier fly larvae by feeding them food waste. After the larvae pupate, they are processed into an insect-based protein product called MagMeal. This can be fed to fish, pets, chickens, and other monogastric animals. The company also recycles organic waste obtained from restaurants, farms, supermarkets, and food factories into valuable products.

How can I invest in fertiliser and agricultural chemicals?

Multinational companies with largely Euro-American links dominate the African fertiliser and agricultural chemicals market, and some companies of Asian origin are trying to cement their brands in various countries. This status quo means a new player entering the market has to position themselves cleverly. For example, finding a niche market based on location or a particular line of products will ensure healthy market growth without going against the big players. This is because they have substantial marketing budgets and guaranteed government contracts.

You need to assess the product saturation of the market you want to enter. Africa has had a slow agricultural boom as the younger generation is now beginning to choose farming as a business venture. The emergence of this market presents an opportunity for new players who hope to grow with their customers.

The raw materials in your location of choice will also determine the product range and demand satisfaction. Potential players in the field need to consider the availability and accessibility of the raw materials required to make the organic fertiliser and agricultural chemicals. A leap into the unknown will result in failing to meet demand and overspending on the raw materials.

There should be a conscious effort to comply with different local and international regulations that guide the company’s establishment and the particular standards the products are supposed to meet.

What are the risks associated with investing in this industry ?

Examples of the challenges that often must be overcome to avoid market failure include strong seasonality in demand for fertiliser, the riskiness of using fertiliser (stemming from weather-related production variability and uncertain crop prices), highly dispersed demand for fertiliser, lack of purchasing power on the part of many potential users of fertiliser, the bulkiness of most fertiliser products, and the need to achieve large volumes of output in fertiliser procurement.

The perennial droughts that persist in Sub-Saharan Africa due to climate change may also reduce the demand for fertilisers. Most farmers are reducing the size of the land they are farming on to minimise the risk. This results in a state oversupply that might affect new players, leaving only the existing ones with rolling supply contracts with big estates and/or governments.

We hope you enjoyed reading. Please let us know your personal experiences investing in fertiliser in Africa and your suggested do-s and don’ts to help other readers.

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