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Monday, 7 October 2013
Dangote vies with China over tomato market
Shittu Ibrahim ekes out a living for his two wives and 11 children by selling tomatoes he grows to passers-by along a highway that runs through the Kadawa Valley near Kano. With no way to find new customers, about two-thirds of his crop rots.
Now the Central Bank of Nigeria (CBN) and Africa’s richest man, Aliko Dangote, have teamed up to establish a $25 million tomato-paste factory that could boost income for Ibrahim and the 8,000 farmers who live in the valley, reports Bloomberg.
“We are doing this only to feed, as you can see, I can’t afford the luxuries of life,” the stocky 56-year-old said as he sat on a stool on June 6 outside his mud-walled house, which is surrounded by tomato fields as far as the eye can see. “There are better prospects in supplying Dangote because people will buy from them from all over the country. We hope that things will improve.”
The intervention by the CBN, which commissioned a study to show that processing local tomatoes is cheaper than importing paste from China, is part of the government’s drive to cut annual food imports of more than $10 billion. It also plans to boost agriculture in a country that was food self-sufficient in the 1960s, and create jobs in the north where poverty and unemployment have fueled an Islamist insurgency.
“We want to take Kadawa as a model and prove that with the right application of government policy we could get finance to the sector, improve productivity, create jobs and raise income,” CBN governor, Sanusi Lamido Sanusi, said in a June 25 e-mailed response to questions.
The 2011 study showed that Nigeria pays $360 million to import more than 300,000 metric tons annually of tomato paste from companies including Hebei, China-based Baoding Sanyuan Food Packing Co. and Singapore’s Olam International Ltd (OLAM) a year. The country produces 1.5 million tons of tomatoes annually of which about 900,000 tons rot, agriculture minister, Akinwunmi Adesina, said at a June 13 presentation in Abuja.
Annual consumption is about 900,000 tons. Tomatoes feature in popular Nigerian dishes like Suya, a spicy northern delicacy of meat kebabs with raw tomatoes, as well as a tomato stew eaten with rice, beans, yams and cassava dough.
Dansa Holdings Ltd., a unit of Dangote Group, the company that accounts for the bulk of Aliko Dangote’s $19.9 billion wealth, took up the project after a failed attempt to get importers including Olam, Conserveria Africana Ltd. and Chi Group Ltd. to form a venture. The plant is expected to start by November and will produce more than 400,000 tons of tomato paste annually. Most of its tomatoes will come from farmers in Kadawa Valley.
Farmers will receive a guaranteed price of about $700 per ton compared to an average of less than $350 now, the central bank said.
Dangote, the world’s 32nd richest man according to the Bloomberg Billionaires Index, owns businesses including flour mills, fruit canning plants and palm oil refineries.
“It’s a win-win situation. We have a price we can compete with and the farmer has a price that makes the tomato a good value,” said Sani Dangote, vice president of Dangote Group and a brother of Aliko Dangote, in a June 18 interview in Abuja. “It’s only agriculture that can take poverty away overnight because it doesn’t take long for the farmer to see the results and reap the rewards.”
The Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending, or NIRSAL, a unit of the Central Bank of Nigeria, which carried out the tomato study, also provides credit guarantees to enable banks to lend to farmers, Jude Uzonwanne, its head and a former consultant at Boston-based Monitor Group, said in an interview in Abuja.
At Kadawa, NIRSAL determined that “about 8,000 farmers producing in about 5,000 hectares needed roughly N4 billion in working capital,” he said. It also established a farm office of agronomists and managers “to run all the middle mechanics between growing crops and delivering to the Dangote factory.”