Doing business in Africa: The Mali example
By Marc van der Sterren
Mali assigns 15 % of the national budget to agriculture. This is far above the 10% as recommended in the Maputo-declaration, that most African states don’t even reach. And it is the same amount that is allocated to safety.
Moussa Ismaila Toure proudly presents those figures. The general manager of API Mali, the Investment Promotion Agency, is very eager to convince companies to come and invest in Mali. “We have so many opportunities. All we need are the right players in this country.”
Jihadism and mafia
Safety problems hamper those kinds of economic development. The war against Al Qaeda and other Islamic terrorist groups, local freedom fighters and all robberies and criminalities that come with it, make the north of the country a no-go-area.
Yes, it is only in the north. In the southern parts, where it’s green and all economic activities take place, lives around 90 % of the population. Here it is relatively safe. Toure, however, does not want to diminish the gravity of the safety-issue in his country. “The fact remains that we need to tackle jihadism and mafia.” Which is even a bigger problem, he admits. “There’s a lot of trafficking of drugs and weapons up there. They do not want the presence of the government. We really need to work on that.”
One of the ways to work on that is investing in economic opportunities. Mali needs investors who can improve smallholder farming, to ensure a rural economy to slow down urbanisation. But it will not stop urbanisation, simply because of the huge population growth. The population will be doubled by 2035. “Therefore, Mali needs a transition into agribusiness,” Toure urges.
Large scale and modern agriculture, however, is not quite understood by regional banks, Amadou Sidibe experienced. This entrepreneur has the first and only greenhouse in Mali where he grows vegetables and roses for the local market on about three hectare covered with nets against high temperatures and insects.
Roses are very profitable
His business is booming. He sells quality tomato’s for €1.20 per kilo, while it only costs him € 0.30 to grow. Roses are even more profitable. Sometimes he sells them for € 2 per stem, while the costs are too little to mention: “Chicken feed”, Sidibe says.
Now he wants to increase his greenhouse with another five, or even ten hectares. “I have the space, I have the market, I only can’t get a bank loan.” He wants to equip his greenhouse with the most modern technology for climate control and providing water and nutrients. But banks don’t understand. “They say this is not agriculture; this is industry.” The banks industry department on the other hand, doesn’t know about agriculture. “They say the risks are too high.” So for his investments, he needs a guaranty of USAID or another development bank.
The secrets around milk
Bridging the gap between agriculture and industry also was a big theme at the Salon International de l'Industrie du Mali. “Mali needs not the kind of investments focused on import and export of raw materials, but evolving the industry with knowledge and development,” says Cyril Askar, general manager of Groupe AMI and president of the industrial employers’ organisation of Mali. Askar is the third generation of a family from Lebanese origin. His family company Group AMI is a big player in West-Africa, producing wheat flower, drinking water, animal feed, sweets, pasta and oil. Next project will be a milk processing plant, he announces. “There is so much milk in this country, but it is not used, simply because people don’t have the knowledge and means for technology like pasteurising or cheese making. And that’s exactly what we are going to do.”
Cheap imports push corruption
Toure from the Investment Promotion Agency states that the main reason for the lack of milk processing in Mali is the cheap imports of milk powder from Europe. The price for milk from the farm is around 300 CFA Franc, which is around € 0.45. And that’s too high compared with the price of imported milk powder, Toure utters. “Yes, you may call that dumping”, Toure says frankly.
But not only Europe is to blame, he admits. Corruption in his own country is also a big problem. “Of course we have import rules and taxes. But it’s cheaper and faster to make a deal with someone beyond those official bureaucracy.”
It’s what Askar calls smuggling. “That’s the easy way of doing business. Establishing a decent business is very difficult. You need to be educated, follow the rules, pay taxes, etcetera.
There is only one way to stop the smuggling, according to the entrepreneur. And that is to develop a decent sector to fill this demand. “This is what happened with wheat. We now have six mills, which is practically sufficient for the Malian consumption. Smuggling of wheat is something of the past.”
What goes for wheat or dairy, goes for everything that Mali needs, says Ashkar. And they need a lot. With 18 million citizens and growing, the business opportunities are enormous.
Toure recites: “Dairy, of course. But also meat. 52 % of our meat goes to surrounding countries, but only alive. It’s cattle that is transported. What we need is someone to invest in a modern slaughterhouse.”
Other opportunity: Animal feed. The demand for animal products in West-Africa is huge and growing. “So we need more and more professional quality feed.” And there is lot of fruit in Mali, which is not used. “70 % of all mangoes in this country lie rotting beneath the trees. Just because of a lack of infrastructure and ways of processing and conserving.”
Enough export opportunities
Export to surrounding countries is not difficult, since Mali is part of Ecowas, the Economic Community of West-African States. It stretches from Senegal to Nigeria, including 15 West-African states with a total of 350 million citizens.
West-Africa is a massive market, also for European companies like Bavaria. According to insiders, this Dutch brewery is planning to invest in a local branch to produce for the West-African market, which is cheaper than importing beer from Europe. The Bavaria headquarters in The Netherlands will neither confirm nor deny this. They only admit they are investigating the opportunities in Mali.
Terrorism and extremism
From a Malian point of view, Europe, however, is a market with his own problems. The Dutch agricultural consultant Kees-Jan Van Til experienced this first hand. He already lives in Mali for eleven years. He used to have an organic farm. For his sesame seeds and -oil he had a customer in Germany. “Suddenly they did not want products from Mali anymore, because they wanted 100 % reliability of supply.” They never had any trouble. Van Til emphasizes they had a good relationship, but because of the unsafety in the northern part of the country, the German company did not have enough trust.
Mali is a developing country, in which almost everything needs to be improved. And every business needs to be established from scratch. It’s never just a business, most of the time you need to establish the complete production chain. “It’s not easy,” Van Til admits, but that’s what makes it interesting. “You need to deal with corruption and ridiculous rules. For example; a company is only allowed to buy from companies whit a proven social and fiscal track-record. But almost every business is informal. So this is simply not possible. So a fine of 40.000 euro is inevitable.”
Foreigners doing business in Mali, need to deal with the local ethnicities and peculiarities. For those challenges, they can ask assistance from consultants like Van Til. A fine is negotiable, he knows. “For negotiating, you need to know people. And you need to know the culture.”
With the right people, Mali can be a very profitable market. With a growing population of 18 million, the market is big. The traditional agricultural profits are low. Production in the country can easily double. “Maybe even more”, Toure tells. “What we need is the right partners. Thanks to foreign partners, some potato farmers produce three to five times more potatoes than with traditional varieties and farming methods.”
Successful business woman
Someone who is not to blame for rotting fruits, is Aïssata Diakité. She is only 28 and runs a small juice factory. 35 women deliver mangoes to her company Zabbaan. Besides that she employs 30 workers who process the fruit into 5.000 to 10.000 bottles of juice per day. Seven days a week.
At this moment she is building a new location where she can, with the same number of employees, produce 40.000 bottles per hour. She aims to open it at the end of this year. The different kinds of fruit juices and mixes are not only for the local market, but also for the export to Ivory Coast, Benin, Senegal and even to France. And with the new production plant, she hopes to seriously enter the European market.