Ragout d’Ignames and Bœuf aux Gombos. Sauce Arachide Ivoirienne avec Bœuf. These are some delicious classic dishes in Cote D’Ivoire.

A great shot of Bœuf aux Gombos Cote divoire dish

Bœuf aux Gombos.
Photo credit: uwezo-blog.com

While on a visit there, do not be surprised if your hosts tell you that beef is not on the menu. For a country very French in culture, bœuf avec frites (i.e., beef and french fries), or better yet, beef with anything, is not so common, with domestic beef only meeting 40 percent of the demand. I can tell you from an experience that a gap in demand and production like that is very evident on the ground.This article is the second part of the FMCG Coverage double article about the “Cash Cow of Africa.” The first article focused heavily on the changing dairy consumption habits of Africa, the production of dairy, and the opportunity for investors within that space. This article will look at another money-making stream of the cow: beef.

The growth and investment opportunity for beef in Africa is an intricate one. Beef consumption per capita annually in Africa between 1990 and 2010 has grown minimally, rising from 6.5 kg to almost 6.7kg. When compared to growth of the 0.5kg of poultry (of which is largely chicken) per capita consumption annually in Africa between 2000 and 2012, the growth in beef appears dismal.

According to the International Livestock Research Institute (ILRI), by 2030, beef consumption in Africa should only account for 43 percent of overall meat consumption as compared to 46 percent in 2007. This number declines to 40 percent by 2050. However, when examining the numbers deeper, the investment opportunity becomes clearer. The growth in Africa’s overall meat consumption will grow drastically over that time due to growth in incomes and, moreover, in population. By 2050, Africa is estimated to account for 27 percent of the world’s population and accordingly a majority of the world’s consumers. According to a new Food and Agriculture Organization of the United Nations (FAO) study titled “World Livestock 2011,” by 2050, meat consumption is projected to increase almost 73 percent and dairy consumption is predicted to grow 58 percent. Accordingly, Africa’s share of the world’s consumption of meat consumption will grow.

The growth trends in overall consumption and production of livestock and an unmet demand in Africans diets supports these projections. In 2012, livestock meat products are projected to supply around 12.7 percent of calories consumed worldwide – more than 19 percent in developed countries. Their contribution to protein consumption is estimated between 26 percent and 27 percent worldwide and between 47 percent and 48 percent in developed countries. The average consumption of livestock protein in Africa, according to FAO, is less than 25 percent of that consumed in the Americas, Europe, and Oceania and accordingly less than 17 percent of the recommended consumption level for all proteins. Africans essentially should consume more food, especially protein from chicken and beef, as their economies and subsequently pockets grow.

While the opportunity is obvious, the path to capitalizing on it is not so clear. Production in many African countries is low because of lack of knowledge and high input costs. In general, lack of knowledge will grow with mobile phones and internet. One day, I hope to never hear someone explain to me how cows must walk all day to become good meat as compared to sitting still, grazing and becoming fat, and producing milk. Feed costs and pasture costs in Africa are a huge detriment to the maturity of the industry. Feed is hard to come to by because it is way below its needed level across the continent. This reality coupled with the growth in dairy and beef consumption across Africa offers another investment opportunity. However, most potential feed producers do not recognize that they are potential feed producers. I cannot count on one hand the amount of health food companies that use cereal grains and/or legumes in their products and produce large amounts of waste but can never be convinced of the dollars they toss out with waste instead of selling it as cow feed.

The idiosyncrasy of many cow farmers in Africa doesn’t end there. I spent two hours recently debating with an Ethiopian farmer on value of the cow’s manure. It is too common in Addis Ababa to see cow herders walking cows in the street as they lay their valuable excrements on certain sidewalks. I am thinking dollars and the farmer is thinking waste. In East Africa, the inability to capture the value of manure from the cow is detrimental to economies as many economies depend heavily on agriculture. Effectively, the country has cheap agricultural input sitting on the side of streets and in the grass which could boost the incomes of the cow herders and the country altogether. It must be said that this narrative is not limited to East Africa as I have seen this “dropping of dollars” on the street in several West African countries.

The story of the cash cow in Africa overall is less one of major growth when compared to chicken and eggs, but rather it is one of more efficiency and value chain alignment in the face of low productivity, high demand and differing but high prices in certain countries. Again, some developed countries extract 12,500 liters of milk annually from a cow while I know several African farmers who barely get 350 liters annually from a cow. The potential of productivity growth coupled with the high price of milk across the continent is a potential boom to the industry. The potential for fatter and healthier beef through better management of farms, particularly on the feeding side, along with a growing demand is the second part of the boom. Throw in manure as an added windfall and the potential for a commercial dairy and beef investment goes through the roof.

The potential for private equity investors to transplant emerging market stories from other countries 10-15 years past the stage of similar African countries and build an investment plan through that transplanted experience coupled with their networks of technical advisers is untapped. Just don’t forget the logistics and infrastructure issues. Let the rat race for finding the right farmers begin. Oh wait—it has already begun.

(Editor’s note: Part I of “The Cash Cow of Africa” appeared on Wednesday.)

Kurt Davis Jr. is a Senior Associate with Schulze Global Investments in its Ethiopia office. He is a private equity professional and early business/start-up consultant with experience in Sub-Saharan Africa and North Africa, Asia, Europe and United States. He is an avid traveler who has been to 60+ countries throughout the world in search of new investment opportunities, new people, and better understanding of the world. His international professional career also includes positions with Kukula Capital, African Development Bank, Swicorp S.A., Bear Stearns, Citigroup Smith Barney, and Skadden, Arps, Meagher, Slate & Flom. His experience covers the agri-processing/food processing, construction, fast-consumer moving goods (FMCG), energy & infrastructure, manufacturing, natural resources and real estate sectors. Mr. Davis holds a Master in Business Administration (M.B.A.) degree from the University of Chicago Booth School of Business, Juris Doctor (J.D.) degree from the University of Virginia School of Law, and Bachelor of Arts (B.A.) degree from University of Virginia, having also taken classes and/or studied in Ghana, Nicaragua, France, and Brazil. He is a registered lawyer with the New York State Bar and the Massachusetts State Bar. He has also passed CFA Level I and II and speaks English, French, Portuguese and Spanish. He can be reached at kurt.davis.jr@gmail.com.