It is Friday night in Maputo and nightlife has not exactly started. But the KFC is bustling on Avenida 25 de Setembro with families buying buckets of chicken for dinner and groups of singles purchasing meals for pre-nightlife preparation.
This scene is not unique to Mozambique. The “KFC gathering,” as one investor labelled it, is the dream of KFC owners across the continent and those providing chicken. Yet, in most African countries, it can feel like the KFC owners and other restaurateurs outnumber the local chicken providers. According to U.N. Food and Agriculture Organization, poultry consumption will grow north of 150 percent over its 2014 levels by 2030, creating a huge opportunity for investment. Additionally prices across the continent are drastically higher than other markets (US$2.20 per kg in U.S., US$3.20 per kg in the EU, and US$3.40 per kg in Brazil).
Africa.com previously chronicled the challenges of chicken (and eggs) HERE. In this article we examine the top countries for ventures into chicken investment in Africa.
One farmer simply summarized the investment opportunity in a few simple statements: (1) The country is approaching 100 million persons; (2) The cost of chicken per kilo is approximately US$8.00 per kilo (US$3.64 per lb); and (3) Average annual consumption of poultry in Ethiopia is barely near 5 kg per person. The growth potential for poultry – similar to many other sectors – in Ethiopia is gigantic!
Yet farming challenges and transport issues, including cold storage, have consistently undermined the trajectory. Few farms have conquered the intricacy of fast growth in chickens on the farm while avoiding the influx of disease (and subsequent drug costs) and finding a sufficient supply of feed. A growth in waste from the processing of beans and nuts helps the feed supply side but demand continues to eclipse demand. As for cold storage, it is nothing but a dream as transport challenges effectively ensure that chicken consumption in the capital Addis is nearly double to triple that of other parts of the country. Breaking that barrier would open the ‘floodgates’ for chicken.
Ghanaian poultry consumption is expected to surpass 7 kg per person by the end of 2014. All signs would point to high times for producers, yet production numbers remain static while imports continue to growth approximately 10% biannually.
Government officials confront the problem by raising the fees on the imported chicken – currently 20% duty, 12.5% VAT and an additional 4.9% for a mix of smaller charges. The government additionally supports lowering and, in some cases, removing import duties on poultry inputs, including feed, drugs, and other related additives. Such efforts are intended to lower the US$5.00 per kilo (US$2.27 per lb) price of chicken.
Farmers and investors face tough hurdles in ensuring the health of their poultry. Current protection measures surpass neighboring countries but are not up to commercial standards, i.e. for a restaurant such as KFC. Transport infrastructure in the country has greatly improved in recent years, further opening the potential for the sector.
The Nigerian story is similar to the Ethiopian story but with higher potential. The Nigerian population is approximately 170 million persons and growing. Annual consumption of poultry is already in the double digits but far from the 40 kg annual consumption that South Africa is approaching. The cost of chicken is about US$6.90 per kilo (US$3.14 per lb).
The statistics are enticing on the surface. Behind the scenes, transport challenges and poultry input deficiencies blur the entire picture. Woolworth’s exit from the country shined light on infrastructural challenges there, but investors should not run scared.
The opportunity, in the eyes of a local farming group, is dependent on constant trial and error and coddling local connections. It is time consuming but worth the adventure and reward.
If you have noticed a trend in this article, it should be that the best opportunities involve large populations, high chicken prices, and growing consumption. Tanzania has all three: (1) population approaching 50 million, (2) US$7.50 per kilo (US$3.40 per lb), and annual consumption is skyrocketing toward double digits. It is no surprise that Tanzania is a target growth country for KFC and other restaurant chains.
Tanzania’s inclusion into the Common Market for Eastern and Southern Africa (COMESA) allows for imports of chicken. But price structures and transport logistics ensures that local production can win out, if it can meet commercial standards. Only one chicken company has met KFC standards in Kenya, and Tanzania is proving to be tougher by all accounts.
The potential for cold storage and potential export as well as cross border conglomeration with Mozambique and Ethiopia will nevertheless make this country a prime target for investors. A bump in local production and/or reduction on duties for feed inputs and vaccinations could also help the outlook in the country.