Business in Ghana

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Nigerian Entrepreneur defies experience to succeed with rice in Ghana

Posted by Business in Ghana on December 14, 2011

By William Wallis

Borrowed from the Financial Times for Discerning Ghanaians

Nigerian-born Toks Abimbola landed in Ghana as he might have done in his previous incarnation as an investment banker: with hand luggage and a room at the Holiday Inn in Accra.
Less than two years later he, his business partner, and the investors backing their start-up, have become the largest commercial rice farmers in the country, with 500 hectares of land under cultivation and another 4,500 hectares still to plant.
It is early days and there is plenty that could go wrong. But the trajectory of Gamco, their company, is of a kind that could break open Ghana’s agriculture sector by showing what is possible in farming when the stars align.
Many parts of West Africa are littered with failed rice projects. These have mostly been piloted by the state, aided by foreign experts and investors, and abetted by development agencies.
The intention is usually noble: to show it is possible to become self-sufficient in food. But when projects fail, they often end up suggesting otherwise.
Rice is one of west Africa’s single largest imports, a drain on foreign reserves and, recently, as world food prices have soared, a significant driver of inflation.
It engenders a precarious dependency. Africa imports rice from meagre Asian surpluses that are being sliced back as consumption grows in Asia. Yet, despite the strategic nature of the commodity, until now, it is hard to point to a single large-scale west African project that achieved its aim.
For all the talk of how central agriculture will be to Africa’s development, farmers trying to scale up production of all but the most strategic crop, cocoa, list the same problems year after year: inadequate storage, poorly marketed inputs and complex overlapping land tenure systems that make it difficult to create the necessary scale.
Ghana is not a place where you can grab land. It is too subdivided and too emotive an issue.
That is why Mr Abimbola’s confidence and the pace with which his group is clearing and planting, at 80 hectares a week, is so striking.
It was in late 2008, after the collapse of Lehman Brothers that the seeds of the project were sown. The west African infrastructure fund Mr Abimbola was trying to raise was dying in the midst of global financial meltdown. So he and his British Indian business partner began researching rice growing as an alternative to unemployment.
He identifies several ingredients of their initial success. One is the time they put in to researching successful models in other parts of the world.
Brazil has achieved spectacular growth in rice production in similar agronomic conditions, so they brought in Brazilian experts, and piggybacked on their extensive research and development.
Another important ingredient was ensuring they grew the right product. “African consumers are extremely discerning. There is no point growing something they are not going to eat,” says Mr Abimbola.
Meanwhile, instead of negotiating an initial lease for the 5,000 hectares of undulating valley they are farming by the Volta river, they agreed to pay a share of revenues annually to the local community, ensuring their interest in the success of the farm.
“You can’t engage in agriculture in Africa without being inclusive. You want the community to develop in line with the farm. It’s bad news if the farm is 10 years ahead,” he says.
Crucially, their business model also involved the collaboration of Ghana’s largest distributor of food and importer of rice, Finatrade. If other projects have failed, or struggled, it has often been because the managers underestimated capital costs.
Typically, before farms could reach the scale necessary to become profitable, credit starts slowing, drying up or disappearing through mismanagement.
Within three years, and with a targeted 30,000 tonnes production, Gamco will be a $100m business, Mr Abimbola believes.
Nabil Moukarzel, chief executive of Finatrade, which has annual turnover of $1bn, guarantees to buy Gamco’s production for cash.
Mr Abimbola says his initial investment has been less than $10m. This was part funded by Summit Capital, a hard-nosed Seattle based hedge fund. Mr Abimbola is equally hard-nosed. “I didn’t leave my flat [in London’s elegant] Holland Park to live in the village. I came to make money,” he says.
The farm employs several hundred workers mostly in their mid-20s. Some are university graduates with more of an appetite for farming than the received wisdom about the urban inclinations of Africa’s educated youth would suggest.
For Mr Moukarzel, selling local rice is more lucrative and less trouble than importing. Buying locally also provides a hedge against febrile world food markets and the protectionist instincts of the government. “We need this to work to persuade the government that there is an alternative to slapping on tariffs,” he says.
The region needs it to work too. Food production is rising up the priority list of African governments, as urban populations grow and inflation fosters social tension. So far, there are few models.
It’s a marathon not a sprint, says Mr Abimbola. Success will come from “disciplined action every day”.

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