Africa’s milling sector continues to take shape, registering rise in number of players

TRENDS IN FORMULATING, PROCESSING, PACKAGING & CONSUMPTION OF MILLED & BAKED GOODS AND ANIMAL FEED

Investments in new grain milling plants surge as consumers demand higher quality flour

By Catherine Wanjiku

The milling sector in Africa plays a vital role in ensuring food security as its products are the primary ingredients of staple foods consumed in most countries in the region. In addition, the sector adds value to the commodities, bringing variety to the consumers’ food basket.

The milling industry is a traditional sector that for generations has been content to create its products in time-honoured fashion. In Africa, the sector has gradually metamorphosed into a booming economic segment, leading to consolidation among the bigger players and the launch of new and independent outfits. This has been partially attributed to the natural endowment of raw materials in the region, as Africa boasts of having 60% of the world’s arable land and diverse agro-ecological zones. To this end, the region is said to be the centre of origin and a major producer of several grains and cereals like maize, wheat, barley and rice, among many others.

According to FAO, the aggregate cereal production in Africa was forecast at an above-average level of 212.8 million tonnes in 2020, 7 million tonnes higher on a yearly basis. The rise in cereal production is also expected to be registered worldwide, as global out-put is projected to expand by 375 MT, to reach 3,054 Mt in 2029, mainly driven by higher yields, indicates OECD-FAO Agricultural outlook 2020-2029.

Maize for human consumption is projected to increase by 23 million MT, especially in Sub-Saharan Africa where white maize is an important food staple and population growth remains high. Global consumption of rice is projected to increase by 69 million MT by 2029, with Asia and Africa accounting for most of the projected increase and direct human consumption remaining the main enduse of this commodity. The use of other coarse grains is projected to increase by 30 million MT, with higher food use expected in Africa.

With the rise in grains production in Africa, signifying availability of raw materials, alongside increase in consumption rate, the region has become an attractive frontier to both the international and local investors. This is evident by the number of investments in new milling plants and upgrade of existing projects that have been witnessed in the region in the last 3 years.

FLOUR EASTERN AFRICA

Agriculture-focused investor Unigrains estimates that flour milling capacity in sub-Saharan Africa grew by 12%, or 3.6m tonnes, between 2014 and 2017 to reach 34m tonnes. This number has substantially grown, as companies such as Unga Group, a Kenyan-based holding company with investments in flour milling and manufacturing of a human nutrition products and animal feeds, commissioned a new 300 tonnes-a-day wheat milling plant in Eldoret in 2018, more than doubling its processing capacity from the previous 250 tonnes-a-day mill.

In the same year, Capwell Industries, invested US$10

million in a new plant, enabling it to expand its Soko brand. The new Alapala plant, equipped with pre-cleaning equipment and a storage silo with a capacity of 15,000 tonnes has a daily tonnage of 250 TPD. In 2019, GMach, a leader of milling technologies, delivered a steelconstructed high-capacity turnkey milling facility with 500 tons/day capacity in Kenya to Pembe Flour Mills. The launch of the milling facility, featuring advanced milling technologies, positioned GMach as a major solution partner to the country’s milling sector.

Still, in East Africa’s largest economy, Grain Industries Limited (GIL) has invested in a state-of-the-art milling plant producing wheat flour products with a total milling capacity of 2,250 TPD, catapulting the Mombasa-based miller into the leading wheat miller in Kenya, in a few short years. The company’s products are sold under its flagship brand Ajab, which has taken the Kenyan market by storm, adding a maize meal plant with a 400 TPD in 2020.

Meanwhile in neighbouring Tanzania, the Mohammed Enterprises Tanzania Limited (MeTL) Group, a diversified investment company, inaugurated a new wheat and maize processing facility after investing US$89.17million (TSH. 205bn) in 2019. The plant by its subsidiary 21st Century Food and Packaging Limited has the capacity to process 300 tonnes of local maize and 500 tonnes of imported wheat per day.

The grain milling industry in Uganda is in its nascent stages, however the recent entry of Mandela Millers, with a new 300 tonnes per day wheat and a 48 tonnes per day maize milling plants, is an indication that the country’s milling sector has many untapped opportunities. Another recent investment in the sector was by Master Grain Millers based in the second city of Jinja, which was a 300 TPD plant.

In the land of a thousand hills - Rwanda, Minimex Limited, the country’s leading maize milling firm, received US$3 million from UK based social impact investor, AgDevCo in 2019, to expand its production capacity from the then 40,000 tonnes per annum.

Still in the Eastern Africa region, Ethiopia’s milling sector has registered several investments in the last three years, characterised with installation of new mills alongside baking facilities. The twin investment enables

MAIZE FOR HUMAN CONSUMPTION IS PROJECTED TO INCREASE BY 23 MILLION MT, MOST OF THE GROWTH WILL BE IN SUBSAHARAN AFRICA WHERE WHITE MAIZE IS AN IMPORTANT FOOD STAPLE

SECTIONS OF THE RECENTLY COMMISSIONED 300TPD FLOUR MILL AT NATIONAL FLOUR MILL CO., SOMALILAND

the investors to ensure the baked goods facilities have ample and readily available raw materials, as well as meet the high demand of wheat flour and baked goods in the country. In 2019, Dina Gezahegn Import & Export, invested US$7.1 million to set up a flour processing and biscuit manufacturing factory with the processing capacity of 820 tonnes of flour a day. This was followed with A.S.S.E.S. Industry Plc, an Ethiopian conglomerate, investing US$1.64 million in the establishment of a modern wheat flour plant with a processing capacity of producing 82 tonnes of wheat flour per day.

On a similar track, Kiya, a local food processing company in Ethiopia, invested 350 million Br (USS$10.3m) in 2020, to expand its flour processing, pasta and biscuit manufacturing plants. Vita Hydro Agro-Processing Plc, sister company of Belayab Food Production Plc, franchise owner of Pizza Hut and Cold Stone Creamery brands in Ethiopia, constructed a flour and biscuit processing plant worth 210 million Br (US$6.3m). The factory has the capacity to process between 42-60 tonnes of flour a day. Also eyeing the expansive wheat flour and baked goods market in Ethiopia was Horizon Plantations Plc, kick starting operations at its 900 million Br (US$26m) state of the art Sheger Bread & Flour factory.

An inaugural investment was undertaken in Somaliland when Alapala, one of the leading suppliers of flour milling equipment in the world, completed the installation of a flour mill reference at the National Flour Mill Company in the country. Being the first flour mill in Somaliland, it was commissioned in April 2020 and has a processing capacity of 110,000 MT wheat annually.

NORTH AFRICA

The Turkey based premier milling equipment company, Alapala, also completed the installation of another flour mill reference at Flour Mills Company in Morocco in 2020. The new plant has a processing capacity of 300 tonnes per day.

Still in the Northern part of Africa, Jordan based AlHazaa Investment Group added a second flour mill in Egypt, Al-Tajj mill 2, worth US$35m. The new wheat mill has a production capacity of 460 tonnes per day, and a grain storage capacity of 90,000 tonnes alongside flour storage capacity of 3,000 tonnes.

SOUTHERN AFRICA

Shifting gears to Southern Africa, African Milling Limited, one of Zambia’s largest integrated wheat and maize flour milling operations, commissioned its newly installed maize mill with a capacity of 336TPD and 50,000 MT storage in 2019. The official opening of the mill marked the culmination of a joint undertaking between the company and Swiss milling equipment supplier, Buhler, which installed the modern facility.

Another eye-catching investment in the country was undertaken by National Milling Corporation, an affiliate of American agribusiness and transport conglomerate, Seaboard Corporation, commissioning a new US$37.5million milling plant in the same year. The plant was also installed by Buhler, having a milling capacity of 600 metric tonnes of wheat per day.

In neighbouring Zimbabwe, the board of National Foods, has recently approved the purchase of a new state of the art flour mill, which will be installed as a replacement for the existing mill at the Bulawayo Basch Street site, at an estimated cost of US$5 million. This follows the company registering 56% growth in volume at its flour unit in the half year period ended December 2020.

Prior to that, in 2019, the leading flour and food producer invested US$2.5 million into a plant to produce breakfast cereals in bid to diversify its product range with the launch of instant porridge in four flavours under the Pearlenta Nutri-Active brand.

Within the same product category, Nestle Zimbabwe inaugurated a US$2.5m cereals manufacturing line in 2020, aimed to boost operations, meet local demand and exports. According to the food manufacturing giant, the investment will result in over 30% incremental volume throughput, targeting to triple its US$400,000 monthly exports in the medium term.

KEY NUMBERS

212 MILLION

AGGREGATE CEREAL PRODUCTION IN METRIC TONNES THAT AFRICA PRODUCED IN 2020

WEST AFRICA

Elsewhere in West Africa, KEDAN Ltd, a Ghanaian agribusiness firm, commissioned a new 30 metric tonnes per day maize processing factory in Tumu in 2018. Also, the Ghanaian government through its One-District-OneFactory initiative, invested US$4 million in establishment of a new maize processing factory in Ashanti region.

Through the same initiative, DUFIL Ghana, owner of the Indomie brand, received a major boost with the inauguration of a US$20 million noodles and spaghetti manufacturing plant. The factory, situated in the Tema West Municipality has a production capacity of 30,000 tonnes of noodles and 8,000 tonnes of spaghetti annually.

In Nigeria, Kellogg Tolaram Nigeria Limited, a joint venture between the Kellogg’s group of the US and the Tolagram Group of Singapore, opened a N6 billion (US$14m) cereal factory in the Lekki Free Trade Zone with a production capacity of 10,000 metric tonnes of breakfast cereals annually in 2018.

One of Africa’s leading food and manufacturing conglomerates, BUA Group, closed the year 2020 by signing of an agreement with Milleral, a Turkish manufacturer and installer of milling equipment, to build the company’s new flour milling plants with a total milling capacity of 2,400 TPD. The plants, expected to be completed in 2021, will bring BUA’s total installed flour milling capacity to 4,000 TPD.

The manufacturing giant also entered into an agreement with Italian maker of pasta production equipment, FAVA spa to install a new pasta processing plant. The new plant will have a total processing capacity of 720 tonnes per day of pasta across 5 lines. It is scheduled to be completed in 2021, complementing the food processor’s already existing 720 tonnes/day pasta processing plant in Port Harcourt, Nigeria, bringing its total installed pasta processing capacity to 1,440 tonnes per day across 10 lines.

Meanwhile, Crown Flour Mills, the Nigerian subsidiary of multinational food and agribusiness company Olam International, established a state-of-the-art vitamin premix facility in 2020, to steer its food fortification efforts. A first of its kind by any flour miller in the West African country, the complex was established with technical support from the international non-profit organization TechnoServe, under its Strengthening African Processors of Fortified Foods programme.

RICE

Other than flour milling, investors have also been pumping funds into the construction of rice mills, mostly in the West African region.

Both Nigeria and Ghana are in the quest to attain rice self-sufficiency in a bid to reduce the import bills and meet the high demand of the commodity locally. According to USDA, Nigeria’s rice consumption in 2021/22 is projected to reach 6.6 million metric tonnes, against production of 5 million metric tonnes of milled rice. In Ghana, consumption has been set at 1.58 million metric tonnes during the period under-review, with production estimated to reach 600,000 metric tonnes. In a bid to bridge the supply gap, the public and private sector have been mulling investments to boost rice production and processing.

In 2019, Stallion Group, a Dubai-based conglomerate through its Nigerian Subsidiary, Popular Farms and Mills Limited, inaugurated a new rice milling plant in Kano State. The firm invested about US$22.19m in the establishment of the processing plant with an installed milling capacity of 430,000 metric tons per annum.

EVALUATION OF WORKS DURING CONSTRUCTION OF MANDELA MILLER'S NEW 300TP WHEAT MILLING PLANT IN UGANDA

Meanwhile, Kogi State government established a rice milling factory worth N4 billion (about US$11.11m), with a processing capacity of 80 tonnes per day of paddy rice, giving out 50 tonnes of rice per day.

In search for further growth, Lagos State Government, the commercial center of Nigeria with a population of about 22 million people, is setting up a 32 metric tonnes/ hour new rice processing mill in Imota. The mill will start operating around July 2021 and is set to be the largest mill in Nigeria.

Crossing boarders into Ghana, where the government has set the target of locally produce 1.6 million metric tonnes of milled rice by 2023, the Western Deedew Group Company Limited, initiated plans of constructing a processing plant in Agona, Ashanti Region in 2019. The company secured Ghc2.5 million (US$0.46m) in funding from the GCB Bank Limited for setting up the processing plant.

In 2020, the government of Ghana inaugurated a rice processing centre in the Adansi-South District of the Ashanti Region, constructed under the government’s One District, One Factory (1D1F) initiative. It has a processing capacity of 140 bags of rice per day and was constructed under the supervision of the Ministry of Food and Agriculture and B. Kaakyire Agro Chemicals Company Limited.

BARLEY

The beverage sector is also linked to the milling sector given that alcohol makers cannot miss one of the most important ingredients in brewing of beer: malt, milled from barley. In Africa, Ethiopia is one of the few countries that has welcomed investments in the sector recently.

Beginning of the year, Boortmalt the World’s leading malting company, commenced operations at its new Birr 2.8 billion (US$71.6m) plant inside the Debre Birhan Industrial Park Zone. The factory, with a processing capacity of 60,000 tonnes of malt per annum, is seeking to quench the thirst of the 14 Ethiopian breweries whose demand stands at around 170,000 tonnes per year.

Soufflet Group, a French family-owned business, also joined the game by kick starting production at its newly built malting plant near Addis Ababa. Located also at the Debre Birhan Industry Park in Amhara region, the new factory will initially produce 60,000 tonnes of malt and in the longer term it hopes to reach a production capacity of 110,000 tonnes per annum.

MAJOR DEALS IN THE MILLING SECTOR

Other than industry players raking in huge amounts of investments towards expansion of businesses, the sector has also been graced with notable deals undertaken by leading players.

One of the stand-out deals undertaken in Nigeria in 2018, was Kellogg’s, the World’s leading breakfast cereal and convenience food maker, exercising an option to acquire a stake in packaged food manufacturer Tolaram Africa Foods (TAF) for US$420 million, to expand its presence in the African market. TAF is a subsidiary of Tolaram Group, which owns 49% of Dufil Prima Foods, the Nigerian consumer goods manufacturer of the popular Indomie noodles. The move was building on Kellogg’s formed joint venture agreement with Singapore-based Tolaram in 2015, which saw both companies take a 50% stake in Multipro, the largest distributor of foods products in Nigeria and Ghana.

In the same year, Dufil Prima Foods acquired three noodles production lines of May&Baker Nigeria Plc, a maker, seller and distributor of consumer products for US$2.14 million, consolidating its market position in pasta and noodles segment. Meanwhile, Dufil’s unit in Ghana, opened its cheque book in 2020, and purchased Ghanaian manufacturer of Yum-mie Noodles brand, Blow Chem Industries.

Nothing seemed to slow down in the deal rooms of Nigeria as Olam International Limited, the multinational food and agribusiness company, acquired Dangote Flour Mills (DFM) through its Nigerian subsidiary, Crown Flour Mills Limited for N120 billion (US$331m) in 2019. The move doubled Olam’s capacity as it added five more flour mills into the already existing 5 units.

Another deal that came to the radar was Amethis Fund II in partnership with Proparco and Kibo Fund II, acquired a minority equity stake in Mozambique’s largest integrated wheat and maize miller, Merec Industries in 2020 for an undisclosed amount. In the current year, Amethis, made its first transaction in Senegal with the acquisition of a minority stake in one of the country’s leading producers and distributors of pasta, wheat flour and animal feed, Nouvelle Minoterie Africaine (NMA).

The grain handling and storage segment was also not left behind as Holmarcom Group, a leading diversified industrial group in Morocco offloaded a 49% of its stake in its grain terminal operator, Mass Céréales al Maghreb (MCM) to Danish company A.P. Moller Capital (APMC), as part of its development ambitions in Africa.

Africa’s milling industry is continuing to take shape as it feeds the masses. To ensure processors have efficient and ultra-modern facilities, premium milling equipment suppliers such as Alapala, are expanding their presence in the region. The company recently announced that it will be opening a new office in Kenya. With such kind of moves, it is evident that the sector is ripe for further growth.

TO ENSURE PROCESSORS HAVE EFFICIENT AND ULTRA-MODERN FACILITIES, PREMIUM MILLING EQUIPMENT SUPPLIERS SUCH AS ALAPALA, ARE EXPANDING THEIR PRESENCE IN THE REGION.

FBA