In an exciting development, the Fertilidea team, spearheaded by the CEO of African Business Exchange Italy Mr. Silas odiero, arrived in Zambia on the 28th of January 2024 hot on the heels of a fruitful encounter with H.E The President Hakainde Hichilema of the Repubic of Zambia during his official visit to Rome. The anticipation surrounding their arrival is palpable, marking the beginning of a promising chapter in cross-continental collaboration.
Upon touchdown, the team was graciously welcomed by Mr. Albert Halwampa, the esteemed Director General of ZDA (Zambia Development Authority), along with his dedicated team. This pivotal moment captured in the photograph signifies not only the commencement of a new partnership but also the convergence of expertise and ambition.
Silas Odiero
In a landmark moment of diplomatic synergy and agricultural advancement, His Excellency Hakainde Hichilema, President of Zambia, embarked on a state visit to Italy on November 21, 2023. Among the numerous agendas fostering bilateral relations and exploring avenues for cooperation, one particular highlight stood out – the introduction of Fertilidea, an Italian organic fertilizer manufacturing company, to the Zambian market.
Captured in this photograph is a pivotal moment where President Hichilema, renowned for his visionary leadership and commitment to sustainable development, engages in discussions with representatives from Fertilidea. Against the backdrop of Rome’s timeless architecture, the scene epitomizes the convergence of diplomacy and innovation.
With Zambia’s agricultural sector poised for growth and Italy’s expertise in organic farming practices, the partnership between Fertilidea and Zambia holds immense promise. As President Hichilema and the Fertilidea team exchange ideas and explore opportunities, they pave the way for a future marked by mutual prosperity and environmental stewardship.
This photograph encapsulates not only a single moment in time but also the seeds of collaboration sown between nations, transcending boundaries and fostering a shared vision for a more sustainable future.
]]>The product also remains one of the top foreign exchange earners for the country alongside tourism, horticulture, and coffee.
The Eastern African nation has also recently emerged as a major source of innovation in new varieties of tea and single origin artisan teas. Over 60 percent of Kenyan tea is produced by scale farmers and marketed through the Kenya Tea Development Agency (KTDA).
Market
Kenya’s top 10 traditional tea markets account for over 80 per cent of the exports to over 30 destinations. Pakistan remains the main buyer of the produce. Recent industry performance indicates that Karachi, Egypt, United Kingdom, United Arab Emirates, Russia and Sudan among other top buyers accounted for the lion’s share of the commodity. Exports to Pakistan for instance, was 14 million kilograms in the period under review (February 2017-February 2018) – a growth of 55 per cent from the same period last year when exports to the country were nine million kilos.
Egypt maintained the second position at 7.5 million kilograms with the imports having increased by 28 per cent from 5.5 million kilos last year, while UK came in third after buying 4.1 million kilos in the same period. The volumes to UK grew by a significant 48 per cent as fears arose that export would drop following after the exit of Britain from European Union (Brexit). Experts warned that after Brexit, there could be a drop in volumes of tea that the UK imports from Kenya due to anticipated decline of its (UK) re-export market to other nations.
The UK is a major re-exporter and in 2014 it exported 17 per cent of the beverage it imported, with countries such as Republic of Ireland, Germany, Poland and France its major markets.
Export destinations declined from 44 countries to 39 countries in the period under review.
Among the emerging markets that recorded significantly higher tea imports from Kenya included Sri-Lanka, Switzerland, Somalia, the US, India, Ireland, Turkey, the Netherlands, Iran, Indonesia, Japan and Oman.
Kenya is trying to open up new markets and expand the existing ones such as China, which has the potential of buying more of the local beverage, to protect farmers from low earnings.
Local tea consumption for February 2017 stood at 2.20 million kilos against 2.26 million in the 2016 period.
Prices
Tea prices in the world’s biggest exporter of black tea hit record high this year as buyers stocked up over fears that drought in the country would affect production.
The average price for Best BP1’s leapt to $5.01 per kg from the traditional record of $4.00-$4.7 per kg. “Brighter BP1’s met very strong competition and gained $0.34 to $0.66,” a regular market report by the Africa Tea Brokers said.
Forecasts of better than average rains due to begin in October have failed to dampen prices for the best tea, although prices for some lower quality grades fell. There was good but irregular demand for the 77,529 packages (4.9 million kgs) on offer with much tea remaining unsold (19.81 per cent).
Best BP1s fetched $5.06 – $5.01 per kg up from $4.72-$4.22 per kg, at the last sale, while top PF1s changed hands at between $3.58-$3.334 per kg down from $3.70-$3.50 per kg.
Kazakhstan was dominant especially on best BP1s while Pakistan Packers, Yemen and other Middle Eastern countries showed more interest with Egyptian Packers quieter at the start but was more active towards the close.
Tea Prospects for 2018
According to the country’s Agriculture and Food Authority Tea Directorate, tea export earnings are forecast to rise further this year (2018), while total output is expected to improve after a fall in production last year (2017).
Export earnings will rise 5 percent in 2018 to 135 billion shillings ($1.33 billion), while total output is expected to hit 452 million kg buoyed by good weather conditions, after drought had cut the country’s production in 2017, the directorate said in a statement. Total export earnings rose to 129 billion shillings in 2017 – the highest in five years – from 120 billion shillings a year earlier, while total output was down 7 percent to 439 million kg. Drought hit many parts of Kenya’s farming areas in early 2017, affecting the output of tea while processing factories received fewer deliveries. Export volumes were seen rising slightly to 423 million kg this year from 415 million kg a year ago, the directorate added. The average price per kg of tea at the Mombasa-based auction was expected to rise to $3 per kg from $2.98 per kg last year.
Kenya’s main tea export markets are Egypt, Sudan, Afghanistan, Pakistan, UK and UAE with emerging markets including Angola, Vietnam, Philippines, Azerbaijan, South Korea, Czech Republic, Myanmar and South Sudan.
Challenges
Weak trend in the export price of tea. This export price problem is as a consequence of worldwide tea export increases, which has occurred more rapidly than world consumption. Over the last ten years, there has been a consistent surplus of tea supply into the world market, this has had the effect of depressing auction prices. The dollar price released for Kenya tea is at the same level as it was 10 years ago. This problem can be solved by a number of measures, some of a long-term nature, while others can be implemented immediately. Regulating the supply of tea into the world market has also been suggested.
Rising costs of production. This applies most forcibly to the estate sector where labour account for some two thirds of production costs ex-factory. The main problem arises from the pattern of wage awards imposed on the industry. Since 1990, the basic wage rate has risen 10 times; in fact since 1998 it has gone up by more than 50 percent. The danger signals are evident: small producers have been resigning from the industry body in order to escape the statutory basic wage award.
Lack of credit facilities is a major concern to the small-scale farmers. Poor infrastructure, unreliable electricity, high costs of fuel and packaging materials further increase production costs. The factories have been the hardest hit by the ban on procurement of wood fuel from the forest. This is because they rely on wood fuel to cure the tea. Since the ban was effected three years ago the factories have been forced to procure fuel from farms where trees are rare and therefore sold at exorbitant prices.
Negative publicity by some churches is a challenge the tea industry has to overcome. Many do not know the benefits of consuming tea. A study conducted by Dr. Weilsburger director meritus at the American Health Foundation, consuming tea has health benefits. Among the many benefits, tea extracts have been shown to cause cancer prevention these tea extracts prevent the growth of breast cancer and prostate cancer cells.
]]>When did you start thinking about looking across the border for your business?
There have been three major crises that have shaken the Italian and European textile industry, particularly cotton trade, since 2000. In 2001 China became part of the World Trade Organization (WTO). This had a huge negative impact on the cotton growers in the area between Bergamo and Brescia, which used to be referred to as the Manchester of Italy. In 2005, the end of the Multifibre agreement, which regulated the international textile trade, led to a deeper liberalization of trade which affected the Italian companies even further. Then came the financial crisis of 2008. Filmar managed to survive all the crises and to avoid contracting production elsewhere. After this difficult period, it became clear that it was time to act.
So, you decided to establish a plant in Egypt. Why there?
The plan to set up a subsidiary in Egypt began in 2007 and was merely implemented in 2009. The choice of Egypt was a logical one: we were big importers of Egyptian cotton in the 60s and the 70s. It is a reality that we were already familiar with, so we decided to move our production because of the energy costs characterised by huge consumption of gas. Energy impacts a lot on production costs in Italy making it very difficult to be profitable. The cost of energy in Egypt is lower compared to Italy, which means we have higher margins. Furthermore, it is a country where trading is done in US dollars. In 2007 for example, the euro was very strong, which meant that goods from Europe were costlier compared to those from China for example, which was trading in US dollars. This made it difficult for the European exporters to do business.
Egypt is a developing country, with a good deal of political instability: did regime changes affect your business?
No, we have never had any problems from a political point of view. Not even when the transition from Mohamed Morsi to the current President Abd-al-Fattah al-Sisi took place. There have perhaps been some concerns from the religious point of view, especially during the transition from Mubarack to the Muslim Brotherhood. It is important to note that Egyptian people are used to cohabitation and religious tolerance, which is a good thing.
What about corruption. Has it affected you in any way: according to Transparency International, Egypt is ranked 108th out of 176 countries regarding corruption … (Italy is 51st)?
Fortunately, we have never had any problems with corruption. I think it is due to our transparent approach to doing business: we are well cognisant of the fact that we are in a foreign land and that we are the objects of great attention. Currently, we have a series of projects in progress, among these is “Cotton for Life” thanks to which we have been able to integrate the value chain of high quality organic cotton. This gives us particular visibility at political level and allows us to face public officials on an even safer platform.
Setting up a business abroad, especially in countries with a lot of bureaucracy such as Egypt, is always quite complex. Have you had to lean on someone? Who were some of your partners on this path?
It was not easy at first, but things got better once we partnered with two other business friends, and a Swiss company, all of whom were non competitors in the textile sector. The Italian Embassy also gave us a lot of support. We chose to entrust the construction of the plant to a general contractor, therefore the plant was handed to us “keys in hand”, so we didn’t have to go through the difficult task of applying for permits: we simply provided the required documents while the contractor took care of the rest. It terms of financing, we made a logical decision right from the beginning to work with Banca Intesa which at the time was acquiring the Alexbank of Alexandria in Egypt, given the good relationship we had enjoyed over the years: We now collaborate with them both in Italy and in Egypt.
Delocalization is often talked of in negative terms, particularly from the point of view of workers in the country of origin who fear losing their jobs. Did you have difficulties in your company in Italy when you notified the Italian employees about the move?
I wouldn’t refer to it as delocalization, but an implementation of a project that we already had in mind. The numbers show that before opening up in Egypt, the employees in Brescia were 100; now there are 140 which is an improvement. The difficulties, however much they were, did not derail the process, partly because everyone was actively involved in the opening of the African office. The operations of the two sites differ in that, the production in Italy is more linked to fashion, so it has much tighter schedules; whereas in Egypt we do large-scale production. However, both of them are important for our business model. It’s worth noting that the expansion has strengthened our business making it truly international to the extent that we can now compete with the whole world from Egypt.
Your initiative “Cotton for Life” is your interpretation of innovation in the cotton sector. Did the communication have a positive impact?
“Cotton for Life” was a dream that has now become a reality. We are the only fully integrated company in the world: from the production of seeds and organic cotton, to the dyeing of yarn. We decided to invest in the cultivation of organic Egyptian cotton because it is of a more superior quality that is able to compete with the American Supima which is genetically modified. Here, we are “Monsanto-free” he said as he laughed. I believe innovation should focus on the sustainability of the value chain, as well as the social and environmental aspects of any successful company.
Which other countries in Africa is Filmar interested in?
Sudan would certainly be very interesting because of its type of cotton, which is perhaps better than the one from Egypt. Unfortunately, the geopolitical conditions there are highly unstable making it unfavourable for business. Another country could be Ethiopia, even though their cotton is not long fibre, which is what we use mostly.
Some lasting lessons?
It is generally difficult to find the right partners that would meet your expectations, so my advice is to be very careful about the choice of partners and consultants. If you have any doubts, I suggest you retreat immediately. My other concern is about some of the local people, who don’t always reciprocate when you treat them with respect.
Where it all began:
Piera Francesca Solinas, now Filmar’s corporate social responsibility manager, encountered the Italian company when she was an employee at the Italian embassy in Cairo. She not only inspired the project in Egypt, but also played an important role in its set up.
Was it difficult for Filmar to start producing in Egypt?
Not really, the setting up of Filmar in Egypt was quiet smooth, even though bureaucracy and the search for a qualified workforce posed real challenges. Filmar Italy was very instrumental in ensuring that the operation went well and that there was harmony with the newly opened Egyptian branch. In fact, I am very proud to say that all Egyptian personnel in Filmar Nile many of whom have come for training in Italy, currently speak good Italian. The training between the two countries is usually very active and is aimed at ensuring that the know-how circulates within the company.
Filmar invests in human resources, actually starting from schools…
The company has played a significant role in promoting education in order to enable students to work in the modern textile industry. The local Ministry of Education has developed a three-year course in a technical and professional high school through a joint programme with Filmar whereby we guarantee a number of vacancies to the students who graduate successfully from the institution. Some Italian schools and universities have also been instrumental in making up for this deficit in the Egyptian curricula by taking in some of the students and also training local teachers. The local school already had a base for the mechanical industry training, so we pushed for the textile industry training to be introduced as a specialization.
Filmar’s commitment doesn’t end there…
Students are offered a three-month internship programme in the establishment in the first year, and a monthly payment to cater for their transportation costs and everything else needed for the job. This is in addition to food, which we also provide. We have tried to create an attitude of inclusion by offering alternatives, in order to distract the youth from the thought of irregular emigration to Europe which is becoming quite common. Filmar gives them the opportunity to develop a competence in an Egyptian company, but with an international level of technical know-how.
Was it easy to talk to the Ministry to convert this into action?
It was not easy but, the Italian Embassy was supportive in pushing the agenda. Once we gained access to the Ministry, they were very receptive and willing to listen to our proposals: Egypt is focusing heavily on foreign investments. A law has recently been passed which gives many advantages to foreign investors. Clearly, it is necessary to have the ability to activate those processes. I would like to point out that there is a large Italian community in Egypt, which has remained in close contact with Italy and which can be highly instrumental in creating a strong link between the two countries.
What are the other important variables for a company that intends to set up there?
In addition to the embassy which has a wide range of networks, there is the ICE (the foreign trade institute), and the Italian Institute of Culture abroad. It is critical to see what the common interests between the two countries are, it is also very crucial to establish contact points with the local culture. It is important to understand the development policies adopted of a country. In the case of Egypt, the pull factors for foreign entrepreneurs are the reduced costs, the geographical position, the free trade agreements with strategic market regions of the world for those who produce and export, low taxation and easy availability of land. All these measures are put in place by the government as incentives for potential investors.
]]>But where does this cherished product originate? West Africa collectively supplies two thirds of the world’s cocoa crop, with Ivory Coast leading production at 1.8 million tonnes as of 2017, and nearby Ghana, Nigeria, Cameroon and Togo producing additional 1.55 million tonnes.
Ivory Coast
The cocoa market is experience volatility at the moment that could pose a serious problem for the cocoa value chain. In October 2016 , the Ivory Coast government set a mandatory minimum farm gate price and with the global market offering less than the government asking price, buyers backed out and processing facilities shut down waiting for higher market prices. Exporters who secured rights to purchase cocoa in bulk also backed out. In addition, before the 2016/17 season, poor weather had reduced global cocoa supply. As expected, lower production in Ivory Coast and Ghana led to a spike in prices for the first half of 2016.
Cocoa farmers in Ivory Coast bet big on a continued slump following another weak harvest. Cocoa exporters bid on contracts before any real trends could be established in the October-March harvest season. These orders were used to set a minimum farm gate price by the Conseil Cafe Cacao (CCC), the regulatory body for cocoa and coffee in Ivory Coast. The price was set at 1,100 CFA francs per kilogram for the 2016-17 marketing year in October 2016, just as the harvest was set to begin.
Speculation on a market as opaque as cocoa includes inherent risks which may lead to big losses. The traders thought another poor harvest was just around the corner and bet prices would rise. Therefore, a combination of good weather and slumping cocoa demand could spell trouble for Ivory Coast. Increased rainfall began with the October-March harvest in West Africa, which was good news for farmers hoping for a better season.
Within the same period, there was also a lack of demand in Europe. The common measure for cocoa demand, grindings, stagnated. Possible causes for the downturn include worries over Brexit, a hot summer, and recent wellness trends. By the time farmers were ready to sell, the prices that wholesalers were willing to pay were already lower than Ivory Coast’s set farm gate price.
Exporters and producers could not purchase cocoa at the price set by the CCC if they wanted to make a profit. Trucks laden with cocoa sat at ports for months due to a lack of buyers. Of the purchases that were completed, several were rejected because of rotten beans. Ivory Coast’s miscalculation is a costly one for the country. Cocoa beans, paste, and butter account for 40.2 per cent of Ivory Coast’s exports by value. Ivory Coast had to review its 2017 budget because of the drop in sales. The West African country also asked for additional funds from the International Monetary Fund to cushion it going forward.
However, prices have inched back up in recent weeks, indicating that the worst of the crisis may be over. The fact that so much chaos could come from an ostensibly positive event suggests that there are structural problems in the Ivory Coast cocoa sector that need to be addressed. A regulatory system that better protects cocoa farmers during times of crisis would also reduce the risk of meltdown in market mechanisms.
GHANA
Ghana is the world’s second largest cocoa producer with an annual production of 750, 000 to a million tones putting its total share in the global market at 20%. In the past decade, the chocolate industry’s demand for the product has gone up 12 per cent but production has stagnated.
While the demand, especially from developed economies like India and China is a positive sign for the Industry, the more than 6 million cocoa producers, most of whom are small-scale farmers, face a myriad of challenges ranging from poverty, poor connection to infrastructure from producers to consumers.
But the Ghana Cocoa Board (COCOBOD) established in 1947 has had a history of overseeing the sector, ensuring that it remains on track despite the challenges. The board serves as the only exclusive marketing intermediary between producers and processors of the crop.
The marketing year for cocoa begins in October, when harvest of the main crop begins, followed by the harvest of a smaller “light crop” in July. Light-crop beans are smaller than the main-crop variety, but are identical in quality and grown on the same trees. The main crop accounts for 90 per cent of total annual cocoa bean production in the country, and the light crop accounts for the remaining 10 per cent.
During the 2015/2016 harvesting season the country produced approximately 800,000 metric tones , which was 20 per cent of the total world harvest.
Until a couple of years ago, cocoa generated around a third of Ghana’s export earnings. This share decreased due to the start of oil production. In 2014, cocoa was the third largest export product with a share of 20 per cent. It is estimated that during the 2016/17 a total output of 850,000 will be produced.
Collective cocoa bean purchases by the Ghana Cocoa Board in the 2015/2016 season reached 778,000 tones, representing an increase of around 38,000 tones compared to the previous season. Although production fell short of the Government’s estimated target, it exceeded the low level of the previous season.
For the 2016/2017 season, the Government announced an increase of the guaranteed price paid to cocoa farmers to GH¢7,600 per ton (US$1,914). As at 22nd October 2016, cocoa purchases in Ghana, as reported by News Agencies, reached approximately 200,000 tones.
Cocoa production in Ghana remains a major contributor to the tax income of the government. There are approximately 800,000 cocoa farmers in Ghana. Cocoa is grown on an estimated 1.9 million hectares. The cocoa industry employs about 60 per cent of the total labor force of the agriculture sector; most cocoa farmers are smallholders who harvest cocoa on 2 to 3 hectares with a yield of on average 400 kg/ha. Including families of farmers, employees of trading companies and input services, the cocoa sector provides income for more than 1 million Ghanaians.
The cocoa sector is one of Ghana’s economic backbones. Ghana is not only the second largest producer of cocoa in the world, but it produces the world’s highest quality cocoa. The cash crop accounts for about 9% of Ghana’s GDP and makes up about one-third of the country’s export revenues, totaling over US$ 1.5 billion.
Additionally, cocoa is an important tool to guarantee the liquidity of the Ghanaian government. Every year, the government issues a bond, which is secured by the predicted income from selling the cocoa of the next harvest. Potential investors know that due to the forward cocoa selling system the bond is a low risk investment. The Ghanaian government pays for the bond at much lower interest rates than it would have to pay for a bank loan.
Which trends offer opportunities on the European cocoa market?
The popularity of chocolate is growing. This results in a stronger demand for high-quality, fine flavor cocoa in Europe. While Ivory Coast and Ghana remain the largest suppliers of cocoa to Europe, their share is decreasing.
Latin American suppliers are increasing their market share, as sustainability is increasingly important on the European chocolate market. Consumers want to know more about the context of cocoa production, and the impact of their purchases.
In Europe, growing demand for chocolate is in traditional consuming countries such as Belgium, France, Germany, Italy, Switzerland and the United Kingdom. Consumption in this segment is associated with higher incomes but also with consumer awareness and market exposure.
This trend is especially driven by a small group of educated, loyal and casual consumers (for example, seasonal shoppers during festivities such as Easter and Christmas)
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