Zambia : Zambeef finds more ways to take a bigger bite (The Africa Report n°38 – March 2012)

The Southern African agribusiness company is looking to Nigerian cattle and Zambian Palm oil to diversify and grow its operations.

Zambeef used to be just that, a beef company. “Beef contributed 80-90%of our income 10 years ago. Now it’s about 25%,” says Yusuf Koya, executive director of the Zambian agribusiness firm. With net profits up 125% in 2011 and a successful listing on London’s Alternative Investment Market (AIM) in June, Zambeef has built its growth through a constant push to diversify. First into milk, then pork, chicken, eggs and, most recently, edible oils and animal feed.

Zambeef had already listed on the Lusaka Stock Exchange, and the AIM listing was driven by the need to raise $55m to buy three farms at Mpongwe in Copperbelt Province. “Africa and agri and food and Zambia, at the moment, are good flavors, especially with what’s happening in Europe,” says Koya of the listing. But the share price has fluctuated, and in late January stood at £0.42, only slightly higher than the listing price of £0.38.

Zambeef will use the Mpongwe farms to grow soya to feed the processing plants of Zamanita, the edible oils business it bought in 2008. Zamanita’s turnover grew 17% in the year to end-September r 2011, contributing 19% of the group’s profits.

Zamanita currently imports crude palm oil from Asia before processing and selling it. “If we actually had our primary product in Zambia, we’d get import substitution and higher margins,” says Sushmit Maitra, Zambeef’s finance director. Zambeef is planting 4,000ha of palm seedlings at a pilot project near Mpika in Northern Province. If successful, the project will cover 20,000ha, which, Maitra says, “should be able to supply the majority of Zambia’s palm demands”.

No more than 5% of revenue typically comes from exports, mainly to Zimbabwe. Any exports further afield have to factor in an extra $200-250/tn of transport costs. Zambeef’s managers argue that in a landlocked country they can never compete on a global scale. “Our aim is to become the mini-Brazil of sub-Saharan Africa, not the Brazil,” says Koya.

The company’s biggest move outside Zambia has been on the coat-tails of South African supermarket chain Shoprite as it expanded in West Africa. After more than a decade running the butchery concession in Shoprite’s Zambia stores the retailer chose it to run the meat franchise of new Shoprite branches in Nigeria in 2005. A similar deal in Ghana followed two years later.

Initially, Zambeef’s Master Meats Nigeria division was mainly a trading business that procured, packaged and sold. “The biggest challenge in Nigeria is the consistency and quality of supply of meat,” says Koya. Now as Shoprite plans to open another six stores in West Africa in the next two years, Zambeef is securing control over its supply chain. With the help of a $3m World Bank loan in 2010, Zambeef has invested $5m for the 25-year lease of a disused dairy farm north of Lagos where it is building its own abattoir, feed lot, cold room and processing operation.

Back home, the company is watching how the pro-poor mandate of President Michael Sata plays out for the business community. Zambeef employs 5,000 people across the country and any decision to raise the minimum wage could eat into margins. “We’re not unduly concerned or worried yet because we all have to eat and we’re in the food business, » says Koya.

Gemma Ware

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