Grains are, by far, Africa’s most imported agricultural commodity, with wheat being an important part of that scenario.
Wheat is one of the fastest growing food staples in Africa, largely due to the continent’s tremendous population growth, which is the key driver for growth in import demand. The African continent currently has a population of. 1.2 billion, and it is expect to add another 450 million – equivalent to the current population of the European Union – by 2030, which is projected to account for about 40% of the population growth over that time period.
In recent decades, the countries of Egypt, Algeria and Morocco have been the biggest importers of wheat on the African continent. But according to a recently released report from Rabobank, Sub-Saharan Africa (SSA) is expected to overtake Northern Africa in wheat imports within the next 10 years.
The report, “African Wheat Imports Look South,” authored by Vito Martielli, says growth in population and gross domestic product have resulted in a more than doubling of imports to the SSA region in the past 15 years, while domestic production remained relatively stable.
“This widened gap between production and consumption is expected to continue to grow rapidly in the next decade,” Rabobank said.
According to the report, Africa accounts for 27% of wheat imports on the global market, and in the last 15 years imports grew at a compound annual growth rate (CAGR) of 3.8%, which is above the 3.3% global average. Over the next decade, Rabobank said it expects SSA to have a CAGR of 3%, compared to a global CAGR of 1.1%.
Currently, SSA wheat imports, at 21 million tonnes, lag behind those of North Africa by around 5 million tonnes. However, the gap is closing quickly. SSA is expected import an additional 9 to 11 million tonnes of wheat per year in just one decade from now, Rabobank said.
“Even though Egypt and Algeria are the number one and two importers globally – with a combined volume of 18 million tonnes – countries in the east and west of Africa are continuing to gain in importance,” Rabobank said.
West Africa and East Africa will contribute 71% of Africa’s expected population growth, or 315 million people, the report said, while North Africa is expected to account for only 13%, or 55 million people.
Another important driver is the increasing per capita consumption of wheat, which will grow at a CAGR or 0.57% in SSA, according to the report.
“This growth is very different between North Africa and Sub-Saharan Africa,” Rabobank said. “In North Africa, per capita wheat consumption is around 200 kilograms, and it is saturated, while in SSA, per capita consumption is only 31 kilograms, but with continued strong growth. A growing middle class and labor force, along with the urbanization, are slowly transforming the traditional cooking styles toward easy-to-prepare wheat-based foods, such as bread and baked goods.”
West Africa Trade Opportunities
Because it lacks favorable climatic conditions to grow significant amounts of wheat locally, West Africa is heavily dependent on imports. Therefore, the region is expected to continue to rely on overseas trading partners to feed the growing population in the coming decades, Rabobank said. The report noted that, on average, West Africa imported 6.8 million tonnes of wheat per year during the last five years, which accounted for 5% of global trade.
“Interestingly, from 2008, we can also observe growing exports to neighboring countries, with West Africa showing even higher export numbers than East Africa,” Rabobank said. “This can mainly be explained by means of the re-exports to landlocked countries in the region. As a consequence, a so-called hub-and-spoke network of wheat trade emerged. Within this network, Lagos, Nigeria – with annual imports of over 4 million tonnes – is the largest trading hub for wheat in the western region of Africa.”
Lagos is home of Flour Mills of Nigeria, one of the largest flour milling complexes in the world.
Rabobank said that despite turmoil and political uncertainties in Nigeria, it expects the utilization of the hub in Lagos to increase significantly, as Nigeria is expected to witness one of the largest population growths in absolute volume in the world.
Other main trade hubs for wheat in Western Africa are Abidjan, Cote d’Ivoire; Accra, Ghana; and Dakar, Senegal, annually importing 510,000, 575,000 and 650,000 tonnes, respectively.
“This hub-and-spoke model and the huge volume growth of wheat will require the development of logistics infrastructure in Africa – in particular storage facilities at ports and the comprehensive improvement of transport routes,” Rabobank said. “The overall difficulties faced by the enabling environment and the lack of ease of doing business in the region can hamper these developments.
“However, in the past decade, progress has been made, and Transparency International’s Corruption Perceptions Index has improved in the four countries with the highest wheat potential: Nigeria, Ghana, Senegal and Cote d’Ivoire. In addition, public tenders are less common in these countries compared to the situation in other major wheat-importing countries in Africa like Egypt, and we expect that private trade will benefit as a result.”
Rabobank said the Western African hubs are mainly supplied by European and U.S. players. The report said France, in particular, has strong trade connections with West Africa due to a shared colonial history, except for Nigeria, where U.S. wheat has a strong market share.
Due to its geographic presence and assets in ports on the Atlantic, French wheat exporters have an advantage over competitors in the U.S. and Black Sea region, because freight costs are lower, Rabobank said.
“For the next decades, we expect E.U. players, especially France, to be well-positioned to capture the growing demand,” Rabobank said.
East Africa's Production Problem
In contrast to West Africa, some East African countries such as Ethiopia, Kenya and Zambia provide possibilities to product wheat locally as a result of favorable agroclimatic conditions. However, the potential is not sufficient to feed the current and future population of East Africa, so this region will also remain heavily dependent on wheat imports, the report said.
With 385 million people, East Africa is slightly larger than West Africa, which has a population of 347 million. However, per capita consumption of wheat in East Africa (38 kilograms per year) is much higher than West Africa (22 kilograms per year), and therefore wheat imports of East Africa (7 million tonnes) already surpassed those of West Africa (6.8 million tonnes), the report said.
This is noteworthy, Rabobank said, because East Africa is the second largest wheat-producing region on the continent after North Africa, with an annual average production of 4.7 million tonnes.
“The countries (in East Africa) in which it is possible to produce wheat are Ethiopia and Kenya, due to the presence of high latitudes with more suitable temperatures for growth,” Rabobank said. “Zambia can also produce wheat and is expected to become a stronger net exporter of wheat to neighboring countries. This is a result of both favorable climatic conditions and government policies, but also due to expectations on yield improvements and potential land availability.
“Importing wheat at the coast and transporting it over land to Zambia is very expensive, and, in addition, imports are highly regulated by the government, which explains the country’s local production. Opportunities arise for local farmers to exploit the growth potential.”
On average, over the past five years, East Africa imported 7 million tonnes of wheat annually. In contrast to West Africa, East Africa has no preferred supplying countries, but has various trading partners such as the E.U., the U.S., Argentina, Australia and Ukraine, the report said.
“Therefore, we expect that all large wheat-originating countries could benefit from the growing demand, and opportunities will arise for both global players as well as large regional players,” Rabobank said.
Zambia fighting to maintain surplus production status
A quiet agricultural success story that is taking place on the Africa continent is occurring in Zambia, which, according to Rabobank, has evolved from zero wheat production in the early 1970s to a surplus production status in 2011.
Rabobank noted that Zambia currently has one of the highest self-sufficiency ratios within the African continent (74%). Wheat production has risen to 338,000 tonnes per year against the national consumption requirement of 310,000 tonnes per year.
However, shortfalls were recorded the last two seasons because of unfavorable weather conditions, increased consumption, to around 350,000 tonnes, due to the rise in middle-income families, and an increase in flour exports, which requires more wheat to grind, Rabobank said.
Because of this, the government this year allowed imports of 75,000 tonnes of wheat and removed a 15% duty on non-Southern African Development Community and Common Market for Eastern Southern Africa wheat to help bridge the deficit.
“For next year, we expect wheat production to drop, as some farms have reduced their wheat area planted due to expectations of load shedding (electricity) and reduced water levels, which are both expected to negatively impact irrigations systems,” Rabobank said. “In addition, Zambia is also facing a devaluation of its currency. Therefore, input costs such as fertilizer and seeds become more expensive in the country own currency, triggering a switch to other crops that require no irrigation systems.”
Currently, SSA wheat imports, at 21 million tonnes, lag behind those of North Africa by around 5 million tonnes. However, the gap is closing quickly. SSA is expected import an additional 9 to 11 million tonnes of wheat per year in just one decade from now.