BUSINESSAFRICA.NET NEWSLETTER ISSN 1563-4108 Dr. QUENUM & ASSOCIATES INVESTMENT AND BUSINESS PLANNERS Fax: +1 347 534 9329 Email: Click here to get email address
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STRATEGY AND ECONOMIC ANALYSIS

SYNOPSIS

This delivery is the continuation of the series on the developing of African countries: Strategy for African Countries Less Than 10% Annual Growth Rate? That's Peanuts. On the page related to the second above listed link, is exposed a delivery that explains why African countries absolutely need to target double-digit economic growth rate. If they do not, it would take them up to several decades - far beyond into the second century of the new millennium - to alleviate prevailing poverty. This current delivery deals with a case study based on edible oil production - combined with animal breeding. That combination is a real "economic catalyst" as it binds together economic activities of primary (agriculture), secondary (industry) and tertiary (services) sectors. In brief, the case study is a perfect illustration of the "Synergetic Impact Factor" - that is the inherent capability of an economic operation to activating and sustaining the global economic growth, through a dynamic interrelation between activities of the primary, secondary and tertiary sectors. The final result being an annual economic growth rate in the double-digit range over 10 running years. Click the "Cash Bag" on the right side to visualize the rocketing / tornado power of the "Synergetic Impact Factor" that accelerates the economy to producing double-digit growth rates, year in year out. We recommend reading this article in continuation to the one entitled "How to reach the target." Economic Catalyst / Case Study / Small Scale Units / Hog Fattening / Oils Seeds and Cereals / Impact On The GNP / Resulting Annual Growth Rate / Synergetic Impact Factor / Diversified Economy / Self-sufficiency in energy

Before the description of a Case Study to the proposed Integrated Economic Scheme that would show the scheme has the inherent capability to generate, year in year out, double-digit economic growth rates, let us consider, once more, the meaning of the "economic catalyst" concept. Its understanding is necessary for one to fully comprehend the boosting impact the scheme could have on the developing of African countries.

So what is an "Economic Catalyst"?

An "economic catalyst" is an economic activity with the following characteristics:

- 1 - It provides cash on a regular and sustained basis. Monthly preferably. In national currency. - 2 - It boosts the production of the original raw material. - 3 - It generates by-product(s) and raw materials for the development of new high added valued economic operations.

As a close observer of the developing of African countries, one is struck by the fact that, most of the time, projects included in African countries' development schemes are not linked together. They are implemented without any interrelation. Each component project is established as a single and independent entity.

That paradox is one of the reasons for the failure African countries are experiencing with regards their developing policies since decades.

To perform high economic growth-rates over several running years and trigger the take off of the economy, African countries need to set up programs with inherent synergetic capacity to create enterprises from a fusion of agriculture, industry and services.

As the majority (60 to 80%) of African country's citizens live in rural areas, strengthening economic activities in these areas, would, doubtless, boost the global economy. One way of doing this is to create economic activities in rural areas that act as "economic catalyst" in said areas. That is, to set up economic activities capable of generating forecast and planned revenues, and substantial cash flow, year after year.

Currently, economic operations in African rural areas are based on classical agriculture cash crops - coffee, cocoa, tea, cotton and palm-oil. Etc. These productions are sold abroad, as bulk raw materials, at uncertain, erratic international prices.

These classic agriculture cash crops have reached their limit in providing substantial revenues to farmers and to national budgets.

Sure, the selling prices of the classic cash crops above listed could be improved through industrial processing that increases their value on the marketplace. One should bear in mind, however, that a whole set of factors have an impact on the selling prices of classic cash crops. Namely crop reports, economic news, political unrest and civil war. Even in normal times, African decision-makers - private entrepreneurs or governments alike - have absolutely no say in the setting up of the purchasing prices of classic cash crops.

Local national consumers' market being marginal (in the range of 1% of the world's market), the trading prices of these classic crops are regulated by independent international decision centers in London, Paris, Amsterdam, Chicago and Tokyo. Countries like Ghana, Ivory Coast, Kenya, Burundi experienced, during the late 1990's, the negative impact on their national budget of uncertain and volatile commodities prices.

Therefore, running classic cash crop operations, in African rural communities, is no more sufficient to drive the economy upward. In order to perform as economic launching-pad, cash crop operations promoted and carried out in African rural areas, should generate substantial cash month after month, and activate rural development as "economic catalysts."

The following conditions appear to be necessary to setup economic activities in African rural areas, which would boost the global economy:

- 1- To choose economic operations, which products (bulk and industrially processed) have a ready consumers' base - on local, national and regional marketplaces. In other words, to reverse the trend of selling up to 99 percent of productions on the international marketplace, in order to control international speculators' role in depreciating selling prices. - 2- To choose economic activities, which generate cash money on a monthly basis. (Cash crops such as cocoa, coffee, tea do no have that advantage.) - 3- To establish and operate these economic activities on a strict professional basis; productivity objectives being clearly defined and monitored by a dynamic accounting system. - 4- To valorize wastes and by-products - not leaving a single stone unturned and harvest to the fullest the economic activities' potential.

Diversifying agriculture's productions, establishing crops processing units and valorizing wastes, is the surest way to link together agriculture development, industrialization (crops' transformation) and related services.

Table below summarizes the potential of several crops suitable for industrial processing, that could be established as " economic catalysts":

TABLE 1
CROPS	FINISHED PRODUCTS
Tobacco Plant	Tobacco products.
Forests	Wood, natural rubber, cellulose products, delivery houses buildings, furniture.
Corn, Sorghum, Millet	Starch, alcohol, glucose, saccharine, glues, paints, plastics, synthetic fibers garments, fuel, chemical products.
Sweet Potato	Saccharine, chemical products, medicines.
Linen, Cotton, Hemp	Natural textile fibers, Clothes and dressing materials.
Animal breeding	Wool, bones, leather, glands, milk, collagen's products, extracts, proteins, fatty acids, paints, glues, plastics, chemicals, composite materials, detergents, lubricants. Etc.
Flowers plants	Extracts, perfumes, medicines, house plants, cut flowers.

The network of "economic catalyst operations," all over a national territory, would constitute an integrated development scheme linking agriculture, industry and services

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A CASE STUDY EDIBLE OIL PRODUCTION COMBINED WITH HOG FATTENING

In the delivery titled "How to reach the target," the following points were analyzed and discussed:

- 1 - Economic myths (particularly the alleged "narrowness" of African countries' consumers base and African consumers' lack of purchasing power"), which apparently are hindrances to boosting African countries' respective national economies. - 2 - The decision making process (brainstorming sessions and consensus democracy) necessary to blending together the population, national government authorities and private sector in implementing national economic development schemes. - 3 - The setup of a Supervision Body in which government and private sector work together as strategists and guardians of national interests.

And the one all-important question had been subsequently raised: How to achieve annual double-digit economic growth-rate? Which economic development scheme to implement to trigger the take-off?

To give a convincing reply to that question, here, in this paragraph, is discussed a Case Study based on the following economic activities:

- 1 - Oilseeds and cereals crops' development - 2 - Small scale Industrial processing of oilseeds - 3 - Animal breeding.

SMALL-SCALE EDIBLE OIL PRODUCTION

The listing of oilseeds, nuts and kernels in Table N° 6 gives an idea about the huge potential oilseeds plants represent for the establishment of a prosperous edible and industrial oils' industries to be integrated into a strategic economic development planning.

The industrial processing of these various oilseeds, nuts and kernels could be carried out either on a large-scale industrial basis; or through the setup of hundred to thousand of small-scale oilseed processing units scattered all over national territories of African countries. The latest option being labor intensive will help reduce the high unemployment rate (up to 70% of available work force outside agricultural development,) which currently exists in African countries.

There are, food-processing machinery and equipment tailored for small-scale operations. (Input "oil press" in Internet search engine, and you will get links to manufacturers.) These equipment are versatile. They process all kinds of oil-seeds, nuts and kernels listed at the following table. The processing capacity ranges from as low as 5 to 8 kg per hour of raw material to 100 to 300 kg.

Let us consider an oil-expeller of 40 kg processing capacity per hour of dried sesame seeds, which produces (1) 10 liters of pure oil per hour, and (2) 28 kg of Oil-meal per hour. We have the following operational data - under below listed assumptions:

a - Three expellers. b - 1 shift - 8 effective working hours. c - 26 working days per month. d - 12 months of operation. e - Sesame seeds local purchasing price: US $ 480 per metric ton. f - Sesame oil's local selling price: US $ 1 per liter. g - Oil Meal's local selling price: US $ 68 per metric ton.

TABLE 2
Items	Amount (US$)
INVESTMENT
Shelters; Storage Area. Etc.	4,000
Three Expellers; small power generating set; miscellaneous	30,500
Preliminary expenses	1,000
Starting expenses	2,500
Operational funds (3 months)	12,000
Total investment	50,000
TURNOVER
Oil = 30 x 8 x 12 = 74,880 liters	74,880
Oil Meal = 84 x 8 x 26 x 12 = 209,664 kg	14,257
Total Turnover	89,137
OPERATING COSTS
Total Salaries	4,800
Other Operating Costs	50,000
Total Operating Costs	54,800
GROSS PROFIT
Total Gross Profit	34,337

One sees that the Return On Investment is "excellent" under previous assumptions

- REMARK: Sesame is the best oilseed crop to use as raw material to establish a network of small-scale oil production units. Sesame seed contains 50% to 60% of oil that has an excellent stability due to the presence of natural antioxidants such as sesamolin, sesamin and sesamol. For more on Sesame click here and here. Sesame oil-meal, left after the oil is pressed from the seed, is an excellent high-protein (34% to 50%) feed for poultry and livestock and even for human consumption. Comparative composition of various oilseeds meals is available here.

HOG FATTENING COMBINED WITH OIL PRODUCTION

- The oil-cake or oil-meal from crushed sesame-seeds is suitable to breed different kinds of animal stocks.

The oil-meal produced as byproduct of sesame seeds' crushing is an excellent animal-feed - as it is or as component to animal-feed formulation. It is an excellent feed to breed fowls (poultry, ducks, pentads and ostriches) or livestock (cattle, hog breeding. Etc.) Both breeding could be carried out either intensively in confined compound, or extensively in open area / pasture or in mix operation combining semi-confinement and open air pasture. Either way fowls breeding needs additional investments for shelter building in comparison to hog breeding.

Let us consider hog breeding. All assumptions based on tropical area's hog production stats (Brazil)

- Additional investment to the small oil producing operation

In tropical area, it is possible to breed hog extensively. One needs to have a fenced area to contain second step finishing hogs - above one month after weaning. (It can be electrified) and a U-shaped open shed for open air feeding. Plus two hooped shelters. One for sow gestating, and another one for first step finishing weaned hogs (up to one month after weaning). For glossary click here

1° - Feed Formulation:

The small-scale oil production unit here described yields 209,664 kg of oil-meal for one year operation. That quantity of oil-meal could be mixed with cereals and mash to produce feed to breeding hogs. Vegetable wastes (sprouts, carrots. Etc.) could be added as complement. That "natural" feeding would preserve the hogs from catching strange diseases linked to the consumption of meat-flour diet.

If one uses a feeding composition likes the following one per kg: 20% of oil-meal, 40% of mash (from corn head, rice wastes. Etc.,) and 40% of cereals (corn, sorghum. Etc.,) the quantity of oil-meal above mentioned yields: 1,048,320 kg of animal feed for hog's breeding. To that quantity one could add 250,000 kg of breweries wastes plus 160,000 kg of vegetable wastes.

2°- Feeding Cost Estimate: in US$

TABLE 3
Components	Quantity / kg	Price / metric ton	Cost
Oil meal	209,664	68	14,257
Mash	419,328	5	2,967
Cereals	419,328	113	47,384
Breweries wastes	250,000	20	5,000
Vegetable wastes	160,000	20	3,200
Medicine mix	3,090	600	1,854
Total animal feed	1,461,410
Total Cost			73,792
Cost per metric ton		51.51

3°- Initial Hog Breeding' Stock Acquisition:

Following assumptions are used to estimate the initial breeding stock of boars and gilts: For glossary click here

TABLE 4
Average total piglets born alive per litter	10.4
Pigs weaned per litter	9.9
Average age at weaning	20.2
Sow Boar ratio	70
Turnover ratio	2.81
Feed conversion ratio	1.95
Average gestation length	114.9
Farrowing interval	144.4
Average finishing days	127.69
Feed consumed / head / day (kg)	1.25

Replacement rate of the breeding stock is consider null for simplification. Therefore, the quantity of weaned piglets is deemed constant throughout the calculation of the bottom line.

Let us consider a starting breeding stock of 110 gilts and 33 boars. The first farrowing in line with previous assumptions should give: 110x9.9 = 1,089 weaned piglets. That means 1,089 hogs ready for farrowing to finishing. That amount multiply by the turnover ratio gives 1089x2.81 = 3,060 pigs from farrowing to finishing for the operating year.

The total amount of animal to feed is equal to: [3,060.+143 (boars and sows) = 3,206.] Total feed consumption for an operating is equal to: [1.25x3,060x365 = 1,462,738 kg] - here one notices a small gap of 1,328 kg compare to what is here exposed. Finished hog weight or carcass weight: [1.25x127.69:1.95 = 81.85 kg.] Selling price for a finished hog: [1.30x81.85 = 106.405 US$ ]

- Table below gives estimates about the investment, operating expenses and resulting gross revenues of the combined operations - Oil production and hog fattening:

TABLE 5
Items	Amount (US$)
INVESTMENT
Shelters; Storage Area. Etc.	25,000
Three Expellers; small power generating set; quad- cart; miscellaneous	50,500
Preliminary expenses	5,000
Starting expenses (gilts and boars purchase)	60,000
Operational funds (3 months)	25,000
Total investment	165,500
TURNOVER
Oil = 30 x 8 x 26 x 12 = 74,880 liters	74,880
Finished hogs 106.405x3,060 =	326,000
Total Turnover	400,479
OPERATING COSTS
Total Salaries	15,800
Other Operating Costs	150,000
Total Operating Costs	165,800
GROSS PROFIT
Total Gross Profit	234,679

One sees that for an increase of investment from US $ 50,000 (vegetable oil production alone,) to 165,500 (vegetable oil production plus animal breeding,) the gross profit jumped from US 35,000 to 234,679. (Click here for data related to vegetable oil production ). The performance could be substantially at following conditions:

a - The initial breeding gilts and boars are from a good and sane genetic stock. b - A second farrowing herd is established after the first. c - Animal feeding tests are carried out to decrease the feed conversion ratio. d - Behavioral experiences are carried out to increase the total of piglets born per litter - In Europe:24.3, in North America: 22.14 against 10.4 in tropical area. e - Two or three working shifts are established for the edible oil production operation.

OILSEEDS AND CEREALS CROPS DEVELOPMENT

Figures listed above (Tables 2 and 5) about oil production and hog fattening clearly show that the establishment of a network of small-scale oil processing units - to crush nuts, kernels and oil-containing seeds - combined with hog fattening, would, doubtless, play the role of a perfect "economic catalyst." Indeed, it boosts the production of oilseeds and cereals crops, and generate additional high added value economic activities here briefly listed.

The short listing of oilseeds, nuts and kernels - in Table N° 6 below - gives an idea about the huge potential these raw materials represent for the establishment of prosperous edible and industrial oils' industries to be integrated into the strategic economic development planning:

TABLE 6
Oil-containing seeds, nuts, kernels (Adapted from IBG Monforts product literature)
Apricot stones	Black currant	Red pepper
Avocado nut	Jojoba	Brazil nut
Cotton seed	Coffee	Passion fruit
Bilberry	Cocoa	Pecan
Borage	Coriander	Pistachio
Stinging nettle	Caraway seed	Rape seed
Beech nut	Pumpkin seed	Castor bean
Cashew nut	Mace	Mustard seed
Copra	Corn seed	Sesame seed
Safflower	Macadamia nut	Soybean
Groundnut	Almonds	Sunflower seed
Rubber seed	Poppy	Tomato seed
Hemp	Evening primrose	Walnut
Hazelnut	Neem seed	Citrus seed
Raspberry	Niger seed	Water melon seed
Elderberry	Palm kernel	Mango nut

Let us consider, for example, a network of 10,000 small entrepreneurs (established over a period of 10 years) involved in the scheme of oil production combined with hog fattening. The annual need of raw materials when the scheme reaches full speed - after ten years of implementing - reads as follows:

- 1 - Sesame seeds: 40 (kg) x 8 (hours) x 3 (expellers) x26 (days per month) x 12 (months) x 10,000 (entrepreneurs) = 3,000,000 metric tons - 2 - Cereals for animal feed formulation: 4,190,000 metric tons Click here to see why)

Please remark these pretty huge amounts of sesame seeds and cereals would have a local consumption base - completely independent from international market's pricing dicta as here explained.

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IMPACT ON THE GROSS NATIONAL PRODUCT

Cereals and oil-seeds' crops quantities above mentioned clearly demonstrate the scheme here discussed - based on edible and vegetable industrial oil production combined with animal breeding - is a perfect "economic catalyst." That scheme could be used to establish a strong industrial base in any African country providing jobs to thousand of small entrepreneurs and farmers.

Small industrialists involved in implementing the scheme would normally pay back loans without difficulty. Indeed, Return on Investment - ROI - of both, the vegetable oil production and the combined operation (oil production and animal breeding) is interesting (two to three years) as above outlined in Tables 2 and 5.

Non-edible Industrial and edible vegetable oils produced by the small-scale operations are also raw materials to producing a string of other industrial products: soap, cosmetics, food products, detergents, paints and even substitutes to petroleum-based lubricants and fuels. The byproduct labeled oil-meal will help solving the animal feed problem that exists in most of sub-Saharan African countries and boost animal breeding: cattle, goats, fowls.

The "Synergetic Impact Factor" of the scheme - that is to say its inherent capability to activate and sustain the economic growth through a dynamic interrelation between the activities of the primary sector (agriculture), secondary sector (industry) and tertiary sector (services) in a total fusion - graphically represented here is therefore obvious.

Now we can move a step further to evaluating the impact of the scheme on the Gross National Product of any African country that carried out said developing program.

The calculation of revenues generated by sesame oil production combined with hog breeding - and listed in red in Table N° 7 below - is based on previous assumptions, figures listed in Tables 3 and 4 in addition to the following assumptions:

- 1- An annual economic growth rate of 5 percent - without the implementation of an integrated development scheme - which represents the economic growth rate currently achieved by most of the least developed African countries. - 2- An initial US $ 3 billion Gross National Product that is more or less the current GNP of most of the least developed African countries. - 3- Services (transport, storage, insurance. Etc.,) contribution equal to 45% of revenues generated by primary (agriculture) and secondary (industry) sectors. Transport costs being influenced by high purchasing prices of gasoline. - 4- A conservative zeo percent increase of crops (sesame oil seeds and cereals), vegetable oil production and animal breeding's yields, over year, for the simplification of the evaluation of revenues. - 5- The establishment of 1,000 small-scale vegetable oil processing industrialists a year. Over 10 years.

Table below lists revenues generated by the scheme's outputs and the global impact on the Gross National Product (GNP):

TABLE 7
Revenues (in red): US $ x 1,000,000
YEARS
		1	2	3	4	5	6	7	8	9	10
Oil	a	75	150	225	300	375	450	525	600	675	750
Animal breeding	b	326	652	978	1.304	1.630	1.956	2.282	2.608	2.934	3.260
Cereals crops	c	474	947	1.420	1.894	2.368	2.841	3.315	3.788	4.262	4.735
Oil seeds crops	d	204	408	612	816	1.020	1.224	1.428	1.632	1.836	2.040
Services (storage, transport, insurance; etc.)	e	486	971	1.456	1.941	2.427	2.912	3.398	3.883	4.368	4.853
Total revenues generated by the scheme	f	1.565	3.128	4.691	6.255	7.820	9.383	10.948	12.511	14.075	15.638
GNP without the scheme	g	3.000	3.150	3.308	3.473	3.647	3.829	4.020	4.221	4.432	4.654
Global GNP	h	4.565	6.278	7.999	9.728	11.467	13.212	14.968	16.732	18.507	20.292
Resulting annual Growth Rate	i	52.16	37.52	27.41	22.62	17.87	15.21	13.29	11.78	10.60	9.64
Line (i) highlights Abramowitz's Catch Up theory . Within a span time of ten years, the initial GNP (year 1 -line g) is multiplied by 6.76 - (year 10 -line h) even without considering any increase of outputs over years.

Figures in Table N° 7 and the eye-catching chart above speak for themselves. The Case-study here exposed: the establishment of a network of small-scale (edible and non-edible) industrial oilseeds processing units combined with animal breeding is a real "economic catalyst" capable of generating the "Synergetic Impact Factor."

One remarks the outstanding economic annual growth rate achieved over years in line with Abramowitz's theory and Parker's observations and findings. Other high added value operations briefly listed here could be established to sustain the economic growth and keep it into the double-digit bracket for an additional 10 to 20 years running.

The graphical table below shows the dynamic interrelation between activities of the primary sector (agriculture), secondary sector (industries) and tertiary sector (services) in a total fusion as triggered by the Case-study discussed in this delivery.

SYNERGETIC IMPACT FACTOR
Fertilizers Manure			Oil Meals				Animal Breeding
	Agriculture Schools		Crops Processing		Edible Oils		Industrial Oils
	Nurseries		Plantations		Chemical Industries		Mechanical Industries
	Research Institutes				Agro-Allied Foods Industries		Power generating sets / Renewable Energy
Hydraulic Power			Irrigation				Rural Electrification

One thing is sure: if US $ 9 (nine) billion poured into Ghana's economic system, by the IMF and the World Bank, from 1988 to 1998 - Click here for more - were used to setup an integrated development scheme with the" Synergetic Impact Factor," the economy of Ghana, would have been, now, at the beginning of the new millennium, in better shape.

Nowadays, on August 2001, Ghana, not only would have achieved macroeconomics equilibrium, it would also had been endowed with:

- An economy completely diversified from cocoa, coffee, timber and gold. - Industrial units scattered all over its national territory. An industrialization strategy, based on regular supply of local agricultural raw materials to processing units, would have helped Ghana to establish a strong linkage between agriculture and industry. - A booming services' sector: transport, crop storage, insurance Etc. - Farmers with increased purchasing power. Consequently, a strong national's consumers market would have emerged. Indeed, farmers would be purchasing equipment, fertilizers; dressing better; building houses. Etc. - A low level of unemployment.

Ghana's national budget would be garnering more taxes and duties from the industrialists and farmers. Therefore, Ghana's government would be in the position to spend more on Education, Health and other infrastructure.

The integrated scheme would have launched the developing of Ghana on an unprecedented growth path contrary to what had been achieved during 12 years of Structural Adjustment Programs - SAP, from 1986 to 1998 - click here for more - that did not trigger the development process and, instead, created more poverty. For more on the evolution of resulting Per Capita GNP Click here

That analysis about the evolution of Ghanaian economy is valid for any sub-Saharan African country.

Now SAP' sponsors - implicitly recognizing the failure of the assistance concept carried out under SAP- are planning to focus financial assistance, to African countries, on Health and Education.

That approach also will, doubtless, fail as SAP failed. Focusing more financial means "direct" on nonproductive sectors such as Education and Health (in developing countries Health and Education do not directly produce wealth or riches. In the contrary, they spend revenues generated by other economic sectors) will not trigger developing in African countries. That would only inject some financial means in the economic system and to helping African countries survive for a short span of time.

What Africans do need is a long range strategic scheme that integrates all aspects of economic activities: agriculture, industries and services interacting in fusion with each other, to generate double-digit annual growth-rates for several years running. A strategic planning that triggers off a sustained growth of the economy to creating descent living conditions and prosperity for all: food in abundance, decent housing, electricity, running pure water, health assistance, affordable education, global security, freedom of movement and jobs.

To review the impact of the Case-study on the supply of renewable energy: click here

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© Dr. B.M. QUENUM
Investment and Business Planner

©2001 - 2004 Dr. Bienvenu-Magloire Quenum. All rights reserved
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- Interested parties (private international investors / companies, governments, regional authorities, economic development agencies) may contact Dr. Quenum & Associates (click here to get email address) or Fax to: +1 347 534 9329 for further consulting in implementing an integrated development scheme capable of generating double digit annual economic growth rate.