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BUSINESS IN AFRICA™
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BUSINESSAFRICA.NET NEWSLETTER
ISSN 1563-4108
INVESTMENT AND BUSINESS PLANNERS Fax: +1 347 534 9329 Email: Click here to get email address | ||
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TAKE CARE OF BUSINESS IN AFRICA™ | |||
| STRATEGY AND ECONOMIC ANALYSIS | |||
ECONOMIC DEVELOPMENT SCHEME FOR AN AFRICAN COMMUNITY
A HIGH ADDED VALUE CASH CROP OPERATION AS LAUNCHING
PAD
INCOME BUILDING POWER FOR THE COMMUNITY
© 2000 Dr. Quenum and Associates
Investment
and Business Planners
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FOR A GLOBAL DEVELOPMENT SCHEME
FREQUENTLY
ASKED QUESTIONS
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| Blue Gold/ Alternatives/ Investment Period/ Currencies Table/ |
| This delivery - in close link with the one titled: "Strategy For An African Country" - is a scheme elaborated to boost up the economic development of a country's regional territory. it deal with the the implementation of a high added value economic that has the inherent capacity to generating the "Synergetic Impact Factor" and increasing, in a sustainable manner, the purchasing power of the populations. |
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In sub-Saharan African countries' rural areas, economic activities are carried
out by farmers who cultivate small plots (1 to 5 hectares). Sometimes, they also
have pastoral activities (poultry, goat, pig and cow's breeding). The bulk of
the productions is for self-consumption and the scarce extra sold on village markets..
In brief, most of the times, African rural communities' economic
activities lack the inherent capacity to be a driving force to boost up the economy.
These traditional economic activities do not produce wealth on a steady manner
for the communities. That is the reason for the sheer poverty prevailing now
in Africa's rural communities.
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As
discussed in the delivery about "A
Case Study On How To Reach Double-digit Growth Rate", it is a necessity
- if one is committed to developing a local economy - to run a cash crop operation
that could act as an "economic catalyst". That is an economic
activity with the inherent capacity to generating forecast revenues, substantial
cash flow year after year and most important byproducts, which can be used
to manufacture other value-added products.
Currently, in sub-Saharan
African countries, when such economic operation does exist, it is often based
on traditional agriculture cash crops - coffee, cocoa, tea, cotton and
palm oil. To name the few. These productions are sold on the international marketplace
as bulk raw materials at uncertain and erratic prices. Most of the time they
are not locally processed and do not generate any byproduct, which could be further
processed.
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The
selling prices of above listed traditional cash crops could be improved through
industrial processing that would increase their added value.
One should
bear in mind, however, that a whole set of different factors can affect - and
does affect - the selling prices of these traditional 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 no
say about the selling prices.
Local consumers' market being marginal
- in the range of 1% of the world-market - their trading prices are regulated
by international decision centers in London, Paris, Amsterdam, Chicago and Tokyo..
Countries like Ghana, Ivory
Coast, Kenya, Burundi
and Benin experienced during
the late 1990's the negative impact on their national budget of uncertain or volatile
commodities' prices.
Therefore running a cash crop operation for a
community is not enough to have a launching pad for a sustained growth of the
economy. That cash crop's operation should play the catalyst's role in generating
substantial cash month after month. To perform as a perfect economic catalyst
it should also yield byproducts that can be used as raw materials to produce other
added valued products.
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Four conditions are to be met to setup successful rural economic activities, which
could act as an economic driving force; they are:
| 1-
To choose an economic operation, which products (bulk and industrially processed)
have a reservoir of local, regional and national consumers' base. That
is the only way to fight against the international market dictatorial law. |
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There
are plenty of economic operations to promote to boost up the economy on local,
regional and national level. Many are listed in "Strategy
For An African Country" and also in the monthly
issue of Afrricabiz® Online.
The best activity to choose depends
on following criteria:
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a- The local existing traditional agricultural and pastoral activities. b- The localization of the territory - seaside, alongside a lake, a river or landlocked. |
The existing traditional agricultural and pastoral activities should be analyzed
to see:
| a- How to improve their
productivity. b- How to increase their added value. |
For
instance, if cereals (corn, rice, sorghum. Etc.) are the main productions, processing
operations should be established to produce flour, semolina, parboiled rice, breakfast
meals based on these cereals and sorghum beer. Straws from the harvesting should
be used as fuel for power generation, sold
to corrugated tar saturated cardboard producers; or to produce salted, dried
or smoked meat from animal breeding. In brief one should make sure all products
and wastes are used to the maximum and processed into marketable products.
These above mentioned additional processing operations should be taken
into account at the early stage of planning. That is the recipe for a successful
implementation of economic catalysts with the inherent capacity to driving the
economy upward on a steady manner.
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Fish is an appreciated staple all over Africa. Local production however - sea,
rivers and lakes fishing - is not enough to cover demands in spite of excessive
off sea and inland fishing. Therefore, huge quantities of fish - frozen, dried,
smoked and salted - are imported by most sub-Saharan African countries - the landlocked
ones in particular.
In African countries fishing is a traditional economic
activity. There are villages communities, which earn their living through extensive
river, lake or sea fishing. Some communities live right on the spot alongside
the river or lake banks; or have their villages built inside the water area in
so called lacustrine-villages - Ganvié for instance in Benin
Fishing activities in sub-Saharan African countries are, however, small-scale
operations. Fishermen going to sea just engage in coastal fishing - one to two
miles off the coast - avoiding high sea fishing for lack of adequate equipment.
Nevertheless, there are fishing companies in Mauritania,
Ivory Coast, Senegal,
South Africa and Namibia
that have high sea vessels and deal in tuna fishing for the export market. Fisherman
practicing inland fishing (river and lakes fishing) use small pirogues to cast
their fishing nets and harvest the immersed fishing nets.
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In line with all exposed about fishing in chapter 6, one can say that fishing
represents an excellent opportunity to boost up the local or regional economic
activity and to establish an income building power for a community. It
complies with the criteria outlined in paragraph 4.
To illustrate
a local or regional economic development scheme, let us consider a high added
value operation in the fishing sector. The so called BLUE GOLD business.
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BLUE GOLD is fish, shrimp and prawn farming professionally operated, on an
industrial basis, which could give yields to up to 500 - 1,000 metric tons per
100 hectares of farming compound and a ROI (Return On Investment) in 2 to 3 years
span times.
BLUE GOLD's profit making potential is in the same range
as the one generated by the "Ice
on the cake"
Some African countries with sea-coastline are
involved in prawns harvesting and exporting to Europe and Southeast Asia. All
over the Africa continent, however, there is no aquaculture business organized
on industrial basis to produce fish, shrimps and prawns for local consumption
and for the export market. This is really astonishing when one knows that aquaculture
is a cash crop industry, which offers a very high return on vested money in a
short span of times.
There are three kinds of aquaculture farming:
| a- Intensive, b- Semi-intensive c- Extensive. |
For instance, semi intensive aquaculture farming for prawns is the most widely
spread method, which yields up to 2.5 to 3 metric tons of prawns per harvesting
cycle (4 to 5 months) per hectare of farming-pond. Considering current selling
price of US $ 10,000 per ton one can see that this is a business
opportunity not to be missed. It is nicknamed: "THE BLUE GOLD". The following
table 1 gives an idea about investment in tiger prawn farming:
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| Investment - US $ |
6,850,000 | |||
| Yields - tons | 150 |
300 |
500 |
metric tons |
| Turnover |
1,500,000 |
3,000,000 |
5,000,000 |
US $ |
| Direct cost of sales | 300,000 |
600,000 |
1,000,000 |
US $ |
| Operating costs | 150,000 |
300,000 |
500,000 |
US $ |
| Interest + taxes | 700,000 |
700,000 |
700,000 |
US $ |
| Net profit | 350,000 |
1,400,000 |
2,800,000 |
US $ |
One
can see that the time for earning back the initial investment is 2 to 3 years
if the project is professionally implemented to reach the maximum yield of 500
metric tons of output per year.
Beginning of second
year of operation - as shown in table 2 below - the financial results could be
dramatically improved if the operation is geared to an intensive exploitation;
workers and managers having gained experience in running the business.
|
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| Investment - US $ |
6,850,000 | |
| Yields - tons | 1,000 |
metric tons |
| Turnover |
10,000,000 |
US $ |
| Direct cost of sales | 1,400,000 |
US $ |
| Operating costs | 700,000 |
US $ |
| Interest + taxes | 700,000 |
US $ |
| Net profit | 7,200,000 |
US $ |
These
are remarkable results, which could be multiplied tenfold - if the farming compound
has an area of 1,000 hectares for instance. In that case the investment is recovered
within one to two years of operation.
There is no doubt the setup of
an operation of the kind in the regional territory of a country would be a booster
to the economy and help increasing the purchasing power for the populations. The
substantial cash flow could be used to setup additional economic activities and
increase the "Synergetic
Impact Factor"
Click
here for figures about an extra intensive operation.
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/africabiz/ Dr. Quenum and Associates with their global partners in
business development and planning - BOTT (Build, Operate, Train and Transfer)
concept or on turnkey basis - are at the disposal of any interested
sub-Saharan African country's government, development agency, regional authority,
international development agency, etc. for further consultation and discussions
for the establishment of a development scheme as explained in this delivery. |
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In brief, the setup of an activity such as the BLUE GOLD - on an African country
regional territory (or any other country in the world at large) - can activate
the local economy and serve as a launching pad for a sustainable high -rated economic
growth. It shall act as an income building power for the whole community.
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Tables
1 and 2 above deal with prawn farming and such an operation needs sea water and
therefore should be established on territory near coastline.
There is
also BLUE GOLD operation for fresh water fishing farms, which can be setup inland
for selected categories of popular types of tropical fish. In that case investment
level for a 100 hectare farming compound is less than for sea-water farming; US
$ 4.5 - to 5 million.
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Time required for designing, supplying materials, implementation of the project
and completion on turkey basis would be approximately 15 months from the date
of contracts signature and initial payment; plus additional 3 months to meet unanticipated
delays.
Click here for a "Strategy
for an African country".
Click
here to view why Zimbabwe' Scenario Won't Happen In South Africa.
Click here for "Less Than
10% Annual Economic Growth-Rate? That's Peanuts for an Emerging Country"
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