Businessafrica.net Newsletter ISSN 1563-4108
Dr. QUENUM & ASSOCIATES
INVESTMENT AND BUSINESS PLANNERS
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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

CLICK FOR A GLOBAL DEVELOPMENT SCHEME
FREQUENTLY ASKED QUESTIONS

SYNOPSIS
Introduction/ Catalyst/ High Added Value/ Economic Operation/ Activities / Case Study/ Fishing/
Blue Gold
/ Alternatives/ Investment Period/
Currencies Table/

This delivery - in close link with the one titled: "Strategy For African Countries" - 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.

1- INTRODUCTION

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.
2- THE NEED FOR AN ECONOMIC CATALYST

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.
3- HIGH ADDED VALUE ECONOMIC CATALYST

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.
4- NECESSITY TO CHOOSE THE RIGHT ECONOMIC OPERATION

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.

2- To choose economic activities, which generate cash on a monthly basis. Traditional cash crops such as cocoa, coffee, tea do no have that advantage.

3- To setup and operate the economic activity on a strict professional basis, with an experienced management staff. Productivity objectives being clearly defined and monitored by a dynamic accounting system.

4- To transform byproducts, valorize all wastes to producing other added-valued products. In brief not to leave a single stone unturned and harvest to the full the potential of the economic operation.

5- WHICH ACTIVITIES TO PROMOTE?

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:

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.
6- A CASE STUDY

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.
7- FISHING ACTIVITY AS AN ECONOMIC GROWTH LAUNCHING PAD

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.
7-1- WHAT IS BLUE GOLD?

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:

Prawn Farming On a 100 Hectares Compound / semi intensive operation
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.

Prawn Farming On a 100 Hectares Compound / intensive operation
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 ImpactFactor"

Click here for figures about an extra intensive operation.

/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.

All inquiries to be sent to this email address or Fax to Dr. Quenum & Associates: +(1) 347 534 9329

BusinessAfrica's intervention pricing

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.
7-2- DIFFERENT KINDS OF BLUE GOLD

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.
7-3- INVESTMENT PERIOD

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"

1997-2010 Dr. Bienvenu-Magloire Quenum. All rights reserved

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