Global Insight: Trends in sub-Saharan Africa fertiliser supply chains

Based on rapid appraisal studies of fertiliser industries in 15 countries in sub-Saharan Africa, there are 10 major trends currently evident in fertiliser supply chains across the continent.

1. There has been a significant growth in fertiliser consumption across the continent. South Africa, the largest fertiliser consumer, has seen major growth in fertiliser consumption, particularly since 2009, with consumption increasing by at least one million tons.

Ethiopia, Kenya, Nigeria and Mali are among the major consumers of fertiliser that have experienced surges in demand. However, there are countries such as Tanzania, Zambia and Malawi that have comparably lower consumption levels and use, but have shown considerable growth albeit from a lower base.

These countries have seen their fertiliser consumption being driven mainly by major government programmes such as bulk procurement systems and input subsidies, which have led to widespread adoption of high-quality fertilisers among resource-poor smallholder farmers.

2. The consumption of fertiliser has been driven by staple food commodity production such as maize, teff, rice, sorghum and millet, as well as cash crops such as tobacco, sugar, cotton and horticulture.

Small grains (for example teff, sorghum and millet) account for at least a third of national fertiliser consumption in countries such as Nigeria (33%) and Ethiopia (36%), while maize is particularly dominant in Zambia (82% of total fertiliser consumption), Tanzania (67%), Kenya (55%), South Africa (53%), Burkina Faso (41%), and Mali (36%).

3. Competition is intensifying at import, distribution and retailing stages, especially in maturing markets, through product differentiation (branding and blending), pricing, services, and distribution channel activities.

The landscape is competitive in countries such as Uganda, Ghana and Nigeria, where supply chains are beginning to strengthen and becoming more coordinated. However, market concentration levels remain relatively high in countries such as Ethiopia, Coté d’Ivoire, Zambia, Tanzania, Kenya and South Africa.

4. There is growing interest in fertiliser manufacturing and blending, particularly in two of sub-Saharan Africa’s largest markets, Nigeria and South Africa. Nigeria now has over 30 domestic manufacturers and blenders, while South Africa has 22.

The manufacturing and blending subsector remains relatively small in the rest of the subregion, with Ghana having six major players; Mozambique, Coté d’Ivoire, Kenya, Ethiopia with five each; Zambia with four; Tanzania with three; and Uganda, Mali, Rwanda and Burundi each with single firms.

5. Government fertiliser subsidies have proved to be instrumental in defining fertiliser markets across subSaharan Africa, but there is now a shift towards electronic voucher systems to promote efficiency. E-voucher systems are more transparent, allow for timely input delivery, and also reduce administrative and implementation costs of these programmes in order to provide a higher return on investment.

6. Financing options are expanding for importers, blenders, wholesale ‘hub’ agro-dealers, retail agro-dealers, largescale farmers, and smallholders.

This includes cash or prepayment; letters of credit (bank facilities for between 90 and 120 days); bank credit guarantees; parent company financing, and so on for various role players such as importers, port/distributor/hub warehouse operators, and truckers. At retail level, seven- to 15-day credit facilities are made available to agro-dealers. Farmers and aggregators are using electronic warehouse receipts and contracts to get finance.

MORE PROGRESSIVE REFORMS

7. Policy and regulatory frameworks are becoming more progressive, with many countries passing microreforms that unlock supply chain bottlenecks and restrict and sometimes eliminate the production and distribution of counterfeit fertilisers.

8. There has been an improvement in infrastructure, which has increased the efficiency of fertiliser supply at ports, import processes, logistics, transport and handling of transit fertilisers through cargo hubs.

9. Despite smallholder-farmer use of fertilisers through input subsidies, largescale commercial farms, estates and plantations are still important, particularly for the use of specialised fertiliser products.

10. The adoption of information and communication technologies is increasing opportunities for digital platforms to facilitate transactions between farmers and fertiliser suppliers, create value, and capture part of that value within the supply chain. Remote farmers can be reached to increase their awareness and knowledge of fertilisers and enable ordering of inputs.

• This article is based on a presentation by Dr Joseph Rusike at the annual Forum of the Arab Fertilizer Association in Egypt. Dr Tinashe Kapuya is head of the value chain analytics division at the Bureau for Food and Agricultural Policy. Email him at tinashe@bfap.co.za.

COMPETITION IS INTENSIFYING AT IMPORT, DISTRIBUTION AND RETAILING STAGES