Tractor-makers paint future with greener shade of Africa
Dealers for Deere & Co., the biggest farm-machinery maker, are opening new African sites to sell equipment such as the 5503 tractor, its most popular in the region.
The world’s largest makers of agricultural equipment are looking in Africa for more people like Levy Sinyimba.
The businessman bought his first tractor, a 60-horsepower model, about three months ago after becoming fed up with paying others to plow his 1,000 acres in Zambia. Sinyimba says he knows other farmers who want to do the same.
Those Zambians are part of an emerging agricultural class in Africa increasingly courted by foreign manufacturers. Sub-Saharan Africa’s 5.6 percent economic growth forecast for 2013 will outpace the developed world’s, generating wealth to invest in crops. Almost half the land available for sustainable farm expansion lies in Africa, meaning it can better feed itself and the growing global population if productivity can be boosted.
Dealers for Deere & Co., the biggest farm-machinery maker, are opening new African sites to sell equipment such as the 5503 tractor, its most popular in the region. The $24,000 price is less than a 10th of some of the machines it sells in the United States.
Most tractors sold in Africa have less than 100 horsepower, according to Ganesh Jayaram, Deere’s vice president of agriculture and turf sales and marketing for most of Asia and Africa. The company’s 5503 75-horsepower model, made in Pune, India, is its best-seller in Africa, according to Afgri Equipment, a Deere dealer.
Fiat Industrial SpA’s CNH Global NV unit says African sales are jumping as much as 20 percent year on year, boosted by farmers making their first purchase.
The companies “are all racing to get there for the next growth wave,” Larry De Maria, a N.Y.-based analyst for William Blair & Co., said. “It could be a lucrative situation for the equipment makers and solve the potential food shortages in Africa.”
Much has changed in the five decades since Moline, Ill.-based Deere entered the continent through apartheidera South Africa.
Greater political and economic stability and a push by some nations for food selfsufficiency have made the continent more attractive, said Jayaram. An abundance of arable, uncultivated land and untapped water supplies also offer “strong tail winds,” he added.
Forty-five percent of the land in Africa is suitable for sustainable agricultural expansion, meaning it isn’t protected or forested and has a low population density, according to the World Bank.
The value of the African food market may triple to $1 trillion by 2030 on population growth and urbanization, the World Bank estimates. African machinery demand will rise on the back of that growth while Asia slows, De Maria said.
The level of mechanization in African farming is still very low. Kenya had 25 tractors per 100 square kilometers (39 square miles) of arable land in 2009, while Nigeria averaged almost seven, according to the most recent data from World Bank. That compares with an average of 271 tractors serving the same land area in the U.S.
The size of the farmequipment market in Africa will be about 24,000 to 30,000 machines in 2013, according to Duluth, Ga.-based tractor-maker Agco Corp. By comparison, U.S. industrywide tractor sales were 137,776 this year through August, according to the Association of Equipment Manufacturers.
As in much of Asia, African farmers work small lots, limiting their access to financing. An average of 1.1 tons of grain per hectare was reaped from 2008 to 2010 in the sub-Saharan region, roughly one-third of the world average, partly because farming technology is costly and under-utilized, the U.S. Department of Agriculture said in a September 2012 report.
“The demand for technology is growing,” Nuradin Osman, Agco’s director of operations for Africa and the Middle East, said. “The demand for higher horsepower is growing.”
Agco, the third-largest farm equipment maker, already has 150 to 200 dealer outlets in Africa. It has opened a parts distribution center in Johannesburg and has started assembling Massey Ferguson tractors in a joint venture in Algeria.
Deere had 30 dealer locations in east, west and central Africa excluding South Africa in 2010, and according to Jayaram, the number will double this year. Deere set up a parts distribution center in South Africa in 2012 to serve the whole continent and has tripled its parts inventory in Africa in the last few years.
Dealers for CNH, the second-largest farm equipment maker, have added 20 to 30 new sites in the last three years for a total of about 300 sales and service locations, said Diego de la Calle, the business director in Africa for Case IH and New Holland equipment. It plans to continue expanding, particularly in distribution in West Africa.
“There is substantial growth for farming equipment, for more mechanization,” de la Calle said. “The trend has intensified in the last three to five years.”