Developing an integrated chicken processing plant in Ethiopia is a promising opportunity, particularly for investors with expertise in feed, poultry, processed chicken products, and/or food retail. Here we feature an example of a potential debt partner investment in an upcoming greenfield chicken processing plant with a planned capacity of 9 million day-old chicks and 12 million kilograms of chicken meat, where a $20 million debt investment with an interest rate of 15% and a payback period of 7 years is expected to have an IRR of 15-20%.
Ethiopia contains over 50 million poultry, of which 96% are non commercially raised chicken. There is an enormous potential for a new commercial poultry producer to capture market share.
From 2006 to 2013, poultry meat production rose at 5.5% per year. Growth is projected to accelerate going forward: the Government of Ethiopia’s climate Resilient Green Economy (CRGE) strategy targets increasing the share of chicken meat in total meat consumption from 5% to 27% by 2030, to substitute red meat from high-emitting ruminants.
While Ethiopia has the second-largest population on the African continent and is one of the five fastest-growing economies in the world, Ethiopians currently eat an average of only 400g of chicken meat per capita per year, versus 4kg in Kenya and over 40kg in the US.
With rising incomes, among the fastest urbanization rates in the world, and shifting tastes and preferences leading to increased meat consumption, Ethiopia has one of the world’s largest under-served poultry markets.
WHY INVEST IN ETHIOPIAN POULTRY?
Rapid growth in poultry is a national priority: The Ethiopian Livestock Master Plan has put forward ambitious targets to increase in chicken meat production by 247% and in egg production by 828% by 2020. The GoE recognizes that an enormous increase in production is essential to close the projected national meat production-consumption gap. Therefore, the GoE has prioritized interventions to support the sector, and is currently rolling out several initiatives including: importation of exotic crossbred chickens with higher genetic potential for eggs and meat, allocation of adequate land for poultry feed production, promotion of private investments to increase the number and size of specialized commercial scale broiler and layer units, and encouragement of private sector investment in poultry agribusinesses.
SPOTLIGHT ON A POTENTIAL INVESTMENT
An experienced poultry company is interested in expanding operations to Ethiopia, but seeks an investment partner who could provide a loan for approximately half of the project at $20 million. This plant would include a feed mill, hatchery, broiler production, meat processing, and packaging for sale. As a new investment, this would include a staged business model whereby infrastructure is built from the hatchery to packing over time. The plant would be projected to reach nearly 10 million day-old-chicks and 12 million kilograms of chicken meat per annum and fully-functional chicken meat processing and packing facilities three years after the initial investment. The project is financially viable with an IRR of 15-20% on a debt investment of $20 million over 7 years. For those interested in investing to expand existing Ethiopian operations, there are at least 18 large-scale commercial poultry farms (over 2,500 heads) located in and around Addis Ababa.
Get in touch
The Agricultural Transformation Agency is an initiative of the Federal Government of Ethiopia Off Meskal Flower Road, across from Commercial Graduates Association