Establishment of a wheat processing plant in Ethiopia offers an opportunity for investors with expertise in the food, wheat and agricultural sectors. Here we feature an example of an investment-ready business on the ground today with a NPV of $USD 49 million and an IRR of 30%.
There is opportunity to install agro-processing capacity for the wheat sector in the production of domestically produced wheat flour, pasta and macaroni and biscuits.
Ethiopia is the largest grower of wheat in Sub-Saharan Africa and produced 3.4 million metric tons (MT) of wheat in 2012. The projected consumption of wheat in Ethiopia is set to increase by a steady average rate of 4.2% over the next five years. While the forecast annual growth rate is lower than the previous five years of 7.3%, increases in wheat yields and cultivated area are critical to avoid dependence on wheat imports.
Increase western taste palates and expats in Ethiopia gives rise to
demand in processed goods such as cookies, pastries and pasta and
WHY INVEST IN ETHIOPIA?
Open for business: Ethiopia’s bread wheat and durum wheat value chains are strategically important to the Government of Ethiopia (GoE). In Ethiopia’s Growth and Transformation Plan-2 (GTP II), the GoE has prioritized wheat as a major implementation strategy, with targets to increase bread and durum wheat production volumes from a collective 42.3 million quintals in 2015 to 62.08 million quintals by the year 2020. The GoE has explicitly prioritized private sector investment in the wheat sector, with investors in prioritized regions eligible for an additional one year income tax
exemption and import of duty-free capital goods and materials to establish or expand existing businesses.
Suitable climatic conditions: Ethiopia is endowed with favorable weather, altitude, adequate water and availability of suitable soils for wheat production across much of the country. A variety of improved seeds are also capable of growing in Ethiopian soil and the ATA is currently working with farmers to increase yield and train on efficient handling processes.
Increasing domestic demand: Ethiopia is one of the most populous countries in Africa, with increasing demand for value added products such as pasta and biscuits. Wheat is also used for many popular local products – to produce bread (injera, dabo), local snacks like dabokolo, some local beers, and wheat straw can be used for roof thatching and animal feed. We have already identified a domestic B2B wholesaler, who is struggling to obtain sufficient supply of wheat products and is looking for domestic processors for value added wheat products such as pasta and biscuits.
Potential for import substitution: Despite the resource potential for local production, wheat continues to be of the highest imported commodities in Ethiopia, along with meslin, sugar and palm oil. Second only to Egypt, Ethiopia is among the largest wheat producers on the continent. Despite the large production capacity, Ethiopia is a net importer of wheat. Therefore, there is huge market potential to fill the gap between demand and supply domestically Ethiopia imported over $390 million worth of wheat and wheat flour in 2013, demonstrating the scale of the opportunity for import substitution. Further, nearby Egypt, which Ethiopia does not currently export wheat to, is the world’s largest importer of wheat and
presents a specific opportunity.
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