To ease your site search, article categories are at bottom of page.

September 22, 2008

Joint venture company to refine sugar in Nigeria

Olam International Limited, a leading global, integrated supply chain manager of agricultural products and food ingredients, on September 15 announced that it has entered into a strategic partnership with the Modandola Group (MG) for investments in sugar refining and wheat milling businesses in Nigeria.

Olam will make two investments totalling US$128.4 million in Nigeria through its partnership with MG. Olam will form a 49:51 joint venture (JV) company with MG and invest US$91.0 million for a 49% stake in the joint venture, which will set up a 750,000-tonne per annum capacity sugar refinery with a captive port in Lagos.

Olam will acquire a 49% stake in Standard Flour Mills (SFM), currently owned by MG, for US$32.5 million. Olam will invest an additional US$4.9 million to raise SFM’s operating capacity from 1,200 to 2,000 tonnes per day.

Started in the 1950s, MG is today one of Sub-Saharan Africa’s leading diversified business groups with broad interests across several industries including industrial & commercial real estate investments, manufacturing, flour milling, shipping, port management and agriculture. With sizeable port land and access to jetty facilities, MG will be instrumental in obtaining the necessary concession, port land access and licences for the sugar refinery.

Sunny Verghese, Olam’s Group Managing Director and CEO, said: “Olam has accumulated a significant operating experience in Nigeria as a company as well as from our main sponsor, the Kewalram Chanrai Group. Olam is the number one non-oil exporter in Nigeria as we source, process, export and distribute multiple products including cashew, sesame, coffee, cocoa, rice, dairy products, packaged foods, cotton and timber. We believe we now have the capacity and capabilities to expand our value chain participation in some of these businesses and enter into new adjacent products, beginning with our investments in sugar refining and wheat milling.”

MG’s Chairman, Bode Akindele said: “Olam has grown from a single product in Nigeria to a large multi-national with a diversified product portfolio of 16 products and operations across 56 countries today. We believe Olam’s global network of suppliers, extensive marketing and distribution in many of these countries, and its capabilities in managing risk in futures-traded products will serve our sugar and wheat businesses well into the future, capturing the high profit and growth potential available in this country.”

The strategic partnership brings together the complementary strengths of Olam and MG to create a unique combination of skills in global sourcing and origination, manufacturing, port management, deep operating experience in the local environment, pan-Africa distribution, systems and risk management, and therefore a strong, sustainable competitive advantage in sugar and wheat in Nigeria.

Olam and MG, through their JV company, will jointly set up and operate the portbased sugar refinery at a total capital cost of US$190 million to be phased over three years from FY2009 to FY2011. Under the terms of the joint venture agreement, Olam has an option to increase its stake in the JV to 51% at market value after three years from the commissioning of the refinery post the achievement of certain pre-agreed operational milestones.

Olam will undertake project management for setting up the refinery and will be responsible for the overall management of the refinery, including production, sales and marketing, distribution, systems and capital management. MG will be responsible for all local management and support activities, such as sourcing of local workforce and industrial relations.

Nigeria is the largest consumer of sugar in Africa, excluding South Africa. The country’s consumption has grown annually at a rate of 7.0% since 2003 to 1.5 million tonnes in 2007. Per capita consumption is currently at only 8.4 kilogrammes, one of the lowest in the world. With steady population growth and growing disposable incomes, annual consumption of sugar is expected to cross the 2 million metric tonne mark in the next five years. Approximately 80% of annual demand is met by four local refineries, with the balance 20% or 300,000 tonnes being met through direct imports of refined sugar.

The Nigerian government encourages local value addition by maintaining a duty differential of 50% between imports of refined sugar and raw sugar and granting five year tax holidays to refineries. (The tariff differential between imports of refined sugar and raw sugar from the Economic Community of West African States (ECOWAS) and other countries is 15%). These trading conditions, coupled with a high degree of concentration and low utilisation of capacities by the local refineries, support a persistent differential between local and import parity prices of refined sugar.

The gap between demand and supply is expected to increase, giving room for the proposed JV to participate in this growing market. The addressable market also extends to ECOWAS and the rest of Africa.

ECOWAS, excluding Nigeria, imports 1.0 million tonnes of refined sugar annually due to the lack of local refining capacity and its per capita consumption and income profile is similar to Nigeria.

Flex News Food

Article Categories

AGRA agribusiness agrochemicals agroforestry aid Algeria aloe vera Angola aquaculture banana barley beans beef bees Benin biodiesel biodiversity biof biofuel biosafety biotechnology Botswana Brazil Burkina Faso Burundi CAADP Cameroon capacity building cashew cassava cattle Central African Republic cereals certification CGIAR Chad China CIMMYT climate change cocoa coffee COMESA commercial farming Congo Republic conservation agriculture cotton cow pea dairy desertification development disease diversification DRCongo drought ECOWAS Egypt Equatorial Guinea Ethiopia EU EUREPGAP events/meetings expo exports fa fair trade FAO fertilizer finance fisheries floods flowers food security fruit Gabon Gambia gender issues Ghana GM crops grain green revolution groundnuts Guinea Bissau Guinea Conakry HIV/AIDS honey hoodia horticulture hydroponics ICIPE ICRAF ICRISAT IFAD IITA imports India infrastructure innovation inputs investment irrigation Ivory Coast jatropha kenaf keny Kenya khat land deals land management land reform Lesotho Liberia Libya livestock macadamia Madagascar maiz maize Malawi Mali mango marijuana markets Mauritania Mauritius mechanization millet Morocco Mozambique mushroom Namibia NEPAD Niger Nigeria organic agriculture palm oil pastoralism pea pest control pesticides pineapple plantain policy issues potato poultry processing productivity Project pyrethrum rai rain reforestation research rice rivers rubber Rwanda SADC Sao Tome and Principe seed seeds Senegal sesame Seychelles shea butter Sierra Leone sisal soil erosion soil fertility Somalia sorghum South Africa South Sudan Southern Africa spices standards subsidies Sudan sugar sugar cane sustainable farming Swaziland sweet potato Tanzania tariffs tea tef tobacco Togo tomato trade training Tunisia Uganda UNCTAD urban farming value addition value-addition vanilla vegetables water management weeds West Africa wheat World Bank WTO yam Zambia Zanzibar zero tillage Zimbabwe

  © 2007 Africa News Network design by

Back to TOP