Mr. Ade Adefeko is the Director of Corporate and Government Relations at OLAM Nigeria Limited, a subsidiary of OLAM International with operations in 65 countries. A seasoned banker and widely travelled, Adefeko had a stint with several banks including Eko International Bank, heading Domestic Treasury at the then Fidelity Union Merchant Bank, head Treasury Marketing at Standard Trust Bank, head Corporate Communication at Societe Generale Bank and was also in charge of public sector at Devcom Bank. Adefeko branched off to Head the Corporate Communications & Public Affairs Department at Multichoice Nigeria and later Regulatory Affairs & External Communication Manager British-American Tobacco Nigeria. In this interview with TheEconomy’s OSAZE OMORAGBON he speaks on the OLAM activities in Nigeria, funding the agric sector, and the need to partner with government to attain food self-sufficiency among others. Excerpts:
You just returned from the 49th annual meetings of the AfDB in Kigali Rwanda which also coincided with the 50th anniversary of the Bank. What is your lasting impression?
My impressions are long lasting because of where the meeting took place. Rwanda is a country that has always been dear to my heart and it recently held a memoriam to commemorate the 20th anniversary of the genocide that took place in the country. Rwanda has risen from the ashes of the genocide and has done very well in the last 20 years. Visionary and thoughtful leadership has been the hallmark of the country. They have been blessed with a leader who has been working to empower the entire population and scale up infrastructure in Rwanda.
The AfDB has done a lot and the 50th anniversary of the bank was striking particularly the $2billion financing agreement which the Chinese offered for development projects in Africa over a 10 year period. That was quite impressive and instructive because they have been in Africa for a long time and it will go a long way towards financing the productive sectors in Africa.
In what ways do you think other African Agro-allied companies including OLAM can key into this $2billion financing agreement between the Chinese and the AfDB?
We are a leading company in agric sector of Nigeria, we are the leading exporter in the non-oil sector in Nigeria for the last 10 to 15 years. Our principal activities in Nigeria are basically sourcing and procurement, grading and processing, and export of various agric products like cocoa, cotton, cashew and sesame. It is instructive to note that we are Nigeria’s largest exporter after oil and gas. We do a considerable chunk of exports and we are also into the importation, distribution and local farming of rice. We are into wheat milling through Group Company which is called Crown Flour Mills and we also produce juice and beverages through our company called Ranona Nigeria Ltd. We are also into breakfast foods and kitchen ingredients through Caraway Foods Ltd.
We have a wide and deep network of operations across all regions of Nigeria. We have offices and units across all geopolitical zones of Nigeria and a wide and growing network of wholesalers, local buying agents and suppliers. Curiously, it may interest you to know that we are a fully owned subsidiary of Olam International Limited which is in Singapore. It is a publicly-held company and we are listed on the Singapore Stock Exchange. We operate globally in about 65 countries across Asia, Africa, North America, South America and Australia. We currently have a portfolio of 19 products and business platforms.
We started in Nigeria in 1989 with cashew trading and since then we have grown and expanded our business by adding more agric crops. Like I said earlier, we are the leading exporter in Nigeria after oil and gas. So in Olam, we feel agriculture is the future and we are keying into that future. We believe in the Agriculture Transformation Agenda of Mr. President and just recently the Minister of Agriculture was at our rice farm in Nassarawa and he saw for himself the forays we made in the rice value-chain space.
The Minister of Agriculture talks about attaining food self-sufficiency especially in rice. With your N12billion investment in 10,000 hectares rice farm in Nassarawa, do you think we can become self-sufficient in rice production, given unpredictable climatic changes?
The Minister talks about attaining food self sufficiency particularly in rice which is one of our major produce and there is a growing global demand for rice owing to shrinking land. By 2025, according to the Food and Agriculture Organisation (FAO) the world will need additional 300million metric tons of rice. Current production is about 475 million metric ton, so there is an increasing demand for rice due to urbanization and population growth. There is shrinking cultivatable acreage so we have a dearth of infrastructure such as roads and irrigation. If you take a global look, acreage in India and China is under pressure and both jointly produce about 50 percent of rice globally.
The current Nigeria’s requirement for rice stands at 3 million metric tonnes and the current gap for paddies are around 5.5 million metric tonnes. The average yield per hectare is in region of 4metric tones and the required acreage to cover that gap is about 1.3 million hectares. This is based on the assumptions that there are two cycles annually; the dry cycle and the wet cycle. Right now the gap in production is covered by imports and cross border illicit trade. In 2013 almost 3 million metric tonnes of rice were smuggled through Benin Republic and Niger; that is colossal by any standard.
How sustainable is this production of rice given adverse climatic changes and the smuggling in rice you talked about?
The key to self-sufficiency is to stop cross border smuggling and to regulate imports. It is that simple. We believe it will help if the government allows say few genuine businesses to import rice. This will help in price control, quality control, tame smuggling and engender transparency. It will also be nice to mandate other international and national trade houses to participate in commercial farming. You see there is difference between farming and agriculture. Agriculture is mechanized farming while farming is subsistence. We have to be ready to go into agriculture. This cannot be achieved by sloganeering; we must walk our talk. It requires concerted effort and a firm resolve to succeed in it. During the AfDB conference former President Obasanjo was speaking about Operation Feed the Nation which gave way to the Green Revolution and the 7point agenda under the Yar’ adua administration.
We have had successive policies on agriculture but sustainability has been the bane of all government policies. Strong institutions as President Paul Kagame stated during the AfDB meetings in Kigali breed good leaders.
Back to the rice issue, we need to support farms that produce rice and encourage and attach out-growers to commercial farmers and this again can be monitored by a neutral body or an NGO. There should be a ban on brown rice import because there is a captive raw material for millers which will discourage buying and processing of paddy. The downward pressure on paddy prices will lead to disengagement of farmers in the system. OLAM has a commercial rice farm in Nassarawa which is a fully irrigated rice field, precision leveled field and we do two crop cycles in a year. There is a lot of input application in what we do.
We commenced this farm in 2011 so far we have invested over $50million. We have about 1000 hectares planted and harvested in March 2013. 3000 hectares was harvested between November and December 2013. Between March and April this year, 3000 hectares was harvested as well. This year’s wet and dry cycle, we plan to plant about 4200 hectares. By 2015 we are looking at doing 6000 hectares and by May this year we started with 3000 farmer out-growers. Currently we have 105,000 metric tonne capacity yield with an expansion provision to double this capacity to 210,000 metric tonnes. The project will ensure we produce high quality paddy to compete with imported ones and employment generated is in the neighbourhood of more than 1000 jobs at present and this could be extended to more than 2000 jobs by 2015. We have a network of about four villages with the hope of turning them into towns in the next 18 months. What we are doing in essence is to improve our food security and the only way we can do that is by import substitution.
With this scenario you have painted, is there a time frame you think Nigeria can attain food sufficiency especially in rice production?
That is quite difficult. We are just one in a million and I will not deceive you by saying OLAM’s 10000 hectare rice farm will help Nigeria attain self-sufficiency. That is a mirage. This question will have to be posed to the Minister of Agric. We are just doing our best from our end which is to make sure that our brown field investment yields dividend. What I am saying is that in our little way, we are supporting the Agriculture Transformation Agenda of this administration.
Hopefully as we demonstrate success, others will enter the market. But there is no way we can become self-sufficient in rice production just overnight. When we will get there, I do not know. But it is important to say that the train has left the station.
What are your backward integration plans?
First, I have to tell you about our challenges which include electricity, irrigation infrastructure, roads, network problems, security and spare parts sourcing. To a large extent, it is important to say that during the agric Minister’s visit to our farm, he named us a staple crop zone for rice. That is, our rice farm in Nassarawa has now been designated a staple crop processing zone. Every area in the country has a comparative advantage in the production of a particular food crop and the government decided to create staple crop zones for different crops across the country which is a welcome development and we commend the Minister of Agriculture and indeed the federal government. The government has shown visionary leadership especially as it concerns the agric sector. A lot has been done under the watch of the current Minister and I think he needs to be encouraged. He understands the issues and how to deal with them accordingly. To a large extent, I think we are on the right track.
How prepared is your company towards weathering changing climatic conditions?
We are lucky with the kind of weather we have here which enables us to do dry season or wet season farming. I am not trying to say that we are immune from the vagaries of climate change but climate change has not adversely affected us; if it had, all the figures I gave earlier will not be attainable. However, we are teaching the out grower farmers how to manage the impact of adverse climatic changes. Be that as it may, we are positive and we hope to turn that positivism into a reality.
Aside this crop which your company specializes in, are there plans to add other crops?
What we try to do is to stay within our comfort zone. People have told us to diversify into flowers export. We believe adding value to what we do is what makes us stand out. Olam employs about 500 direct employees and creates another 5000 indirect jobs through our network of suppliers and service providers. We touch the lives of over 400 Nigerian farmers through outsourcing, procurement, exports, farmer out-grower programmes and processing activities. This has won us numerous awards and recognition from reputable international organization such as the “UNDP World Business Award” which was conferred on us on the sidelines of the UN General Assembly summit in September last year.
What did you take away from Rwanda?
I took away the serene and tranquil nature of Kigali. They are hospitable people and have distinct features. It’s a country that has risen from the ashes of the trauma of genocide. 20 years ago there was no Rwanda, so to speak but today it is fast becoming a regional hub for ICT and for conferencing. I have been travelling for a long time but this is the first time I have been in a shuttle bus which is 4G internet compliant in Africa. I mean that is commendable.