The official ribbon cutting for AGCO Corporation’s new Africa headquarters in Johannesburg, South Africa in May 2018 was a fresh sign of the global agricultural equipment producer’s intensified commitment to the continent.
AGCO, a US corporation based in Duluth, Georgia, reported net sales of $8.3bn in 2017. Its product line includes well-known tractor brands such as Massey Ferguson, Challenger and Fendt. It has had a presence in Africa for more than 80 years. AGCO also has a 49% share of Algeria Tractors Company, a joint venture based in Constantine, Algeria that has produced Massey Ferguson tractors for the Algerian market since 2012.
Going the extra acre
But in making a strategic decision in 2009 to target the African market more aggressively, AGCO is now going beyond simply marketing its products on the continent. It is working to build up the agricultural expertise of African farmers and middle management through innovative demonstration and training projects.
The strategy includes moving its staff closer to the market with the new headquarters in South Africa, opening a new office in Casablanca, Morocco, and expanding its office in Kenya, according to Nuradin Osman, AGCO’s Africa vice-president and general manager. The company now employs some 200 people on the continent, where it has a presence in 40 countries.
“We have established a more hands-on strategy than in developed countries. We have to train people, and we have to be part of infrastructure building,” says Mr Osman.
Good to grow
Mr Osman believes Africa has all the fundamentals to be successful in agriculture, with plentiful arable land. There is also a large and sophisticated consumer base with higher standards for local foods that AGCO is targeting in working with farmers. Furthermore, he says official GDP figures do not reflect incomes and activity in the huge informal sector.
However, while farmers in many mature markets have access to subsidies, credit and finance, along with insurance against crop losses and guaranteed farm loans, in Africa there is little infrastructure to support the farmer. In most cases, the actual work of farming is done by women, who are often left on their own to grow enough food to feed their family, and, if they are lucky, have a surplus to sell in the market, according to Mr Osman. “We want [African farmers] to be more productive and to achieve the same yields as in the rest of the world,” he adds.
Mr Osman is well placed to bridge the two worlds. The son of a Somali farmer who experienced famine twice in his native country, he fled the country at the age of 16 during its ongoing civil war for the Netherlands, where he worked on various types of farms. He joined AGCO in 2005 as an intern in its UK office, and in 2007 was assigned to work for its president and chairman. In 2011 he was named as the vice-president and general manager of the company's African operations – the first person of African descent to occupy the role.
Investing in Africa
As part of its commitment to invest $100m in Africa, AGCO built Africa’s largest logistics centre for spare parts and agricultural machinery in Johannesburg. The $35m facility is intended to improve after-sales service for its customers.
The company followed this up by establishing a global learning centre and 'Future Farm' on 70 hectares in Lusaka, Zambia, with a second planned in French-speaking west Africa. The project targets both commercial and small-scale farmers, as well as the company’s dealers and distributors. It encourages the development of integrated modern agricultural methods, including drip irrigation, and improved and diversified crop management to promote sustainable food production. AGCO claims these methods can more than triple the yield per hectare.
A key component of the Future Farm is a state-of-the-art mechanisation centre. “We are fully aware that there is no resale value to our tractors because there is no market,” says Mr Osman. He attributes this to the lack of workers with the mechanical knowledge to maintain and repair the machines, which is one reason the project emphasises the training of mechanics.
One of the big problems for African agriculture is that farming is seen as a demanding, unrewarding occupation that offers little escape from poverty, according to Mr Osman. Young people no longer wish to work in agriculture. 'A Farm in a Box', a farm mechanisation package, is intended to make agriculture a more attractive career choice. The package, which features a range of Massey Ferguson tractors and a full line of accompanying implements, offers farmers access to modern farm equipment at an affordable price.
AGCO has also arranged a financing mechanism to help with the cost of setting up a farm. A partnership with its Zambian distributor and the Zambia National Commercial Bank provides access to credit for farmers. Mr Osman says it’s intended as a one-stop pay-as-you-go system that can be paid off over 30 years.
To address a severe shortage of well-educated middle managers on the continent, AGCO has worked with educational institutions in Kenya and the UK to establish a post-graduate two-year qualification programme that the company will fund for two years. Candidates who complete the programme may be hired by AGCO or its partners.
A higher level
AGCO is now in the process of taking the lessons learned from the Future Farm concept to a higher level as it selects a location for its first 'Agri-Park' – described by the company as a “networked innovation system of agro-production, processing, logistics, marketing, training and extension services”. Burkina Faso, Côte d'Ivoire, Nigeria, Zimbabwe and Mozambique are under consideration to be the location of the product. The South African government launched a similar programme in 2015 as a means of kick-starting rural economies, and reports encouraging developments.
Mr Osman sees the Agri-Park as a community where growing, seeding, processing, raising animals, establishing its own hatcheries and abattoirs, and selling the final product to the market all take place in a vertically integrated system.
“We are doing a turnkey project with the Agri-Park, building in all the elements to be successful. You are helping people grow their own food, receive a minimum wage, find education and housing, even build a clinic or a fuel station. Anything you can do to help the community will be important. You have to take all the elements within 100 kilometres into account and bring a holistic approach to the market,” he says.
Mr Osman is adamant that there are plenty of opportunities for foreign investors to succeed in Africa. But, he cautions, no one should work on the continent if they do not have the passion for it.