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West Africa uses scarce resources to import food
Western companies can now play a big role either through direct investment or via alliances
A market of 225 million people
West Africa is one of the business world's last frontiers. Blessed with rich mineral deposits, fertile soil, and access to important waterways and ocean ports, the region has been an economic center for centuries, attracting ivory hunters, textile traders, miners, and metal craftsmen (see boxed insert, "A brief overview of West Africa" on p. 106).
Today, however, West Africa is among the globe's poorest regions. Its 225 million inhabitants have a per capita income of less than $1,500 a year (even after adjustment for low local prices), roughly level with India's and less than a tenth of Western levels. They have almost no mass-produced consumer goods and only four telephone lines and 40 television sets per 1,000 people, low even by the developing world's standards. Half the population has no access to potable water, and infant mortality is almost 87 in 1,000. Even though the population is largely agrarian, daily calorific intake is 60 percent that of people in developed countries, and crop yields are a fraction of Western levels (see boxed insert, "Affluence and agricultural demand"). West Africa is barely able to feed itself.
Though the situation is dire, it is not without hope. There is a remedy, and it lies in the restructuring of agricultural value chains. At present, farming productivity is minimal, a result of food crops being produced in near-subsistence conditions on small family-owned or leased plots with scant investment in seeds, fertilizer, pesticides, and machinery [ILLUSTRATION FOR EXHIBIT 1 OMITTED]. The typical daily ration of cassava, yam, or maize is processed by hand in each home, or by street vendors. Quality and cleanliness vary greatly, and wastage is high.
The creation of a modern agriculture and food industry in West Africa calls for change in a number of areas. Farmers will have to shift to hybrid seeds and utilize fertilizers, herbicides, and other modern crop inputs and production methods. Processing facilities will have to be built and operated to convert these crops into food products, which then must be marketed and distributed. Finance must be found for trucks, tractors, combine harvesters, processing equipment, irrigation systems, and so on. Some form of futures and options market will be needed to smooth out bumps in supply and demand and help growers manage production risk.
The task is enormous - and could be enormously lucrative for Western companies in the agriculture, food, and farm equipment industries, which have a role to play in the restructuring, through either direct investment or alliances with local companies.(*) The expected incremental margin pool available annually for eliminating the storage and distribution waste from a single crop - maize - will be up to $110 million in Ghana alone, and up to $500 million in the region as a whole.
The opportunities for Western companies should be understood in the context of West Africa's political and cultural history. Three generations of colonial rule - bent on exploiting Nigerian oil, Ghanaian gold, Guinean and Sierra Leonian diamonds, cocoa, and coffee - came to an end with the struggle for independence in the late 1950s and early 1960s. Ghana, under the leadership of Kwame Nkrumah, gained independence in 1957. Nigeria (under Nnamdi Azikiwe) and Cote d'Ivoire (led by Houphouet-Boigny) followed in 1960. By 1965, all 16 West African nations had established independent governments.
Today, from the perspective of Western multinational companies, the countries of West Africa fall into three categories: Nigeria, the …