Agenda

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(No Transcript)
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Agenda

• Why Invest in Agriculture in Mozambique
• Agribusiness Strategy and Corridor Attractiveness
• Agribusiness Opportunities in Mozambique

3
Mozambique at a Glance
Mozambique is a stable, high economic growth
country with substantial agricultural potential
Demographics (2011)

• Population 23.9 million
• Population Growth (5 Year CAGR) 2.4
• Capital Maputo
• National Language Portuguese
• Business Languages Portuguese English

Land and Climate

• Area 800,000 km2 (80 million ha)
• Arable Land 36 million hectares
• Climate Tropical to Sub-Tropical

Key Economic Indicators (2011)

• Currency Metical, Abbreviation MZN
• GDP USD 12.8B
• GDP per Capita USD 535
• Projected Annual GDP Growth almost 8 per year
  average until 2015
• Agriculture Contribution to GDP 32

Source IMF World Economic Outlook Database,
September 2011 World Bank
4
Mozambique A Nation of Potential
The countrys potential can be captured in four
key areas

• 36 million ha of arable land, mostly unutilized
• Tropical to sub-tropical climate with fertile
  soil and ample rainfall
• Tremendous irrigation potential from major rivers

• Significant private sector investments
• Major infrastructure investments
• Numerous innovative public-private partnerships

• Strong and growing economy
• Reliance on imports Large import substitution
  opportunity
• Coastal position Access to international and
  regional markets

• Agricultural development seen as critical to
  countrys development, with activities across
  sectors focused on 6 agriculturally attractive
  corridors
• Government business incentive programs
• Specific organizations set up to organize and
  assist investors

5
Excellent Conditions for Agriculture
Mozambique boasts ideal growing conditions
plentiful water supply combined with diverse
micro-climates support a broad range of
agricultural commodities

• Major rivers such as Zambezi, Limpopo, Save, and
  other tertiary rivers offer tremendous irrigation
  potential

Land Suitability
Utilization of Arable Land
5.4
Extensive waterways
15.0
30.6
10 distinct agro-climatic zones
Vast Unutilized arable land
Hectares
85.0
Year-round production potential
Suitable for rainfall agriculture
Unutilized
Utilized
Arable Land

• Tropical climates offer potential for year-round,
  high yield crop production

Moderately suitable for rainfall agriculture
Source Ministry of Agriculture World Bank
6
Diverse Agro-Ecological Zones
There are 10 distinct agro-ecological zones in
Mozambique offering potential for a wide variety
of crops to be grown
Main Agro-Ecological Regions in Mozambique
Region Part of Mozambique Ag. Commodities Produced
R1 Inland Maputo and south Gaza Maize, cowpea, groundnut, cassava, sweet potato, banana
R2 Coastal region south of the Sabi (Save) River Maize, sugar, cowpea, sweet potato, groundnut, cassava
R3 Center and north of Gaza, and west Inhambane Cattle, goats, rice
R4 Medium altitudes of central Maputo Maize, sorghum, cassava, cowpea
R5 Low altitudes of Sofala and Zambezia Rice, cotton, cashew
R6 Semi-arid region of Zambezi Valley and Southern Tete Sorghum, millet, sugar, rice
R7 Medium altitudes of Zambezia, Nampula, Tete, Niassa, and Cabo Delgado Maize, soybean, sorghum, cassava, cowpeas, groundnuts, rice, sesame
R8 Coastal litoral of Zambezia, Niassa, and Manica Banana, cassava, millet, rice, cashew
R9 North interior of Cabo Delgado Maize, sorghum, cowpeas, cassava, sesame
R10 High altitudes of Zambezia, Niassa, and Manica Soybean, maize, common beans, potatoes, rice
Source Ministry of Agriculture World Bank, IFAD
7
Strong and Growing Economy
The Mozambican economy has displayed strong
growth and is expected to continue growing at one
of the fastest rates in the world
GDP Trend (2000 to 2015 est.)1
World's Fastest Growing Economies (2011 to 2015
est.)
8
Industry
9.5
Agriculture
Estimated CAGR
8.2
8.1
17.4
7.7
Services
CAGR
8
USD B
Year over Year Growth
9.6
23
6.6
32
25
4.2
25
27
45
24
48
51
Ethiopia
India
China
Mozambique
2015 est.
2010
2005
2000
Note 1) Growth rates are based on nominal
prices Source IMF World Economic Outlook
Database, September 2011 World Bank The
Economist Intelligence Unit National Institute
of Statistics
8
Location with Optimal Market Access
Mozambique has an advantageous geographic
positioning, providing an ideal gateway to both
international and regional markets
Mozambique Proximity to High Opportunity Markets

• Natural gateway to the Middle East,
  Mediterranean, and Asia
• Bordering regional markets like South Africa,
  Zimbabwe, and Malawi
• Port upgrades at Nacala and Beira will further
  trade opportunities

9
Trade Potential as a SADC1 Member
As a member of the Southern African Development
Community, Mozambique has access to an
agricultural market worth over USD 3B
SADC Trade Agreements
Southern African Development Community Members

• The SADC trade agreements aim to
• Eliminate barriers to intra-SADC trade
• Eliminate import duties based on a phased
  approach
• Eliminate all export duties
• Eliminate non-tariff barriers
• Apply no new quantitative import restrictions
• Eliminate quantitative export restrictions

Democratic Republic of the Congo
Tanzania
Seychelles
Angola
Zambia
Malawi
Mauritius
Zimbabwe
Trade Opportunity Within SADC
Namibia
Madagascar
Mozambique
Botswana
Balance of Trade Value for Agricultural Products
in SADC Region1
Swaziland
Lesotho
South Africa
3.4
3.2
2.1
USD B
1.3
Under SADC trade agreements, Mozambique aims to
have access to barrier-free trade with other
member states
2008
2011
2010
2009
Note 1) Southern African Development Community
2) Trade balance calculated as total value of
imports less total value of exports Source SADC
International Trade Center
10
Government Support
Agricultural transformation is a priority within
the highest levels of government and investors
are offered attractive incentives and support
FOCUS ON AGRICULTURE
INVESTMENT INCENTIVES
INSTITUTIONAL SUPPORT

• President Guebuza is a co-founder and champion of
  Grow Africa1
• Agricultural growth is a high priority for the
  government to
• Enhance employment and income potential
• Enhance food security
• 10-Year Strategic Plan (PEDSA) for agricultural
  sector development in place
• Focused on six growth corridors

• Exemptions on equipment importation duties
• Real property transfer tax reductions
• Reduction in corporate income taxes
• Agriculture corporate income tax generally 10
• Effective tax rate can be 2 until 2015 and 5
  until 2025
• Low cost land
• 50 year lease with 49 year potential extension of
  land for USD 1/ year/ hectare

• Agencies dedicated to facilitating investment
• The Investment Promotion Agency (CPI) and Centre
  for Promotion of Agriculture (CEPAGRI) promote
  and support agricultural investment opportunities
• GAZEDA dedicated to the Nacala Economic Zone
• Some corridors also have organizations focused on
  developing and coordinating investments

Note 1) Grow Africa is a series of conferences
and interactions that connect the private sector
and governments, focusing on accelerating
investments Source Investment Promotion Agency
Website
11
Growing Foreign Direct Investment
Mozambique has recently attracted many large
private sector investments, ranging from the
mining and natural gas sectors to agriculture
Priority is being given to agriculture when
attracting foreign investors in the hope of
improving productivity, reducing dependency on
imports, and helping cut food prices
FDI Inflows (2007 to 2011)

• Foreign direct investment (FDI) in Mozambique
  grew nearly fivefold from 2007 to 2011
• Aggregate FDI from 2007 to 2011 amounts to USD
  4.8B
• FDI is largely led by the expanding mining and
  natural gas sectors

2,100
USD M
893
789
592
427
2011
2010
2009
2008
2007
FDI by Sector (2011)
Sample of Large, Recent Projects
Transport and Communication2
Agriculture3

• Vale USD 6B coal mine
• Anadarko Estimated USD 30B by 2017
• Mozal JV USD 2.5B aluminum project
• Green Resources USD 2.2B eucalyptus plantation
  and industrial infrastructure
• Matanuska USD 60M invested to date focused on
  bananas
• Olam USD 50M investment in rice

Other Sectors2
Financial Activities6
ExtractiveIndustries87
Source World Bank Investment Promotion Agency
IMF
12
Ongoing and Planned Infrastructure Projects
Project Project Investment (USD M) Date of Completion
TRANSPORT INFRASTRUCTURE 1 Deepening of Beira Port 300 2012
TRANSPORT INFRASTRUCTURE 1 Beira Coal Terminal 140 2012
TRANSPORT INFRASTRUCTURE 1 Beira Coal Terminal 400 2012
TRANSPORT INFRASTRUCTURE 2 Nacala Airport 111 2012
TRANSPORT INFRASTRUCTURE 3 Rehabilitation of Beira railway (570km, 58MT/Y) 120 2013
TRANSPORT INFRASTRUCTURE 4 Nacala Corridor (24MT/Y) 2,600 2014
TRANSPORT INFRASTRUCTURE 5 Tete Bridge 190 2014
TRANSPORT INFRASTRUCTURE 6 Nacala Port (2025MT/Y) 295 (phase 1) 2015
TRANSPORT INFRASTRUCTURE 7 Public Transport Network 980 Unknown
TRANSPORT INFRASTRUCTURE 8 Catembe Bridge and Ponto do Ouro Roads 750 Unknown
TRANSPORT INFRASTRUCTURE 9 Maputo Public Transport 310 Unknown
6
2
4
5
3
Project Project Capacity (MW) Investment (USD M) Type Date of Completion
THERMO-ELECTRIC POWER 10 Gigawatt RG 100 230 Natural gas 2013
THERMO-ELECTRIC POWER 11 Moazite Phase 1 300 1,500 Coal Unknown
THERMO-ELECTRIC POWER 12 Benga 600 1,300 Coal Unknown
1
Infrastructure including road, rail, ports,
airports, and electricity generation is under
development providing better capacity for
linking agricultural products to markets
Project Project Capacity (MW) Investment (USD M) Date of Completion
HYDRO-ELECTRIC POWER 13 Lupata 520 800 2016
HYDRO-ELECTRIC POWER 14 Boroma 165 250 2016
HYDRO-ELECTRIC POWER 15 Cahora Bassa North 1,200 1,100 2017
HYDRO-ELECTRIC POWER 16 Mphanda Nkuwa 1,500 2,600 2017
HYDRO-ELECTRIC POWER 17 Moamba Major 17 500 2020
Source Banco Nacional de Investimento , Ministry
of Energy, Ministry of Public Works
8
9
7
13
Innovative Agricultural Partnerships
Innovative public-private partnerships to
transform Mozambiques agriculture are being
implemented
Examples of Successful Public-Private
Partnerships Underway

• Beira Agr. Growth Corridor (BAGC) Partnership
• Catalytic Fund of USD 20M in publicly-backed
  investment for startup agribusinesses
• First African country with a dedicated catalytic
  fund for agriculture
• AGRA Standard Bank
• USD 25M loan guarantee facility
• GoM World Bank
• USD 70M irrigation program (Proirri)
• USAID Agrifuturo
• Program to promote agribusiness
• Pro Savana
• Partnership between GOM, Japan and Brazil to
  develop agribusiness

14
Agenda

• Why Invest in Agriculture in Mozambique
• Agribusiness Strategy and Corridor Attractiveness
• Agribusiness Opportunities in Mozambique

15
Aligning Efforts Across Stakeholders
The four stakeholder groups of the Public and
Private sectors along with People and development
Partners are key to developing Mozambiques
agriculture potential
16
Importance of Agriculture in Mozambiques Strategy
Agriculture is a key priority for the Mozambican
government for poverty reduction and attaining
food security, as is detailed in the countrys
ten-year strategy plan
Summary of the Strategic Plan for Agricultural
Development (PEDSA), 2011 to 2020
Vision An integrated, prosperous, competitive
and sustainable agriculture sector

• 6 corridors targeted to align efforts across
  public, private, and development sectors through
• Agricultural potential
• Support services (research centers, educational
  institutions)
• Connection to market (infrastructure)

1
2
3
4
Agricultural production and productivity to
increase ability to compete
Infrastructure and services for markets and
improved marketing
Land, water, forest, and wildlife resources used
sustainably
Agricultural institutions strengthened
Mozambique plans to allocate 10 percent of its
budget to agriculture by 2015, as resolved in the
Maputo Declaration of 2003 by the African Union
Source Ministry of Agriculture
17
Agriculture Growth Corridors
Of Mozambiques six agricultural corridors,
Nacala, Zambezi Valley, and Beira corridors are
being highlighted due to their high agricultural
potential
Of the six corridors identified in Mozambiques
strategy
this action plan will focus on the following
three corridors
Why These Three Corridors Have Significant
Potential
Provinces within Beira, Nacala, and Zambezi
Valley Corridors1
Six Corridors in Agricultural Strategy

• Agricultural opportunity due to soil and climate,
  while most of countrys water is here
• Level of existing or planned infrastructure,
  including ports
• Existing framework to attract / manage
  investments2
• Alignment with other efforts3
• Economic zones4

Nacala
Cabo Delgado
Niassa
Zambezi Valley
Nampula
Tete
Beira
Zambezia
Pemba Lichinga
Manica
Sofala
Limpopo
Inhambane
Gaza
Maputo
Maputo
Note 1) Color coding represents approximate
positioning of corridors 2) Zambezi Valley
Development Authority and Beira Agricultural
Growth Corridor 3) ProSAVANA in Nacala Corridor
4) Nacala Economic Zone exists now with Beira
Economic Zone plannedSource PEDSA, Government
and Expert Interviews
18
Nacala Agricultural Growth Corridor
The government has focused significant resources
and business-friendly investment programs on the
Nacala Corridor
Investments Made
Attractiveness of Nacala
Nacala Special Economic Zone

• Nacala Special Economic Zone provides 500 ha
  industrial free zone with no VAT and customs
  duties, as well as technical assistance

Soybeans

• Rei do Agro Mozambican company investing USD 5M
  for soy and maize production

• Green Resources USD 2.2B eucalyptus plantation
  and industrial infrastructure

Forestry
Nacala Port Potential

• Upgrade of the deepest port on East African coast
  at Nacala

Demand from Mining

• The mining sector is increasing demand for
  agricultural products currently imported from
  South Africa at high cost

Bananas

• Matanuska USD 60M invested to date focused on
  bananas

Mining

• USD 4.4B upgrade to rail by Vale

Land Mapping

• The Pro Savannah project is mapping land potential

Source Ministry of Agriculture
19
Zambezi Valley Corridor
Zambezi Valley has the greatest agricultural
potential, with the highest concentration of the
countrys water resources
Investments Made
Attractiveness of Zambezi Valley
Agro-Processing

• Chinese government USD 50M investment for cotton,
  maize, and rice processing facilities

Vast Water Reserves

• 80 of the countrys water reserves are found in
  the Zambezi Valley corridor

Irrigation1

• USD 70M World Bank PROIRRI irrigation project,
  mainly aimed at irrigation for rice

• Diverse topography and good rainfall during
  cropping season provides perfect climate for a
  variety of crops

Broad Crop Variety
Rice

• Olam is investing USD 50M over the next 4 years

Large Local Demand

• Local market potential as one of the most densely
  populated provinces

Port Infrastructure

• Estimated USD 1B port investments by Rio Tinto

Note1) PROIRRI project is part of both the Beira
and Nacala Corridors Source Zambezi Valley
Development Agency
20
Beira Agricultural Growth Corridor
Beira currently has the most developed
infrastructure and linkages to neighboring
countries
Investments Made
Attractiveness of Beira
Infrastructure and Connectivity to Region

• Well-developed infrastructure with road and rail
  network linking Zambia, Malawi, Zimbabwe and
  Mozambique to the port of Beira

Catalytic Fund

• USD 20M for the BAGC Catalytic Fund
• First catalytic fund dedicated to agriculture in
  Africa, which is already leading to a number of
  investments

Demand from Mining Activities

• A number of multi-billion dollar mining
  investments are going ahead, which will improve
  access to infrastructure in the region and boost
  local demand

Irrigation1

• USD 70M World Bank PROIRRI irrigation project,
  mainly aimed at irrigation for rice

Beira Port

• USD 67M from JICA and EU for upgrades to the Port
  of Beira

Note 1) PROIRRI project is part of both the
Beira and Nacala Corridors Source BAGC
21
Additional Growth Corridors
The other corridors Pemba-Lichinga, Limpopo,
and Maputo also present potential and
additional value chains
Pemba-Lichinga
Limpopo
Maputo
Attractiveness
Attractiveness
Attractiveness

• Higher altitudes inland are very well suited to
  crops such as soybeans
• Significant investment underway to complete a
  road connecting Lichinga to Malema by 2014
• Large tracts of available land provide easier
  expansion opportunities

• Well established irrigation infrastructure in
  Chókwè can facilitate production
• Features technological support from the South
  Investigation Center based in Chókwè
• Quality road infrastructure connects to Maputo

• Proximity to Mozambiques largest city and South
  Africa provide strong market potential
• Most extensive infrastructure in both roads and
  port availability further facilitate market access

Crop Potential
Crop Potential
Crop Potential
Soybeans, maize, potatoes, wheat, beans, cotton,
tobacco, poultry, and aquaculture
Rice, sugar, vegetables, livestock, and poultry
Rice, vegetables, fruits, livestock, and poultry
Source Ministry of Agriculture, Expert
interviews
22
Agenda

• Why Invest in Agriculture in Mozambique
• Agribusiness Strategy and Corridor Attractiveness
• Agribusiness Opportunities in Mozambique

23
Commodities Analyzed
For the sixteen prioritized commodities,
additional information is included in differing
levels of detail to supplement the investment
cases distributed during the Forum
I
II
Rationale for Investment Described
Cashew
Tea
Cassava
Maize
Cotton
Groundnuts
Vegetables
III
Highlights of Opportunities
Pulses
Aquaculture
Forestry
Livestock
Fruit
24
Commodities Analyzed
For the sixteen prioritized commodities,
additional information is included in differing
levels of detail to supplement the investment
cases distributed during the Forum
I
II
Rationale for Investment Described
Cashew
Tea
Cassava
Maize
Cotton
Groundnuts
Vegetables
III
Highlights of Opportunities
Pulses
Aquaculture
Forestry
Livestock
Fruit
25
Rice
Executive Summary
Market

• Major gap exists between domestic production and
  demand
• Climate and soil are very well-suited to rice,
  with opportunities for year-round production
• Significant investment is underway, which may
  dramatically improve current infrastructure and
  raise rice yields

Investment Opportunities

• There are business opportunities in several parts
  of the value chain as well as for an integrated
  producer
• One of those opportunities is a medium-size
  milling facility, which requires investment of
  USD 5M
• Would be supported by 3,000-5,000 smallholder
  farmers

26
Rice Market Analysis (1/2)
Market
Rice consumption has doubled over the past
decade, but without significant reductions in
rice importations
Growth Potential
Production growth has not been able to overcome
demand growth keeping imports high

• Mozambique has the 3rd highest rice consumption
  in SADC, but is mostly dependent on imported rice
• Unlike neighbor countries, the share of imports
  has not reduced over time and instead remains
  around 60
• Despite the significant growth potential for rice
  (Mozambiques climate and soil are considered
  very well-suited to rice), domestic production
  has only grown at the same rate as imports
• Without increased local production, this gap will
  only grow due to a projected 7 domestic demand
  increase per year

Consumption of Rice (in 000 tonnes)
90
2009
2000
Share of Imported Rice on Local Consumption
80
62
Gap Neighbor countries reduced imports to 10
60
40
9
20
0
2011
2006
2010
2009
2005
2008
2007
2004
Malawi
Zambia
Mozambique
Source IRRI, FAOSTATS, USDA
27
Rice Market Analysis (2/2)
Market
Significant investment is underway by the
government, private sector, and development
partners to grow rice production
Large, Recent Investments
NON-EXHAUSTIVE
Investment Expected
KeyGeographies

• OLAM
• Rice production and processing facility in
  Zambezia, expanded over the next 5 years
• Partnership with local producers, also used for
  cotton

1
USD 50 M

• Ubunto
• Rice production and processing facility in
  Matutuine
• Partnership with the Libyan Investment Fund
• Processes 600 ton/ day and sells 27,000 ton/ year

2
USD 33 M
1
4
3

• World Bank1
• Investments plan to improve agriculture
  infrastructure of over the next five years,
  specifically with irrigation development

National Production
USD 70 M
gt 30
gt20

• International Rice Research Institute2
• Present in Mozambique since 2006, focusing on
  rice breeding, socio economic studies, crop
  production, productivity and private
  sector-village programs

4
gt10
4
4
N/A
gt1
2
0
Note 1) Areas non identified 2) IRRI has three
research and development regions in Mozambique
Maputo and Xai-Xai for irrigated conditions and
Quelimane for rain fed condition. Source
Interviews, Africa Agriculture News, World Bank,
OLAM, IRRI, Monitor Analysis
28
Rice Investment Opportunities (1/3)
Investment Opportunity
Several entry opportunities exist throughout the
rice value chain
Value Chain Analysis
Infrastructure
Inputs
Milling
Production

• Only 3 of small and medium-size rice farmers use
  improved seeds

• Lower yields as farmers frequently are not
  leveraging optimal farming technique, including
  irrigation practices

• 15 grains lost after harvest because of old
  machinery1
• Capacity incompatible with expected raise of
  production

Current Situation
PotentialOpportunities

• Seed Importer
• Research Center

• Leasing of machines
• Irrigated farms

• Independent mills
• Integrated mills

• No specific names

• Typically integrated if larger player

• OLAM
• Inácio de Souza
• Moçfer

Players
Note 1) Inputs offered by the mill includes
irrigation, selected seeds, fertilizers and
chemicals they are offered as a way to obtain a
more homogeneous and high quality supply of
paddies 2) In South Africa, this percentage is
9. Source Interviews, Agrifood (2005), Monitor
Analysis
29
Rice Investment Opportunities (2/3)
Investment Opportunity
In the proposed investment, the mill assumes a
central role in the rice value chain, including
supporting famers to improve quality and yields
Rice Mill Facility
Invest USD 5 M in a Rice Mill to process rice
in partnership with smallholders farmers
Infrastructure
Inputs
Milling
Production
ILUSTRATIVE
High-Quality Paddy
Selected Seeds
Market
Rice
Training1
Mills
SmallholderFarm
Seed Seller
Money
Legend (Color of Pictures)
1
2
3
Sourcing Model 100 small/ medium size farmers
(training, seeds, credit)
Processing more than 30,000 tonnes/ year
Targets Domestic consumers
Own Company
Partner/ Consumers
Note 1) Potential irrigation to assist farmers
not modeled Source Interviews, Agrifood (2005),
Monitor Analysis
30
Rice Investment Opportunities (3/3)
Investment Opportunity
Investing in a rice mill in Mozambique is an
attractive opportunity for investment, with
significant margins and meaningful social impacts
PRELIMINARY
Rice Mill Facility
Expected Margins by Share of High-Quality
Grain(in , 2012)
Key-Financial Indicators

• Farmers Yields may vary from 2 ton/ ha (rain
  fed farm) to 4 ton/ ha (irrigated farm)
• Number of smallholders supported between 3,000
  and 5,000 farms1
• Price per kg USD 1/ kg (whole grain), USD 0.75/
  kg (broken) and USD 0.3/ kg (bran)
• Expected margin typically vary from 20 to 22,
  but with potential to raise up to 25
• Investment estimated acquisition of small mill
  may require investment of USD 5M2
• Return expected similar investments has reported
  IRR between 13 and 15

Improved farming techniques can help achieve
greater rice quality, helping push margins
towards 25
Margin (Post-tax)
Whole Grain ()
Broken Grain ()
25
24
22
20
20
25
30
35
45
40
35
30
Irrigation, Training, Seeds
Average Practices
Improved Practices
Note 1) Dependent of the extend of irrigation
used 2) Potential irrigation to assist farmers
not modeledSource Interviews, Monitor Analysis
31
Soybeans
Executive Summary
Market

• Demand for soybeans is increasing due to the
  development of poultry and soy oil sectors
• Downstream markets are highly dependent on
  imported inputs
• High availability of natural resources may
  benefit expansion of soybeans crop

Investment Opportunities

• There are business opportunities throughout much
  of the value chain, as well as for an integrated
  producer
• A USD 4.5 M soy extraction refining center was
  selected as an example, utilizing 3,500-4,000
  hectares of soybean fields as inputs
• 1,400 smallholder farmers included into the
  supply chain

32
Soybeans Market Analysis (1/2)
Market
Soy cake is a considerable cost for the poultry
industry and could be a key driver of domestic
production substitution of imported chicken
Soy Cake Strategic Segment
Poultry industry Though soy is a small share of
feed by volume, it represent almost half of costs

• Poultrys consumption is growing throughout
  Southern Africa and is projected to continue
  expanding in Mozambique at 13 per year over the
  next decade
• Government is actively encouraging growth of
  domestic soybean industry to substitute imported
  soy cake, which is a critical and expensive feed
  component for poultry
• Importation of high-priced soy cake is driving up
  prices for domestic poultry, making competition
  with imported chicken difficult
• Leading component of domestic poultry cost is
  feed (74)
• Local production of soy cake should reduce costs,
  improving competitiveness of the poultry industry

Composition of Poultry Feed, Volume (2005)
60
100
1 kg Poultry Feed
20
40
20
Soy Cake
Others
Non-Maize
Maize
Feed
Costs for Chicken Producers in Mozambique (2005)
37 of total costs (50 of feed costs)
corresponds to soy cake expenses
Others Costs
26
74
Feed
Source TechnoServe
33
Soybeans Market Analysis (2/2)
Market
Opportunity to refine waste byproduct oil from
processing soy cake in North will continue to
grow with expansion of soy industry
Soy Oil Potential to Grow
Geography Historically, crude soy oil is
imported and then processed in refineries for
further sale

• Domestic soy oil market is nascent and lacks
  constant input supply, relying almost entirely on
  imports
• However, interest is increasing as soy oil can
  attract a higher price point (18) than vegetable
  oil blends, mainly made from palm oil (an
  inferior substitute)
• When soy cake is separated for soy oil
  domestically, much of byproduct oil is not
  utilized, providing a market opportunity
• This opportunity will only continue to expand as
  poultry demand, and consequently soy cake
  production, increases

Soy Oil Market in Mozambique (2011)
North feed manufactures frequently waste soy oil
by-product after processing soy cake
North Center limited soy oil processing, but
growing interest
North Center limited soy oil processing, but
growing interest
South more mature and largest soy oil market,
refineries import crude oil and refine oil for
sale
Source TechnoServe
34
Soybeans Investment Opportunities (1/3)
Investment Opportunity
There are opportunities in numerous parts of the
value chain, as well as for an integrated producer
Value Chain Analysis
Segment
Current Situation
Opportunity
Players

• Rei do Agro
• Pannar

• Seed Importer
• Fertilizer Factory

Soybean Input Supplier Lack of availability of
seed and inoculants
Soybean Farming Insufficient soybean production
exists within country to meet demand

• Farm

• N/A

• Processing Refining Facility

• Mafuia Oil
• Sanoil
• JAM

Soybean Processing Additional capacity required
for expected growth in demand
Oil Refining Current waste of oil byproduct by
soy cake manufacturers

• Feed Manufacturing

• Novos Horizontes
• Abilios Atunes

Poultry Opportunity to compete with imports to
meet growing need of livestock farmers
Soybean Storage Insufficient warehouses and
silos for storage of locally produced grains

• Silos
• Warehouses

• N/A

Source Interviews, TechnoServe Analysis, Monitor
Analysis
35
Soybeans Investment Opportunities (2/3)
Investment Opportunity
Soy Extraction Refining Center
PRELIMINARY
Invest USD 4.5 M in a Soy Extraction Refining
Center, with inputs and training to get new
smallholder farmers into the supply chain to
enhance supply
Infrastructure
Inputs
Production
Process Refining
Demand
CrudeSoy Oil
RefinedSoy Oil
1
Sourcing Model 20 from own farm and 80 from
smallholders (assistance for training, seed
selection, credit)
4
Targets Domestic consumers
Targets Domestic consumers
Soybeans
Soy Cake
Feed
2
Processing Facility Capacity to process more
than 9 M ton/ year of soybeans
Legend (Color of Pictures)
3
Products Refined Soy Oil Soy Cake
Own Company
Partner/ Consumers
Source Interviews, TechnoServe, Monitor Analysis
36
Soybeans Investment Opportunities (3/3)
Investment Opportunity
Invest in a soy extraction refining center in
Mozambique to achieve attractive margins and
returns, with strong social impact
Soy Extraction Refining Center
PRELIMINARY
Revenue EBITDA Margin Expected (in 000 USD
and , 2014-2018)
Key-Financial Indicators

• Famers Yields between 1.0 ton/ ha (rain fed
  farm) and 3.0 ton/ ha (irrigated farm)
• Crop Sales Price USD 0.39/ kg
• Number of smallholders increase from 500 up to
  1,600, with average land of 2 ha/ farm
• Cost per hectare between USD 320/ ha and USD
  1,100/ ha1
• Investment estimated total CapEx of USD 4.5 M2,
  90 invested on the first two years
• Return expected similar investments has reported
  IRR up to 19

Revenue
EBITDA Margin
27
29
22
10
-524
Year 5
Year 4
Year 3
Year 2
Year 1
Note 1) Dependent of the number of smallholders
added by year 2) Potential irrigation to assist
farmers not modeledSource Interviews,
TechnoServe, Monitor Analysis
37
Banana
Executive Summary
Market

• Opportunity to meaningfully increase Mozambiques
  banana exports
• Demand imbalances exist in the Middle East, the
  Mediterranean, and to a lesser extent Southern
  Africa
• Year-round, high-yield crop potential within
  Mozambique provides additional export
  opportunities and improved margins
• Potential for lower farm costs than other
  competitors

Investment Opportunities

• Value chain integration is the basis for an
  attractive investment prospect
• Opportunity for an investment of 56M in a 300
  hectares commercial banana plantation leveraging
  nearby producers to achieve scale at lower
  investment levels

38
Banana Market Analysis (1/2)
Market
Mozambiques banana industry is well situated to
benefit from both its geographical position as
well as potential cost advantage
Mozambique Competitive Advantage
Banana Trade Balance(in 000 tonnes, 2001 2009)

• Ability to feed large demand imbalances in the
  Middle East, the Mediterranean, and to a lesser
  extent Southern Africa
• Demand imbalances have increased at different
  paces in these regions over the last years, with
  greatest growth in Europe
• Europe Has competitive export tariff advantage
  for African countries over most of Latin America,
  (value of USD 3 per box)
• Middle East Mozambique has 8 to 10 days1 vs. 20
  days shipping transit time to Middle East when
  compared to Latin America and Philippines
• Mozambiques lower farm to port costs than
  Philippines, coupled with Philippines production
  being diverted to China, has heightened
  opportunity in the Middle East

CAGR
6
2001
1,600
2009
3
994
550
15
443
25
8
Southern Asia
Middle East
Mediterranean
Farm to Port Costs(in USD)
8
Philippines
Mozambique
Note 1) Assuming direct shipping Source
FAOSTAT Interviews with experts TechnoServe,
Abt, Monitor Analysis
39
Banana Market Analysis (2/2)
Market
While companies in the South focus on internal
markets and neighbor countries, companies in
North focus on overseas markets
NON EXHAUSTIVE
Banana Market in Mozambique
Main Companies

• Matanuska invested 60M to date to develop a
  3,000 ha plantation in Nampula province
• At full production, Matanuska plans to ship 100
  containers per week
• Bananalândia exports 40,000 tonnes (80 of total
  production) mainly for South Africa, Swaziland
  and Botswana
• Conglomerate of 5 companies1 exported 35,000
  tonnes per year and created 2,500 direct jobs

1
North exporting bananas to mainly Middle East
from Nacala port
1
2
South responsible to supply Maputo metropolitan
area and neighbor countries
2
3
3
Note 1) Libombos Macadamia, Frutas Libombos, AAA
Enterprises, Tropical Fruit and Rio Verde Source
CEPAGRI Interviews with experts TechnoServe,
Abt, Monitor Analysis
40
Banana Investment Opportunities (1/2)
Investment Opportunity
Value chain integration is the basis for an
attractive investment prospect, with involvement
from farm production through delivery
Farming
Post-Harvest Handling
Transport Marketing
361
31
611
Transportation and Marketing Value Chain ( of
total value added)

• Transport cost is one of the main drivers of
  costs
• It constitutes almost 20 of the total
  farm-to-market value chain, thus being a key
  competitiveness driver for exports
• Another important part of the value chain is the
  cleaning, packaging and ripening of bananas
• Usually small producers do not capture much of
  the potential value of their investments because
  they lack these facilities

Cleaning Packaging
13
19
Ripening
30
Transport
38
Agent Fees
Note 1) Percent of value added in the value
chain Source GDS Monitor Analysis
41
Banana Investment Opportunities (2/2)
Investment Opportunity
A mid-size commercial banana plantation could
generate about 1 M in net income per year with
potential margin increase as yields rise
Mid-Size BananaPlantation in Nampula
PRELIMINARY
Potential Margin per Yield
Key-Financial Indicators
Potential Margin Increase

• Investment 5-6M in a 300 hectares commercial
  plantation
• Yields typical yields range from 36 tonnes/ha
  40 tonnes/ha, with more possible
• Revenue about 5.0M with potential to increase
  with higher yield
• Net Income about 1M per year with potential to
  increase with yield increase
• Expected IRR may vary from 15 - 17 with up to
  potentially 20

With yields above 40 tonnes / hectare, variable
costs become much lower, leading to even more
attractive margins
44 tonnes/ hectare
40 tonnes/ hectare
36 tonnes/ hectare
Source Interviews with experts TechnoServe,
Monitor Analysis
42
Sesame Market Analysis
Market
Sesame is an emerging crop in Mozambique with
high potential for higher valued exports such as
the premium confectionary market ,and organic/
fair trade sesame

• Mozambique has ideal growing conditions for
  sesame, especially in the tropical and
  sub-tropical climates along the coast
• Mozambique could export sesame to markets in the
  Middle East, Asia and Europe
• More immediate opportunities are in export of
  sesame seed, while with increased production
  processing in to sesame oil may become viable
• Sesame is currently mostly exported to Asia and
  the Middle East with no processing
• Opportunity for export of cleaned and de-hulled
  sesame seed to premium confectionary market in
  Europe

1
2

• Mozambique has the opportunity to build origin
  identity to satisfy niche markets for organic and
  fair trade sesame
• As an emerging grower, the current volumes grown
  could justify entering these niche markets for
  potentially higher margins
• Sesame provides high income for farmers, with
  farmers capturing 50 of FOB value

3
Sesame Prices by End Use1 (USD/ metric ton, 2011)
4
Confectionary
Organic
Oil
Tahini
Confectionary and organic markets provide the
highest levels of income
Note 1) Highest recorded prices Source
TechnoServe SNV Expert Interviews Monitor
Analysis
43
Commodities Analyzed
For the sixteen prioritized commodities,
additional information is included in differing
levels of detail to supplement the investment
cases distributed during the Forum
I
II
Rationale for Investment Described
Cashew
Tea
Cassava
Maize
Cotton
Groundnuts
Vegetables
III
Highlights of Opportunities
Pulses
Aquaculture
Forestry
Livestock
Fruit
44
Sugar Cane Market Analysis
More Competitive, Sugar Farmers Could Raise
Production and Export More
With higher yields, Mozambique has produced and
exported more sugar over the past 5 years

• Domestic production has almost doubled over the
  last 5 years and is expected to keep growing in
  both yield and area

1
Sugar Cane Production (real values and
estimative)

• Environment conditions and increased training
  favor the production of sugar cane, such as
• Optimal weather conditions and high-quality,
  available land benefit the sectors expansion
• Training of local farmers, including more than
  USD13 MM in transference of technologies to sugar
  farmers from Europe, has enhanced the quality and
  yield of sugar cane harvested

2
Yield (ton/ ha)
Production (Mt)
4.4
3.9
3.4
2.7
2.3
2.1
2.0
2015e
2012e
2011
2010
2009
2008
2007
Sugar Exports (in 000 tonnes)
76

• Commercial agreements in EU and SACU1 allow for
  exporting with favorable financial conditions

3

• Growing exports for sugar highlight increased
  market potential in the future

4
2011
2007
Note 1) Agreement signed in 2011 SACU (Southern
Africa Customs Union) is the group formed by
Botswana, Lesotho, Namibia, South Africa and
Swaziland. Source Balanço Anual do Açucar (2011)
45
Poultry Market Analysis
Significant Potential for Import Substitution
Makes Poultry a Strong Investment

• Demand for poultry has grown meaningfully across
  Africa
• Poultrys consumption has more than doubled in
  over 10 African countries over the last decade,
  with high dependence of imports from Brazil,
  Asia, and US
• Opportunity for local players to supply this
  demand due to geographic advantages
• While domestic demand in Mozambique has grown
  slightly in past, future demand is expected to
  more than triple in the next 10 years
• Impact of considerable growth in mining as well
  as oil and gas sectors on working population will
  help full domestic demand
• Feed costs correspond to 75 of total costs
  with growth in the domestic soy cake industry,
  potential for reduced input costs could further
  drive demand

1
2
3
African countries has reported meaningful growth
in demand for poultry meat
Poultry consumption has grown less in Mozambique,
but future growth is expected
Poultry Consumption in Africa (in 000 tonnes)
Poultry Consumption in Mozambique (in 000
tonnes)
2000
2007
36
164
133
226
21
1,228
137
904
42
35
145
57
55
24
Zimbabwe
Angola
South Africa
2020e
2010e
2000
Note Djibouti, Comoros, Cape Verde, Ghana,
Gabon, Gambia, Angola, Democratic Republic of the
Congo, Zimbabwe, Congo, Sao Tome and Principe and
Guinea. Source FAO, USAID, TechnoServe, Monitor
Analysis
46
Tea Market Analysis
One of countrys larger export crops, with
opportunity to recapture past success
Great potential exist to utilize available land
to increase production

• Despite much higher yields than before the civil
  war, total production is lower due to unused land
• Signifies opportunity for potential investors who
  wants to capture unused potential

1
Yield (tonnes/ha)
Total Production (tonnes)
89.0
32.0

• Mozambiques tea industry is undergoing
  impressive growth with a 16 production increase
  in the last year

2
2011
1973
2011
1973
Production is increasing rapidly

• There is still available, unutilized land with
  high tea growing potential
• Zambezia province alone has 39,000 hectares in
  Gurue, Ille, and Milange districts
• Of 22,400 hectares specifically allocated for
  tea, only 18 are in use

3
Production (tonnes)
17
2011
2010
Source Balanço Anual do Açucar Expert
Interviews Monitor Analysis
47
Cashew Market Analysis
Opportunity to Regain Position as One of Worlds
Top Exporters

• Prior to independence in 1975, Mozambique was one
  of the leading producers / exporters of cashew
  nuts, evidencing the countrys suitable climatic
  conditions and knowledge
• Production was once as high as 200,000 metric
  tons (versus 65,000 today)
• A significant limiting factor on Mozambiques
  success (diseased trees), can be relatively cost
  effectively prevented
• Spraying the trees against disease greatly
  improves productivity

1

• Cashews can be grown throughout much of the
  country, but are particularly successful in the
  Nacala corridor
• Significant government and donor efforts are
  underway to revitalize the industry. For example
• INCAJU (Government Cashew Initiative) plans to
  grow 3.3 million cashew saplings in 2012 to be
  planted as new trees
• TechnoServe now supports 16 cashew processing
  plants with 36,000 metric tons processing
  capacity

3
4
2
Spraying trees greatly increases productivity
Cashew nut yields (kg/tree)
Sprayed Tree
Yield Gap
Current Yield
Source FAOSTAT TechnoServe African Cashew
Initiative INCAJU Expert Interviews Monitor
Analysis
48
Cassava Market Analysis
New Processing Technology Expands Market
Opportunities for Cassava

• Cassava does and will continue to have a strong
  demand advantage versus other staple crops in
  Mozambique, particularly in the north
• Cassava is an easy-to-produce and
  drought-resistant crop with food security
  importance
• Substitution opportunities exist for cassava
  within Mozambique, given strong cost advantages
  over other commodities
• Cost for cassava is roughly half of some related
  commodities
• Example Up to 25 of wheat1 used in bread can be
  substituted by cassava at 55 of cost
• Potentially significant market opportunities have
  been created by a mobile cassava processing unit
  created by DADTCO
• This allows for additional uses of cassava in
  livestock feed, industrial raw materials, alcohol
  brewing, and ethanol
• For example SABMiller will invest an additional
  124 M over the next two years to continue to
  develop its cassava beer (Impala), made possible
  by the mobile processing units

1
2
Others
Rice
Wheat
Maize
Cassava
3
60
55
343
86
Potential for Cassava Substitution
Wheat Used in Bread Industry
Maize
Wheat
Note 1) Wheat has the highest production deficit
in Mozambique Source FAOSTAT MSU Promar
Monitor Analysis
49
Maize Market Analysis
Opportunity to Substitute Imports, Meet Poultry
Demand Growth and Boost Rural Income
FOOD SECURITY NUTRITIONAL IMPORTANCE

• Maize is one of the most consumed staple crops in
  southern African, with high relevance in terms of
  food security
• Though 71 of all farms in Mozambique produce
  some maize, most rural households are net buyers,
  and the country need to import 99,000 MT yearly
• Additionally, increasing demand for feed will
  parallel poultry industry growth in domestic and
  foreign market, including meaningful exports to
  Malawi and Zimbabwe
• Several key investments particularly in the
  high potential Northwest of Zambezia, West of
  Nampula, or Central and South of Niassa could
  help transform the country into a regional
  breadbasket
• E.g. Invest in silos and adequate storage
  processes to reduce post-harvest waste and
  aflatoxin contamination

1
Area Harvested, 000 ha (2010)
LAND
2
01
Maize
02
Cassava
03
Legumes
3
Food Consumption, in of total consumed (2004)
CALORIES
01
Cassava
35
4
02
27
Maize
03
Sorghum
6
PROTEINS
01
36
Maize
02
14
Cassava
03
Pulses
13
Source FAO USAID Monitor Analysis
50
Vegetables Market Analysis
Opportunity to Substitute Imports and Export
Additional Crops to Nearby Countries
1

• Vegetables in Mozambique are an important income
  earner with high growth forecasted
• Despite occupying only 6.6 of cultivated land,
  they accounted for USD 15M and 3,500 jobs in
  2009
• World Bank projects the total formal domestic
  vegetable market will be USD 100M by 2021 from
  USD 65M in 2006
• Vegetables present a significant opportunity for
  import substitution within Mozambique
• The three largest vegetable crops are tomato1,
  potato, and onion. Combined they represent a
  local supply deficit of 310,000 metric tons

2
Consumption of Vegetable Crops (metric tons, 2011)

• Recent entrance of supermarkets such as Shoprite
  and Game, as well as mining operations, provide
  potentially large buyers of locally grown
  vegetables

3
Import
Production

• Export of vegetables is also an option for
  Mozambique
• Most of Southern Africa cannot produce
  frost-sensitive export crops like baby-corn,
  beans, and chilies during winter months but
  Mozambique can, particularly in the tropical
  coastal climates found in the Beira corridor

3
379.250
4
283.800
44
31
133.250
56
40
69
60
Potato
Onion
Tomato
Note 1) Actually a fruit, but grouped with other
key value chains of potatoes and onions Source
TechnoServe Ministry of Agriculture World Bank
Monitor Analysis
51
Cotton Market Analysis
A long, successful history of export, with
significant productivity improvement potential

• Mozambiques cotton lint has a long history in
  accessing important international markets,
  traditionally in Europe as well as more recently
  in Asia

1
Possibilities for Cotton Production

• High potential for increased productivity
• Current productivity is one of the lowest in the
  world (380 kg/ha)

2

• Opportunities for ginning of cotton for export of
  high quality cotton lint and processing of cotton
  seed into oil and cake

3
3
4
380.0
Kenya
Mozambique
India
USA
China
Israel
Source TechnoServe GDS Interview with experts
Monitor Analysis
52
Groundnuts Market Analysis
Production has been increasing rapidly to meet
food and oil demand growth
Significant production growth in Mozambique

• Already, widely grown in Mozambique, groundnut
  production has been increasingly rapidly to meet
  growing demand