Strengthening the fertilizer value chain in Africa

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2 Strengthening the fertilizer value chain in Africa Imane Belrhiti Vice President for Africa Sales OCP Organization logo to appear here

3 Africa current demand and potential Distribution in Africa and its challenges OCP actions on the field and achievements

4 Africa is growing significantly during last years African DAP/MAP/TSP/MGA/Rock imports in KT P 2 O 5 6,9% Source: IFA Source: IFA

5 especially compared to the other continents ,0% Phosphate consumption in MT P 2 O ,2% % 3,4% 3,4% 3,4% 6,9% 3,9% -5,6% 0 East Asia South Asia Latin America and the Caribbean North America Western and Central Europe Eastern Europe and Central Asia Africa Oceania West Asia Source: IFA

6 yet the potential is still far from the reality Africa s maximum theoretical fertilizer potential consumption Africa s potential in comparison to Asia in terms of fertilizer consumption per capita Cultivated area in Africa 226 MHa 226 MHa MHa Asia Africa = 20.4Kg nutrient/capita Asia 24.9 Nutrient consumption per Ha 21 Kg/Ha 150 Kg/Ha 150 Kg/Ha 15 Total nutrient consumption 4.7 MT 34 MT 175 MT Africa Source: FAO, IFA

7 Africa current demand and potential Distribution in Africa and its challenges OCP actions on the field and achievements

8 Yields (T/ha) Distribution can improve significantly Farmers yields Agricultural potential realization is correlated to the use of fertilizers Distribution is still the weakest link in the value chain Maize compared yields Canada Agricultural inputs producers: Awareness of African potential More volumes towards African market Australia USA Port logistics: Investments in ports logistics Effort to reduce congestion 6 6 Argentina Malaisia China EU South Africa SubSaharian Africa India Brazil World Mexico Indonesia Fertilizer application rate (Kg/Ha) Distribution: The unique access to the smallholder farmer The weakest link in the value chain Output market: International demand of agricultural crop in continuous increase Africa can be the solution to the global world food insecurity

9 Distribution in Africa is mainly PULL driven Pull mode Supply trying to answer existing demand Little effort to create new markets (new formulas more adapted, new customers, new crops ) High competitiveness between distributors on small existing markets, especially public ones 2 different markets : public and private A public market (~1/3 of the market) done through tenders A private market (~2/3 of the market) more fragmented and requesting more commercial and business development effort Limited size and presence Except for YARA, LDC and ETG, other distributors are small and have very limited presence in the continent

10 Distributors bear all the risks in public markets Tender example in Western Africa Cahier des charges engrais septembre 2014 Distributors issues linked to this kind of tenders Volume : 135 KT NPK, two formulas Participation of many players, even the ones that are not in the fertilizer business Lots number: 26 lots of different sizes from 700T to 16000T Limited lots sizes do not help improving raw material purchasing and logistics Bank Caution: 14 euros/t Price validity period: 3 months after opening of tender Delivery schedule: 4 months following tender offering Needed commitment on prices for more than 4 months within a volatile market Payment terms: 240 days after delivery of each lot High financing costs to cover the payment terms No Force majeure accepted Fertilizer quality is not usually considered as a priority compared to the price

11 In the private sector, distributors are facing issues limiting their development Urea price delivered to farmer ($/T) Constraints Effects Lack of structure And / or Margins not enabling investments Very high delivered prices And / or USA Thailand Ghana Kenya Mozambique Mali 0% 2% Urea Cost structure delivered to farmer in % 12% 16% Margins Taxes Finance cost Inland transport 3% 7% 36% 3% And / or Products offered rarely adapted And / or Variable efficiency of the fertilizers proposed And / or Weak coverage 72% Urea CFR bagged 51% Training And / or And / or Lack of framer training USA Mali Financing Source: OCP, IFDC

12 Africa current demand and potential Distribution in Africa and its challenges OCP actions on the field and achievements

13 OCP tries to address some of the distributors constraints Constraints Lack of structure Volume allocation, dedicated capacity, priority given to the distributors, flexibility of the offer Margins not enabling investments Package contract : Incentives to agricultural development initiatives Products offered rarely adapted Development of new formulas and R&D Training Expertise sharing, training programs and industrial sites visits Financing Flexibilization of payment terms

14 Dedicating production capacities to Africa to help distributors Committed to serve African demand Commitment to deliver all the volume needed for African demand growth 1 MT granulation unit dedicated to Africa (P import market of almost 3 MT) Flexibility of the offer to address the different needs of the distributors

15 Package contracts enabling distributors to improve margins and encouraging them to invest Package contracts description Package Contract OCP sells fertilizers to its distributors Local distributor Distributor commits to promote the best use of fertilizers and accompany the farmers Farmers beneficiate from extension services provided by the distributors in order to help them improve their productivity OCP co-finance the distributor TOGUNA/MALI Entreprise privée malienne. Un des plus grands distributeurs d intrants agricoles en Afrique de l Ouest. Activité commerciale dans toute la sous région. Distribution d engrais, de semences, de produits phytosanitaires et de matériels agricoles (irrigation, ) Zone d activité Offre des services d extension à ses clients : conseil agricole, analyse de sols, formations, caravanes de vulgarisation des bonnes pratiques, ONE ACRE FUND/AFRIQUE DE L EST ONG internationale fermiers servis en Afrique de l Est. Ils adoptent une vision globale de la chaîne de valeur agricole : ils distribuent les intrants agricoles à crédit, fournissent une assurance, forment les fermiers et les aident à commercialiser leur production.

16 In partnership with ATA, OCP has developed fertilizers adapted to Ethiopian soils Fertilizer distribution is mainly done through the Government Development of new formula more adapted to soil enabled yield improvement Producers/ Traders +25% Compared yields (in T/Ha) +12% +10% +15% Teff Barley Maize Wheat Urea & DAP Urea & NP+ Ethiopian Government Farmers organizations/ smallholder farmers Ethiopian farmers have chosen NP+ over the DAP starting from 2014 Source: OCP, ATA

17 OCP contributes to farmers training on technical and agronomical levels Technical support and expertise sharing Participation to distributors and agro-dealers training sessions Mali caravane in partnership with Toguna Réception de 2 délégations de petits distributeurs en coopération avec l AFAP et l IFDC et visites des sites de production OCP Technical support for technology development Programme 2015 de formation de 65 agro-dealers en Côte d Ivoire et au Ghana en coopération avec l AFAP et AGMARK Source: OCP, AFAP

18 OCP Stratégie achievements de développement in Africa en Afrique : des résultats très encourageants PORTFOLIO PORTFOLIO MAP 9% TSP 43% DAP 48% 50 kt fertilizer X13 sales volume +15 countries +11 fertilizer formulas TSP 5% MAP 8% DAP 18% NPK+ 39% Rock 2% NP+ 28% 665 kt fertilizer LOGISTICS Bulk carrier +15 new customers +20 container loading Parcelling Multi destinations LOGISTICS Containers Multi clients Vrac/ensaché Distributors share Distributors share Source: OCP Traders 91% 18 Distributors [POURCENTAGE ] +53% in distributor share Traders 38% Distributors [POURCENTAGE]

19 Thank you for your attention