We’ve invested over $1bn to achieve self-sufficiency in rice production–Owoeye, Elephant Group boss

In its effort to discourage rice smuggling and boost local production and investment in its value chain through backward integration, President Goodluck Jonathan in May this year approved the 2014-2017 Fiscal Policy Measure on Rice.


The new fiscal policy, which was a review of the 2013 Fiscal Policy Mea­sure significantly reduced the levy on husked brown and semi-milled or wholly milled rice to 10 per cent duty and 20 per cent levy for investors with rice milling capacity from 100 per cent that obtained in the former fiscal policy. But for pure traders, government reduced the levy to only 10 per cent duty and 60 per cent from 100 per cent. The policy was also to significantly boost food security.

Before the policy came into place, Nigeria has been a net importer and highest consumer of imported rice in Africa as statistics from the Federal Ministry of Agriculture show that she spends N356 billion yearly on rice importation.

But Tunji Owoeye, Managing Director of the Elephant Group, with presence in Nigeria, Senegal, Ghana, Cameroon and Niger Republic and the National President of the Rice Millers, Importers and Distributors Association of Nigeria (RMIDAN), said this would soon become his­tory as local manufacturers gear up towards bridging the gap.

According to him, the Federal Gov­ernment’s backward integration has had a lot of positive impact on the local manufacturers, who hitherto were importers, but have now gone into full production.
He speaks more on the collabo­ration with government and other stakeholders, and the country’s future in rice production.


Excerpts:
Impact of government’s policy on backward integration
Without doubt, government’s policy on backward inte­gration has had a lot of positive im­pact on the industry. Impact in the sense that it has prompted us into ensuring that we take seriously the aspect of production and processing as against huge reliance on importa­tion of commodities. In the last two years, government has been consistent in the campaign of its ag­ricultural transformation. Take the rice issue, for instance, we all know there is a gap between production and consumption, so what govern­ment has done through the Minister of Agriculture, Dr. Akinwumi Ad­esina, is to ensure that we are given incentives that will encourage us to go into backward integration and I must tell you at this stage that this is really working. As the Chairman and President of RMIAN, one has seen a lot of increase in the invest­ments by our members in both local production and processing. In the last two years, our members have seriously taken up additional invest­ments in increasing their milling and production capacity, so I think it is working.

Some people have said that the government’s backward integra­tion policy has created an avenue for people to take advantage of the loopholes in the policy to smuggle in rice from neighbouring countries and as an association, we also saw it from that perspective. But as we began to work with government in the areas of border strengthening and policy reviews, we’ve seen a lot of improvement. I will tell you what it was in January 2013 is not the same story today. Yes, when the policy was changed, there were a lot of bombardments at the border flanks, especially Niger Republic, Benin Republic and Cameroon. But government has been proactive, I must tell you, by working closely and seriously with the association on the policy in terms of building structures that would work. You would have seen that government, within the last 18 months, has moved away from the 100 per cent levy, back to 60 per cent levy, so I give kudos to them for being proac­tive and sensitive to the dynamics of our market and we have adjusted to suit the challenges we face.

The issue of smuggling is a hydra-headed monster, not only in rice but in all commodities. You will find the same problem in veg­etable oil, sugar, auto, cement and other commodities. I think that in as much as government is sensitive and proactive, we will get the re­sults and that seems to be the case. Without patronising government, I must salute the efforts of the Minis­ters of Agriculture; Industry, Trade and Investment and the Coordinat­ing Minister of the Economy and Minister of Finance for accepting to take a second look at review­ing the rice policy. The policy has been reviewed and is now double pronged in the sense that for inves­tors investing in the value chain, there are additional incentives. This is attracting additional capital investment from industry players away from just trading.

Also, smuggling is being ad­dressed by policy adjustments and the Customs have been proactive as well. This year, we’ve seen Customs taking pains to go through every document of goods in transit, which has really put a lot of fear into smugglers. When you see things happening positively in our environment, one has to commend it. Indeed, it is not everything that is happening in Nigeria that is negative. I have seen over the last few months that government has done remarkably well in the area of revision and implementation of the rice policy in the country and I can tell you that we are beginning to see the results in terms of invest­ments and in terms of acreage. For a company like ours, the Elephant Group, it was not part of our aspira­tion to go into rice production but today, we are in our third harvest and we are growing rice in about three states and we have thousands of out-growers, as well as a lot of communities that we have adopted and there are other competitors in the industry that are doing the same thing, which is helping the people of these communities in gainful employment.

Meeting local demand
No! Millers have not been able to meet the demand of rice in the country and that is why you have the demand gap. And government in the new policy has identified the need to allow imports for the shortfall between consumption and local production. I must thank government that they gave us the opportunity to partake in the committee, so we are also contributing to the policy that af­fects us as players in the industry. We have also assured government that we would take ownership for the success or failure of this policy, because they allowed us to come and propose what we think is work­able and I think this is noble.

Public, private sector partner­ship
As a private sector company in the agriculture business in Africa, we welcome the president’s transformation agenda. Since the new government started, policy structures have been developed although there are limitations as to how far we can go at the moment, because of non-existent infrastruc­ture. We have seen that govern­ment is interested in supporting the efficiencies of value chain in agriculture.
Since this government came into power, it has not been part of the procurement, having left it to the private sector. That gives serious operators in this business the op­portunity to integrate and expand the market and put themselves out there and gain more market share. We need government to work much more closely with operators to develop the value chain together. Within six to eight years, we can get to our destination but not within the tenure of the present govern­ment.

Marketing of smuggled prod­ucts
There was a period when we alerted them not to support smugglers to distribute smuggled goods and it was something they took in good stride. I must com­mend them as well that the situation is getting better by the day. They are part of the value chain because they ensure that the goods get to the consumers. We engage them regularly to enable them access in­formation, and our relationship with them has been quite cordial. We cannot work without them and they cannot work without us. Together we have been working to ensure that government’s target of rice sufficiency set for the country is feasible. From both the theoretical and practical perspectives of setting targets, these are meant to be reviewed periodically. The target for rice sufficiency in 2015, I think, was set three years ago, but there have been some setbacks in the area of smuggling, which government has addressed by amendment of the policy. I think the target should be revised and I’m sure that in the next three years, if the organised private sector continues to go at the pace we are going and given consistency in government’s policy, with the passion and the level of investment we have committed, we should be close to the target. And I think that is not a serious departure from what govern­ment has said originally.

Govt investment in rice production.
With what we have seen from our members in the last one year, the investment has been in excess of $1 billion. I can tell you that the market is adapting well to homegrown rice. Both the homegrown and foreign-grown rice come in the form of paddy. I think the only difference between them is the level of sophistication of processing, which is also being corrected in Nigeria, because some of the mills we use today come from renowned equipment manufacturers that other nations we are importing from are using. For instance, in Thailand and India, most of these machines are from similar manufacturers, but the level of sophistication in the polishing and de-stoning is the main difference. However, most of the mill­ers today are beginning to install good equipment and de-stoning machines to be globally competitive. If you go to the factories of some of our members and see the rice produced and then com­pare it with what is being imported, you will discover that there is no difference, as the homegrown rice is as competitive as what we bring in and I believe we have re­ally moved up.

Fluctuations in price of rice at Christmas and new year
Generally, prices are dictated by the forces of demand and supply. Internationally, we have seen what is happening in other countries. For instance, Thailand is sitting on more than 20 million metric tons inventory of rice over the last two years, same as India, while Vietnam and Brazil are also shoring up their capac­ity. I think because there is a lot of production going on and also imports, the prices will not necessarily be out of reach, as our members who are producers and those who only import always plan for this period and if you put both together, I don’t think there will be any serious threat with regard to price increase.

How to make agriculture attractive to youths
Given its not too en­couraging disposition to agriculture, part of what Elephant Group has done is to conduct a lot of training for agro entrepreneurs across Nigeria and some African countries where it has opera­tions and the idea is just to sensitise young school leav­ers to embrace agriculture as a business. You must have noticed that there is a group of agro entrepreneurs in the country. It is a massive group put together by government.

Also, President Goodluck Jonathan has created an arm in the Presidency being su­pervised by Mrs. Barka Sani, a Senior Special Assistant to increase the level of agricul­ture awareness in schools. This will not only sensitise young school leavers, but also help them to develop in­terest while still in secondary school and maybe influence their decisions in going into agriculture. Because they will be made to see that they can make money in agricul­tural endeavours like fishery, cassava, timber, rice, cocoa to mention a few.
Under the programme, as companies and agribusi­ness ambassadors, we will be adopting schools across the country, encouraging them to grow what is found in the region on their school farms, supporting them with money and at the same time mentoring them. I believe that once this is in place and is sustained, it has the potential to displace some white collar career choices among our teeming youths. Just like it used to be in those days when cocoa was booming, you find young school leavers not taking up paid employment but rather preferring to be local buying agents for cocoa because they knew it would fetch them more money. So we are coming back to such a time again when the opportuni­ties in the agricultural value chain will be seen to be more profitable than white collar jobs.

Expectation from agric-based firms going forward
We see a lot of compa­nies, even the new ones that are coming into agribusiness moving from small companies to medium companies to large compa­nies and to public quoted companies. Before now, most parents never wanted their children to become farmers, but with million­aires and billionaires spring­ing up from the agricultural sector, shouldn’t the message be changed to reflect the trend? First, let us not lose cognisance of the fact that there is need for us to acquire basic education, because education is key in the prac­tice of agriculture today. You could be a medical doctor, an engineer or a lawyer. I am a chartered accountant, it doesn’t stop you excelling in agriculture. So what we are saying is that irrespective of your background, we should all embrace agriculture as a way of life, and will deliver decent profits to us. Our dreams, while we were in school, were not to go into agriculture as many people were running away from it. But we found opportunities in agriculture and came back to it irrespective of our pro­fessional backgrounds and we have no regrets. I want to encourage every Nigerian and African youth that farm­ing is not for the poor and ignorant. It is a profession that can lead to extreme pros­perity and it is something that we all can do.

Aspirations
Our main aspirations are to feed our people and to increase the number of people we engage in employment. As a company, we want to increase our em­ployment numbers and that gives us a lot of joy when we are able to support the government in taking people out of the street, especially serious-minded, disciplined people.
We also want to ensure that our products are avail­able in all parts of Nigeria and Africa and we consis­tently have been doing this. As a company, we also ensure that the quality of our products rival the best you can get anywhere. We want farmers to come back, we want traders to come back and tell us that, oh, this is what we bought from you and it gave us increased output – all this will give us joy.

Nigeria’s pov­erty challenge
Frankly, pov­erty level in Africa is still high and I think Nigeria is one of the best numbers we have in the continent, though I think as Nigerians and Af­ricans, we have responsibil­ity to make a bold statement to the world. In the sense that the only place you have land bank in the world today is in Africa and when you say Af­rica, of course, you know the place of Nigeria in Africa. So when you are talking of poverty alleviation, I think with the kind of seriousness the government has shown towards agricultural trans­formation and with the op­portunity afforded us by the huge acreage of arable land in Nigeria, which I believe is the single most important factor in poverty alleviation, it can be attained. We are delighted that government has taken a second step in supporting agribusiness because we quickly need to move away from subsistence agriculture to mechanised plantations. That is why the kind of new policies the gov­ernment is churning out with incentives to investors along the value chains are helping to encourage companies like ours to invest more money into agriculture. In as much as we keep having these kinds of policies that attract investments, what we need to do is to amend the Land Use Act, which I think shouldn’t be a problem given that we already have a land bank and in a few years the issue of poverty can be considerably addressed.

Corporate social respon­sibility programmes
The benefit for this company is that we have been able to em­power more people and we have been able to increase production. We are an input company, so they have increased production and yields, and they are able to take care of themselves. At the end of the day, we will be able to put them all together, process and convert them into finished products via backward integration. Whichever way you look at it, it is a win-win situation for us. We see ourselves as Africans with an objective to empower Africans and train and develop African entrepreneurs, especially in agribusiness. Nigeria has the third largest population in the world after India and China, and because of that, we believe that as entrepreneurs and as a company, if you do not support and empower the people around you, you cannot say you have genuine success. For instance, you can’t say you are comfort­able, your family is comfort­able and you do not have any problems. Because of that, we have taken it upon ourselves to employ as many people as we can, not only in Nigeria but also in places like Ghana, Cameroon, Ni­ger and we are reopening our offices in Togo and Benin and other sub-regions of the continent. Our business is across Africa and we ensure that we empower people and have more food on the table. As we assist African people, we also get better values in terms of funds and expand­ing the company.

Vacation
I take about three weeks off in a year and my perfect vacation would be to visit an African country that is serene and close to nature. Africa is a land of opportu­nity, irrespective of the area we look at it, both economi­cally and socially. If we can develop our tourism, more people will come to Africa for leisure and business. Al­ready, you see more foreign­ers spending their vacation in Africa because of the natural and serene environment. As Africans, we should value our culture and the products made in our country.

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