#1JICA Market research of high priority investment sectors in Côte d'Ivoire Agro processing & machinery report May 2021#2Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 2#3Return to table of content Table of contents > Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 3#4JICA Context: JICA's market study aims to accelerate Japanese companies' business in CI and improve the investment environment • The Africa-Japan Business Council was launched under the initiative of the 7th Tokyo International Conference on African Development (TICAD7) in August 2019 to improve the business environment in 7 African countries with the aim of increasing Japanese investment · With this goal in mind, JICA has conducted a study to promote investment by Japanese companies in selected sectors in CI, and improve the overall investment environment As a result of high-level assessment, JICA has identified agro-machinery/processing and waste management as two high priority sectors and is conducting detailed market research with BCG that can be utilized by Japanese companies' business consideration in Cl This report summarizes the output from the market research (including size/growth, competitive landscape, regulatory landscape, value chain analysis, etc.) which was done through extensive interviews with key market players & selected government agencies to identify investment opportunities for Japanese companies in the agro processing & machinery sector#5JICA Approach: 14-week effort on overview of investment landscape, market research on the 2 high priority sectors, and synthesis 3 weeks Desktop research 11 weeks 1 2 3 Sector prioritization Market research (8-9 wk) (1-1.5wk) Synthesis (1-1.5 wk) • Conduct interviews with key market players & selected government agencies • Data analysis on FDI • market trend analysis and health check Analyze relevant policy • and IPA analysis Validate JICA's suggestion on the · Conduct desktop market research (e.g. market reports, data analysis) priority sectors Propose 2 sectors for market research Build alignment with JICA/JETRO on the sector prioritization • • • . · (mostly virtual but could be done in-person when necessary) Conduct interviews with Japanese companies interested in the 2 sectors Develop initial outputs from market research and share them with Japanese stakeholders (JICA/JETRO/EOJ and selected Japanese companies) for their comments Finalize the market research outputs based on inputs from the Japanese stakeholders Develop recommendation for JICA/GOJ to further promote FDI in the 2 sectors Develop final report 5#6Return to table of content Table of contents Overview of focus of study > High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 6#7JICA Côte d'Ivoire has a strong momentum and is rapidly becoming a leading player in the region #2 in West Africa for ease of doing business¹ Climbing from 170th place (2010) to 110th place (2020) worldwide 8% GDP CAGR from 2011 to 20192 Second fastest growing economy in Africa, and fastest in West Africa #4 fastest growing infrastructure devt. Index in Africa³ Significant investments to improve infrastructure (especially transport) 0.8% Inflation rate in 20194 Stable CFA currency (fixed rate with the euro) keeps inflation rate low #2 Highest FDI to GDP ratio in West Africa with $1.8B total5 Large volume of FDI mainly from France, with strong momentum from Morocco 120M Population accessible through the Port of Abidjan Gateway to West Africa (including many landlocked. countries) with the most modern port in the region 26% of Ivorians belong to the middle-class Growing middle-class (beyond the capital city) driven by GDP growth 1. Doing business 2020, World Bank Group - #1 country in West Africa is Togo 2. World Bank data 3. Africa Infrastructure Development Index (AIDI) 2020 4. Côte d'Ivoire Economic Outlook, African Development Bank 5. fDi Markets; Press Search – represents greenfield investments 6. La Côte d'Ivoire en chiffres, CEPICI 7. Ecole Nationale de Statistiques et d'Economie Supérieure Appliquée#8Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire > Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 8#94 key points from Côte d'Ivoire's investment environment health check analysis Côte d'Ivoire is performing relatively better than Kenya and Senegal but lagging behind regional front runner Ghana They perform relatively well than peers in market access and connectivity On the other hand, there are areas for improvement in FDI incentives and talent and innovation Côte d'Ivoire is relatively better positioned to excel in efficiency-seeking FDIs compared to market- seeking FDIs 6#10JICA Investment environment health check vs. peers: Côte d'Ivoire performing well relative to African average but room to catch up with regional front runners Burkina Faso Nigeria Senegal Ethiopia Guinea Kenya Cote d'lvore Ghana Rwanda Morocco South Africa Singapore # 0 3.02 3.27 West 3.30 Sub-Saharan 3.42 3.46 3.51 3.58 3.63 Africa 3.90 4.30 4.62 4.87 4.93 5 8 Africa Africa average average Scoring methodology explained on slide 15 Source: World Bank Data; Global Competitiveness Index; BCG Analysis (Best in class) 10#11JICA Overall result: Côte d'Ivoire is performing relatively well overall though lags behind Ghana mainly in FDI incentives, talent and innovation and political stability BCG Health Check Score (out of 8) Cote d'Ivore 3.90 Ghana 4.30 Talent & Innovation. Stability And Security Business Environment Market Access Cote d'Ivore Connectivity Senegal Ghana Kenya Cost Competitiveness ...... West Africa FDI Incentives Senegal 3.46 Kenya 3.63 West Africa 3.27 Note: FTA - Free Trade Agreement; WW - Worldwide Source: Press search, BCG Analysis Good market access due to relatively strong trade position in the region Good connectivity driven by competitive quality of infrastructure in energy and transport and strong Logistics Performance Index High cost competitiveness due to good transport infrastructure, low ICT cost and low corporate tax Moderate conduciveness of business environment driven by moderate ease of doing business rating and strong labor flexibility Moderate political stability and security due to weak checks and balances though they has been increased transparency and openness in governance ☑ weak attractive FDI incentives resulting from weaker regulatory measures × Lag in talent and innovation driven by lower skilled labor force and low innovation capability 11 Scoring methodology explained on page 15#12JICA Backup Indicator breakdown: Côte d'Ivoire is behind Ghana and on a number of indicators but performs well in connectivity Subcategories Business environment Connectivity The utility cost could be less competitive than peers 1 (To be verified in the field visit phase) Cl: 21 cents/kWh Ghana: 13 cents/kWh Kenya: 18 cents/kWh Cost competitiveness FDI incentives Market access There is no comparable data available. Competitiveness to be verified in the field visit phase Indicators Ease of doing business Financial System Incidence of Corruption Labor Market Flexibility ICT Adoption Infrastructure Logistics Performance Index Corporate Tax Cost of Electricity Cost of ICT Cost of Labor (Accountant) FDI Incentives Consumer spend per capita (Log) FTA Coverage of WW GDP GDP growth Population (Log) N/A N/A Cote d'Ivoire Senegal Ghana Kenya West Africa 73 2.19 2.66 2.03 3.20 2.13 2.01 31 4.4 3.83 4.36 .64 Green: Major strengths Red: Major weakness Stability and security Talent and innovation Trade/ GDP Checks and balances Macroeconomic Stability Political Stability & Absence of Terrorism Security Innovation Capability IP protection Labor Force Skills Quality of Life N/A 0 2 5 3.28 3.66 17 4 Note: FTA: Free Trade Agreement; WW: Worldwide; N/A: Sufficient data not available; Data for Quality of life unavailable for West African countries 1. The price of electricity for households and businesses as of September 2019 (Global Petrol Prices). Data for Senegal is not available Source: Press search, Global Petrol Prices, BCG Analysis 6 6.C 12 Scoring methodology explained on page 15 8#13JICA Backup Ease of Doing Business ranking: Côte d'Ivoire is gradually improving over the past 5 years. Major improvements have made in starting a business and resolving insolvency indicators 0 50 50 100 150 200 2011 2012 2013 2014 2015 2016 2017 2018 2019 110 123 139 139 145 142 AHI 167 167 173 Ease of doing business country ranking Cote d'Ivoire Senegal Mali Burkina Faso Benin Kenya Rwanda Nigeria Ghana Source: World Bank Ease of Doing Business Index; BCG Analysis 13#14JICA Backup Global Competitive Index: Côte d'Ivoire has been gradually decreasing since 2015 due to comparatively poorer performance in education, institutions, infrastructure indicators etc. 0 50 50 100 150 2011 2012 2013 2014 2015 2016 2017 2018 2019 115 129 129 131 Ease of doing business country ranking Cote d'Ivoire Senegal Ghana Nigeria 91 99 South Africa Mali Kenya 114 118 Cl data in 2017 not available Rwanda Relative positioning and historical trend differs by index (e.g. East of Doing Business vs Global Competitive Index). It is important to capture real situation on the ground (to be verified in the field visit phase). Source: Global Competitive Index by World Economic Forum; BCG Analysis. 14#15JICA Analysis approach: 5-step approach used to compute Health Check scores 1 Consolidate information used as • . inputs Raw indicator scores for all countries retrieved from public sources E.g., GDP growth information sourced from World Bank Indicator and sub- category weightings for each investor type developed through expert input (range of 0 - 2, with increments of 0.5) 2 Convert raw indicator scores to scaled scores Set up scaled score range of between 0 (bad) and 8. (good) For each indicator, raw figures indicating worst performance given a score of 0, best performance given a score of 8 E.g., Ethiopia has highest average GDP growth rate post-2009 recession at 9.9%: given a score of 8; Yemen has lowest rate at -4.1%: given a score of 0 Scaled indicator scores for each country interpolated based on raw score range 3 Compute sub- category scores for each FDI type Multiply each scaled indicator score by respective indicator weighting and sum them up to obtain raw sub-indicator score • Minimum and maximum sub- category scores identified: Max. score given sub- category score of 8; min. score given 0 Scaled sub-cat. scores interpolated based on raw sub- cat. score range 4 Compute country scores for each FDI type • Multiply each scaled sub-category score by respective sub- category weighting and sum them up to obtain raw country score • Minimum and maximum country scores identified: Max. score given country score of 8; min. score given 0 ✰ Output used in the analysis Scaled country scores interpolated based on raw country score range 1. Several experts (BCG senior advisors and topic experts) consulted to develop consensus on appropriate indicator and sub-category weightings for each FDI type 5 Compute overall country and sub- category scores Compute overall country score as an average of country scores for each FDI type Compute overall sub- category scores as an average of sub- category scores for each FDI type 15 Source: BCG Analysis#16Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 16#175 FDI trends in Côte d'Ivoire Positive growth trajectory in FDI post-civil war era but still susceptible to occasional headwinds Europe is Côte d'Ivoire's largest investor, driven by France Investments from Africa growing, driven by Morocco Real estate & transportation and warehousing key sectors driving FDI Inconsistent Japanese FDI mainly focusing on real estate 17#185.9% 7.1% …..lu 3.3% 2.2% 0.5% 0.7% 2009 2010 1.0% 2.8% 3.4% 2.2% 1.2% 2011 2012 2013 2014 2015 2016 2017 2018 JICA Overview of FDI volume: Côte d'Ivoire has untapped potential to increase FDI in light of occasional strong performance in the last 10 yrs FDI as % of GDP historically generally below 4% with occasional spikes, modest recovery from '09 & '10 lows FDI inflow as a percentage of GDP Côte d'Ivoire (%) Côte d'Ivoire leading largest West African economies¹ in FDI attraction but lagging behind Ghana 5-Yr Weighted average Greenfield FDI as a % of GDP (2014-2018) Primarily into oil and gas - sector breakdown further explained in slide 13; See Appendix for summary of Ghana FDI trend analysis Note: Cl = Côte d'Ivoire 1. The 4 largest West African economies are Nigeria, Ghana, Côte d'Ivoire and Senegal Source: fDi Markets; World Bank; BCG Analysis Egypt Ave 8.5% 6.7% 5.8% 5.1% 4.4% Rwanda Ghana Ethiopia Morocco Côte d'Ivoire 2.9% 2.5% 2.2% Tanzania 2.1% 1.9% 1.7% Senegal Kenya South Africa 18 Nigeria#19JICA Historic FDI trend: Greenfield FDI inflows to Côte d'Ivoire grew from early 2010s after civil wars with occasional spikes Total FDI inflow into Côte d'Ivoire ($M value rounded up) 2 large one-off electricity investments 2,357 One-off 1.5B$ investment in residential building construction 568 +64% 1,833 Political and social instability, drop in price of Cocoa +32% 1,457 1,759 a.baı 885 355 772 455 Significant uncertainty for FDI going forward due to impact of COVID-19 pandemic 2011 2012 2013 2014 2015 2016 2017 2018 2019 122 166 '02-'07: 1st 2009 2010 Civil War 2nd Civil War # of projects 9 9 Source: fDi Markets; Press Search; BCG Analysis 7 14 19 15 25 34 34 21 32 37 37 19#20JICA Origin of FDI by region: Europe has remained Côte d'Ivoire's largest investor, but momentum increasing from Africa Total greenfield FDI inflows by source region ($M value rounded up & %) Growth rate between the 5 year periods Investments from 3,806 282 188 (7%) 603 (5%) (16%) 793 (21%) 1,939 (51%) 6,800 607 115% (9%) 421 124% 305 (4%) (6%) -49% 2,220 (33%) 180% Other 1 3,246 (48%) 67% Middle East Asia-Pacific 2010 - 2014 2015-2019 1. North America, Latin America & Caribbean and Emerging Europe Note: YoY year-on-year - Source: fDi Markets; BCG Analysis Africa Western Europe Europe are mainly driven by France Investments from African countries mainly driven by Morocco with consistent YoY investments since 2013 20 20#21JICA Origin of FDI by country (I / III): Top 10 investors account for ~81% of FDI inflow into Côte d'Ivoire over the last decade Greenfield FDI inflows by source country (2010 – 2019) ($M value rounded up & %) 19% 2,022 3% 3% 4% 301 304 5% 451 5% 526 6% 547 6% 584 13% 662 1,424 16% 1,707 20% 2,079 10,606 France Morocco United Switzerland Kingdom Cayman Islands Nigeria Belgium Singapore South Africa UAE Other Total N + Source: fDi Markets; Press Search; BCG Analysis 21#22JICA Origin of FDI by country (II / III): France & Morocco leading, taking over from UK & interest from others steadily increasing Cumulative greenfield FDI inflows by source country (2010 – 2019) ($M value rounded up) - 6,800 660 (17%) 3,806 1,464 (22%) 526 (8%) 1,680 (25%) Others Belgium Morocco (0%) (0%) Japan Switzerland Cayman Islands Nigeria South Africa Singapore France United Kingdom 124 89 (3%) 159 (2%) 537 110 |(2%) 225 (4%) 292 (8%) (6%) 445 (8%) (12%) 323 (5%) 425 (6%) 12 703 6 (18%) 1,376 (20%) 1,082 (28%) 342 (5%) Source: fDi Markets; BCG Analysis 2010 - 2014 2015-2019 22 22#23JICA Origin of FDI by country (III / III): Of the top 10 investors, Morocco is the largest grower in the last decade Greenfield FDI inflows by source country (2010 – 2019) ($M value rounded up) - From 4 projects to 7 17 projects 1,680 1,376 703 High FDI in 2010-14 were driven by 2 investments in the power sector 1,082 2010-14 2015-19 $445M investment by Olam International in 2010 & 2012 537 526 425 445 342 323 292 225 207 124 159 94 27 6 12 France Morocco United Switzerland Cayman Kingdom Islands Nigeria Belgium Singapore South Africa UAE Source: fDi Markets; BCG Analysis 23 23#24JICA Backup Deep dive on French investments: Strong focus on investment in transport & logistics in the 2nd half of the decade, taking advantage of developing sector Top 5 French investments in Côte d'Ivoire (2015 - 2019) Investing 1 Project year 2018 Destination company Bollore city Abidjan Transport & Sub-sector Warehousing & storage Activity Jobs Investment created ($m) Logistics, 823 493 Distribution & Estimated? Yes (jobs) / No (investment) Logistics Transportation 2 2019 BIOVEA Not specified Biomass power Electricity 62 223 Energie Yes (jobs) / No (investment) 3 2018 Bollore Abidjan Warehousing & Logistics, 131 220 Yes Transport & storage Distribution & Logistics Transportation 4 2017 Seafrigo Abidjan Freight/Distribution Logistics, 98 72 Yes Services Distribution & Transportation 5 2017 Orange Abidjan Wireless Headquarters 194 50 Yes (jobs) / No (France telecommunication (investment) Telecom) carriers Source: fDi Markets; Press Search; BCG Analysis 24#25JICA Backup Deep dive on Moroccan investments: Focus zeroing-in on residential real estate investment in Abidjan Top 5 Moroccan investments in Côte d'Ivoire (2010 - 2019) Project year Investing company Destination Jobs Investment 1 2015 Douja city Abidjan Promotion Sub-sector Residential building Construction construction Activity created 1,466 ($m) Estimated? 1,457 Yes Groupe Addoha 2 2016 Saada Côte Abidjan d'Ivoire (B Residential building Construction construction 712 12 Yes (jobs) / No (investment) Group) 3 2016 Ciment San Pedro (April) d'Afrique Cement & concrete Manufacturing products 120 60 Yes (jobs) / No (CIMAF) 4 2018 5 2016 Ciment Denia Snacks Grand- Bassam Bouake Food & Beverages - Manufacturing Grains & oilseed 500 24 Cement & concrete Manufacturing products 44 22 (investment) No Yes (jobs) / No (investment) (October) d'Afrique (CIMAF) Source: fDi Markets; Press Search; BCG Analysis 25#26JICA Backup Deep dive on UK investments: Majority of investments focused on electricity generation especially in 1st half of the decade to increase electricity output Top 5 UK investments in Côte d'Ivoire (2010 - 2019) Project year 1 2013 Investing company Aggreko Destination city Abidjan Sub-sector Activity created Jobs Investment ($m) Estimated? Fossil fuel electric Electricity power 119 653 Yes 2 2011 Azito Energie Abidjan (Globeleq Fossil fuel electric Electricity power 116 428 Yes Generation) 3 2019 Azito Energie Abidjan (Globeleq Fossil fuel electric Electricity power 116 293 Yes Generation) 4 2016 Unilever Abidjan Food seasoning & Manufacturing dressing 58 10 Yes (jobs) / No 5 2015 PCCI Group Not specified Business support Customer Contact services Centre 428 4 (investment) No Source: fDi Markets; Press Search; BCG Analysis 26#27JICA Sector breakdown of FDI into Cl: Significant FDI diversification occurring over time Greenfield FDI inflows by sector ($M value rounded up) 6,800 3,806 157 (4%) 749 (20%) 847 109 (3%) 159 114 (4%) (3%) 309 (5%) 1,557 (23%) 1,481 (22%) 847 (12%) 224 342 (5%) Others Renewable energy Transportation & Warehousing Business services Real estate Financial services Building materials Metals Communications Food & Beverages 450 (3%) (22%) (7%) 427 223 (6%) 1,546 (41%) (3%) 635 306 (9%) Coal, oil & gas (4%) 2010 - 2014 2015-2019 Source: fDi Markets; BCG Analysis 4 key sector trends: • Significant growth in investment in real estate and transportation & warehousing in the 2nd half of the decade • Strong investment in coal, oil and gas in 2011 and 2013 that has since reduced in consistency • Consistent investment in food and beverage & communication sectors despite decline in share of FDI • Potential growth in sectors such renewable energy & business services whose investment is picking up 27#28JICA Activity breakdown: Investments in infrastructure show strongest growth, share of FDI into manufacturing stagnant Total Greenfield FDI inflows by activity ($M value rounded up) 6,800 341 (5%) 1,568 (23%) (2%) 1,665 (24%) 3,806 101 46 66 159 (4%) |(1%)| (3%) 689 (18%) 981 (26%) 1,546 122 |(2%) 1,762 (26%) (41%) 2010 - 2014 Source: fDi Markets; BCG Analysis 573 (8%). 2015-2019 520 (8%) Others Logistics, Distribution & Transportation Construction Sales, Marketing & Support Business Services Extraction ICT & Internet Infrastructure Manufacturing Electricity Infrastructure investments FDI inflows increasingly directed towards infrastructure: Construction (~25x growth) & Logistics and Transportation (~34x growth) Despite stagnant share of total FDI, manufacturing FDI grew ~1.8x mainly due to growth in FDI towards metals, building materials and chemicals Despite steep decline, investment in electricity moving towards renewables 28#29JICA Backup Deep dive on manufacturing: Progressive diversification occurring with food & beverage production, metals and building materials leading the way Investments in manufacturing in Côte d'Ivoire, $M value rounded up & % (2010 - 2019) 39 |(4%) 981 17 9 (2%) (1%) 803 (82%) 2010 - 2014 114 (12%) 1,762 14 74 /10/\ (4%) 86 267 (15%) 302 (17%) (5%) 22 22 (1%) 425 (24%) 573 (32%) Plastics Electronic components Consumer products Pharmaceuticals Automotive OEM Chemicals Building materials Metals Food & Beverages 2015-2019 Key trends: . • Food and beverage manufacturing has been on the decline across multiple sub-sectors such as snack food (~77% decline, but # of smaller scale investments increased) and sugar & confectionary products (~13% decline) • Significant growth noted in building materials (cement) and pharmaceuticals manufacturing; large one-off investments driving growth in metals and chemicals Source: fDi Markets; BCG Analysis 29#30JICA Backup Deep dive on construction: Significant growth in residential real estate arising from increasing urbanization Investments in construction in Côte d'Ivoire, $M value rounded up (2010 - 2019) 66 66 2010 - 2014 1,665 208 (13%) 1,457 (87%) 2015-2019 Accommodation (hotels) Commercial & institutional building construction Residential building construction Key trends: Significant investment in residential building construction concentrated around the Abidjan area, potentially driven by increasing urbanization (from ~43% in 2000s to >50% in 2018) as pop. grows (2.6% in 2018); gov't committed to providing home financing Source: fDi Markets; Oxford Business Group; World Bank; Press Search; BCG Analysis#31JICA Deep dive on logistics sector: Substantial diversification occurring with FDI being mainly channeled into warehousing & storage for exports Investments in logistics in Côte d'Ivoire, $M value rounded up (2010-2019) Key trends: 46 2010-2014 10 (1%) 1,568 30 15 (1%) 22 (2%) (1%) 150 (10%) 72 (5%) 161 (10%) 1,108 (71%) Other (Food & Beverages) Cement & concrete products Water transportation Clothing & clothing accessories Nonstore retailers Air transportation Freight/Distribution Services Support activities for transportation Warehousing & storage 2015-2019 • ⚫ Considerable investment in warehousing & storage being led by Bollore Transport & Logistics (France) - primarily in support of cocoa processing & export- & Sea Invest (Belgium) • Establishment of CI's 1st fixed based operator 1 (Jetex) driving investment in support activities for transportation ⚫ Diversification of freight & distribution services taking place to include air and sea freight, and set up of logistics parks 1. A fixed base operator is an organization granted the right by an airport to operate at the airport and provide aeronautical services Source: fDi Markets; Oxford Business Group; World Bank; Press Search; BCG Analysis 一つ#32JICA Job creation effect of FDI in Côte d'Ivoire: Manufacturing activities have created the most jobs Direct thousand jobs created per activity (2010-2019) 20 Number of direct jobs per $1M invested (2010 - 2019) 8 15 16.5 10 5 3.0 2.7 1.3 0 Manufacturing Construction 1.3 0.7 0.5 0.4 Logistics, Distribution & Transportation Sales, Marketing Business Services & Support ICT & Internet Infrastructure Electricity Extraction Note: Applies to greenfield investment only and related to only direct jobs created from investment, not including indirect jobs created Source: fDi markets; BCG analysis 00 6 4 2 32#33JiCA FDI to Côte d'Ivoire over past 10 yrs by country: Japan in 15th position for greenfield FDI Total greenfield FDI into Côte d'Ivoire 2010 - 2019 ($M value rounded up) Rank France 2,079 Morocco 1,707 United Kingdom 1,424 + Switzerland 662 Cayman Islands 584 Nigeria 547 Belgium 526 Singapore 451 South Africa 304 Some countries are omitted Japan 199 Some countries are omitted China 105 Others Source: fDi Markets; BCG Analysis 1 2 3 4 5 6 7 8 9 15 17 2,018 33 33#34JICA Historic shift of Jpn FDI: Total of 6 announced and executed projects Japanese greenfield FDI into Côte d'Ivoire (2010 – 2019) ($M value rounded up) 66 76 24 15 10 8 0 0 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 # of greenfield 1 0 1 0 1 1 0 0 1 projects Source: fDi Markets; BCG Analysis Ave per deal $33.2M Avg per year $19.9M 34#35JICA Regional breakdown of Jpn FDI: FDI concentrated in Abidjan & mainly in real estate and automotives Project Investing year company 1 2019 Toyota Motor Destination city Abidjan Sub-sector Automobiles Activity Manufacturing Jobs Investment created ($m) 947 76 Estimated? Yes 2 2013 CFAO Group Abidjan Commercial & Construction 388 66 Yes (jobs) / No (Toyota Motor) institutional building (investment) construction 3 2015 Mitsui & Co Abidjan Commercial & Sales, Marketing 14 24 Yes institutional building construction & Support 4 2010 Mitsui OSK Abidjan Lines (MOL) Water transportation Sales, Marketing 10 15 Yes 5 LQ 2016 CFAO Group Abidjan Consumer products & Support Manufacturing 259 10 Yes (Toyota Motor) 6 2011 Ajinomoto Abidjan Plastics packaging Manufacturing 34 8 No materials & un- laminated film & sheets Source: fDi Markets; Press search; BCG Analysis 35#36JICA Sector comparison: Jpn FDI vs. global FDI in Côte d'Ivoire Japanese FDI focusing on real estate & automotives Japanese greenfield FDI in CI compared to Global greenfield FDI in CI, $M value rounded up (2010-2019) 0 (0%) 10 15 (8%) (5%) 76 (38%) 90 (45%) 972 23% (9%) 1,482 (14%) 586 (6%) 1,851 (18%) 77 9 (1%) (0%) 1,568 (15%) 17 1,459 (0%) Japanese FDI in Cl 1. Global figures exclude Japanese FDI Cl = Côte d'Ivoire; OEM = Original Equipment Manufacturing Source: fDi Markets; BCG Analysis (14%) Global FDI in Cl¹ Other Metals Communications Food & Beverages Coal, oil & gas Plastics Consumer products Transportation & Warehousing Automotive OEM Real estate Global FDI in Cl is more diversified with significant investments in coal oil & gas, food & beverages, communications etc.#37JICA Sector comparison: Global FDI in Cl vs. global Jpn FDI: Potential for Japanese FDI diversification leveraging existing strengths 8 (4%) 10 (5%) 15 (8%) 76 (38%) 90 (45%) Japanese FDI in Cl 1..Global figures exclude Japanese FDI into Cl; OEM = Original Equipment Manufacturing; Source: fDi Markets; BCG Analysis 28% 17,020 17,129 (3%) (3%) 30,079 (6%) 31,878 (6%) 42,005 (8%) 53,608 (11%) 16,717 19,554 (4%) 9,558 (2%) (3%) 70,275 (14%) 55,541 (11%) Global Japanese FDI1 Other Electronic components Rubber Chemicals Metals Automotive components Coal, oil & gas Plastics Consumer products Transportation & Warehousing Automotive OEM Real estate 37#38JICA Major M&A by Jpn companies in CI: M&A not a prominent entry strategy, only 3 transactions recorded Direct M&A Anadarko Petro-Block Cl-103 Indirect M & A SGI Africaine De Bourse SA Olam Cocoa Processing Cote d Ivoire CI Target Acquired 20%, deal value undisclosed Acquired 40%, deal value undisclosed Owns 100% Mitsubishi Corp CFAO SA Olam International Acquiror N/A Acquiror parent Transaction Year 2014 Source: Thomson One; Press Search; BCG Analysis Owns 100% Acquired 20% for $1.1M Toyota Tsusho Corp Mitsubishi Corp 2019 2015 38#39Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis > Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 39#40JICA ☐ Agriculture in Côte d'Ivoire: Executive Summary Overview of the Agriculture Sector Agriculture is a major economic sector in Côte d'Ivoire with high production volume across key crops Côte d'Ivoire is the world's largest producer of cocoa (accounting for 40% of total world production) and raw cashew nuts It is the largest exporter of rubber, palm oil, bananas, pineapples and copra in Africa, and the second producer of Robusta coffee on the continent The country is self-sufficient in most major local crops (maize, sorghum, millet, yam, cassava, plantain), rice remaining the exception Given its size and momentum, the sector presents some opportunities for private investors Size and growth: Production grew by 50% between 2011 and 2017 (15.8M to 23.7M tons), 30 percentage points faster than in Sub-Saharan Africa Government: The government has unveiled an ambitious program to improve production and processing in which the private sector will play a key role Private sector: Several large international players including Japanese companies continue to invest in the sector (e.g., Barry Callebaut, Olam, Cargill and CEMOI have 80% of installed cocoa beans processing capacity) Access to markets: Thanks to its modern ports and established routes, Côte d'Ivoire offers access to a larger West African market Despite its importance, the sector still faces some challenges • • • Low land use: less than 60% of total agricultural land is cultivated Crop yields lag peers: 50-70% lower than global average across local and export crops Low local processing: less than 5% of export crops processed locally, which is up to ~50% potential loss in value realization High wastage: 2x of global average (8.2% vs 4.5%), driven by inadequate storage infrastructure, poor post-harvest processes and farm ecosystem Japanese companies' interest in the sector Several Japanese companies are active in the sector and the benefits they could gain from this study depends on their activity We have classified the Japanese players in three groups based on involvement in the sector and potential opportunities highlighted in this study: Rice farming and processing machinery: Opportunities to supply machinery to local dealers or processing players - Cocoa sourcing and processing companies: Consider cocoa processing to Côte d'Ivoire (based on cost implications) Established agri-processing players: Potential to increase processing in cocoa and cashew if the economics are right Japanese players consistently identified three key challenges Difficulties for local players to get financing: high interest rates from financial institutions (over 20%) prohibits purchases of agricultural machinery High processing costs: processing costs are higher in Côte d'Ivoire than other markets due to an accumulation of factors including higher logistics, management hires, security, machinery servicing/maintenance costs Need for improvement in government policies: duration of incentives, import control on rice, and governance of market competition can be improved 40#41JICA The Ivorian agriculture sector is attractive for investment because of its size and continuous growth supported by government's policy 123 Size & Growth · Agriculture accounts for 23% of GDP and more than 65% of exports Agricultural production grew by 50% from 15.8M tons in 2011 to 23.7M tons in 2017, 30 percentage points faster than in Sub-Saharan Africa and 20 percentage points faster than in West Africa Government Actions • After a 3.7B$ investment (2012-2017), the government plans to further invest 7.9 B$ in the 2018-2025 period to improve the sector • The plan has three objectives: - - Increase value-added Strengthen production Support rural development Source: Ministry of Agriculture, World Bank (2020), 41#42JICA Sector size and growth: Agriculture is a major economic sector in Côte d'Ivoire with high production volume across key crops #1 producer of cocoa in the world Largest producer of cocoa in the world, accounting for ~40% of the world's production #1 global exporter of raw cashew nuts Leading exporter of raw cashew nuts with a 38% market share in global export of RCN (2018) #7 producer of natural rubber 7th largest producer of natural rubber with 760,000 tons (2018) Source: World Bank (2020) #1 Africa's largest exporter of key fruits Africa's largest exporter of bananas with 400,000 tons and pineapples with 32,064 tons (2019) #2 exporter of Robusta coffee in Africa #2 exporter of Robusta coffee in Africa with 1.1M tons exported in 2019 42 42#43JICA Backup Sector size and growth: Growth across key crops and organization of the sector GDP: Agriculture vs Other sectors Key Crops GDP (B$) Prod. Volume Harvested Area 58 58 ('000 t, 2019) ('000 ha, 2019) 52 49 48 46 43 10 9 Cocoa 2,180 4,777 10 34 36 8 8 669 37 10 9 8 13 11 9 66 68 13 14 Raw Cahsew Nuts 793 1,913 11 Export Natural Rubber 665 413 9 crops 18 17 20 23 23 25 25 25 26 26 28 31 31 Cotton, Seed 356 351 Oil Palm 2,055 315 Yam 7,177 1,287 2010 Others Agriculture Industry (includes agro-processing) In 2019: • Agriculture represented -16% of GDP • 2011 2012 2013 2014 2015 2016 2017 2018 2019 Rice, Paddy 1,884 698 Services Local Crops Plantains 1,826 479 Cassava 5,238 866 Agribusiness represented 7% of GDP and 50% of manufacturing Policies The National Agricultural Investment Program (PNIA) is the reference document for all development policies and strategies in the agricultural sector 6 Development Programs ~7.9 B$ of investment Source: World Bank, FAO, EIU, Press Search Le Conseil du Café-Cacao CNRA ANADER Key Players SIFCA OLAM Cargill SUCRIVOIRE Wilmar Mondelēz SMDIAA International BARRY CALLEBAUT COMPAGNIE FRUITIERE Nestle 43#44Backup Government actions: The Government has unveiled an ambitious development plan to develop the sector PNIA National Agricultural Development Program Development Policies and strategies in the agricultural sector (2017-2020) ~7.9 B$ to invest in 6 programs: 1 Productivity and sustainable development 2 Improvement of value-added and of agriculture market performance 3 Sustainable management of environmental and climate resilience 4. Improvement of the livelihood of players in the value chain 5 Increase access to finance and private investment channels 6 Strengthening the institutional framework, governance and business environment Source: Ministry of Agriculture (November 2017) 44#45JICA Despite its importance, the sector faces several challenges across local and export crops 2 Land Yield 3 Supply Chain Value addition Source: FAOSTAT, FAO reports, OECD, Press search 1 Low land use: <60% of total agricultural land is cultivated Small size of land holdings • Avg. size 1-1.5 Ha vs 5.5 Ha (global average) 2 Crop yields lag peers 50-70% lower than global average across food and cash crops Driven by small farm size, insufficient input use, inferior crop varieties, low mechanization, poor farm management 3 Low local processing • <5% cash crop processed locally - up to ~50% potential loss in value realization Driven by high processing costs, lack of infrastructure and weak local demand for processed products 4 High wastage -2x of global average (10% vs 4.5%) • Driven by inadequate storage infrastructure, inadequate development of farm eco-system & poor post-harvest processes 445#46JICA Backup Small size of landholdings: Average size of landholdings is half of Sub-Saharan Africa nations and <5 times world average Average land holding size in ha 4 2 1-1.5 Côte d'Ivoire avg. landholding size is < 5 times world average 2.4 2.0 0 Cote d'Ivoire Sub Saharan Africa Total Africa 5.5 World 168.4 USA Fragmented small landholdings leading to challenges in mechanization, irrigation, infrastructure etc. Source: Secondary research, FAO Stats 46#47JICA Backup Low Yield: 50-70% lower yield observed across food and cash crops as compared to world average Food Crops Cereals and pulses tonnes/ha 7.6 -47% 4.4 4.3 3.7 3.6 2.2 2.0 1.4 Northern South Europe World Asia Oceania Cote Africa America America d'Ivoire tonnes/ha 30.7 Fruits and vegetables -66% 19.0 18.2 16.2 15.9 14.2 8.7 5.4 tonnes/ha 0.7 0.6 Cash Crops Cashew nuts -38% 0.6 0.4 Asia Africa World Cote d'Ivoire tonnes/ha 11.0 Cotton -58% 5.8 5.6 4.8 4.5 4.4 2.0 1.8 Northern Europe America Asia South World Oceania Africa America Cote d'Ivoire Oceania South America Europe Northern America Asia World Africa Cote d'Ivoire Source: FAO, 2014 yield data 47#48JICA Backup Low local value addition: Lack of local transformation ecosystem resulting in majority export of raw products Cocoa: Developed regions exporting processed cocoa, realizing -2x higher value for exports Value realized³ ($/tonne) -2x value increase by processing Processed cocoa beans 4-4.9 Raw cocoa beans 2.5 Cashew Nuts: Unlike Côte d'Ivoire; all other regions mainly export processed (without shell) cashew nuts ~8x value increase by removing shell Processed Raw cashew cashew nuts Value realized³ ($/ tonne) 6.1 nuts 0.73 100 99 9 83 28 72 20 14 20 1 3 84 91 99 100 100 96 97 99 60 86 80 17 Asia Central European Northern Union America South Côte America d'Ivoire Africa Oceania Exported cocoa beans (% export) 16 9 Central Asia South America European Union Oceania Northern Africa America Côte d'Ivoire Locall processed (% export) 48 Locall processed (% export) Exported raw cashew nuts (% export) 1. Processed cocoa includes cocoa cutter, cocoa paste, cocoa powder and cake; 2. Processed cashew includes cashew nuts without shells while shelled are raw nuts; 3. Value realized calculated as (exports value/ exports tonnage) for 2013 for Côte d'Ivoire Source: FAO#49JICA Backup High Supply Chain Wastage: Wastage in Côte d'Ivoire almost 2x global average Wastage as a % of production quantity (aggregate across all crops) % wastage Côte d'Ivoire almost 2x of the global average on wastage +81% 10 7 8.9 8.2 5.8 4.9 5 4.5 2.3 1-1.5 0.9 0 Oceania Northern America Europe World Asia South America Ivory Coast Africa Source: FAO. 2013 data 49 49#50Several Japanese companies are active in the agro- processing/machinery sector with varying levels of interest and involvement Higher interest in rice farming and processing machinery • Several Japanese companies are interested in the rice farming and machinery sub-sectors, having already realized some recent sales Implications for the market study 1 1st priority: rice farming and rice processing for deep-dive • Those companies perceive Côte d'Ivoire as a high priority market within the region given its high rice harvesting area 2 • Current players focus on leveraging existing GoJ projects and are mostly focused on post-harvest phase with the supply of rice tillers, combines or rice milling machines Lower interest in processing and machinery for other crops • Processing of cocoa, cashew, rubber and cotton have not attracted the interest of new Japanese players Existing processing and trading players are interested in cost benchmarks for processing crops in Côte d'Ivoire, with a particular focus on Cocoa Farm size and farming technique for cocoa, cashew, rubber and cotton are not suitable for machinery 2nd priority: 1st level processing of cocoa in Côte d'Ivoire 3 Deprioritize cashew, rubber and cotton and only provide overview of the sector 1. GOJ Government of Japan = 50 50#51JICA Japanese companies in agro-processing/machinery sector identified a few consistent challenges and opportunities to improve the business environment Japanese companies identified three major challenges in Côte d'Ivoire... $ • Difficulties for ✓ local players to get financing High cost of processing when compared to other markets Need for improvement in Government policies • • • High interest rate by financial institutions (e.g. over 20%) prohibits their customers (contractors) to purchase farming/processing machinery Processing costs are higher in Côte d'Ivoire due to higher logistics, management, security, machinery and maintenance costs Incentives provided by the government to promote processing are short in nature (3-5 years), which limits long-term planning/investment Need for the government to promote local rice farming and processing Existence of unfair competition due to some treatment favoring certain players ... and highlighted some actions that can be taken to improve the environment Expectation for JICA's support Request for this market research Advocate to Cl government to remove Pre-export Verification of Conformity for agriculture machinery and its spare parts (to avoid extra time and cost for export from Japan to CI) Further advocate importance to effectively promote local rice production Provide funding beyond feasibility study/piloting phase Market data on rice farming in Côte d'Ivoire: information on contractors; level of mechanization by region; transport infrastructure; upcoming investments Cost benchmarks on processing Cocoa#52JICA Opportunities for the private sector Challenges Interest by Jpn firms machinery Opportunities & challenges for machinery & processing: We identified stronger interest from Japanese companies in the rice sector and cocoa processing Agro-processing & Rice ~2.8Mt in demand for white rice and government's will to increase insufficient local production presents opportunities for: . Supply of farming Cocoa #1 global producer of cocoa beans and government's target of increasing local processing capacity by 2025 creates opportunity for Investment in cocoa beans processing for established players in the cocoa value chain machinery Supply for processing machinery Slow progress in • domestic production increase Difficult access to finance for local processors/contractors Cashew #1 exporter of raw cashew nuts in the world with potential to grow processing as only -10% of the production (760k tons) is done locally bringing opportunities for Investment in primary and secondary processing of cashew nuts High processing costs Temporary nature of government incentives • · High processing costs of raw cashew nuts compared to India and Vietnam Low use of by-products Rubber ~100M$ of rubber goods imported per year bringing a small opportunity to manufacture non-tire rubber products like mattresses, conveyor belts, gloves, condoms and shoes • • High processing costs Difficult access to key inputs (chemicals) to make rubber goods Difficult access to qualified labour Cotton #3 producer of cotton (high quality) in Sub-Saharan Africa, offering an opportunity to invest in fabric manufacturing with potential additional benefits if byproducts (cottonseed oil and linters) are commercialized • High processing costs • Low use of by products Higher interest Medium interest Lower interest Lower interest Lower interest 52 ש#53JICA 22 interviews conducted with Japanese companies & relevant government agencies Company/Government agency Contact name Contact info / e-mail address Ministère de l'Agriculture et du Développement Rural Ministère du Commerce et de l'Industrie MINEDD1 Conseil du Café-Cacao [Confidential] 7 Japanese companies in Agro-machinery processing sector Conseil du Coton et de l'Anacarde Conseil Hévéa-Palmier à Huile [Confidential] 5 Japanese companies in Waste Management sector Chambre d'Agriculture de la Côte d'Ivoire Chambre de Commerce et d'Industrie de Côte d'Ivoire Société Ivoirienne de Technologie Tropicale Coulibaly Wathami Gue Simplice Sabah Mohamed Bella Kouassi Lago Kouakou Casimir Dosso Lancine Kouadio Kouassi Gilbert Serge Kouadio Centre Ivoirien Anti-pollution Direction de l'économie circulaire MINASS² Other Agence nationale de gestion des déchets (ANAGED) CEPICI (Centre de Promotion des Investissements en Côte d'Ivoire) Konan Eddie Franck Quenum 1. MINEDD: Ministère de l'Environnement et du Développement Durable 2. MINASS: Ministère de l'Assainissement et de la Salubrité Contact info available upon request 53 53#54Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 54 54#55Rice: Assessment of the Agro- processing / machinery sector Côte d'Ivoire ranks #6 in Africa in terms of rice harvesting surface It produced about 1,1M tons of white rice in 2018. Côte d'Ivoire imported 53% of total rice demand in 2018 Rice Cocoa Cashew Rubber Cotton 55 55#56Rice Overview Rice production & import: Despite the growing demand for rice, local production and processing remain low, making CI more dependent on import Total available rice in CI - Local production and imports (1000s tons) Lagging local production and increasing demand has led the country to rely heavily on imports +3% 2,801 2,698 2,617 2,536 50% 53% Imported white rice 45% 49% 55% 51% 50% 47% Local white rice 2015 2016 2017 2018 1. SNDR National Rice Development Strategy _ Source: Expert Interview; Interview National Chamber of Agriculture; IFC (2015); SNDR 2020-2030 Plan; WFP (2018); BCG Analysis Stagnating productions is driven in part by low level of mechanization in rice production • Government launched a new strategy to improve self-sufficiency, following several attempts with limited success 56#57JICA Rice Overview Low level of mechanization: Three factors hinder mechanization in the sector and contribute to the stagnating rice production $ Difficulties in accessing finances Players along the value chain (farmers, processors, machinery service providers) have challenges securing loans to finance their projects ו 0-1-0 Lack of infrastructure The absence of infrastructure around farming areas (e.g., irrigation, road) prevents development of large- scale production and processing projects Unsecure land ownership Farmland is highly fragmented (majority between 0.5-1.0 ha) with unclear process for acquisition/ownership making it difficult for large commercial farms to rise Implication for machinery suppliers All Difficulties in accessing finance hinder sales. of high-priced machinery and spare parts Farming machinery • Insecurities around land ownership prevent development of commercial farming, thus limiting demand of farming machinery Lack of road infrastructure around farming. areas can limit access to larger machines, further lowering mechanization Processing machinery • Prevalence of small-scale production creates challenges securing sufficient raw materials to ensure full utilization of processing units 57#58Rice Overview The government and Development Partners are pushing to boost mechanization and local processing New Rice strategy for Côte d'Ivoire 2020-20301 The strategy aims to reach self-sufficiency by 2025 and turn Côte d'Ivoire into a rice exporter in Africa by 2030. 5 measures were defined to reach this goal: Repair existing dams and 55,000 ha of rice parcels belonging to the state Design and implementation of integrated rice projects (irrigation, seed production, mechanization, support to farmers with intrants etc.) Ensure the functioning of rice poles and state-owned processing units (to be passed on to the private sector) > Production of high-quality seeds in partnership with CNRA2 and AfricaRice Boost mechanization of rice farms via installation of mechanization centers in all production regions, in partnership with Small and Medium Enterprise CARD Partners IsDB THE WORLD BANK DIDA مجموعة البنك الاسلامي السمية FARA JIRCAS NEPAD TRANSFORMING AFRICA Islamic Development Bank Group JICA AGRA AfricaRice JLIFAI Growing Mica's WFP Food and Agriculture Organization of the United Nations World Food Programme Impact of JICA's PRORIL project • Impact of PRORIL phase I (2014-2020) 50% increase in production and sales among subject farmers from before PRORIL launch Increased participation by financial institutions in rice farming • Strengthened cooperation among parties involved in the value chain Expected impact of PRORIL phase II (2021-2025) System to ensure sustainable and high- quality agricultural machinery services established Post-harvest processing technologies, reduction of post-harvest losses, and improvement of the quality of final products Development of financial products for different actors of rice value chain Measure addressing mechanization and processing All other measures 1. The National Rice strategy is developed with the support of the Coalition for African Rice Development (CARD) Source: ADERIZ (2020), JICA internal document (2021); Rice for Africa (2021) 2. CNRA - National Agricultural Research Center 58#59Rice farming machinery in Côte d'Ivoire 59 59#60JICA Rice Farming Machinery Rice farming machinery in Côte d'Ivoire: Executive Summary Overview of the rice farming sector Large rice harvesting surface and low yield presents a strong upside potential to increase production through mechanization Côte d'Ivoire ranks #6 in Africa in rice harvesting surface with 698k ha The productivity in yield is low: 50% lower than global average across local crops including rice Value chain and key players Given the small farm sizes, the government designed a "contractor" model to centralize machinery activity. Contractors (called PMEAs) provide farming machinery services to farmers or cooperatives. OEMs use local dealers or distributors to sell equipment to the PMEAS Large international OEMs: Mainly provide tractors (used for various crops), and rice farming machinery Tractors: 8 major players active in the market, collectively selling ~300 tractors/year. They include Kubota, John Deere, Massey Fergusson, New Holland, Mahindra and TAFE Rice farming machinery: Most demanded machines are power tillers and combine harvesters. Japanese players active in the segment compete mostly with Chinese brands (e.g., Chalion) and Indian brands (e.g., Shakti). Experts estimates Japanese to have a longer lifespan than Chinese machinery (10 years vs 1-2 years) but costs twice as much Dealers / distributors: Mix of local companies (e.g., Lassire Industrie, CI Motors) or subsidiaries of international dealers (US - Kanu Equipment, French - Bouchard CI). Dealers often have partnership with regional mechanics and contractors/PMEA Contractors/PMEA: 13 government certified PMEAs (small and medium contractors) provide farming machinery services to rice farmers Challenges in the sector In order to expand the rice farming machinery business, it is critical to address challenges faced by PMEAs, with the support of OEMs, the government and/or development partners Access to finance: Contractors/PMEA have difficulties in accessing loan as financial institutions charge high interests (e.g., over 20%). This makes it difficult for them to purchase high-priced machinery Maintenance: Challenges in accessing spare parts (especially compared to Chinese brands) and lack of skilled mechanics Labour: Untrained operators reduce the life span of equipment (e.g., tractor lasts 10-15 years in Europe vs. 2-3 years in Côte d'Ivoire) Infrastructure: The last mile transport infrastructure around rice farming areas needs to be improved 60 60#61High rice harvesting surface and low yield presents an opportunity for mechanization Rice Farming Machinery # 6 in rice harvesting surface in Sub-Saharan Africa 50% lower yield observed across food crops (including rice) as compared to world average 1 Nigeria 2 Guinea Harvesting surface in 000s ha¹ 5,281 1,924 3 DRC 1,813 4 Tanzania 1,053 5 Mali 925 6 Côte d'Ivoire 698 7 Sierra Leone 602 8 Senegal 346 9 Ghana 321 10 Cameroon 268 1. FAO 2019 harvesting data 2. FAO aggregated 2014 yield data Yield (tons/ha)² Northern America South America 4.4 Europe 4.3 World 3.7 Asia 3.6 -47% Oceania 2.2 Cote d'Ivoire 2.0 Africa 1.4 7.6 Strong upside potential for significantly increasing production through machinery and mechanization 61#62JICA Rice Farming Machinery Value chain & key players for agro machinery in Cl: International players are active in the market, leveraging in-country distributers for contractor sales OEM Export In-Country Distributer Import/Distribute Post-sale Repair Contractors Provide services to farmers Maintain Non-exhaustive -Tractors CASE III AGRICULTURE NDF Kubota JOHN DEERE TAFE MASSEY FERGUSON MAHINDRA -Tillers and combines Kubota CHALION YANMAR SHAKTI 2 to 3 months delivery time Trusted local and international dealers Non-exhaustive lassire industrie CIMOTORS AGRITECH BOUCHARD CÔTE D'IVOIRE KANU EQUIPMENT Experience The Support 1. PMEA - Small and Medium Agricultural Enterprise Source: Desktop Research; BCG Analysis; Interview with experts Contractors / PMEAs¹ Machinery Owners Imported Parts Dealers have a network of mechanics across the country 62 62#63JICA Backup Rice Farming Machinery OEMs (incl. Japanese players) active in Côte d'Ivoire partner with distributors Non-exhaustive 123 N DEALER NAME 1 ATC COMAFRIQUE • MECHANIZATION SERVICES Does not provide mechanization services but collaborates with PMEA CAP BERE COMPANY OVERVIEW & OEMs Cars and machines dealer supplying OEM tractors HQ in Abidjan, 3 franchises: Tropi-Auto (Yamoussoukro), Midas (San Pedro) and SOCOMCI (Korhogo) Subsidiary of French Group Bouchard Installed in Cl since 2015 HQ in Abidjan, no regional branches but delivers service within 72 hours EQUIPMENT DELIVERY TIME1 ☆ Tractors (40hp, 75hp) Tools: disc plow, sprayer, rotary cutter, cereal seeder 10 weeks Combine harvester, tracked trailer and mower (on order) Tractors (35 to 75 hp) Tools: Disc plow, double axle trailer, • sprayer, grader blade 8 Weeks Modular tillers Combine harvester . Ivorian machinery dealer supplying multiple OEM brands ☆ Tractors (40-75hp) • Tools: disc plow, rotary tillers HQ in Abidjan, collaborates with regional mechanics Tillers from China and India 7 weeks Mowers, threshers, combine harvester Milling machines, drying and seed • • 2 BOUCHARD CI 3 CI MOTORS treatment system Ivorian machinery dealer created in 2003 supplying an OEM brand ☆ Tractors (40-75hp) with tools Tillers 4 GIA AGRITEC HQ in Abidjan, partners with regional mechanics 5 KANU EQUIPMENT 6 LASSIRE INDUSTRIE 1. Delivery time - • • US based dealer selling an OEM brand tractors and other agriculture machines (in partnership with ALVAN BLANCH) HQ in Abidjan since 2017, technicians in other regions Ivorian dealer supplying various OEM brands HQ in Abidjan, branch in Korhogo Partners with CFMAG for training defined as time from order to delivery Source: JICA PRORIL II Report 8 weeks (tillers) 12 weeks (tractors) OEM tractors (35-60hp) and tools ☆ OEM tractor (75hp) Combine harvester • 12 weeks Thresher Rice milling machines OEM tractors (38 to 90hp) with tools Tillers Combine harvester Does not provide mechanization services Operates as a PMEA servicing rice and oil palm farmers in Yamoussoukro, Dabou, Eloka, Sikensi, Anguedou Plans to establish a training center Provides mechanization service in Western Cl Plans to expand to the center in collaboration with JICA Partners with GRACE CI, FERME BIO, CAP BERE, AGRO KROBIS 8 weeks ° Partners with ELOLA PMEA ☆ Most demanded equipment 63#64PMEAs are critical to the government's mechanization strategy... PMEAs are service providers who deploy their machinery on farmers' field and help increase productivity. They can also to ensure proper use of machinery 123 N PMEA NAME 1 GRACE AGRICOLE CI 2 CAP BERE 3 CI MOTORS CORPORATION + 5 00 MECA PREST INTER SYLLA PRESTATIONS AGRONEGOCES 7 GARAGE IVOIRE AGRI (GIA) D Non-exhaustive LOCATION Yamoussoukro, M'Bahiakro District de savanes, Tonpki, Région du Béré District de Yamoussoukro, région du Gbèkè Région Agneby Tiassa Région du Goh Région du Hambol, région du Gbèkè Région du haut Sassandra, Cavally Moronou,béré, Goh District du belier GBEKE, IFFOU, HAMBOL, LA ME, INDENIE DUABLIN, 8 AGRO KROBIS 9 FERM BIO 10 SIMAPRES 11 SAMI 12 GBEKE PREST AGRI GBEKE, HAMBOL, BERE 13 PAYSAN AUTONOME District de Yamoussoukro 23 District des Savanes Rice Farming Machinery ... But they face several challenges Challenges faced by PMEAS 1 Access to finance: PMEAs must pay higher interest rates (over 20%). This leads to purchase of cheap machinery and to frequent breakdowns as they often cannot afford to purchase spare parts in a regular basis 2 Access to spare parts: PMEAs find it difficult to access spare parts of Japanese machines as compared to Chinese spare parts 3 Shortage of skills at 3 levels: shortage of skills affects three levels • • Management skills to run day to day management activities and deliver high quality service Operation skills to properly operate the machinery - Maintenance - skills to run regular maintenances on the equipment Source: Interviews, PRORIL II, World Bank 64#65Key Findings from focus group discussion with PMEAs¹ Objectives • Duration Participants • Collect feedback on PMEAs' experience with current machinery Understand their decision- making process 3 hours 6 PMEAs/contractors • 3 to 20 years of experience Dealers of farming and processing machinery (including one who also provides service to farmers) • Located in the North and West of Côte d'Ivoire Rice Farming Machinery While Japanese brands are perceived as durable, the lack of a broad and reliable spare parts supply network and higher purchasing price compared to Chinese machines create a challenge 1 PMEAs/contractors using Japanese machines perceive it as high quality, but find it difficult to acquire spare parts in time and perceive Japanese machines as more expensive 2 3 Most signaled the need to often go to Abidjan to acquire spare parts PMEAs indicated no explicit lower quality perception for Chinese machinery PMEAs highlighted the ease of finding spare parts for Chinese machinery, and the lower initial cost of Chinese machines (relative to Japanese machines) All highlighted challenges in educating farmers for appropriate usage and maintenance Frequent breakdown occur due to inappropriate basic maintenance (e.g., wrong. quantity of oil, maintenance at infrequent intervals) Brands of sold equipment 5 dealers sell Chinese brands 1 dealer sells multiple brands including one Japanese Tractors, threshers, tillers and respective spare parts Farming Equipment Processing Equipment Sheller and miller Imperative for farming machinery suppliers to: • Build an effective spare parts supply network Partner with training facilities and/or local technology companies (e.g., 12T - Ivoirian Institute of Tropical Technology) to provide timely maintenance service 1. PMEA Small and Medium Agricultural Enterprise ― 65 65#66JICA Backup Rice Farming Machinery Case study: Large international tractor manufacturer strategy in Nigeria Player and Context • In 2018, an international tractor manufacturer has signed a MoU with the Nigerian Government to supply 10,000 tractors to rural farmers across Nigeria The agreement was enabled by Agricultural Mechanisation and Equipment Leasing Company (NAMEL) and the Federal Ministry of Agriculture and Rural Development (FMARD) Key successes factor Strong government collaboration/support MoU to supply 10,000 tractors This initiative is being subsidized by the government through reduced interest rates loans to private tractors lessors The Company partnered with TATA for the distribution of its tractors: TATA often sells tractors to private sector hiring services who enjoy government support to purchase tractors. Hiring services then lease these tractors to farmers to support specific work • Partnered with Alluvial, a Nigerian company that uses an innovative service delivery model (SDM) to support smallholder farmers by providing training, technology, land preparation, irrigation, input supplies, and market access Partnered with Hello Tractors, who use a tractor monitoring device to tell when maintenance is required and acts like an "Uber" for tractor owners/farmers Source: All Africa, 2018; Africa Scanning; Hello Tractor; Reuters, 2018; Yahoo Finance, 2019; Financial Times, 2018; BCG Analysis • • Non-exhaustive Learnings for Côte d'Ivoire including Japanese companies Strong government collaboration/support Japanese companies need to seek opportunities to partner with the Government to unlock the market Enabling downstream value chain activities and after-sale support Japanese companies need to have a clear after-sales strategy before entering Côte d'Ivoire. Partnering with a player who offers an innovative after-sales is an option (e.g., Hello Tractors in the case of Nigeria) Strong local partnerships Identifying local champions and working with them can be beneficial in the long-term (e.g., Alluvial in the case of Nigeria) 66#67Rice processing in Côte d'Ivoire 67#68JICA Rice Processing Rice processing machinery in Côte d'Ivoire: Executive Summary Overview of rice processing sector and key players Processing is dominated by mini-processors (less than 2 tons per hour units). Industrial processing is at ~2%, presenting a strong upside potential Industrial processors typically operate at -30% capacity due to limited production of raw materials and cyclical nature of production Processing machinery market is highly fragmented with several small Chinese and Indian brands active International players including Satake, Bühler, Avlan Blanch and Riela all offer end-to-end crop processing machinery including rice milling Government actions and potential opportunity for Japanese players Cl government and machinery players both stand to benefit from an increase in industrial processing capacity Government: High prevalence of mini-processors creates an obstacle to the ambitious targets for production growth Machinery players: Increase in industrial processing would create additional opportunities for machine providers As part of its effort to promote industrial processing, the government secured thirty (30) industrial units, funded by EXIM Bank of India 15 units have been installed (of which 5 are in operation), but local expert state that funding issues are preventing the installation of remaining units Few processors have purchased units from the government under this scheme: SOCOMCI, GAN-LOGIS, and Oriane Industries are confirmed buyers To be confirmed: According to local expert, Sania (subsidiary of agribusiness leader SIFCA) is preparing to invest in industrial rice processing plant Challenges in the market and potential support by Development Partners including JICA Pole leader model could be key to develop industrial processing • Pole Leaders are responsible for increasing rice production and ensure processing, as well as building mechanization centers (working with PMEAs) They can be a key player in the decision-making process for machinery purchase Despite its potential, the implementation of the Pole leader model has not delivered the expected results Failure to deliver results driven by lack of financing model, lack of criteria for the selection of Pole Leaders, absence of performance metrics and of a clear distribution of roles between the government and pole leaders The model is currently under review by the government to determine how to structure it moving forward Development partners like JICA can support in a few areas • Help clarify and pressure-test the role of different stakeholders involved in the financing and execution of the model Capacity building for ADERIZ, the government implementation agency 68 68#69JICA Rice Processing Rice processing value chain in Cl: Currently industrial processing is marginal (only ~2%) presenting strong upside potential Rice ecosystem in Côte d'Ivoire (using 2016 data) Production Processing 1 Non-exhaustive Distribution 1 Cooperatives and Producers About 600,000 small producers 2,055ktons Middlemen and Organizations 616k tons 135k tons Farmers own consumption (small processing units) 1303k tons ~2% 26k tons 2 Industrial processors Small Distributors SOCOMCI Open market "Cantines" LDC. Supermarkets Export to regional -98% 1280k tons Mini Processors Agri-supplier, construction service providers and machinery 3 CDCin Large Distributors SOCOPRIX PROSUMA Carrefour GROUPE CARRÉ D'OR S.D.T.MBL. Section de Totes Marchand en d Imports (50% of the country need) Cic Cote d'Ivoire GEDIS ETG LOGISTICS Controls ~60% of imported rice market 1. 2nd level processing not included – hydrocarbons, energy, beer and flour 2. Industrial processors more than 2 tons per hour 3. Mini processors - less than 2 tons per hour Source: WFP (2018); JICA Internal report 1 Production is dominated by small producers with small land size (ranging from 0.5h to 3ha) 2 Opportunity to grow industrial processing capacity 3 Rice imports play significant role in meeting demand 69 69#70Rice Processing A few large processing machinery suppliers are active in the market, while there is a strong presence of Chinese, Indian and local players for small machinery Large international end-to-end solution providers1: Typically supply larger processors Non-exhaustive Company SATAKE Satake Europe BUHLER Bühler Origin Japan Germany AB Alvan Blanch UK RIELA Riela ...since 1972 Main offering for rice processing End-to-end solution includes packaging but excludes drying End-to end solution including drying End-to-end solution excluding drying Germany Offers end-to-end solution and specializes in drying Small machinery providers: Typically supply mini-processors This segment is dominated by Chinese and Indian brands followed by Turkish players who have recently entered the market. There is also a limited number of local players providing rice milling machines 1. Many large international players provide multiple crop processing solutions; we have not identified the full scope of their activities in Côte d'Ivoire Source: JICA internal report; Interviews 70#71Rice Processing The government is taking steps to promote industrial processing and secured investments for 30 5t/h units Location of the 30 processing units financed by EXIM Bank of India¹ Minignan Touba Odienne Boundiali Ferkessedougou Bouna Korhogo Niakara Mankone Dabakala Seguela Bouake Man Vavoua Daloa⭑ Sinfra Yamoussoukro Duekoue Bouafle⭑ Zouan-Hounien Saioua Guiglo Bocanda Bondoukou Abornourou Adzone Agboville Soubre Divo San pedro Planned 5t/h processing units As part of its effort to promote industrial processing, the government secured thirty (30) industrial units, funded by EXIM Bank of India 15 units were installed, 5 of which are in operation although not at full capacity Funding issues are preventing the installation of the remaining units, according to local expert Few processors have purchased units from the Government under this scheme: SOCOMCI, GAN LOGIS, and Oriane Industries are confirmed buyers 1. EXIM Export-Import Bank of India Source: Expert Interviews; Interview National Chamber of Agriculture; IFC (2015); SNDR 2020-2030 Plan; USDA (2020); BCG Analysis 71#72JICA Rice Processing Cl government and machinery players both stand to benefit from an increase in industrial processing capacity Cl Government • • High prevalence of mini-processors creates an obstacle to the ambitious targets for production growth More centralized production model enables faster growth and greater control over the product quality Central 'Pole leader' is designed to play a critical role in the industrialization of the sector Processing machinery providers • • Machinery providers currently working with distributors who navigate complex network of small individual processors Increase in industrial processing would create additional opportunities for machine providers Central 'Pole leader' model has potential to simplify go-to-market model with single decision maker for machinery purchase 72#73JICA Rice Processing Pole leader model could be key to develop industrial processing, but has not yet delivered results - Support from Development Partners can help improve the model Pole leaders could be key decision makers in machinery purchase • • Pole leaders are responsible for purchasing all the paddy rice in their zone and ensuring that the rice is processed They can own their own processing units and are therefore potential buyers of machinery (e.g., SOCOMCI, a pole leader, acquired 4 processing units from the government) Alternatively, they can attract investors to build processing units within their pole Implementation of the Pole leader model has not delivered the expected results . Designed in 2012, the pole leader model has had limited success so far • The strategy is lacking a detailed implementation roadmap that includes: Financing model to support the activity of pole leaders • Criteria for the selection of pole leaders Performance metrics A clear distribution of roles between the government and pole leaders As of today, the model is under review by the government to determine how to structure it moving forward Support from Development partners can help improve the model by: • Helping to clarify the role of different stakeholders involved in the funding and execution of the model Supporting capacity building of Rice Development Agency (ADERIZ) to ensure successful implementation of the model Source: ADERIZ (2020); BCG Analysis 73#74Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 74#75Cocoa: Assessment of the Agro- processing / machinery sector Côte d'Ivoire is the largest producer of cocoa beans and cocoa liquor in the world 2.2M tons of cocoa beans were produced in 2019 Rice Cocoa Cashew Rubber Cotton 75#76JICA Cocoa processing Cocoa processing in Côte d'Ivoire: Executive Summary Overview of cocoa processing sector and key players Côte d'Ivoire is the largest producer and exporter of cocoa beans globally, with most of the production being processed abroad • • • 25% of cocoa production goes through first-level processing locally. The remainder is exported, with the key destination being The Netherlands (18%), the USA (9%), Belgium (8%) and Malaysia (7%) Cocoa processing in Côte d'Ivoire is dominated by a small number of global players including Barry Callebaut, Olam, Cargill and CEMOI which account for ~80% of current installed capacity Short to medium-term investment opportunities are in the first level processing given that there is limited opportunity in chocolate manufacturing as only 4% of the global consumption is in Africa Challenges in the market and actions taken by the Government Low local processing in Côte d'Ivoire is caused by high Investment and operational costs when compared to Europe and the US High costs is driven by the accumulation of high costs of labor, utilities, logistics, security, transportation, port logistics and taxes To offset these high processing costs, the government has provided a series of benefits to companies processing cocoa locally • The main incentive is the differentiated export tax (DUS) with lower tax rates for processed products (14.6% for cocoa beans vs 6.0% for cocoa liquor) Already established companies (including Japanese companies) stand to benefit the most from this initiative Some large processors like Barry Callebaut and Cargill have committed to increasing their processing capacities However, many investors are still reluctant due to short duration (3-5 years) of incentives . Expansion of the incentive period could provide reassurance to investors, and help the government achieve its target 76#77JICA Cocoa Processing Cocoa value chain: While Côte d'Ivoire is an important producer of cocoa beans, only ~1/4 of production is processed locally Production and pre-processing 1st level processing 2nd level processing Production and pre- processing Plant growing Cocoa pod harvesting Bean fermenting Drying 2,180,000 100% 2019 Cocoa beans quantity (tons) FAVORICH COCOA LIQUOR Cocoa bean Export Bagging Trading/Export Production of semi- finished goods Roasting, grinding Production of cocoa products (liquor, powder, butter) Optional: solidifying Cocoa powder, butter or liquor export Manufacturing Retail Storage Loading Transport Shipping Optional: Melting Transport Production of industrial chocolate Unpack Display Dairy, confectionary and bakery products Promotion Sales < 1% 26% 18% 9% 7% 8% 6% 23% 3% 2019 Quantity of processed cocoa (tons) Côte d'Ivoire Netherlands USA Belgium Malaysia Germany 24% 12% 11% 10% 8% -4% 30% 2019 Quantity of processed cocoa (tons) Indonesia Others Source: FAO (2020); IFC (2015); Interview with Coffee Cocoa Board 77#78JICA Backup Cocoa Processing Share of cocoa production processed locally has remained steady since 2016 Exports of cocoa products (1000s tons) 1,778 2,034 2,154 2,180 71% 74% 74% 73%¹1 27%1 26% 29% 26% 2016 2017 2018 2019 Exports of Cocoa beans. Exports of processed cocoa 1. Estimates Source: Un Comtrade, FAO 78#7924% of the Ivorian Cocoa beans have been exported to The Netherlands; the USA (12%), Belgium (11%), Malaysia (10%) and Germany (8%) follow Exported quantities (1000s tons) 1,620 219 84 529 52 Cocoa beans Cocoa paste Cocoa butter Chocolate and other food preparations 27 Cocoa powder Backup Cocoa Processing Exported cocoa beans quantities (1000s tons) Netherlands 24% 395 USA 12% 196 Belgium 11% 179 Malaysia 10% 157 Germany 8% 132 Indonesia 4% 68 Turkey 4% 64 Estonia 4% 59 United Kingdom 3% 57 Canada 3% 55 France 3% 51 Italy 3% 49 Brazil 3% 46 Spain 37 37 Bulgaria 18 China 17 Average price Ghana 13 2,21 ($ per ton) Mexico 8 Poland 6 Trade Quantity India 5 1,619 (1000s tons) United Arab Emirates 5 Tunisia 4 Areas, nes 0 Trade Value (M$) 3,575 Sri Lanka 0 Source: UN Comtrade (2019) 79#80Cocoa processing dominated by small number of global players Cocoa Production in Côte d'Ivoire 900,000 smallholder farmers 1st level processing of Ivoirian Cocoa A few companies Cocoa Processing 2nd level processing (Chocolate manufacturing) Chocolate distribution 20% 100% 13% 17% Processing abroad 23% 7 Transport W 27% 1.60M tons (73%) Processors Barry Callebaut, Olam, Cargill, etc. Export Netherlands, > Processing Belgium, USA, Farming Germany, etc. ~2.20M tons Barry Callebaut Olam Cargill CEMOI Others Total Local processing The increase of cocoa 1st level processing capacity will be highly influenced by the global leaders installed in Côte d'Ivoire Source: IFC (2015); Cocoa Barometer 2020 ך Manufacturing Mondelez, Mars, Nestle, Hershey, Ferrero, Lindt & Transport Processing Export Netherlands, 0.60M tons (27%) UK, France, Germany, etc Sprungli, etc Traders Cemoi, ETG - Cargill, Barry Callebaut, Olam etc. Retailers Aldi, Lidl, Ahold, Marks & Spencer, Tesco, Carrefour, Walmart, etc. 80 60#81JICA Backup Cocoa Processing Processing in Côte d'Ivoire is dominated by four large global players who own 80% of the ~690,000 tons of 1st level processing Estimated processing capacity as of 2018 (tons) +Barry Callebaut 190,000 Olam Cargill CEMOI 90,000 Others 40,000 6% Choco Ivoire (Caf cocoa) 30,000 4% Ivory Cocoa Products (ICP) 20,000 3% Entered in recent years Source: IFC (2015); Press Search (2019) Sucso 20,000 3% 120,000 161,000 13% 17% Condicaf 20,000 3% 1st level estimated capacity (tons) CEMOI 10,000 - 23% 2nd level processing estimated capacity 27% 81#82Limited opportunity in 2nd level processing as only 4% of chocolate consumptions worldwide comes from Africa Cocoa Processing Cocoa production in 1,000 tonnes 2019/20 (forecast) Domestic consumption of cocoa in 1,000 tonnes 2018/19 Rest of Americas 1,164 USA 188 1,922 83 51 Eurpoe 802 Ghana Australia India 86 China 779 169 183 Japan Low demand for chocolate products in Africa, making large scale manufacturing unattractive 376 Rest of Asia 77 Rest of Asia Short to medium-term investment opportunities are in the first level processing 3,598 666 Rest of Africa 277 200 Indonesia Brasil 190 Brasil 849 328 Ecuador 2,130 Côte d'Ivoire 331 Rest of Americas Source: ICCO (2020); Cocoa Barometer 2020; BCG Analysis 82#8312 - 34 30-53 31-58 8 00 100 18-45 29-62 7-16 23 100 00 61-92 56 - 72 80 100 Low level of local 1st level processing driven by high operating costs, stemming from an accumulation of factors Cost benchmark: Cost index relative to highest cost country (highest cost country is 100) Labor Taxes Utilities Non-exhaustive Logistics 7-18 19 Worker (general Engineer manufacture job) (ordinary technician) Middle management (section chief class) Corporate income tax South Africa Kenya Cote d'Ivoire Nigeria Mozambique Source: JETRO Cost benchmark (2020); Expert interview; BCG analysis 75 67 80 56 00 100 92 92 85 59 N/A 36 52 Electricity (per 1kWh) Water (per 1 cubic meter) 40ft container - export to Japan 100 96 48 66 85 100 18 58 68 100 Additional factors causing high cost of processing: • Cost of security Transportation costs (driven by road infrastructure) • Port logistics costs 83 Cocoa Processing#84While incentives provided by the government are helping to increase processing of cocoa, the temporary nature is perceived as risky by many investors Cocoa Processing Incentives aim to increase 1st level processing from 26% to 50% by 2025 • Reintroduction of a differentiated export tax (DUS) with favorable rates for processed products (applicable for companies which commit to increasing their capacity by at least 7.5% within 5 years) Cocoa beans: 14.6% Cocoa butter: 11.0% Cocoa liquor: 6.0% Chocolate: 0.0% Establishment of a specific window for export rights exclusively targeted at processors Customs exemption on imported machinery for new investors Some large processors have already committed to increasing their capacities Government measures have had some success as some established processors committed to invest in processing capacity increase Examples Barry Callebaut, the largest cocoa beans processors in the country, projects to increase the capacity of its plant by 40%, from 190,000 tons to ~270,000 tons in 20221 Cargill, the third largest cocoa beans processor, plans to invest $100M to increase its processing capacity by 50%, from ~120,000 tons to ~180,000 tons However, many investors are still reluctant due to short duration of incentives 5 years incentives are perceived as risky by investors (despite being renewable) Expansion of the incentive period could provide reassurance to investors, and help the government achieve its target Source: World Bank (2019); Interview with Coffee and Cocoa Board (2021); Interviews with the private sector; Press Search 84#855 K 10 K 15 K OK 0.7 K 1.2K 0.1 K Production cost Farmer Inland transport Taxes/Marketing board 20 K Back-up: Retailers and manufacturers collect ~80% of the value in the cocoa business Value Distribution (US $ per ton of cocoa bean, 2014) Share of profits by type of players (US $ per ton of cocoa bean) Cocoa Processing 1.4 K 0.8 K 0.0 K 0.2 K 0.0 K International Transport Cost of arrival International trader Processor and grinders Manufacturer Retail & taxes Retail value 6.4 K < 8.1 K 18.9 K 44.2% 2.1% 4.3% 6.6% 7.6% 35.2% Transportation and traders Taxes/Marketing Board Cocoa farmers Processors and Grinders Chocolate Manufacturer Retailer . Increasing 1st level processing of cocoa helps to capture an additional 7.6% in the value A larger opportunity in terms of value resides in 2nd level processing with the manufacturing of chocolate 85#86Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 86#87Cashew: Agro- processing Côte d'Ivoire is the largest producer of raw cashew nuts in the world, producing 20% (~800,000 tons) of the global cashew production in 2019. India is second with 18.7% (~740,000 tons). Rice Cocoa Cashew Rubber Cotton 80 87#88JICA Cashew processing Cashew processing & machinery in Côte d'Ivoire: Executive Summary Overview of cashew sector and key players Côte d'Ivoire is the largest producer of raw cashew nuts globally, but cashew processing is primarily done in India and Vietnam • Côte d'Ivoire is the largest producer of raw cashew nuts in the world, with 20% of the global production. India is second with 18.7% • Close to 90% of the Ivoirian cashew is processed abroad: 56% in Vietnam and 28% in India (as of 2018) • • Olam is the largest processor in the country, accounting for 40% of locally processed cashew (the remaining capacity is shared among dozens of small-scale players) There is limited opportunity for Japanese machinery suppliers, given that Japanese companies have little advantage due to lower level of sophistication required Challenges in the market • • Côte d'Ivoire raw cashew nuts processing cost is highest among peers, being ~3x as high as the one in Vietnam High cost of processing can be explained by lower labor productivity, cost of machinery and spare parts and limited demand for by products and lower quality of cashew nuts Cashew nut processing needs to be done at a high standard (at least 65% of whole cashew) to be more profitable than exporting raw cashew nuts Achieving high standard requires a skilled labor force and the use of processing machinery Actions taken by the Government and support from Development Partners • • The government has provided a series of benefits for companies who agree to process cashew locally, including tax credits and custom exemption on machinery and bonus of 400 FCFA per kilogram of exported processed cashew nut The world bank provided a 285M$ loan to support the development of the value chain including the increase of processing capacity 88#89JICA Cashew processing Currently Côte d'Ivoire processes only 9% of its raw cashew nut production presenting a strong upside potential Production and Pre-processing 1st level Processing 2nd level Processing Raw cashew nut production RCN pre- processing RCN Trade/Export Planting Drying Grafting Sorting Weeding Bagging Storing Trading/Export RCN Processing Calibration RCK Control RCK Export RCK Roasting RCK Retail Grading Storage Steaming Treatment Loading Transport Roasting Transport Unpack Shelling Sampling Transport Pruning Peeling Packaging Shipping Salting Packaging Harvesting Sorting Labelling Display Promotion Sales 761,000 100% 2018 RCN Produced Quantity (tons) 9% 56% 28% 6% 0% 1% 2018 RCN Processing Volume Côte d'Ivoire Vietnam India USA Europe Others 1. RCN ― Raw Cashew Nuts 2. RCK - Raw Cashew Kernel Source: Dutch Ministry of Foreign Affairs (2018); Asoko Insights; BCG Analysis 2% 10% 10% 50% 25% 3% 2018 RCN Processing Volume (tons) 89#90JICA Backup Cashew processing Cashew nut value chain: International trading players active in the market, while local processing is led by Olam Small scale farmers 761,000 tons produced in 2018 ~330,000 farmers Source: Asoko Insight; BCG Analysis Cooperatives/Middlemen Local processors 9% Key Processors processed locally Nord SOBERY Cajou Cajou assou Olam Some locally AFRICAJOU AFRICA FMA processed cashew exported 91% exported raw Accredited exporter / Cooperatives and trading companies Key traders ETG$ Olam ECOM Main export markets for raw cashew nuts -56% -28% 1% Non-exhaustive Local retailers / Supermarkets 90 90#91JICA Backup Olam is the largest cashew nut processing player in Côte d'Ivoire Cashew processing Planned capacity (tons of raw cashew nuts) 42,000 42,000 Installed capacity (tons of raw cashew nuts) OLAM SITA 10,000 CILAGRI 10,000 Netherlands, Mali, France, Algeria FMA 10,000 Afrique Agri Industrie 7,000 STNC/SOTRAPACI 6,000 Nord Cajou 6,000 SOBERY 5,000 CASA 5,000 Africa Négoce 5,000 KOROSHO (ETG) 3,000 Global Cashew Industries 3,000 Agro-Fronan 3,000 Cajou du Fassou 1,500 Caju Industrie 1,500 Source: Dutch Ministry of Foreign Affairs (2018) 2018 estimated processed quantity (tons) Non-Processed 20,000 30,000 20,000 7,000 6,000 10,000 20,000 7,500 7,500 3,000 3,000 3,000 5,000 1,500 91 97#92Backup Cashew processing The majority of first level processing machinery comes from India and Vietnam and has low engineering sophistication leaving limited opportunity for Japanese machinery suppliers Steaming Process that helps to reduce the resistance of the shell Shelling Process that separates the shell from the kernel Peeling Process that removes the film surrounding the kernel Cashew kernel 20% weight of the nut 48% lipids ~20% protids 26% glucids Film covering the kernel Shell 20% cashew nut liquid Cooker Manual Shelling Machine Manual Peeling Machine Boiler Source: Burkina Faso Ministry of Industry (2017) Automatic shelling machine Automatic Peeling Machine 92#93JICA Côte d'Ivoire raw cashew nuts processing cost is highest among peers Cashew processing RCN Processing cost (USD per tons) 704 534 520 368 309 254 217 Côte d'Ivoire Ghana Nigeria Mozambique Tanzania India Vietnam 1. RCN - Raw Cashew Nuts Source: Cotton and Cashew Board (2017); Dutch Ministry of Foreign Affairs (2018) 93#94JICA Cashew processing A few constraints may explain high costs of processing cashew as compared to Vietnam and India Lower labour productivity Lower labour productivity when compared to Vietnam and India Higher costs to acquire machinery and spare parts Poor access to spare parts, costs and delays of repairs and most machinery is imported. Limited demand for by- products The possibility to produce CNSL1, charcoal and compost is not fully exploited in Côte d'Ivoire 1. Cashew Nutshell Liquid Source: Interviews; Dutch Ministry of Foreign Affairs, BCG Analysis 94#95High quality output (65% whole nuts) required to make processing more attractive than exporting raw cashew nuts. Incremental profit from selling processed cashew vs. exporting raw cashew nuts ($ per ton) 1,122 1,012 +40% +27% 770 -4% 330 90% Whole and 10% bits 65% Whole 25% splits 10% bits 30% Whole 40% splits 30% bits 100% bits Profit from export 800 of raw cashew nuts -59% Profit from processed cashew nut ($ per ton) High Level of processing complexity Low - Assumptions: price of raw cashew nut $800 per ton; price of whole cashew $6000 per ton; price of split cashew $4000 per ton; price of broken (bits) cashew $2000 per ton; processing cost $500 per ton; Kernel output rate amount of kernel expected from raw cashew 22%; Source: IFC GAFSA (2015) Cashew processing Implications Processing activity is highly risky but has strong potential to generate profits in the long-run Skilled processors and adequate machinery is paramount to obtain at least "65% whole, 25% splits, 10% bits" cashews 95 95#96JICA Cashew processing The Government and the World Bank have launched programs to improve the cashew nut value chain including an increase in processing The Government has created incentives to increase processing capacity The government has created a series. of incentives valid for 5 years with possibility to renew of additional 2 years. • Customs and VAT exemptions on new machinery and spare parts Tax credits for investors willing to increase the capacity or upgrade their processing units • Bonus of 400 FCFA per kg of exported processed cashew nut Source: Ministry of Agriculture; World Bank (2018); Press Search The World Bank has been supporting the Cashew value Chain with a USD 285 million loan between 2018 and 2023 Goal Activity Value (USD M) 1 Reaching 200,000 tons of RCN capacity, creating 16,000 jobs 2 Bringing total capacity to 190,000 tons, improving RCN quality 3 Facilitating access to markets Creation of infrastructure for cashew nut processing in four processing zones Construction and rehabilitation of RCN storage facilities Rehabilitation and maintenance of 2,100 km of roads, purchase of measuring instruments such as humidity meters, RCN quality analysis kits, marketing 106.2 17.6 19.8 4 Facilitating access to finance Provision of subsidies and matching funds for micro- projects, a guarantee fund for RCN purchase, promotion of a system of intermediate storage 85.6 5 Improving cashew plantation productivity Extending services for at least 300,000 producers, rehabilitation of 32,500 ha of plantations, organization of nurseries and specialized cashew support services 41.5 6 90 Improving value chain governance Organizational strengthening of producers and cooperatives, establishment of an interprofessional organization, setting up a Cashew Technology and Innovation Center (CIAT) in Yamoussoukro and general incentives for private sector investment 14.4 96#97Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 97#98Rubber: Agro- processing With 790,000 tons output in 2019, Côte d'Ivoire is the largest producer of natural rubber in Africa but far behind the Thailand (4.9M tons) and Indonesia (3.3M tons) Rice Cocoa Cashew Rubber Cotton 98#99JICA Rubber processing Rubber processing in Côte d'Ivoire: Executive Summary Overview of cashew sector and key players • • • • With 790,000 tons, Côte d'Ivoire is the largest producer of natural rubber in Africa but far behind Thailand (4.9M tons) and Indonesia (3.3M tons) 77% of the production was locally transformed into Technical Specified Rubber (TSR), the remainder was exported as raw commodity to Malaysia SAPH (owned by Ivorian agribusiness group SIFCA) is the largest TSR producer in the country with 163,000 tons (27%) of installed capacity. Other players are: SOGB (10%), SCC (6%), CHC (5%) and SAIC - owned by Olam (3%) Despite the production of TSR, manufacturing of rubber goods is almost non-existent (less than 1% of production) Given Côte d'Ivoire imports ~100M$ of rubber goods, there is a potential to manufacture non-tire rubber products, including mattresses, conveyor belts, gloves, contraceptives and shoes Challenges in the market and Government actions • • Historically, Côte d'Ivoire has processed 100% of its rubber into TSR. However, processing capacity has not followed the production increase in the past 5 years due to difficulties to access to qualified labour and the high cost of machinery and spare parts To address the problem, the government has signed agreements with existing processors, offering them additional tax incentives to increase processing capacity 99 90#100JICA Rubber processing Significant share of TSR production done locally, while manufacturing of rubber goods for regional consumption is non-existent Production and pre-processing 1st level processing 2nd level processing Preliminary Production Tree planting Tapping1 Processing Coagulating 788,795 Latex export TSR² production TSR export Goods manufacturing Retail Storing Trading/Export Coagulating Shaping Storage Loading Production of goods (mostly tires) Drying Transport Transport Unpack Display Promotion Shipping Sales 100% 2019 Natural Rubber Produced Quantity (tons) Côte d'Ivoire China 77% 23% 2019 Natural Rubber Processing Quantity (tons) Malaysia USA Germany Spain Belgium <1% 18% 17% 9% 8% 7% 7% 33% 2019 Natural rubber Processing Quantity (tons) Others Less than 1% of rubber goods manufactured in Côte d'Ivoire 1. Tapping is the process of collecting liquid latex from trees. In Côte d'Ivoire a tree can produce 5kg of latex per year during 25 to 30 years 2.TSR - Technical Specified Rubber Source: Interview with Hevea and Rubber Board; UN Comtrade; IFC (2015) 100#101JICA Back-up: Natural rubber value chain Backup Production Farmer/cooperatives Output: raw natural rubber Pre-processing Farmer/cooperatives Output: primary rubber products Cup lumps Rubber tree Fresh latex Rubber processing Natural coagulation 23% of rubber is exported as cup lumps Controlled coagulation Unsmoked sheets Stabilized by adding ammonia Latex (stabilised) 1st Level Processing Local factories Output: semi-finished product Brown crepe Standard block rubber (TSR Grades 10-50) 2nd Level Processing Global industry Added to vehicle Output: finished tyres, automotive products, semi-finished product Parts, shoe soles 77% of rubber is exported as TSR Air dried sheets (ADS), ribbed smoked sheets (RSS) (ADS/RSS1-5) Non-exhaustive High-quality technically specified block/pale crepe rubber (H-TSR) Latex concentrate (LCT) Vehicle tyres rubber parts RSS 5: High contamination level: tyres, automotive parts, shoe soles RSS 1: Low contamination level: medical products, food industry Premium vehicle tyres in food Industry Latex dipped products. Condoms, etc. Source: Chanchaichujit/Saavedra-Rosas 2018; Rothemeyer/Sommer 2013 Processed conducted in Côte d'Ivoire 101#102JICA Rubber processing SAPH is the largest 1st level processor, owning 27% of the ~608,000 total installed capacity Estimated processing capacity SAPH1 163,000 SOGB² 63,000 SCC6 38,000 6% CHC3 30,000 5% EXAT4 30,000 5% CCP5 30,000 5% TRCI 26,000 4% SAIC (Olam) 21,000 3% SITEL Less than Zenith Plastique CCP (mattresses) 6000 tons 10% 1st Level installed Capacity 27% 2nd level processing estimated capacity Non-exhaustive 1. Societe Africaine de Plantations d'Hévéa (SAPH) 2. SOGB Societé de Caoutchouc de Grand-Bereby (SOGB) 3. CHC - Compagnie Hévéicole de Cavally 4. EXAT - Exploitation Agricole Tehui (EXAT) 5. CCP - Compagnie du Caoutchouc de Pakidié (CCP) 6. SCC - Sud Camoe Caoutchouc 7. SITEL - Societe Ivoirienne de Traitement de Latex Source: IFC (2015); Interview with Hevea and Oil Palm Board; Company Websites (2021) 102#103Rubber processing Processing of latex made products could be the way forward for Côte d'Ivoire 2019 trade value of Côte d'Ivoire imports - rubber articles (M$) Global share of natural rubber Products (%) 100 70 Entertainment Balloons Molded toys Tennis balls Erasers Wearables Shoe soles Rubber boots Rubber bands Gloves - examination, household, surgeon Condoms Medical House Carpet pads Mattresses Dental Dams Multiple-dose medication bottles 12 8 2 Total Quantity TSR Tires Latex Technological Food Products Storage Glue Others Produced Fonte: Business Biodiversity EU; Renal and Urology News; UN Comtrade Tires 62.4 Potential opportunity Mattresses 8.4 Conveyor Belts 6.4 Gloves 4.0 Contraceptives/Teats 2.7 Others 16.5 Total 100.4 Regional demand for tires is too low to justify investments in tire manufacturing There are small opportunities to manufacture non-tire rubber products like mattresses, conveyor belts, gloves, contraceptives, teats and shoes (currently locally made) 103#104JICA A few constraints may explain low rubber processing in Côte d'Ivoire ww Rubber processing Access to qualified labour Skilled labour is required to ensure sustainable production and processing of natural rubber. Scarcity of skilled labour is, thus, a major constraint to rubber processing Mechanization & Maintenance Poor access to spare parts, costs and delays of repairs. and high cost of machinery as most is imported Access to raw materials Dependency on imported raw materials such as polymers and intermediates (subject to price fluctuations) used to manufacture rubber goods 104#105II Government of Côte d'Ivoire natural rubber processing boost program 1 2 3 Rubber processing New Investments 4-year customs and VAT exemption on machinery, spare parts acquired locally or imported The value of spares should not exceed the value of initial investment on machinery and goods by 20% (Zone A), 40% (Zone B), 60% (Zone C) 4-year VAT exemption on services and feasibility studies linked to increase of rubber processing capacity Increase or maintenance of processing capacity Additional 10-year tax credit depending on the zone, processing capacity and size of the investment ZONE A Large Enterprises1 25% Small and Medium Enterprises² 37,5% Local content ZONE B ZONE C 35% 50% 52.5% 75% 4 Additional 5% tax credit for enterprises with minimum 40% Ivoirian investment with a clause stating that the share cannot reduce for 20 years 1. Mininum investment for large enterprises - 304,900 Euros (excl VAT) 2. minimum investment for SMEs - 76,000 Euros Source: Interview with Hevea and oil Palm Board; Giz (2020) 105#106Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton Appendix 106#107Cotton: Agro- processing Côte d'Ivoire produced 495,000 tons of cotton seed in 2019, most of which is hand-picked, rain fed and requires minimum use of chemicals, making the Ivoirian cotton suitable to manufacture premium fabric Rice Cocoa Cashew Rubber Cotton 107#108JICA Production 495,000 tons (100%) 495,000 tons (100%) Cotton production Pre- processing . Plant growing Harvesting • • Open air Drying Packaging Source: USDA (2020); BCG Analysis Cotton value chain: Low level of local fabric manufacturing, but regional market for woven fabric already exists First level processing 262,350 tons (53%) Cotton seeds (used as livestock feed) 495,000 tons (100%) 212,875 tons (43%) Ginning Drying Cleaning Opening and blending • Carding . Drawing and combing Spinning • Packaging Cotton lint (for fabric manufacturing) 19,800 tons (4%) Waste/debris Second level processing and retail 212,875 tons (43%) Transport/ export 10,650 tons (2%) Local fabric/clothing manufacturing Regional fabric market: In 2019, Côte d'Ivoire exported $25.3M of woven fabric, 90% of which to Benin, Burkina Faso, guinea, Niger and Senegal export . Storage Loading Transport Shipping 13% 9% 202,225 tons (41%) Global fabric/clothing manufacturing 5% 4% 3% 2% 2% 3% Bangladesh India Vietnam China Pakistan Malysia Indonesia 108 Others#109Cotton processing Top 3 players own 85% of ginning capacity, Olam is #4 with 11% Organization of the sector Organization: The Ivoirian Cotton sector is organized in zones each one led by an organization which controls production (supply of intrants to farmers), purchasing, transformation and export. Production/Ginning: Ivoire Coton and COIC control 68% of the production and have 65% of the ginning capacity. Olam owns 11% of the ginning capacity in its two facilities located in the North of Côte d'Ivoire. Ginning capacity of key players in the sector Company Facility District Capacity (tons/year) Share (%) Boundiali (2) Savanes Ivoire coton Dianra Woroba 205,000 32.3% M' Bengue Savanes Korhogo (4) Savanes 155,000 24.4% COIC2 Lataha Savanes 50,000 7.9% Bouake Vallee du Bandama CIDT1 130,000 20.5% Fabric Manufacturing: a limited number of spinning and weaving facilities are run by Uniwax and Seritex to produce decorated fabric (wax "pagne"). Mankono Seguela Woroba Woroba Ferkessedougou Savanes 70,000 11.0% SECO³ Olam Ouangolodogou Gonfreville Savanes Global cotton Vallee du Bandama 25,000 3.9% Opportunities for the private sector Potential opportunities for the private sector in fabric manufacturing leveraging the sustainable nature of Ivorian cotton (hand-picked, rain-fed, use of limited chemical). Sector was deprioritized due to lower interest from Japanese companies 1. CIDT- Compagnie Ivoirienne pour le Developpement du Textile (CIDT) 2. COIC - Compagnie Ivoirienne de Coton 3. SECO-OLAM - Societe d'Exploitation Cotonniere 4. Failure to provide intrants to farmers can result in suspension of the Agreement (SICOSA was removed from the zoning due to its failure to fulfill its obligations) Source: InterCoton; USDA (2020), World Bank (2020) 109#110Return to table of content Table of contents Overview of focus of study High level overview of investment landscape in Côte d'Ivoire Investment environment health check FDI trends analysis Agro-processing & machinery Rice Cocoa Cashew Rubber Cotton > Appendix 110#111Agro-processing & machinery 111#112JICA Backup Cereals, Fruit and Vegetables: Yield is a critical challenge in Cl Yield Low yield as compared to peers¹ across crops • Cereals (42% lower) • Beverages (75% decline in yield over the last decade) • F&V (70% lower) W Land Only 36% of the total agricultural land is used for farming Large pockets of land not cultivated/ developed Food Crops Supply Chain High wastage due to inadequate storage infrastructure • • Average food wastage 1.7x of peers ~10% wastage in Côte d'Ivoire versus 6% in peers1 Key reason is lack of sufficient refrigerated storage facilities Low yield driven by Lack of research, availability and access • to improved seeds • Low fertilizer usage Only 0.011 ton/ha fertilizer used in Côte d'Ivoire vs. 0.15 ton/ ha in peers¹ Limited mechanization <2% of the land is under irrigation • Most of the farming is rain-fed, can increase crop intensity and land cultivated by increasing land under irrigation Post harvest supply chain infrastructure underdeveloped • · Peers at 20x2 tractor penetration versus Côte d'Ivoire Crop intensity is ~ 30% lower than other SSA2 countries · Critical challenge- High cost of transport Inadequate distribution channels Limited availability of information & data Lack of finance 1. Developing Small Farm Nations comprising of 93 nations across Africa, Asia and South America are considered as peers 2. Sub Saharan Africa hp/ha calculated as total hp per 1000 ha of harvested land in 2014. Côte d'Ivoire has 1.13 hp/ha versus peers (small farm, developing nations) at 20.1 Source: FAO, World Bank 112#113JICA Backup Cash crops: Yield and value addition are critical challenges in Cl Cash Crops Yield Low yield across crops when compared with historic yield and peer average Cashew (350% lower) 1 • • Cotton (62% lower) 2 • • Rubber (10-15% lower than historic yield, peak in 2000) 3 Cocoa (30-35% lower than historic yield)4 Largely driven by: . Lack of inputs - high yield seeds, fertilizers Low farm mechanization • Poor farming practices Critical challenge- Land Only 22% of the total agricultural land is used for cash crops cultivation • Large pockets of land are not cultivated/ developed due to government policies or distributed holding Low crop intensity as compared to peers Plantation of crops that have negative environmental impact (e.g., palm) threaten sustainability of agri practices and growth Supply Chain Inadequate farm eco-system and infra • Limited presence of contract manuf. or guaranteed price agreements High cost of collection, distribution, and transportation to urban/ export markets Limited financing support for small farmers (E.g., Rubber) 5 Small farm suited storage solutions leading to wastage Value Addition Limited local transformation ecosystem Average processing is ~ 30% for cocoa, 8% for cashew and ~ 5% for other cash crops • 2-5x value addition potential lost as produce is exported as cash crop6 Critical challenge- 1. Cashew nut yield in Côte d'Ivoire 0.38 ton/ha vs 1.36 ton/ha in peers. 2. Cotton yield in Côte d'Ivoire 0.98 ton/ha vs 1.58 ton/ha in peers 3. Rubber yield has fallen from 1.87 ton/ha in 2000 to 1.65 ton/ha in 2014 4. Cocoa yield has fallen from 0.77 ton/ha in 2000 to 0.58 ton/ha in 2014 5. Rubber plantations have significant upfront cost of US$500-1,000/ha 6. Value addition potential has been calculated as difference between export price of cocoa beans and export price of processed cocoa products like cocoa butter, chocolates, etc. Note: Côte d'Ivoire peer nations are small far,, developing countries Source: FAOSTAT, press search, Agri reports 113#114Despite representing 23% of GDP, Agriculture only accounts for 11% of bank lending Backup Credit to private sector as percent of GDP (2017) 133 Private banks are reluctant to provide credit to small farmers and MSMEs. Available credit has interest higher than the average rate of returns (e.g. for machinery interests' rate can go over 20%). Small farmers and MSMEs are too risky: lack of proper registration or identification and low digitization (e.g., only 10-15% of cocoa value chain is digitized, digitization rate in non-export crops like rice have been minimal) Source: World Bank (2020) 85 47 28 28 26 12 Vietnam Morocco Sub-Saharan Africa Senegal Kenya Côte d'Ivoire Ghana Bank credit by sector in 2017 (%) 27 22 11 11 9 8 7 4 Commerce, Manufacturing Agriculture Restaurants, Electricity, and Fishing water and Gas Finance, Insurance, Transport, Storage and Construction Other 2 Mining Hotels Real Estate, Communication Business Services 114#115Rice: Overview 115#116Share of imported rice has been increasing, reaching 53% in 2018 Total available rice - Local production and imports (1000s tons) 2,536 +3% 2,698 2,617 2,801 46% 43% 38% 43% 7% 6% 7% 8% 7% 5% 7% 6% 48% 46% 44% 41% 2015 Imported White rice consumed locally Imported rice sold in the region 2016 2017 2018 Local white rice sold in the region Local white rice consumed locally 1. SDTM Societe de Distribution de Toutes Merchandises Source: Expert Interview; Interview National Chamber of Agriculture; IFC (2015); SNDR 2020-2030 Plan; WFP (2018); BCG Analysis Findings The share of imported rice has increased since 2013 to reach 53% in 2018. In general, local rice is perceived as of a lower quality than the imported rice, even if progress has been made in recent years W Major traders importing rice to Côte d'Ivoire SDTM¹ (Carré d'Or) imports 50-60% of Ivoirian rice. It is supplied by Louis Dreyfus Company and Olam Asia Remaining imports are shared by: AGRIEX - Phoenix . Nouvelles GEDIS - General Distribution Export Trading Group (ETG) Compagnie d'Investissement Cerealiers (CIC) 116#117JICA Distribution of domestic rice production in 2019 1. Bas-Sassandra District Rough production (MT) Share of Nat'l Consumed production locally MALI GUINEA BURKINA FASO 2. Comoe Bas-Sassandra 58,324 3.1% 74.6% 3. Denguele 3 9 12 10 4. Goh-Djiboua 5. Lacs 6. Lagunes 5 Н 8. 9. 6 Liberia GHANA 11. Woroba 12. Zanzan 7. Montagnes Sassandra-Marahoue Savanes 10. Vallee du bandama Comoe Denguele Goh-Djiboua Lacs Lagunes 55,596 3.0% 59.9% 69,681 3.7% 75.9% 175,569 9.3% 51.1% 31,199 1.7% 41.4% 22,259 1.2% 53.3% Abidjan Yamoussoukro Montagnes 301,302 16.0% 56.2% Share of national production: Sassandra-Marahoue 536,660 28.5% 38.6% Less than 1% Savanes 404,582 21.5% 73.5% 1-5% Vallee du bandama 106,364 5.6% 30.9% 5-10% Zanzan 105,416 5.6% 69.4% 10-20% 20-30% Yamoussoukro 6,983 0.4% 45.8% Note: Abidjan/Yamoussoukro not listed, accounting for less than 1% of production Source: USDA (2020), GOCI 117#118JICA Côte d'Ivoire rice production has been stagnant while other countries (e.g., Nigeria and Mali) are increasing production 1,000 MT 6,000 5,000 4,000 3,000 2,000 1,000 Nigeria Mali Tanzania Madagascar Guinea Cote d'Ivoire 0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Source: USDA (2020), USDA PS&D *USDA/Post estimates 118#119JICA Major rice suppliers to Côte d'Ivoire 1,000 MT 500 474 400 300 320 454 399 385 368 342 271 267 234 236 215 215 191 200 162 100 0 0 2015/16 22 22 2016/17 184 147 103 66 66 50 2017/18 2018/29 93 93 81 58 Thailand Vietnam China India Pakistan Myanmar Source: USDA (2020), Trade Data Monitor (TDM) *YTD, October 2019 - March 2020 238 25 25 154 2019/20* 30 30 21 119#120Rice processing 120#121JICA Backup Large scale transformation units are scarce in Côte d'Ivoire but could grow fast in the coming years Quantity of collected paddy in 2016 by processing units Size of Number of units in the processing units country Quantity of paddy collected (tons) Paddy collected per production site (tons/site) Paddy collected (%) Less than 1 tons per hour 2,635 534,158 203 72% Between 1 and 2 283 192,024 679 tons per hour .........................9.9.9.9.9.9.9.9............................................................... ....................9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9.9 More than 2 tons per hour 6 12,389 2,065 Total 26% 2% Opportunities to supply rice processing machinery will increase as industrial units grow in the country Units projected by the SNDR1 (status as of 2020) .0.2 to 2t/h: 2,500 units 5t/h: 30 units (10 were completed) 12t/h: 1 unit (completed) • 2924 738571 253 100% 1. SNDR National Rice Development Strategy Source: WFP (2015) 121#122Backup Distributors, processors and producers each capture similar share of the margin on 1kg of semi-luxurious white rice Cost and margin distribution (in FCFA/kg of white rice) Distribution of total margin 30% 35% 35% 26 30 30 22 48 370 214 · Agreed retail price Distributor margin Processor Producer Distribution margin margin costs Processing Raw material costs costs Distributors Processors Producers Costs 1. Distribution costs include transport, handling, storage and taxes 2. Processing costs include cleaning, drying, storage, electricity, water, labour, packaging 3. Raw material costs include intrants, cleaning, spraying, harvesting, drying, transport to processing units Source: University of Montpellier; SNDR 2020-2030; WFP (2018) Main stakeholders of the rice value chain have decided to fix the price of 1 Kg to be between 350 and 400 FCFA to stay competitive with imported rice whose price is between 450 and 475 FCFA. The net share of total margin in final retail price is 23% in Côte d'Ivoire, a value significantly lower than the one in Senegal (35.4 to 43.9%) In the long-run, the value chain would gain from the introduction of high-quality seeds and farming machinery 122#123JICA Backup JICA survey results: Size and location of activity of service providers N° PMEA NAME 1 GRACE AGRICOLE CI LOCATION Yamoussoukro, M'Bahiakro Total N° Employees Minignan Tengrela Korhogo 2 Quangolodougeu 2 CAP BERE District de savanes, Tonpki, Région du Béré Boundiali Odienne 3 CI MOTORS District de Yamoussoukro, région du Gbèkè 21 4 MECA PREST INTER Région Agneby Tiassa 6 SYLLA PRESTATIONS AGRONEGOCES Région du Goh 5 Touba 3 Ferkessedougou Bouna Korhogo 1 Saguela Nianaranadougon Niakara Nassian Bondo ukou Tanda Mankono Dabakala Katioh Beo umi Région du Hambol, région du Gbèkè 15 M'bahiakro Bouake N.E Man Vavoua Sakassou Prikro 7 GARAGE IVOIRE AGRI (GIA) Région du haut Sassandra, Cavally 26 Dan ane Zuenoula 8 AGRO KROBIS Moronou,béré, Goh Bangoreo Dolar Bocanda Yamoussoukro Daoukro Bouafle Abernourou Bloleguin Saioua Duekoud infra Bongouanou 9 FERM BIO District du belier I Toue pleu Issia Oune Akoipe Bongouanou GBEKE, IFFOU, HAMBOL, LA ME, 10 SIMAPRES I INDENIE DUABLIN, 11 SAMI District des Savanes 12 GBEKE PREST AGRI GBEKE, HAMBOL, BERE 13 PAYSAN AUTONOME District de Yamoussoukro Buyo Lakota Guiglo Gagnoa Tiasale Guatry Sikensi Soubre Divo Dabou Feesco Tabou Sassandra Grand -lahou San-pedro Agboville Aboisson Grand-Bassam A diake Source: JICA survey of 8 machinery service providers as part of PRORIL II project#124JiCA Backup 6 5 1 5 mix DongFeng (China) 3 1 0 2 4 6 8 10 12 JICA survey results: Machinery type and brand per fleet Number and type of machinery used across contractors Number of machines Brands deep-dive: Tractors Yanmar (Japan) Yanmar / DongFeng 60 40 20 20 20 CO 6 Brands deep-dive: Tillers World / Chalion (China) 25 / Yanmar (Japan) mix China 4 1 Cote d'Ivoire 1 3 0 10 15 10 LO 5 25 5 LO 3 Brands deep-dive: Threshers 4 3 *1=1: Chalion (China) 20 20 CI-MOTORS AGRO- GARAGE Societe des PMEA 1 PMEA 2 CORPORATION NEGOCE IVOIRE AGRI RIZ ABONGOUA RIZ SARL SYLLA MECAPREST PRESTATION INTER CNH (USA) 1 SAME (Italy) 1 Saxon (Germany) 1 Tractor Tiller Thresher Sheller Plow Mower Rotary tiller Seed drill Drying system Rice milling DongFeng (China) 0 сл 0 Source: JICA survey of 8 machinery service providers as part of PRORIL II project 20 20 25 25 T 10 15 20 CI-MOTORS CORPORATION AGRO-NEGOCE Societe des RIZ ABONGOUA RIZ SARL PMEA 1 SYLLA PRESTATION MECAPREST INTER GARAGE IVOIRE AGRI PMEA 2#125JiCA Backup JICA survey results: Number of customers, farming size and payment method Number of customers by contractor Area covered per client (ha) (represents largest client area) Accepted payment type and timing CI-MOTORS CORPORATION 5 3 AGRO-NEGOCE Th 300 100 15 GARAGE 102 IVOIRE AGRI 24- Societe des RIZ 594 219 ABONGOUA RIZ SARL PMEA 1 14 -5 PMEA 2 100 40 MECAPREST INTER 15 0 500 45 10 33 2 2,000 Payment accepted Payment in Payment advance on-site Payment at harvest 544 Cash only 1,000 0 500 1,000 1,500 2,000 Regular clients Occasional clients Source: JICA survey of 8 machinery service providers as part of PRORIL II project >#126JiCA Backup JICA survey results: Benchmarking cost of acquisition Cost of Acquisition (USD) Brands deep-dive: Tractors CHALION*1 CASE IH 50,624 48,860 SAME SOLAR 21,907 SAXON 20,081 DONGFENG 10,041 0 Brands deep-dive : Tillers YANMAR 16,404 10,954 5,112 YANMAR/AGRITECH DONGFENG YANMAR/DONGFENG 1,753 Japan 548 0 50,000 100,000 50,000 1. Bundled with tools 2. Exchange rate: 1USD = 548 FCFA Source: JICA survey of 8 machinery service providers as part of PRORIL II project 100,000 Brands deep-dive: Mower, Plower, Sheller, Thresher, Drying System RIELA China 1 31,035 Turkey 5,232 Côte d'Ivoire 1 3,651 Côte d'Ivoire 2 2,738 China 2 1,734 0 93,105 50,000 100,000 Drying System Mower Plow Sheller Thresher#127Backup JiCA JICA survey results: Frequency and cost of machinery breakdown Number of times breakdowns occurred in 2019 Number of times machine was taken to the repair shop¹ Average cost for each repair (F CFA) Percentage of time breakdown caused delays/cancellation Access to replacement parts Distance to closest machinery parts store CI-MOTORS 10 CORPORATION AGRO-NEGOCE 2 0 GARAGE 2 0 IVOIRE AGRI Societe des RIZ 5 ABONGOUA RIZ SARL PMEA 1 6 PMEA 2 19 MECAPREST INTER 4 0 0 3 5 7 0 0 15,000 50,000 40% 60% (sometimes fabricate own parts) 100% 100% 50,000 20% 80% 200 km (sometimes fabricate own parts) 45,000 100% 6 km 40,000 234 km 30% 70% (sometimes fabricate own parts) Source: JICA survey of 8 machinery service providers as part of PRORIL II project 1. Respondent who do not take their machine to the repair shop either attempt to repair on-site or have an in-house mechanic 100%#128Cashew processing 128#129JICA Backup Majority of first level processing machinery comes from India and Vietnam Cashew processing machinery Origin and Year of Installation Processing unit Place Calibration Steaming Shelling Peeling Sorting Roasting Salting Packaging OLAM Bouaké/ Dimbokro Data not available CILAGRI Abidjan 2018 VIE STNC/SOTRAPACI Abidjan 2017 VIE 2018 IND 2017 VIE 2018 VIE 2018 ITA 2017 VIE/CHN 2017 VIE/IND VIE/CHN/IND 2018 CHN 2018 ITA (plan) 2018 ITA (plan) No data 2017 VIE KOROSHO Yamoussoukro Data not available CASA Bouaké 2014 VIE 2014 IND 2014/15 IND X 2015 VIE 2015 CHN 2014 IND Cajou du Fassou Global Cashew Industries Yamoussoukro 2018 CI 2018 CI 2014 VIE/CHN 2014 CHN 2014 CI 2014 CI 2014 CHN Odienné 2014 VIE 2014 VIE 2014 CHN 2014 VIE/IND CHN 2014 VIE Agro-Fronan Fronan 2016 CI 2016 CI 2016/8 VIE/SL 2016 VIE SOBERY Bouaké 2014 VIE/CI 2014 IND 2018 VIE 2014 IND No data 2015 CHN No data 2015 VIE SITA Odienné 2017 VIE 2017 VIE 2017 VIE 2017 VIE 2017 VIE 2017 VIE No data Caju Industrie Kolia 2015 IND 2015 IND 2015 IND 2016 VIE No data 2015 IND FMA Korhogo 2016 VIE 2016 VIE 2016 VIE 2016 VIE 2016 CHN 2016 VIE Afrique Agri Industrie Bondoukou 2014 IND 2014 IND Nord Cajou Séguéla 2016 VIE 2016 VIE 2014 VIE/IND 2016 VIE 2014 VIE/IND 2016 VIE No data 2016 VIE 2014 IND 2016 VIE Africa Négoce Bouaké No data 2015 VIE 2015 VIE/CHN 2015 VIE/IND No data 2015 IND CI Côte d'Ivoire CHN - China IND - India Source: UK Ministry of Foreign Affairs (2018) ITA - Italy VIE – Vietnam Mix Note: SL-Sri Lanka 129#130JICA#131Unused Slides 131