ECONOMICS AND TRADE | Achieving growth through open markets
30 June 2008
Business Changing in Africa to Confront Food Crisis
Rose grower shifts to producing food crops as well
Chicago -- An Indian company that until now has largely grown roses in Kenya and Ethiopia is diversifying into food staples to help confront the African and global food crisis.
Rao Karuturi, director and chief executive of Sher Karuturi Limited, spoke recently with America.gov at the 2008 U.S.-Africa Agribusiness Forum in Chicago, which was sponsored by the Corporate Council on Africa (CCA).
Karuturi provided insights into how his private company is changing to meet needs both in Africa and globally in the face of the current food crisis.
Presently, Karuturi said, his company produces 1.5 million stemmed roses daily in Africa for shipment to Europe and the United States -- doing about $100 million of business in Kenya and $50 million in Ethiopia.
Karuturi said the company is negotiating with the government of Ethiopia to produce more than 100,000 hectares of rice and 100,000 hectares of wheat, corn and cereal crops.
Food from cereal crops would be for consumption both locally and globally, he said.
Whatever cannot be consumed locally in the East African community -- Uganda, Tanzania, Kenya and Ethiopia -- would be available globally, he said. With those crops being produced locally, Karuturi said, Africans will be able to access food more cheaply because they will be able to avoid significant transportation costs.
Karuturi said his company is actively working with the CME Group -- which operates the world’s largest agricultural commodity exchange in Chicago -- to help market some of the futures trade in these crops.
Karuturi said Sher Karuturi Limited is presently growing food crops in India. “We have significant vegetable cultivation out of India and have vegetable processing operations as well,” he said.
While his company is on the verge of starting a 2,000-hectare vegetable farm in Ethiopia for export to Europe, he said, the food grain farms his company hopes to establish will supply the local African and global markets.
Karuturi attributed much of the rise in food prices to the higher cost of fertilizers -- many of which are petroleum-based and are therefore going up as fuel costs rise. Those same high fuel costs, he said, also cause upward price pressure for foods because most large farms are heavily mechanized and operate large amounts of fuel-hungry farm equipment.
Asked what impact 100,000 hectares of rice would have on the current food situation in Africa, Karuturi called that amount “a significant chunk” of global production.
“Globally, about 650 [million] to 700 million tons of rice is produced every year, but only about 6 [percent] or 7 percent of that is actually traded globally, with 94 [percent] to 95 percent being consumed within the country where it is produced.
“So there is very little left for global trading. Our percentage in terms of global trading would be around 2 [percent] to 3 percent of the global supply, so we expect to have a significant influence on the global supply of rice and hopefully alleviate some of the global pressures that are coming into the global market.”
Commenting on the important role adequate infrastructure plays in agricultural development, Karuturi acknowledged that there are major challenges. To be globally marketed, he said, commodities must be shipped over roads to markets and ports and, if necessary, stored for future use.
He readily acknowledged that “sooner or later those issues will have to be addressed” if a significant amount of agricultural development is to take place in Africa.
Karuturi said his company is trying to build some of the infrastructure it needs itself. He stressed, however, that in the end, African governments must take up that challenge.
Asked if he senses a new kind of confidence in Africa, Karuturi said his company, which has been in Africa since 2004, has “seen steep changes every year we have been there -- this year more than ever. We are confident that the decision that we took four years ago to come to Ethiopia has been vindicated already and it will continue to prove itself over the next few years.”
The two-day agribusiness forum in Chicago attracted Africans, Americans and a host of international agribusiness executives to examine the current food crisis and to seek solutions.
