The West African country of Benin is a success story in making as it embarks upon a mission to process its agro commodities within the country instead of exporting them in raw form. Thanks to ARISE IIP – a company co-founded by Mr. Gagan Guptaand actively into building Industrial Ecosystem in African countries- the industrial landscape of Benin is changing because of the Glo-Djigbe Industrial Zone being developed by it on public private partnership (PPP) format along with theGovernment of Benin. Though still to be formally launched, GDIZ has succeeded in attracting multiple investors from across the globe and India needs a special mention here as sizable number of investors are either Indians, NRIs or PIOs. Food processing industry is the major driver for Benin as it’s an Agro-based economy. Mr. Jasveer Singh, Chief Development Officer of ARISE IIP, spoke to Food Marketing & Technology Magazine at length on host of opportunities at GDIZ and how he sees GDIZ becoming a fully-grown industrial cashew processing hub over the next 2 years.
In conversation with a leader who has committed himself to a mission of developing and marketing integrated multi-product Economic Zones in Africa with the help of Indian Entrepreneurs.
1. ARISE IIP is investing heavily in development of Industrial Zones and SEZs in West and West-Central Africa. Could you tell us in brief about ARISE IIP and its vision and mission? Who is the majority shareholder of ARISE IIP?
ARISE IIP is an Industrial Ecosystem builder active in multiple countries in Africa. Our Vision is to generate 5,000,000 jobs in Africa by 2050. Our Mission is to improve the ‘Quality of Life’ of Africans through industrialization of Africa.
We take a note of the natural resources currently being exported out of the African countries and put in place an ecosystem that promotes processing of these natural resources within that country. We also look at import substitution of high value products by encouraging import of raw materials, semi-knocked down or completely knocked down kits and value addition within the African countries to meet the domestic requirement (example Cement, Food Processing, Pharmaceuticals, automobiles, etc.).
India is a known manufacturing hub and therefore we believe that Indian industrialists and entrepreneurs can play a big role in the industrialization of Africa, thereby generating jobs for the African youth and wealth for themselves.
Africa Finance Corporation (AFC) is the majority shareholder (51%) of ARISE IIP. It is a USD 8.5 Billion pan-African Multilateral Development Financial Institution established in 2007 by sovereign African states to provide pragmatic solutions to Africa’s infrastructure deficit and challenging operating environment. It is collectively owned by multiple African governments; African banks; Private equity funds and Insurance groups.
2. What are your learnings from working with African countries? What are the inhibitions of Indian Investors with respect to Africa?
Africa is a land of opportunities and natural resources. Indian industrialists and entrepreneurs can have priority access to these natural resources if they can process them within the country of origin and this in return can bring prosperity both to Indians and Africans.
Unfortunately, the opportunities are untapped because of the reservations Indian investors have about Africa. Few of the common worries Indians have wrt investing in Africa are listed below:
- General Law & Order and safety of staff
- Corruption and Security of investments
- Possibility of raising finance
- Receiving timely Industrial and environment approvals in a new country
- Availability of good infrastructure – Electricity, water, internet etc.
- Availability of local skilled staff and work visa of Indian workers
- Possibility to repatriate profits to India or any other third country
- Incentives available to Indian investors
Surprisingly, not many Indians are aware that many of the progressive African governments are already aware of the above issues, and they have put in place Single Window Approval Authority and customized incentive packages for Indian and international investors. Important to highlight that the focused industrialization initiative taken by few of the African governments is along with ARISE IIP on a Public Private Partnership (PPP) format where the experiences of a private developer (ARISE) is used to improve the ease of doing business.
3. After the success of Gabon SEZ now you have Togo and Benin Integrated Industrial Zones. What is the focus of these Zones, and which other African countries are on your horizon?
ARISE IIP success in Gabon has become a case study and a development model that all African governments want to replicate. Today companies in Gabon SEZ and their trade partners employ close to 20,000 people (direct and indirect) and annually export USD 500,000 worth of processed products to 54 countries. Gabon SEZ based manufacturers are the biggest exporter of Face Veneer (used to make plywood) to India and control 60% of the Indian market, which earlier was otherwise majorly imported from China, Myanmar, and Malaysia. Gabon SEZ was launched in 2011 and has 50+ Investors of Indian Origin.
Industrial Zones already developed by ARISE IIP are listed below:
- 1350 Hectare Gabon SEZ (GSEZ) – Timber and Food Processing Industrial Zone,
- 750 Hectare Platform Industrial of Adetikope (PIA) – Cotton (Textile), Soyabean and Food Processing focused Industrial Zone in Togo.
- 1400 Hectare Glo-Djibe Industrial Zone (GDIZ) – Cotton (Textile), Cashew, Soyabean and other Agro-Commodities including Food Processing focus Industrial Zone in Benin.
Other Integrated Industrial Zone Projects under different stages of planning are in Ivory Coast, Senegal, Congo (Brazzaville), Guinea, Chad, and Rwanda.
4. Each Integrated Industrial Zone project developed by ARISE IIP requires an investment upwards of USD 300 Million. What are the deciding factors for ARISE in choosing a country in Africa for developing a SEZ/Industrial Zone?
Our investments are big investments because we develop not only Special Economic Zone infrastructure but complete ecosystem including the supply chain. We are answerable to our lenders and shareholders and therefore we follow a systematic approach in selecting the country we invest in. Few parameters we investigate are:
- Political stability and vision of the Political leaders of the Country
- Commitment of the government to improve the ease of doing business
- Readiness for cash investment by the government (up to 40%) in project development
- Assurance by government to put in place a system ensuring raw material availability for the manufacturers investing in the country – first right to natural resource
- Availability of skilled and semi-skilled labor and investor friendly employment policy
- Availability of foreign exchange (USD & Euro)
- Operational freedom to the Private player (ARISE IIP) in line with the model PPP practices.
ARISE being itself an investor understands the possible pain points of the Indian investors and is best equipped to work with the government to find solutions to them.
5. What makes GDIZ (Benin) SEZ an attractive proposition for Indian investment with respect to cashew processing? Is Government of Benin a shareholder in GDIZ project?
Glo-Djibe Industrial Zone (GDIZ) is a joint venture between Government of Benin and ARISE IIP. 35% of investment is by government while 65% is by ARISE IIP.
GDIZ is an attractive proposition for Indian manufacturers specially for Cashew Processors for following reasons:
- Business Opportunity Understanding: Assistance in undertaking preliminary studies to understand the business opportunity.
- Quick Approvals: Assistance by ARISE to get approvals through Single Window Authority. An Indian relationship manager will be assigned to the investor who will liaison with all government departments.
- Ready-to-move-in Industrial sheds: Ready land and readymade Industrial sheds available on rent which means reduced capital investment.
- Raw Material Availability: Full year availability of raw material (RCN) for processing at your factory doorstep. Working Capital assistance for raw material procurement.
- Raw Material Storage Warehouse: Open Drying and Warehousing facility within 500m of the factory.
- Local Assistance: Legal, Human Resource and Civil construction related assistance to investors. Technical assistance in setting up the factory and machine selection assistance also made available on request.
- Quality Infrastructure: Wide roads, assured water supply, reliable electricity supply (quantity, quality, and price).
- Marketing Assistance: Finished product Marketing Assistance. European Union Treaty and AGOA (USA) benefits when exporting to US and Europe.
- Fiscal Incentives: No custom duty on machines and spare parts import, income tax exemption, VAT exemption, etc.
- Skill-upgradation Training: Government to pay 50% of the salary of the local workers for a year or till they complete the skill upgradation training.
- Best out of Waste: Treatment/processing units to handle the waste coming from units and make value added products. Example Cashew Shell Oil treatment unit within the zone.
- Customs clearance and Cargo Handling Facility within the zone: Export/import container handling and logistics facility/agents within the zone. Customs department to seal the containers within the Zone.
- Support Units: Carton Box and Tin box manufacturing units within the zone to meet the requirement of the processing units within the zone.
6. Is ‘Invest in Africa’ in conflict with or complementary to ‘Made in India’?
African governments want fair share in processing of the natural resources they produce, and they also have youth which needs job. India has skillset and means but needs priority access to more natural resources. ARISE wants to create a win-win situation which can be achieved by undertaking one level of processing in Africa and the second level of processing in India. Example, India does not have Timber and so first level of processing happens in Gabon (Face Veneer manufacturing) and the second level of processing happens in India (Plywood manufacturing). Similarly, Active Pharmaceutical Ingredients (APIs) made in India can be exported for Pharmaceutical Formulation (next level of value addition) in Africa. This way both co-exist and support Indian industrialists in capturing a bigger market. Priority access to natural resources and access to market to sell finished product makes ‘Make in India’ possible.
ARISE IIP projects also offer an opportunity to Indian industrialists to establish manufacturing base outside India and capture the European and American markets which is not possible through their manufacturing base in India because of various known reasons. Manufacturing in Africa makes it possible to compete with global players because European and American governments offer incentives/custom benefits to ‘Made in Africa’ products. Example, Indian cashew manufacturers setting up manufacturing facility in Benin can take benefit of EU Treaty to compete with Vietnam based manufacturers and capture the European market.
US-China trade war was an opportunity for India that it failed to encash. Right after the start of Covid Pandemic it was said that manufacturing will get decentralized, and India will emerge as an alternative to China. However, India missed that opportunity as well and Vietnam took all the investments. Now there is a third opportunity for Indian manufacturers in the shape of African Continental Free Trade Area (AfCFTA) and they should not miss the bus. AfCFTA is a free trade area agreement between 54 of the 55 African Union nations and it came into force on 1 January 2021. The AfCFTA aims to boost intra-African trade by providing a comprehensive and mutually beneficial trade agreement among the member states and encourages processing of African natural resources within Africa. However, the fact remains that there are very few large scale manufacturing facilities in West and Central Africa. Indian industrialists and manufacturers can take advantage of this gap and setup manufacturing facility to capture the huge African market. Increase in logistics prices have drastically increased the price of imports and makes local processing even more profitable.
7. Your message to Food Processing companies, especially Cashew Processing, who wish to invest in Africa.
Africa is heavily dependent on imports for food and African countries found them vulnerable during the Covid Pandemic. The increased logistic prices have added to the chaos and hence achieving the Food Security has become the prime focus of many African countries. This changed approach brings many opportunities in Africa for food processors.
Cashew Processing in Benin is advantageous for five main reasons:
- Eliminate Brokers/Commission agents: Priority access to raw material. Direct access to raw material eliminates the international broker in the system and hence raw material availability at reduced prices. Brokers normally have a 15% to 20% margin on RCN.
- Reduced Logistics: In Raw Cashew Nut (RCN) processing 76% is waste or by-product. Current high logistics cost, which in all probability will not reduce now, does not support export of RCN from Africa to Asia for processing and then further shipping to the end market (USA/Europe). Processing within Benin and direct export to the destination will bring substantial savings (15%).
- No currency risk: Europe is a big market for processed cashew. Benin currency (FCFA) is pegged to Euro and therefore it can be said that the raw material is bought in Euro and the finished product is also sold in Euro. This eliminates the currency fluctuation risk which is normally in the range of 2% to 3%.
- Reduced Carbon Footprint: Europe is soon going to introduce the Carbon Footprint tax. More the carbon footprint, higher the tax payable when importing into Europe. Logistics is the biggest generator of green house gases and when processing RCN in Benin and exporting processed nut to Europe versus export of RCN to Asia for processing and then further export of processed nut to Europe, the distance travelled by a nut reduces by 75%. This will transform into clear price advantage (about 5%) over processing units in India and Vietnam – the two biggest processors and exporters of RCN.
- Inflation resistant saving: Benin currency is pegged to Euro and hence it does not see a depreciation over the years unlike Rupee that weakens against Euro or USD year after year. In 2012, 1 Euro was equal to INR 65. Today (2022), 1 Euro is equal to INR 86. It means that if a person would have forgotten 1 Euro in his purse in 2012 then that 1 Euro, though sleeping, would have given an average yield of approximately 3% per annum, where most Fixed Deposits in India give an average yield of 5% per annum. Means your investments abroad in INR terms will always grow @ 3% over and above the project returns.
Benin government is rolling out a red carpet for cashew processors. To know more about the special incentives being offered by Benin Government please WhatsApp Ms. Heena Saboo (+91 8383057074) and Mr. Ashish Jain (+91 90040 56783) or email on Jasveer.singh@arisenet.com.
