Nigerian billionaire can’t get enough tomatoes for his factory

Nigerian billionaire Aliko Dangote is barely managing to operate Africa’s biggest tomato processing plant, six years after the factory began production, because he can’t get enough berries to crush.

Dangote’s 1,200-tonne a day plant is producing at 20% of capacity because farmers don’t have enough resources to boost acreage. The factory was meant to reverse Nigeria’s dependence on imports of tomato paste from China and increase local production. But by 2017, the company had to idle the plant after pests destroyed vast swathes of the crop. It took another two years — and a resolution of a dispute over payment to farmers — for the factory to resume output.

“We haven’t been able to process enough quantity of tomato to make our operations successful,” said Abdulkarim Kaita, MD of the Dangote Tomato Processing Plant. “At the moment, we are counting losses.”

The crisis at Dangote’s tomato plant is emblematic of the challenges faced by many businesses in Africa’s biggest economy. While tomato farming employs about 200,000 people, banks balk at lending to farmers despite President Muhammadu Buhari’s focus on boosting local production. Such policy missteps, entrenched corruption and ethnic tensions are discouraging investment needed to add jobs in a nation that has one of the world’s highest unemployment rates.

A dearth of clear-cut plan with realistic timelines for proper development are eroding the expected gains from the government’s bid to encourage local production, said Segun Ajayi-Kadir, director-general of the Nigerian manufacturers association.

Nigeria is recovering from its deepest recession in four decades as a result of pandemic-induced restrictions. But a sluggish revival and rising insecurity risk raising social tensions, according to the World Bank.

The Dangote plant was to help Africa’s most populous nation cut 300,000 tonnes of tomato-paste imports from China by using about 900,000 tonne of tomatoes lost after harvest every year for lack of storage and processing facilities. But farmers have not been able to supply the factory with the volumes needed to run at capacity.

The plant is processing about 300 tonnes of the fruit each day, the highest capacity it has achieved since 2015, but barely enough to keep the plant operational. Yet it requires the same power and overheads cost of operating at its full capacity, Kaita said.

Tomato processors also can’t import the berry to make up for erratic local supply as imports are barred along with as many as 50 other products by the Central Bank of Nigeria, which refuses to provide dollars to buy these items. That policy is also fuelling inflation, which accelerated to 22.28% in May, the highest in about four years.

Meanwhile, tomato farmers can’t get enough credit to boost output as banks are reluctant to lend for agricultural activities. Tillers have also been harangued by armed marauders and kidnappers.

“The issue is that our production demand has not been met so far and we need to increase the volume of supply from the farmers,” Kaita said. Most of the tomato farmers live in remote villages and that makes it difficult for vehicles to go in and bring out tomatoes to the plant.

To boost the crop, the factory is providing farmers with improved seedlings and encouraging more people to cultivate the product. The move has helped increase the number of farmers to 6,000 from 1,000 in the last harvest season, but supply still was just enough to meet 20% of the factory’s capacity, Kaita said. Each farmer can produce at least 40 tonnes per hectare.

The company is planning to create farming clusters next harvest season and is relying on a proposal by the central bank to provide credit to farmers to boost output.

Dangote’s $17.4bn of assets makes him Africa’s richest man, according to the Bloomberg Billionaires Index. Most of his wealth is derived from his cement business. Dangote is now investing $19bn in a petrochemical complex near Lagos.

Bloomberg News. More stories like this are available on bloomberg.com