Tractor maker Deere expects growing demand in Africa

US company Deere & Co expects to see demand for its farm equipment in Africa grow 8%-10% a year in the coming years, driven by expansion in key markets such as Ethiopia and Zimbabwe, a local company executive said.

Farming accounts for about 60% of total employment in Africa, according to the World Bank. In Ethiopia, Malawi, Mozambique, Tanzania, Uganda and Zambia, food production is projected to add more jobs than the rest of the economy combined through 2025.

A global policy shift away from food aid towards local production — championed at the start of the decade by the World Food Programme among others — has sparked a green revolution, increasing Africa's potential as a market, said Jacques Taylor, MD of John Deere Sub-Saharan Africa.

"We started to see a commercial market developing for agricultural commodities ... That gave an incentive for farmers to produce more," he said in an interview on Thursday.

Taylor said that about 80% of its equipment shipments to Africa currently go to 10 markets, including SA, Zambia, Kenya and Ghana.

"We see three or four countries with significant upside growth potential in the medium-term," he said. "We see opportunity in countries like Angola, Zimbabwe, Ethiopia and obviously Nigeria."

Deere, best known for its John Deere branded tractors, currently ships its products to local dealers in Africa where its main competitors include CNH Industrial and Landini.

Deere's dealer in Ethiopia is partnering with the government, in the midst of reforms, to set up an assembly plant to supply farm machinery to the market of about 100-million inhabitants.

Zimbabwe is also undergoing of a major transition after long-time president Robert Mugabe, who was criticised for overseeing disastrous farm seizures, was ousted in 2017.

"We have high hopes for Zimbabwe. It used to be the food basket for southern Africa. The potential is known," Taylor said. "Zimbabwe could easily recover and get back to the levels of production they've seen in the past."

In SA, Deere's most important market on the continent, the ANC has made land redistribution a key issue ahead of 2019 elections. President Cyril Ramaphosa has promised the process will not threaten food security or growth, but the move has nonetheless unnerved some investors.

"We do see it as a growth opportunity for us. There will be new entrants coming into agriculture," Taylor said. "I think for the sake of the sector and the economy, it's important for us to get clarity sooner than later."

Deere reported $2.8bn operating profit from its equipment business last year, with 39% of that coming from its business outside the US and Canada. Sales grew 5% in 2017 in those home markets.

The company does not break down sales data further. 

Reuters