Africa Improved Foods targets shift to commercial food production

Ramesh Moochikal, CEO of Africa Improved Foods, says that the company is seeking hundreds of millions in investment to enable it to expand to other parts of the continent as it targets a shift to commercial food production.

Africa Improved Foods is a result of a collaboration between Royal DSM of Netherlands, Dutch development bank FMO and the International Finance Corporation, the World Bank’s private sector development arm. Currently, it operates in Rwanda as a subsidiary company called AIF Rwanda, 7% of which is held by the government of Rwanda. 

Under the current model its customers have largely been the government of Rwanda and international organisations such as the World Food Programme (WFP); Catholic Relief Services; and the Red Cross to supply their programmes in countries such as Ethiopia, South Sudan, Uganda and DRC. Currently, he says, only about 5-7% of its output is distributed commercially.

As it expands further, however, that model is set to change. 

“When we go to these other markets in Africa – Ghana, Ethiopia, Nigeria, Zambia and others with significantly evolved consumer markets, a large part of our business will become consumer oriented,” 

Moochikal says. That evolution will essentially turn the current model on its head, with 70% of production intended for commercial distribution and the other 30% earmarked for humanitarian relief.

Frustration with aid sector  

Part of this may be due to the fact that it has lost the custom one of its key buyers in Rwanda, the WFP, at the beginning of 2024. Moochikal doesn’t hide his disappointment about the loss, which he says was unhelpful to African manufacturing.

“The background to this is that so far, the poorest people in Africa were being fed by a factory in Belgium, which was using Belgian crops, Belgian subsidies, Belgian labour and Belgian assets to burn carbon to bring the food here. What sense does that make when you can have an African plant that is producing it for you here in Africa using African labour and African crops?”

Despite the loss, Moochikal says they were able to keep their commitments to out-growers and were able to boost sales via other channels. And with renewed global funding for relief in sight, the WFP could make more purchases in 2025.  

Commercial expansion, it would seem, would leave AIF less beholden to individual buyers. Moochikal points out that whatever the channel of distribution – commercial or humanitarian relief supply – the company’s purpose is to make better nutrition accessible at an affordable cost to the lowest strata of the population. 

“Our product will always be priced at 30-40% of what a Cerelac (a brand of instant cereal by Nestle for infants) is priced at, for example. We want to reach the consumer who can’t afford what is available now.”

In West Africa, where there is less relief activity, the commercial route would serve this purpose better, he says. It is also open to partnerships, such as it has in Ethiopia, where it is partnering with Unilever to fortify the popular local staple Shiro. 

“So depending on the country we are in, the product format would change.”

Expansion plans 

According to Moochikal, AIF is seeking some $130m in debt and another $130m equity for its immediate expansion plans. This would include funding for three new plants in Ghana, Zambia and Ethiopia, each of which will cost about $43m. A $120m plan to move into Nigeria is pending the approval of a cautious board.

Moochikal himself, however, is all in. “I told them that we will have to be there if you want to make the kind of impact that we wish to make in Africa,” he says.  

Of the three countries on AIF’s radar Moochikal says Ethiopia is the one where plans are most advanced. “We are sitting on a project execution plan as we speak. So, if we get the money tomorrow, we can start,” he reveals. “In the case of Ghana, we are in pre-feasibility and Zambia will be the last of the three. So, it will be Ghana, Ethiopia and Zambia in that order,” he adds. The three countries, he explains, were chosen for various reasons by the team at AIF, in consultation with six experts on the continent’s market dynamics.

Ghana was chosen because it serves as the manufacturing hub of West Africa and although Anglophone is strategically located among Francophone countries. Ghana’s weaker currency, he says, also provides an advantage compared to the relatively stronger and stable CFA used by its neighbours. The country also has strong agricultural output and is politically stable, “so Ghana becomes our first base.” Ethiopia is the second choice, Moochikal says, because like Nigeria, it cannot be overlooked, despite its challenges. There, AIF already has a partnership with Unilever that will ensure robust consumer distribution, which he concedes is not a core strength of AIF. Similarly, in Zambia, AIF will collaborate with Trade Kings for distribution purposes. “So between the three countries, we have formed partnerships, we have found the sourcing, and we need to now set up the plants to expand our footprint.”

In Rwanda, Moochikal says, it was able to produce above capacity last year. “The plant’s installed capacity is about 47,000 tonnes. Last year it produced 64,000 tonnes with no fixed asset addition.  So, whether it is efficiency or safety track record or machinery or systems, I think we can claim to be the very best.”

Working with farmers

That record also includes good relations with growers, the other critical factor for the success of an agro-based industry. Moochikal says AIF has supported farmers to not only boost production but also to improve the quality of output. 

“When we came to Rwanda 10 years ago, 98% of the maize that came to our factory was rejected because of aflatoxin, the biggest problem for African crops, resulting from poor post-harvest treatment. We worked with 200 cooperatives here and today, only 1% of the maize is rejected,” he points out. 

Success for the continent’s agriculture sector requires close attention from both governments and private sector actors with an interest in the agricultural output, he emphasises. 

“Whoever buys the commodity from these  communities must take the responsibility of hand-holding them, taking them through the processes, explaining good agricultural practices. Only then can they succeed. And if these communities  succeed, African agriculture will succeed.” 

Policy frameworks alone, he stresses, are not enough, especially with the threat of climate change and related weather events.

Investor outreach

Moochikal is confident that AIF’s outreach to investors will also succeed. So far they have received  tentative commitments from seven investors of between $20m and $30m each. While he concedes that it is only words on paper at the moment, AIF, he says, is also having positive conversations with the Africa Export-Import Bank and the African Development Bank. 

“Before I joined, we were only speaking to the European development banks, which got us nowhere. But we are very happy with the energy and ownership that the AfDB and Afreximbank are showing. Obviously, [for them], we tick all the boxes – children, women, agriculture, farming communities and agro-processing.”

Should its investment drive yield the desired results, Moochikal says AIF would be happy to break out on its own. 

“Every company needs a kind of parent at different stages of its evolution and DSM has done a great job as a parent so far, with the technology, support, the credentials, and the people that it brings as a food producer. But I think the time is now ripe for others with a more commercial outlook in Africa to drive our growth. It might be better for us as a company to find long term investors who can support our growth faster and wider.”