EVOLUTION OF THE AFRICAN MILLING INDUSTRY

As shown in Graph 1, food wheat consumption in Sub-Saharan Africa has been growing almost continuously since the early 1960s, starting from 2.5 million tons and reaching more than 30 million tons today. At the same time, we can also note that flour imports have grown at a much slower pace, increasing from 600 thousand tons to 1.5 million tons. This means that most of the growth in food wheat consumption has been captured by the local milling sector. Interestingly, the average consumption per capita has skyrocketed from 10 kg per year to 28 kg per year, meaning that growth in wheat consumption has not only been generated by population’s growth but also changing eating habits.

The African milling industry has experienced distinct phases over the years. From the 1960s to the mid-1980s, the industry showed slow but steady development. However, progress was hampered by the debt crisis in the 80s, resulting in a temporary slowdown in growth until the mid-2000s.

As shown in Graph 2, since 2007, the industry has witnessed a remarkable boom, with consumption per capita increasing from 17 kg per year to 28 kg per year, resulting in an average annual wheat consumption growth rate of 5.4%. This resurgence can be attributed to various factors, including increased demand for processed food products, urbanization, and changing dietary patterns. Even with the current volatility in the wheat market, as there are currently limited alternative sources of cheap food available to replace wheat and feed the fast-growing African population, it is therefore highly unlikely that this trend will reverse anytime soon.

A prominent trend within the African milling sector is consolidation, particularly observed in West and Central Africa. Millers are focusing on increasing their milling capacity to achieve economies of scale and enhance efficiency. This allows them to import larger quantities of wheat to reach critical size and book bigger vessels, thereby reducing their importing costs. It also enables them to optimize mill usage and reduce production costs. Additionally, it is more cost-effective to transport flour rather than wheat for inland transport, leading to a concentration of milling capacity in main port areas to serve the local market as well as landlocked countries. Key hub cities such as Abidjan, Dakar, Accra, Douala, and Pointe Noire have emerged as central locations for milling operations.

This presents challenges for smaller players who struggle to compete in a price-driven mass market. The absence of significant niches for small players further exacerbates the competitive landscape.

However, it is worth noticing that East and Southern Africa show a lesser degree of consolidation compared to other regions. These regions currently have less installed milling capacity and a higher emphasis on corn milling. Nevertheless, there is potential for rapid development in the near future, especially with increased milling capacity in cities like Mombasa, Dar es Salaam, and Beira. Noteworthy local players such as Bakhresa, Pembe, and Merec are well-positioned to become major leaders in the region.

The Sub-Saharan African milling sector is witnessing a growing trend of incorporating local crops, including cassava, corn, and sorghum, into baking flour. This shift presents numerous opportunities, including improving national trade balances, enhancing food self-sufficiency, and promoting a positive market image. By incorporating local raw materials, countries can reduce their reliance on imports and bolster their agricultural sectors. 

This transition is not without challenges. Limited infrastructure, competitiveness of local crops against imported grains, technical obstacles related to the low industrialization of the local sector, and low baking performance are hurdles that need to be addressed. 

Limited governmental support raises additional challenges, yet we can observe that several initiatives are underway, such as the mandatory incorporation of cassava in Nigeria (although not fully implemented), state projects in Kenya to incorporate corn, and ongoing research on sorghum in Sudan. Southern Africa, with its substantial corn production, holds significant potential for incorporating local crops into milling operations. 

Although the African milling sector is developing rapidly and is expected to continue in the coming years, the current volatile wheat market creates a huge challenge for millers, and it is worth raising the question of how millers cope with shifting origins.

Indeed, a pivotal aspect of a mill’s development potential lies in its wheat procurement strategy. We can typically identify three primary strategies:

 “cheap-cheap” prioritizing the lowest buying price; resulting in high technical and quality challenges, high risk in terms of output, market share, and image, but lower financial burden and easy sourcing

 “quality first” emphasizing safety-oriented long-term wheat buying strategies for easier operations and quality management, but also increasing the financial burden and lowering margins

 “balanced” ensuring a consistent wheat supply basis while incorporating opportunistic buying, leading to easier quality management but generating very high technical challenges for milling operations. This strategy requires highly skilled technical and procurement staff.

The choice of strategy depends on numerous factors, such as the miller’s financial position, market conditions, and risk tolerance. Each strategy comes with its own set of benefits and challenges, highlighting the importance of strategic decision-making in procurement.

Conclusion: The Sub-Saharan African milling sector is currently experiencing a period of substantial growth and is poised to continue its upward trajectory in the coming years. However, it is also undergoing a transition toward becoming a mature market, further catalyzed by the current volatility of the wheat market. Success in this evolving landscape will depend on factors such as financial strength, staff excellence, and a well-defined procurement strategy. Moreover, knowledge development, transparency, and effective information flow are crucial for sustained growth and competitive advantage within the African milling sector. As the industry continues to evolve, millers must adapt to changing market dynamics, leverage emerging opportunities, and overcome challenges to thrive in this dynamic and promising sector.