Sub-saharan Africa is seeing its cities expand to bursting proportions as people flock to the metros in search of a better life. In the context of Agribusiness, we have found at least 3 good reasons to “stay rural”. Setting up shop “in the bundus” (colloquialism meaning “rural area”) is not for the faint-hearted, but can yield some rewarding results. Here is why:
1) In our industry, agriculture and the production of agricultural products and by-products, the first reason is almost too obvious to mention. Generally, agricultural commodities don’t grow in the cities (at least not in large quantities)… It makes, therefore, just as much sense to bring the processing capacity to where the produce grows. Logistics generally become easier the further down they are in the processing cycle. Of course the more complex the final product and the more additives required, the more intricate the cost-benefit balancing act.
2) Many resources are still much cheaper in the outlying areas, especially labour and land. You might just find that the premium you pay for setting up in a metro or the industrial section of a metro for renting warehousing, storage and production space, may just be equivalent to buying land in rural areas. I’ll take ownership before a lease any day and twice on Sunday. Once again the balancing act mentioned in 1) comes into play, and purchasing land/property in many rural areas is often a slightly more complex process.
3) Many African governments offer tax-breaks and/or other incentives to companies that develop rural areas. It is their way of getting privately sponsored infrastructure and essential services to outlying communities. Yes, some of the infrastructure costs take many years to amortize (even with the incentives), but there is also that priceless “feel-good factor” associated with bringing amenities to a village and improving the living standards of an impoverished community which can serve in lieu of CSI investment.
That’s just three reasons. Of course, a reliable and trustworthy local partner who “knows the lay of the land” is always a must when making decisions in Africa, but the rewards are potentially astronomical if you can brave the hardships of the “bundus”.