Nigeria, Dangote: not enough tomatoes to run plant profitably

Africa’s biggest tomato processing plant is barely managing to operate profitably, six years after the factory began production because it can’t get adequate fruits to crush.

The 1,200-tonnes 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.

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 an estimated 200,000 people, banks balk at lending to farmers despite President Muhammadu Buhari’s focus on boosting local production.

The Dangote plant sought to help Africa’s most populous nation cut 300,000 tonnes of tomato-paste imports from China. That’s even as an estimated 900,000 tonnes of tomatoes are lost locally every year due to a lack of storage and processing facilities. But farmers have not been able to supply the factory with the volumes needed to run at capacity.

Tomato plant processing just enough to remain operational
The plant is currently processing about 300 metric tonnes of the fruit each day, the highest capacity it has achieved since 2015, but barely enough to keep the plant operational. Yet, it incurs the same overhead costs, including power operation, as if it were operating at its full capacity, Abdulkarim Kaita, managing director of the Dangote Tomato Processing Plant, said.

Tomato processors also can’t import the berry to make up for erratic local supply as overseas purchases of the fruit are barred by the Central Bank of Nigeria, which refuses to provide dollars to import these items. That policy is also fueling inflation, which accelerated to 22.28% in May, about a four-year high.

To boost the tomato crop, the factory is helping farmers by providing them 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 metric tonnes a hectare.

The company is now 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. “We're optimistic that the 1,200 metric tonnes capacity production will be achieved because every season is a learning experience for us,” Kiata said.

Source: bloomberg.com