Export Trading Group: Making a sustainable difference to agricultural supply chain

The impact of a growing global population and changing climate patterns has put an ever greater emphasis on farming methods to increase yields. Of course for many of the world’s farmers, lack of knowledge and investment capital leaves them stuck in a rut.

One company helping to address this problem is Export Trading Group (ETG), a business that has made a huge success out of investment and education in agricultural techniques.

export“Our Business covers Agricultural supply chain management, dealing with dry and non-perishable goods such as pulses, nuts, maize oilseeds and sugar. We handle all transportation and supply chain issues from farmer to end destination and cover 22 countries throughout Africa,” describes Jean Craven, Executive Director of Export Trading Group South Africa.

The company was established in 1967 however the South African office has been running for around 7 years and now deals with most of the exchange and trading of commodities throughout the Continent. Since its establishment in South Africa, the office has become one of the top 3 business hubs and Craven suggests that this is due to the network that they have available as well as the people that they have employed over the past 7 years.

A measure of the progress that ETG has made can be seen in the employee numbers. The company have 7,000 employees globally and the workforce in South Africa has expanded from 4 up to 80 employees in just 7 years. The company currently operates in 22 countries throughout Africa in addition to its involvement in joint ventures and owns one of the largest pulse processing factories in the world, in Mumbai.

Despite its success and global reach, ETG remains privately-owned, with the majority of the business (70 per cent) owned by family and senior management who have held their shareholding since the 1980s. Additionally, there are 3 external shareholders Remgro (9 per cent), US investor Carlisle (7 per cent) and Standard Charter Bank (13 per cent).

Investment is paramount to ETG’s success and the company owns and operates over 30 processing plants across Africa, with a further 9 facilities reportedly scheduled for construction in the near future.

“Our customers are essentially independent farmers and small growers throughout the country for the fertiliser side of the business, in addition to retail stores for the end product,” states Craven.

The 9 new sites under construction gives some indication of ETG’s ambition but Craven says that the business has also recently entered a new joint venture with Dutch company DSM, to produce maize and soya-based cereal for infants.

This exciting new project is reportedly pioneering and with an investment of 4 million dollars the company hopes to break ground on the new manufacturing facility in March 2015. If this project proves successful, as projected, ETG and DSM are set to open a further 2 facilities in Africa over the next year and a half.

Craven says that often, potential investors are seeing opportunities that will make a difference socially: “ETG have a marketable and direct impact on small growers throughout Africa, helping to improve their income. Usually this type of investment would be a charity and would see no return but ETG has found a way for people to invest in this market and make a return on any investment,” he comments.

Back in early 2013, the company made headlines when it was announced as the “TFR Deals of the Year 2012” winner.

TFR (Trade and Forfaiting Review) (http://www.tfreview.com/awards/deals/tfr-deals-year-2012-winner-export-trading-group) described the winning transaction as thus:

“It was the sheer scale of this two-pronged deal that stood out the moment it got in front of the Deals of the Year judges.

“Export Trading Group Pte Limited Singapore (ETG) is one of the largest integrated agricultural supply chain managers in Africa. Operations involve the global production, processing, trading and distribution of agricultural commodities. It has advanced the interests of agriculture in Africa
over the last 40 years, aiming to become the
strongest link between farmers and consumers around the world.

“ETG procures at farm-gate level, processes commodities via modern facilities while continually investing in storage and logistical infrastructure. Approximately 60 per cent of its revenue is made up of processing, distribution and export of agricultural commodities, while the remainder is derived from fertiliser, rice, sugar and wheat imports, for distribution throughout Africa.”

The award was won in relation to 2 deals which were closed in April 2012, comprising a US$100 million borrowing (BBF) and a US$150 million collateral management (CCM) facility.

One of the biggest reasons for ETG’s on-going success is its ability to take opportunistic decisions at short notice. The borrowing aspect provided the business with the flexibility required to gain significant market share and increase profitability in the agri-commodities industry.

Additionally, ETG was able to deliver stock on short notice to its off-takers, while simplifying the flow from raw commodity inputs to final processed products, thereby fast tracking turnaround times. This covered no less than 35 countries including Ghana, Kenya, Malawi, Mauritius, Mozambique, Namibia, South Africa, Tanzania, Uganda and Zambia, financing cashew nuts, sesame seeds, pulses, sugar, coffee, wheat, rice, maize and soya.

In July 2013 came a further positive announcement, as French-based PROPARCO and ETG signed a US$75 million senior loan to help support the further development of agriculture supply chain infrastructure in Africa.

“Partnership will modernize agribusiness in Africa and stimulate the development of new markets for African smallholder farmers,” the news proclaimed.

“This loan will help finance the construction of logistics infrastructure and processing units in 8 Eastern and Southern African countries.

food-spices“Africa has 600 million hectares of uncultivated arable land and significant potential to improve yields. Agriculture represents an enormous development opportunity for Africa. However, despite strong global demand, African agriculture has failed to reach its full potential. It is particularly disadvantaged by its isolation and the lack of logistics and transport infrastructure.

“PROPARCO’s financing will allow ETG to scale up its network by building approximately twenty additional processing units and approximately thirty new warehouses. This project will create local value-added industry and will develop outlets for African production in sectors that are still relatively unstructured,” the statement continued.

“We are extremely pleased to be establishing our partnership, through this financing, with a dynamic group like ETG, which has a structuring effect on the industry. ETG, which mainly sources from African smallholder farmers, plays an important role by connecting local producers to international markets. This operation will contribute to increasing their incomes and, more generally, to building and modernizing local agricultural industries”, points out Stéphanie Lanfranchi, Head of PROPARCO’s Manufacturing, Agro-industry and Services Division.

“This financing is a landmark transaction for agribusiness in Africa and we are very excited to partner with PROPARCO. ETG and PROPARCO have a shared vision that financial returns can be pursued in a manner that maximizes social returns,” said Ketan Patel, Managing Director of ETG. “PROPARCO’s investment will catalyze the development of ETG’s supply-chain infrastructure in Africa which will create markets and employment, increase incomes and ultimately raise standards of living.”

ETG continues to evolve and make a huge difference to the Continent’s farmers thanks to its funding and flexibility. The business looks set to play an influential role for many years to come.