iGallus Limited

Part 2 "Establishing large poultry businesses in Africa"

This week Standard Chartered Private Equity invested $35 million into Al Jazeera Agricultural Company, a fully integrated poultry company in Jordan. This gives them a significant minority stake in the company to take advantage of the growing importance of chicken as a source of protein in the region.

In summary, what are some of the street wise methods to use when looking at establishing poultry businesses in Africa?

1) Contract a company who has the experience and ability in the Poultry Industry in Africa to assist in all aspects of the project from start to finish. The most important aspect of this company would be that it will stay on after the construction phase to assist and support the new business with day to day operations.

2) Choose a region or country with an existing poultry industry but with a low base to grow from.

3) Look at an area that has a viable access to an existing supply of poultry feed, grain and breeding stock.

4) Find suitable parcels of land, market and with location in mind look at various poultry product options that fit the following: area, market, budget, profit model and land size.

5) Design a number of poultry business options and site layouts around the these previous aspects.

6) The contracted company should then cost the entire project according to each option. The CAPEX or capital expenditure should include everything from buildings through to pens and pencils in the office.

7) A market study should be carried out by the contracted company to establish not only the market for the proposed poultry products but current production costs and wholesale / retail prices.

8) Profitability models are then compiled according to each proposed project option. The CAPEX for each is included to be able to show return on investment for each.

In summary, some points on how much the Private Equity Fund really needs to invest to get the return they require.

The aim is to invest as little as possible wisely into appropriate infrastructure and equipment to achieve the required quality product. Support the business with excellent planning, management, systems and raw material inputs.

1) Contract a company who understands the appropriate level of technology required to produce the correct quality of poultry product with the least capital investment.

2) Use appropriate buildings for the situation. Most African countries have their own sources of building materials that can be used to construct modern poultry infrastructure. In most cases at a lower cost but better suited to local conditions than imported pre-fabricated buildings. Look local first.

3) Investing in the basics to obtain the production results required. Rather than hire independent companies each to complete their section of the project, take their money and leave. Hire a company that will be completely accountable for each step of the project, a company that can deliver a "Turnkey Solution".

In summary, how does the Private Equity Fund achieve success with a return and an on time exit?

1) Find an experienced company to assist in planning the investment, operations and exit strategy.

2) Invest as little as possible and appropriately.

3) Build a brand and a distribution network using the poultry products. A good distribution network and brand is worth more than the operation itself.

4) The exit strategy can be planned as an expansion of the business into another sector say from eggs to poultry meat. The new investor or buyer will be attracted by the existing distribution network and invest directly into the expansion.

I have only really covered a few items in my article but the key thread is to find an experienced company that can provide the support for your new venture.

Contact me for more information and advice on jeremy@igallus.com or visit our website: www.igallus.com

Thanks for reading!