SIFCA 2014: Agriculture and Agribusiness Sector in Côte d’Ivoire

Interview with Bertrand Vignes, CEO of SIFCA

What is your macroeconomic evaluation of the rubber and palm oil sector at the moment?

Our group works in the agro-industrial sector, in the well-defined perimeter of Western Africa. We consider this sector to offer huge opportunities, particularly in countries that offer the possibility for growth and development through this kind of activity i.e. rubber, palm oil and sugar. The dynamism of this sector over the last ten years or so shows that when we talk about development, we are not only talking about the development of the agro-industrial companies but equally about the development of the growers who over the years have shown a lot of vitality. Côte d’Ivoire is one of the best examples of this kind of development.

Your sector is experiencing strong development although it does depend on fluctuating exchange rates and prices.

This sector obviously deals with commodities and so it depends on fluctuating prices. This is the business we deal in; we have to find the way to survive and deal with these fluctuating prices. Fluctuations in the price of rubber were rather strong; the prices had risen sharply. However, they have now come down and we are in a period where there is a lull in this cycle but obviously, these cycles will continue and will evolve. In terms of palm oil, the fluctuations have been slight and in terms of the price of sugar, the sector is relatively protected.

Can you tell us a bit more about SIFCA? We have figures from 2012 that say you produced 280 thousand tonnes of palm oil, 41 thousand tonnes of rubber and 300 thousand tonnes of olein. Your production is increasing and your turn over is now more than 800 million euros. What are your current production rates?

In the rubber segment, we have seen an increase in the production from our own plantations as a result of all of the investment that we have put in over the last few years. We invested in renovating the old plantations with higher performing surfaces and varieties. We have also increased our surfaces for new developments in the four countries where we are present: Nigeria, Ghana, Côte d’Ivoire and Liberia. Thus, our production is increasing; every year our coefficient increases and that will continue. Our growth in terms of rubber production is thanks to the planters, which is consequently the fruit of efforts made byagro-industrial companies like ours, who have been developing over the last few years, planter villages around the sites of our agro-industrial businesses. It is a model that we are very proud of and that is very strong in Côte d’Ivoire. We have duplicated it in Ghana where it is also working very well. We hope to do the same in Liberia and Nigeria. Today, in terms of rubber, more than half of our production comes from these planters and in particular from Côte d’Ivoire. We have 160 thousand tonnes of production, of which more than 60% comes from the planters.

In terms of palm oil, we have invested a lot in renewing the old plantations. Our partners Wilmar have helped us a lot to achieve the production standards that allow us to have such a large production today. In Liberia we are currently developing the palm plantations, because as of yet the plantations there are not producing oil. We should have the plantations ready for production in a few years. However, in Côte d’Ivoire in terms of palm oil, yet again the villagers and the independent growers provide almost 60% of our total production. Thus, the main aim is to be able to support them with cooperatives and professional organisations, etc., in order to support the development of their yield. There is lots of potential to improve their production with the use of manure and fertiliser for example. We want to optimise the existing plantation areas and support the growth of villager plantation areas by providing plans and techniques. Hence, we are seeing progressive growth in terms of palm oil.

In terms of sugar, we have two locations where we are increasing our production progressively with improved control of the irrigation system in order to optimise the yield. We are also seeing the gradual development of the growers and plantations in the surrounding communities who little by little are growing more sugar cane with our support.

We can see that SIFCA has a direct social role because you work with local growers. What is the company´s social responsibility philosophy?

We play a role that has a direct social impact regionally. It is inherent in our business to develop and grow together with the community, not only growing through our own plantations but also by boosting the development of the surrounding community plantations. We also create employment, both indirectly and directly. This agro-industrial activity generates regional economic development and we have a catalyst effect whereby the village plantations and the communities that surround us end up adopting our ways and methods and consequently this creates infrastructure, health and education. Hence, we not only have an impact on the terrains that we control i.e. our plantations but also an impact on the surrounding communities because we support the government activities particularly in terms of transport, infrastructure, education and health.

What are your expansion plans for West Africa?

Our defined strategy is to grow primarily in the countries in which we are already present. We have a good understanding of these areas and good administrative bases and links to the authorities and the communities. Our growth is entirely organic. In the field of rubber, we are growing through our existing company Grel. In the field of palm oil, we are growing through our new partnership with Wilmar. We are reprising old palm plantations and we are developing a refinery to feed the regional market for cooking oils conjointly with our SANIA company, which is based in Côte d’Ivoire. The model we have for palm oil in Côte d’Ivoire is being extended into Ghana. In Nigeria, we have progressive growth in our rubber activities and in Liberia we are growing both in terms of rubber and palm oil using the common infrastructure.

In terms of corporate image, do you communicate mostly via SIFCA or via each particular company?

SIFCA is a group that unites a certain number of companies and each company has its own history and culture and each one works in different areas. SIFCA is a group; it is not a brand. In terms of rubber, our rubber production is sold to the tyre industry and each of our factories has its own characteristics. It is not a product that is destined for the mass public; it is rubber for a few large industries. Michelin is one of our main clients and partners.

In terms of sugar, our Ivorian sugar company SUCRIVOIRE is the brand with which we distribute sugar here within Côte d’Ivoire.

In terms of palm oil, our company SANIA, refines the palm oil produced on the plantations and this refinery process produces palm stearin, which is sold to the soap industry in Côte d’Ivoire and other countries in the region. The refinery process also produces palm olein, which is our strongest product. Olein is a cooking oil, which we distribute under various different brands including Dinor, Palme d’Or and Dora. These are all well-known traditional brands that distribute to all of the regional market.

What about the new players that are entering the palm oil business in Côte d’Ivoire right now?Allegedly there are Israeli and German players interested.

The sub region where we are located is a region full of potential for palm oil. The general conditions are favourable for its production. Everyone can see that this industry has been a success in Côte d’Ivoire using the model that was developed by the Ivorian government and the former palm oil industry. The industry is now privatised and SIFCA is one of the players in the industry. The model in place here shows that it is a success and that it is replicable. Some new players are setting up here. We hope that the players that wish to set up also develop and follow this model i.e. by not only setting up plantations but also by supporting the village community plantations to create a land that will feed the oil works. This model as I said has been a success in Côte d’Ivoire and is the model that we still work with today. We hope that the new players who come to Côte d’Ivoire will also follow this model.

The government will have to somehow enforce the entry of these new players.

The profession is organised. In the palm oil business there is an inter-professional association for the palm oil sector (the AIPH), which brings together associations to do with agro-industry, planters, cooperatives, refiners and processors, etc., and the state is also involved in this association. The organisation is a platform that works towards defining the common regulations and for now, it is working rather well. Together we define by consensus the transfer prices for the crude oil from the growers to the agro-industry and then the prices for the oil going from the agro-industry to the processors. The new players enter into this association and we all follow the rules and regulations.

Palm oil suffers from a very negative image all over the world and particularly in Asia where the plantations have destroyed huge amounts of native forests. What is your point of view? What can be done to combat this negative image?

Well, palm oil is a traditional product in this region and one that originates from this region. It is a product that has made up the basis for the regional alimentation for years and years. Palm oil is produced here and tens of thousands of growers make their living from this crop. It supplies a basic cooking oil for the population here that needs it. Palm oil is less expensive than the majority of other cooking oils because the palm crop produces such a high yield.

When the campaign against palm oil began, the African producers of palm oil found it profoundly unfair. The two factors that were attacked by the campaign were the environmental impact and the health impact of palm oil. In terms of environmental impact, yes there have been some abuses in South East Asia that have generated reactions. The Asians have set up and launched the Sustainable Palm Oil Organisation to be able to give a seal of approval and guarantee the regulations regarding the environment and the community. I must reiterate that this is an issue in Asia. The environmental issues in Côte d’Ivoire are not at all similar. There are not the same deforestation issues as there are in Asia. Growth of plantations in Côte d’Ivoire is done according to very strict and clear rules. I think it is completely unjust that people can attack a product because of bad practices done by specific producers in a specific region. These bad practices have nothing to do with the product itself. That is why the Inter-professional Palm Oil Association (AIPH) in Côte d’Ivoire has sued a French distribution group that was running an advertisement campaign encouraging people not to use palm oil because it was ´bad for the environment´. We considered this campaign to be a denigration of the product and a prejudice against the growers and we won the lawsuit.

The other factor mentioned is the health impact. I think that the fact that palm oil contains a high level of saturated fatty acids is being used as another excuse by people who are looking for reasons to boycott palm oil and as an extra argument to back up the environmental dispute against palm oil. Unfortunately, this argument was made without good judgement because scientists have proven that the saturated fatty acids in palm oil, when separated from the carbon chain, are not absorbed by the body. On the other hand, butter, contains much more saturated fatty acids and these are absorbed by the body. Without wanting to defame butter, globally palm oil represents no more of a negative impact on the environment than any other cooking oil. Palm oil even offers some benefits due to some of its specific properties. The conclusion is that as with all types of fatty substances, we must consume them in moderation but there is absolutely no reason to run campaigns against palm oil because it is totally essential to the food industry. Furthermore, if the food industry cannot use palm oil because of factors like fusion points and so on, it has to hydrogenise other cooking oils and this is much more dangerous for one´s health.

Last year, together with the Inter-professional Palm Oil Association in Côte d’Ivoire we held a congress to promote African palm oil and to organise debates regarding these issues. We aimed to show that palm oil in general but in particular African palm oil must not be a made a victim of the clichés that the media was showing and propagating. We believe that now there is more and more research and information coming out that is re-establishing the truth about palm oil. One such example is the advertising campaign run by the Alliance Française about palm oil. The food industry is also finally demanding to be able to use palm oil once more without having to feel shameful of it. I think we are seeing a reversal of the trend and we hope that it continues.

Unfortunately consumers still have not come round to this way of thinking.

Yes, indeed this is the negative effect of the clichés that were created by the media. It will take time to get back to how it was before. We are backing a product that is going to supply essential cooking oil for people for years to come. If palm oil does not supply this necessary cooking oil then we will need to use between six and ten times more surface area to produce the same quantities of oil whether from soybeans or sunflower. In terms of environmental impact that really would be a catastrophe for the protection of our remaining tropical forests.

What is your vision for SIFCA in two or three years?

For this medium term period, our vision is unambiguously to make better use of our regional space both in terms of our production capacity and in terms of the markets for palm oil and sugar. We are already working on this aspect. We obviously want to excel in our field of business, particularly in terms of palm oil and rubber. The partners that we have today in the three areas of rubber, palm oil and sugar are going to help us achieve these goals. We are lucky to be supported by partners who are experts in these areas: Wilmar and Olam with regard to palm oil, Michelin with regard to rubber and the Mauritian group Terra in terms of sugar. Excelling evidently means optimising our environment, improving the quality of our products and obviously lowering the cost price. All commodities are subject to fluctuations in prices and so to be able to reach the objectives that I have mentioned we need to maintain strong growth independent of the fluctuations in commodity prices. This is our vision and our challenge for the coming years.

What is your vision for the economic development of Côte d’Ivoire over the same period?

We consider Côte d’Ivoire to have some very important assets and strengths. In particular, Côte d’Ivoire has great assets in the field of agriculture and agro-industry. Côte d’Ivoire has already showed its ability to become a leader in certain fields, for example; Côte d’Ivoire is a world leader in cacao. The growth in the rubber sector over the last few years has also showed huge dynamism on the part of all of the growers. We hope that we will see the same dynamism in the field of palm oil and we will of course support such dynamism. All of this shows that the founding principles and the traditions of this country, which are essentially agricultural, point to great agro-industrial opportunities. This sector has so much potential and so many opportunities. The dynamism that we have seen over the last few years in our field shows that it is possible to continue this process and develop even further in the coming years.

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