John Deere expects demand for its farm equipment in Africa to rise by 8 to 10 per cent annually in the coming years, with Ethiopia and Zimbabwe among the countries driving that outlook, a company executive said.
In an interview published on 20 November 2018, Jacques Taylor, managing director of John Deere Ltd Sub-Saharan Africa, said the company was seeing a wider commercial shift in African agriculture as farmers respond to stronger markets for crops and commodities.
He said the change has been helped by global policy moves away from food aid and toward local production, a trend he said had increased Africa’s appeal as a market for machinery. Taylor told Reuters that the company had begun to see “a commercial market developing for agricultural commodities,” which in turn encouraged farmers to produce more.
Taylor said about 80 per cent of Deere’s equipment shipments to Africa go to 10 markets, including South Africa, Zambia, Kenya and Ghana. He added that the company sees “three or four countries with significant upside growth potential in the medium-term,” naming Angola, Zimbabwe, Ethiopia and Nigeria.
Deere, whose best-known products include John Deere tractors, sells through local dealers across the continent. Its main competitors in Africa include CNH Industrial and Landini.
In Ethiopia, Deere’s dealer is working with the government on an assembly plant intended to supply farm machinery to a market of about 100 million people. The project comes as the country pursues reforms aimed at supporting the sector.
Zimbabwe is another market Deere is watching closely. Taylor said the country, once regarded as the food basket of southern Africa, could recover after years of decline linked to former president Robert Mugabe’s farm seizures. Mugabe was ousted in 2017.
“We have high hopes for Zimbabwe. It used to be the food basket for southern Africa. The potential is known,” Taylor said. “Zimbabwe could easily recover and get back to the levels of production they’ve seen in the past.”
South Africa remains Deere’s most important market on the continent, but land redistribution has become a major political issue there ahead of the 2019 elections. President Cyril Ramaphosa has said the process will not threaten food security or growth, though some investors remain uneasy.
Taylor said Deere sees the policy debate as a possible opening rather than a threat. “We do see it as a growth opportunity for us. There will be new entrants coming into agriculture,” he said. “I think for the sake of the sector and the economy, it’s important for us to get clarity sooner than later.”
Deere reported operating profit of Sh280 billion from its equipment business last year, with 39 per cent of that coming from business outside the US and Canada.
Context ¶
The company’s outlook reflects broader expectations that African agriculture will keep expanding as employment and food production grow. The World Bank says farming accounts for around 60 per cent of total employment in Africa, while food production in Ethiopia, Malawi, Mozambique, Tanzania, Uganda and Zambia is projected to add more jobs than the rest of the economy combined through 2025.
What it means ¶
For Deere, the combination of reforms, rising commercial farming and political change in key countries could open new sales channels beyond its established markets. The company’s bet is that Africa’s agricultural transition will translate into sustained demand for tractors and other machinery.
