AGCO Corp is the the world’s third-largest farm-equipment maker and plans to invest $100 million in Africa over the next three years to capitalize on an agricultural boom and a shift to commercial farming.
The World bank attributes 60% of the world’s uncultivated land to Africa, and also suggests that investment in agriculture has the potential to create millions of jobs on the continent. About 10% of cropped land in Africa is prepared by tractor, and only 4% of land is irrigated.
McKinsey & Co says that the continent has the potential to boost farm output to as much as $880 billion by 2030 from $280 billion in 2010.
AGCO Corp is based in Duluth, Georgia, but opened a $35 million parts warehouse in Johannesburg in May. It went on to sign a deal with Algeria Tractors Co in August, to build a plant to produce Massey Ferguson tractors. This is line with AGCO’s African strategy to build factories, set up model farms to demonstrate equipment and teach modern farming techniques, while working with banks to boost credit to potential customers.
According to Nuradin Osman, AGCO’s Director for Africa and the Middle East, “The only frontier left for arable land is in Africa. We are in for the long-term in Africa. We’re coming here for 100 years and more.”
African governments are looking to increase productivity by mechanization as farming becomes more commercial. Ethiopia for example has set aside 4 million hectares (10 million acres) for foreign agricultural investment while South African farmers have been offered land in Angola and Uganda.
About 60% of Agco’s African sales come from South Africa and Morocco, while Nigeria, Zambia and Mozambique are growth areas, Osman said. The company is planning to build smaller parts distribution warehouses costing as much as $15 million each in East and West Africa after it identifies their locations, he said.