Dangote shuts down tomato factory...Again!

 

Barely three months after resumption, Africa’s richest man Aliko Dangote has been forced to close it down again, due to a tomato pest invasion.

Here are the key points from the shut down:

• The factory has a production capacity of 1200 metric tonnes a day and can produce 400,000 tonnes of tomato paste annually.
• 8000 farmers agreed to supply tomatoes at $700 a ton, twice the domestic price.
• The farmers are no longer keen on farming the crop after pest attacks last farming season.
• The disease called tomato absoluta originated from South America.
• The factory has had chequered operations due to a lack of raw tomatoes since it opened March last year.

The shut down has several implications for the firm. Machinery and equipment will have to be mothballed. A foreign crew will have to be flown in to service the equipment before operations resume. The farmers may decide to go for a higher price.

Ultimately the tomato paste produced by the firm will be more expensive. National Bureau of Statistics (NBS) April report released show the food sub index increased 0.17% month on month from 2.04% in March to 2.21% in April. The index also increased 0.86% year on year from 18.44% in April 2016 to 19.30% in April 2017.

Nigeria has one of the largest tomato harvests worldwide, with estimates of about 1.5 million tons yearly. In addition, business tycoon and Africa’s richest man, Aliko Dangote, built a N4 billion tomato paste company capable of processing 120 tons of tomato daily. It seems like a match in heaven. However, it has been nothing of the sort for Dangote Farms. Rather, it has been one problem or the other.

Due to the economic woes experienced in the country last year, Dangote Farms was also affected by the ensuing forex scarcity. However, that was just the beginning. Probably more crucial, was the invasion of tomato leaf-miner pests, Tuta Absoluta, last year ruined more than a third of Nigeria’s tomato harvest. As a result, the factory had to shut down last year due to inability to source raw materials.

In order to forestall a repeat, the company put in place an arrangement with about 8,000 tomato farmers to buy their produce at double the market rate. Unfortunately, though, this has not led to smooth operations for the factory. Rather, tomato farmers are shying away from the crop despite the increased profits they stand to gain. Many of them cannot afford a repeat of last year’s losses and would rather cut their losses than risk another pest attack.

For example, Musa Alasan, who grew tomatoes on his 7-acre (2.8-hectare) farm, allocated only one acre for the crop this year while planting wheat on the rest. “I lost almost everything, so I was really afraid to plant tomatoes again,” he told Bloomberg by phone from his farm in Samawa, near Kano. “I know a lot of our friends who used to grow tomatoes but this year they didn’t, while others who did mixed it with other crops.”

This is bad news for Dangote Farms and Nigeria’s diversification drive as the tomato paste factory has shut down again, the second time in just over a year. As it stands, the factory has operated for just 3 months out of a possible 15 months, since it began operations in March last year.

This start-stop pattern will definitely affect employment in the less developed north of the country and quench any hope of a reduced national import bill. Knowing Aliko Dangote to be the astute businessman that he is, there is every likelihood that the ghosts, or rather pests, of last year, are still causing him a few sleepless nights.