Fertile ground for business

Farm machinery makers are receiving good crop of orders in Africa's developing agricultural market

Three months working in the hot and steamy Angolan countryside was a tough assignment, but for auto technician Fan Ziqing it was worth the hardship.

Song was sent by his company, Shandong-based Foton Lovol International Heavy Industry Co Ltd, to service its tractors and agricultural machinery being used by Angolan farmers during their busy season.

"The days were scorching hot, and often we didn't have enough food or water," he says. "It was common to work through the night.

"But the smiles on the farmers' faces when problems with their equipment were solved drove all the exhaustion away."

Song is one of 100 technical personnel that Foton Lovol send regularly to Africa on after-sales duty.

"We send technicians to African countries every year to give our customers training on using the tractors and help them maintain their agricultural equipment," Chang Jiamao, vice-general manager of Foton Lovol , said this week at a ceremony marking the export of 300 tractors to Sudan.

"Our after-sales service tailored to African users wins orders for us and makes us stand out against domestic and foreign competitors."

This was the company's second order from Sudan, following the sale of 426 harvesters. Nine out of 10 harvesters sold in Sudan are now Foton Lovols.

The company's agricultural machinery has also been sold to Algeria, Ethiopia and Libya.

As well as its after-sales commitment, the company is noted for customizing its machines to suit particular environments and climates. The tractors, for instance, have special air filters to cope with Sudan's particularly arid conditions.

Emad Addin Ibrahim Ahmed Hijazy, the first secretary at the Sudan embassy in Beijing, says the tractors will greatly help agriculture in Sudan, and he praised China's support in developing the industry.

Since 2006, China has increased that support across Africa. In his visit to the continent in March, President Xi Jinping announced a series of projects including a $20 billion credit package for the next three years.

By the end of 2012, China had supported 53 African countries and sent more than 10,000 agricultural technicians to the continent, according to statistics from the Ministry of Agriculture.

Robust growth in the farming sector is providing opportunities for other Chinese machinery companies.

The state-owned YTO Group Corp, China's largest tractor manufacturer, signed a contract worth $100 million in March to export 1,480 tractors to Ethiopia, the group's biggest single farm machinery export deal.

Together with the China-Africa Development Fund, the group plans to set up assembly plants and customer service centers in seven countries across Africa, including Algeria, Egypt and Nigeria.

Chery Heavy Industry Co, based in Anhui province, is also expanding into the African market, and will invest $260 million to build 30 modern farm machinery trading and training centers in the next few years.

The move is designed to help the company provide quality products based on local demand, skill training and comprehensive after-sales service.

Last year, China's total export value of farm machinery rose by 8.39 percent year-on-year to $24.9 billion, and the exports to Africa continued stable growth of 8.57 percent, according to China's General Administration of Customs.

Industry analysts say the number of Chinese companies moving abroad signals that the domestic market is no longer an easy one.

"The gradually saturated market is already trimming Chinese companies' profit margins and forcing them to think beyond China's borders," says Ning Xuegui, deputy secretary-general of China's Agricultural Machinery Industry Association.

Statistics from the association show 1.64 million tractors were sold in China in 2012, down 15 percent from the previous year.

"The domestic tractor market may not be as bullish as before, and is returning to mild growth," Ning says.

However, a report by the World Bank on development in Africa shows that 60 percent of productive land on the continent is not being tilled, and the utilization rate of tractors is only 10 percent.

"The market potential for Chinese farm machinery companies in Africa is huge, due to the comparatively low cost," says Pu Yingji, an expert on western Asian and African development from the Chinese Academy of Social Sciences.

But Pu also warns that Chinese companies should take time to improve their high-end farm machinery in order to compete with overseas giants.

International companies such as John Deere and AGCO are also increasing efforts to develop the African market.

Over the past year, AGCO has opened a global learning center and future farm in Zambia, built a new parts distribution center in Johannesburg to serve customers in Sub-Saharan Africa, and established a joint venture with local partners in Algeria to manufacture Massey Ferguson tractors, Reuters reported.

Contact the writers through

zhaoruixue@chinadaily.com.cn

(China Daily Africa Weekly 08/02/2013 page20)