Rice Export to Africa: Not on Direct Track

11:55:08 PM | 7/7/2011

The Vietnam Food Association (VFA) says that Africa in general and West and Central Africa in particular have been important rice export markets for Vietnam in recent years. Rice shipments to these markets account for a quarter of Vietnam’s rice exported to Africa. However, there is a paradox that most of Vietnamese rice export is finalised by intermediaries. The very indirect way has significantly reduced the value of rice export to these potential markets.
Great potential
According to the South Africa - West Asia - South Asia Market Department under the Vietnamese Ministry of Industry and Trade, only 22 Sub-Saharan countries (Africa) import up to 6 million tonnes of rice out of its annual demand of 16 million tonnes. This figure will increment year after year.
The demand for imported rice in African countries is very high. For example, Benin imports about 50,000 tonnes a year. Côte d'Ivoire annually imports 800,000 - 900,000 tonnes. Nigeria has to import half of its annual demand of 2.5 million tonnes. Senegal needs to import 800,000 tonnes of rice and 300,000 tonnes of wheat each year.
In 2010, Vietnam earned US$1.2 million from rice export to Nigeria; US$91.8 million to Senegal; US$19.1 million to Togo; US$37.3 million Guinea; and US$65.2 million to Ghana, etc.
As people's incomes there are relatively low, they prefer cheaper rice like 25 percent broken or even 100 percent broken rice. From direct talks and contacts, rice importers in West and Central Africa want to directly purchase rice from Vietnam and forge long-term trade cooperation.
Africa has become one of major rice export markets for Vietnam. It currently accounts for 15-20 percent of Vietnam’s total annual rice shipments and ranks the third of Vietnamese rice importers, just after Asia and the Middle East. Notwithstanding huge potential, Vietnamese rice now only makes up 14 percent of the market share, much lower than 36 percent of Thailand’s rice.
Intermediary stage - a paradox
Most of Vietnamese rice exported to these countries must be through the hand of intermediary importers. According to the South Africa - West Asia - South Asia Market Department, this paradox is resulted from the shortage of information about demand and market prices. Direct trade is also impeded by other obstacles like payment and shipping. Import batches in Africa are characteristically of small quantity, leading to high shipping costs.
Some countries import Vietnamese rice for export in addition to meet their domestic demand. For instance, Benin exports from 50,000 tonnes to 150,000 tonnes of rice a year to Nigeria where rice import tax is 100 percent in spite of insufficient domestic production.
Vietnamese rice exporters must cooperate with large companies in Africa. For instance, Benin has five large companies, namely Sherika, Abc, Sonam, Difezi and Tukimex, which hold monopolistic rights and decide selling prices in Benin.
Another difficulty is most African importers do not have representative offices in Vietnam because they are used to buying Vietnamese rice from international traders.
Difficulties arising from payment processes can be resolved completely on the condition that commercial banks in Vietnam stand out to cooperate with reputable banks in these markets. Vietnam also needs to develop trade instruments like insurance, logistics, legal issues and quality control to promote rice export and import activities between African countries and Vietnam.
Vietnam and governments in these regions are increasing country-level exchange policies and forging bilateral trade agreements. Vietnam and Sierra Leone have just signed a memorandum of understanding on rice trading - a legal foundation for establishing stable rice trade ties and developing strategic food supply partnerships between the two countries. In 2010, the African nation imported 14,000 tonnes of rice worth US$8.04 million, accounting for 40 percent of its total imports from Vietnam.
Huong Ly