Opportunities and challenges in some industries 2022

1. Aquaculture

Aquaculture is a growing global industry that offers great potential for Sierra Leone's fisheries sector. The study found that tilapia and catfish farming could provide potential investment opportunities for the country.

(1) Industry overview

The marine fisheries sector plays a vital role in Sierra Leone's economy. It provides a livelihood for more than half a million people and accounts for 10% of GDP. Fish is an important source of protein for Sierra Leone's population, but poor fisheries management threatens the sustainability of the country's marine life. Aquaculture has great potential to provide a more sustainable source of protein as well as increase employment and export earnings. Fisheries include marine, inland and aquaculture sectors. Aquaculture is minimal.

(2) Challenges

There are no commercial feed manufacturers in Sierra Leone and only one company imports feed from Ghana. Mariculture is not currently practiced, although some trials have been carried out with oyster and mussel farming. There is no supply of hatchery-produced shrimp larvae, oyster eggs or any other marine fish larvae in Sierra Leone.

Perennial high-quality fingerling banks are needed to produce species that can be widely distributed at reasonable cost. Currently, Green Agventure is the only commercial producer of catfish and tilapia fingerlings. Most smallholder farmers still depend on other farmers for seed, which is multiplied in ponds and subject to inbreeding pressure. The aquaculture industry also requires technical knowledge, health and environmental support services, and specialized equipment and supplies throughout the value chain, all of which are currently lacking in Sierra Leone. Another problem is the lack of skilled and knowledgeable workers.

(3) Opportunities

Globally, aquaculture is already a $243.5 billion industry. Sustained investment is the only way to meet the growing international demand for more sustainable forms of protein while protecting the marine environment.

Total aquaculture production is expected to reach 109 million tons by 2030, an increase of 32 percent (26 million tons) compared to 2018. While Asia will continue to dominate, accounting for more than 89% of the growth, Africa is expected to experience the greatest growth (up to 48%).

Despite the challenges posed by the current lack of aquaculture infrastructure and support services in Sierra Leone, there is still great potential. Water and land are the natural resources needed to sustain the industry and are readily available.

While there are a variety of options to consider in terms of species and techniques, experts agree that tilapia and catfish are the best options. Tilapia is the second largest fish produced globally. It is an accepted and marketable fish species locally, regionally and internationally and demand is increasing. Other advantages of tilapia are that it does not require high-protein feed and the farming technique is simple. African catfish is also an increasingly important aquaculture species in sub-Saharan Africa. It grows fast, is not demanding on nutrition, and has a growing regional market. Catfish are often eaten as smoked fish. This creates more jobs in the processing sector and opens up export trade opportunities for neighboring countries and diaspora.

2. Fashion industry

Sierra Leone's fashion industry is growing rapidly.

(1) Industry overview

Vibrant tie-dye fabrics have a long history in Sierra Leone, but styles have changed significantly in recent years. The country's fashion industry is small but vibrant, centered on designers in Freetown and artisanal producers in Bo, Kailahun, Kenema and Makeni. The growing global demand for African sustainably sourced textiles presents a great opportunity.

(2) Opportunities

Africa accounts for only a fraction of the estimated $1.5 trillion global fashion industry. Across the world, more than 60 million workers are employed in textile and apparel manufacturing, 80 percent of whom are in Asia, and the majority are women.

In the past, European and American apparel companies profited from outsourcing to Asia; however, in recent years, sourcing from the region has faced challenges. Consumers are becoming more aware of the carbon footprint of their clothes, as well as worker conditions in the textile industry. This is one of the many reasons why apparel manufacturers are now exploring local and regional value chains and seeking to partner with suppliers closer to their key markets.

1. Backward integration

For emerging economies such as Sierra Leone, IFC (International Finance Corporation) recommends backward integration. This can provide an opportunity to work with the supply chain to bring together raw materials, dyeing, weaving and tailoring.

2. The enthusiasm of expatriates

The Sierra Leonean diaspora has been instrumental in revitalizing the textile industry, resulting in a string of successful Sierra Leonean brands (Gitas Portal, Labrum London, Ibrahim Kamara). Many members of the diaspora working in the fashion industry maintain close ties to the country and have tried, with varying degrees of success, to source some of their fabrics or garments from Sierra Leone.

3. "Made in Africa" trend

African creative industries have started to gain international recognition, with some African designers taking part in international fashion events. Some globally renowned designers are incorporating African fabrics and prints into their creations. "Made in Africa" has grown into an important brand identity, with many international brands basing their features on African culture and creativity.

3. Cocoa industry

Despite current low productivity, cocoa is a major source of export earnings for Sierra Leone and international demand is high.

(1) Industry overview

Sierra Leone's cocoa exports have yet to return to pre-civil war levels of about 22,000 tonnes per year. This decline reflects very low productivity due to lack of investment and replanting, and reversing this is the fundamental challenge facing the industry. Farmers have no difficulty in selling their produce, where they usually get higher prices than those in neighboring countries. Existing exports of around 15,000 tonnes still mean that cocoa is the country's main source of export earnings. Cocoa's ability to generate foreign exchange has contributed to high demand and high prices due to difficulties in obtaining foreign exchange in Sierra Leone.

(2) Challenges

There are about 35,000 growers in Sierra Leone, and about 42,000 hectares of land are used for cocoa production. Roughly calculated, Sierra Leone can export 357 kilograms of cocoa per hectare, while Ghana can export 1125 kilograms. The average farmer in Sierra Leone can only export 428 kg per person. This speaks to the serious challenges facing productivity. With yields so low, the extra income wouldn't be able to fund replanting if prices were any higher.

Since the end of the war, the government has taken many initiatives to strengthen cooperatives and link them directly with importers. These initiatives typically focus on quality improvement, including efforts to increase the productivity of existing trees (such as pruning and disease control). However, few have addressed the issue of planting and replanting.

There are several reasons for the low cocoa yields, but the most important is that some cocoa trees are old and need to be replanted. Farmers lack the resources or access to finance to do this, and in some cases land title and use rights.

A successful, sustainable and competitive cocoa industry must be built on a foundation of high productivity, achieved through supply chain investments in cultivation, organizational and skills development, and effective partnerships. The public sector needs to provide support by effectively delivering services and improving the efficiency of supply chains (e.g. ports).

(3) Opportunities

The main challenge facing the world cocoa industry is to produce cocoa beans to meet the demand of approximately 4.25 million tons per year, which is expected to continue to grow significantly. The opportunity for Sierra Leone to sell into this growing market is clear. Cocoa is a small crop that exists around the world and is ideally suited for small-scale production with high productivity.

4. Oil palm industry

Due to the many negative environmental consequences of the expansion of oil palm production in Southeast Asia, attention has been turned to Africa as a potential location for future sustainable expansion. Africa is also one of the major consumers of palm oil.

(1) Industry overview

The oil palm industry in Sierra Leone is an important contributor to the economy and one of the main sources of livelihood. The industry presents a significant opportunity to link foreign commercial investors as well as small producers to supply chains and expand exports from traditional industries. The red oil palm is endemic to Sierra Leone.

As a traditional industry, oil palm is extremely important in the rural economy. However, most of them are semi-cultivated, and the input is small, resulting in a very low yield although there are 300 to 2,000 kilograms of fresh fruit bunches per year. Crude palm oil processed by traditional methods has a very poor extraction rate, only about 11%-16%. A cottage industry that further processes crude palm oil into soap is common, and the product is also sold across the country and across borders. The cultivation of palm trees and the processing of palm products, especially for women, provide an important source of livelihood in rural areas.

Palm oil has become the dominant vegetable oil on the world market, with production rising from about 10 million tons in 1990 to more than 70 million tons in 2020. No other crop offers oil production like oil palm. In Sierra Leone, there have been several attempts to develop commercial plantations of oil palm with little success.

Under the traditional production mode, the yield of fresh fruit bunches per hectare is 500 kilograms, and the recovery rate is 16%; one hectare of land can only produce 80 kilograms of crude palm oil. Under the commercial production mode, the yield of fresh fruit bunches per hectare is 23 tons, and the recovery rate is 22%. One hectare of land can produce 5060 kilograms of crude palm oil.

Among the existing major palm oil producers and processors in Sierra Leone, Planting Naturals focuses on the production and export of crude palm oil. SAC is a subsidiary of SOCFIN, one of the largest palm oil companies in the world. When their plantations are at peak production, the farms can produce as much as 65,000 tonnes of crude palm oil (around $45 million FOB) per year. That could be more than the rest of the country produced in 2020 combined.

At the end of 2019, Jolaks (300 tons of crude palm oil/day) and Kissi refineries (100 tons of crude palm oil/day) were commissioned. At full capacity, these refineries can process more than 100,000 tons of crude palm oil per year. Both companies plan to expand their range of products with stearic acid (such as condensed milk, cosmetics and soaps) and palm kernel oil.

(2) Opportunities

1. Foreign direct investment

SOCFIN's investment in subsidiary SAC shows that the business model to produce palm oil is viable in Sierra Leone. A prerequisite for replication, this model requires companies to have extensive experience with palm oil and a lot of patient investment, as it takes at least seven years for a new plantation of this type to break even.

2. Connecting small producers to the commercial crude palm oil supply chain

Palm oil cultivation is a viable option for small producers due to the high demand for crude palm oil from refineries and the possibility of selling into organic supply chains. If oil palm assets can be developed by growing quality varieties and providing support services, then it is a good crop for farmers.

5. Coffee Industry

Coffee production in Sierra Leone is mostly of poor quality and low volume.

(1) Industry overview

Coffee is advertised as an important crop in Sierra Leone. However, its exports have been on a long-term decline since exports peaked at around 20,000 tons per year in the years before the Civil War. It is now only 2,000-3,000 tons, and there is no sign that this downward trend is reversing. A big reason why coffee is still being exported is that it is a source of foreign exchange, and it is produced by many cocoa farmers, so it is also available for purchase by cocoa merchants.

While small quantities of the rare Stenophylla coffee variety are found in Sierra Leone, the commercial trade is dominated by Robusta and Lipica coffees. Robusta is relatively low quality compared to Arabica and commercial production is based on the higher yields that can be achieved. However, yields locally in Sierra Leone are low (around 375 kg/ha compared to over 900 kg from competitors) and of poor quality. All processing is done by sun drying on the farm, with little use of grinding equipment, farmers use mortar and pestle for processing. This leads to its low price, which makes it far less attractive to farmers than cocoa.

Sierra coffee does not enter the market through any direct connection to the specialty segment, but is sold at the bottom end of the commodity market. There are several roasters in the local area.

(2) Opportunities

1. Propagation of Lipica coffee and Stenophylla varieties (currently only 15 trees in Sierra Leone). The Stenophylla variety cups well and is comparable in quality to Arabica coffee. For coffee lovers, there may be a market for these rare varieties.

2. Premium Robusta coffee can be an option. Robusta coffee is a mainstream market in Sierra Leone.

3. Expand small brand products for the local market.

To develop rare varieties, partnerships between specialty coffee houses, experienced coffee agronomists, farmers and potential investors are needed to cover R&D costs that may occur before revenue is generated. For the local market, there should be more local entrepreneurs working with farmers to buy, process and roast coffee and sell it to consumers in Freetown and other urban areas. If locally produced coffee products are well packaged and distributed, there may be a small export market.

6. Cashew Nut Industry

Cashew nuts are a high-value crop with the potential to support smallholder income growth and export development. In recent years, Sierra Leone has vigorously promoted smallholder cultivation.

(1) Industry overview

The cashew nut industry in Sierra Leone has reached a critical stage of development. While cashews have been grown in Sierra Leone for many years, there has been no significant expansion until recently. Smallholder farmers have invested heavily in orchard planting projects over the past five years and there are currently about 28,000 hectares of cashew in Sierra Leone.

Local farmers have been trained in farming. Although the current production of raw cashew nuts in Sierra Leone is still low, however, as these orchards mature, the supply of raw cashew nuts will increase. This growth can be very substantial if maintained well.

The Invest Salone website models potential yields and makes assumptions about what yields might be achieved. If all goes well, raw cashew production could reach around 20,000 tonnes by 2025.

The only officially established private cashew companies in Sierra Leone are Balmed Holdings, Kamcashew and Mel-O-Africa.

(2) Challenges

Productivity is very low - an estimated raw cashew yield of only 148 kg per hectare of old orchards. In contrast, the rest of West Africa averages yields in excess of 600 kg per hectare, with potential yields as high as 1,000 kg per hectare. Even with relatively high input expenditures on farms in Sierra Leone, as high as 0.80 cents per kilogram, this only yields a gross income of US$118 per hectare, a low level of labor productivity for the investing farmers. The government has stated from 2019 that many other obstacles need to be overcome: 1. Weak governance structure; 2. Local farmers are vulnerable players; 3. Lack of knowledge and experience in cashew management; 4. Lack of market ecosystem; High prices; 6. Exporters are unable to develop their supply chains; 7. Inability to process a large amount of production data locally; 8. Farmers lack access to financing and they need continuous support and encouragement.

The initial investment in the industry by investors in projects to set up cashew farms in Sierra Leone is not enough to sustain the industry in the long run. Farmers need ongoing inputs to fertilize, weed and protect against risks such as fire, and to prune trees. Harvesting and storage also require working capital.

(3) Opportunities

Cashew nuts are a high-value crop well suited to smallholder farmers. The market for high-quality cashew nuts is strong and is expected to grow at an average annual rate of 4.56% over the next five years. The crop can be processed for export as raw cashews (usually in India or Vietnam), but it is possible to develop local processing for export. This requires investment and a high degree of knowledge of the industry and management capabilities. Raw cashews are not perishable and do not require a cold chain. Quality depends on how the crop is grown and on good post-harvest handling (drying and storage).