Willem van der Pijl is senior aquaculture industry analyst at Aqua-Spark, based in the Netherlands. The views expressed in this guest commentary are the author’s own and do not necessarily reflect those of AFN.
Last month we at Aqua-Spark released our first Aqua-Insights report. Many investors are seeing that sustainable aquaculture could be a big part of our future food system, and that it is closely aligned with their ESG goals.
Until now, industry-wide data laying out the broader opportunity hasn’t always been accessible, holding back investment in aquaculture. We launched this report series to showcase how important this investment opportunity is, to further scale aquaculture sustainably and showcase its potential to feed the world in the most resource-efficient and healthy way.
Our first report consists of 92 pages of in-depth analysis of the tilapia sector in sub-Saharan Africa. It addresses why and how farmed tilapia can and should play an important role in solving sub-Saharan Africa’s need to produce sufficient food for its growing population. Aqua-Insights offers an overview of tilapia production, the producers involved, the various segments of the supply chain, insights into sector challenges, and an overview of the investment opportunities and current landscape.
The potential of tilapia in sub-Saharan Africa
We believe that farmed tilapia production in sub-Saharan Africa will continue to grow. The region’s population is expected to almost double to 2.2 billion by 2050.
This will lead to a demand for fish that far exceeds today’s, which stands at 10 million metric tons each year. By 2050, demand for fish could reach as much as 29 million metric tons per year, according to Aqua-Spark projections. Due to overexploitation, wild catch can’t be increased, and thus won’t be able to meet the additional demand. Even if alternative proteins start playing a larger role, we believe that aquaculture production will have to accelerate.
We’ve identified tilapia as the key species to do that: it’s scalable, healthy, sustainable, and affordable.
Large producers need to become platforms for growth
Since the early 2000s, the expansion of tilapia farming has primarily been driven by commercial cage farms. Some of the largest farms have reached scale and dozens of small- and medium-sized commercial farms are ready to step up, too.
To hit a yearly production capacity of 10,000 metric tons, a greenfield cage farming project requires an investment of around $9-10 million and about seven to 10 years to reach scale. This includes investments in basic infrastructure, hatchery capacity, and nursery and grow-out cages. Once at scale, the large farms become platforms for growth and contribute to creating vibrant local tilapia industries. Scaling up production through direct investment in tilapia farms is of the highest priority to accelerate further industry growth.
Investments in basic infrastructure needed to realize potential
Some parts of sub-Saharan Africa are confronted with the challenge that basic infrastructure — think electricity and roads, but also education — is not yet well developed. Building vibrant tilapia industries in areas where no basic infrastructure exists is especially challenging. As a result, at present, the expansion of tilapia farming mainly happens around the big lakes such as Volta, Victoria, and Kariba.
But imagine the potential there still is in many of the other, smaller lakes – some of which are still isolated. If basic infrastructure improves, many complex business cases might suddenly become more feasible. This said, our own investment in Chicoa in Cahorra Bassa in Mozambique struggled with the lack of basic infrastructure. But now the company is growing, is invested in infrastructure itself, and provides jobs and business opportunities to local communities – and, as a result, the local government is starting to gain interest in further developing the area as well.
Education is another major factor where investment is needed. Skilled labor and management is scarce. As the sector grows, more talent needs to be attracted. Therefore, initiatives such as those of Larive International’s Aquaculture Academy in Kenya, which offers vocational training in cage farming and RAS farming, among other things, are so important and need to be supported.
High quality but affordable fish feed is not readily available everywhere
To successfully farm fish, genetics and feed are key inputs. It’s only recently that feed is becoming more readily available. Companies like Aller Aqua and Skretting, who often partner with existing local feed players or with the large fish farmers, play an important role in this. Skretting recently announced a new partnership with Unga in Kenya to produce high-quality fish feed in East Africa. Aller Aqua has a joint venture with Yalelo in Zambia, and Yalelo is also working on a feed mill in Uganda. Raanan, an Israeli company, produces the majority of its feed in Ghana, but might soon see competition from De Heus/Koudijs, which is also starting local production.
In the end, it’s all about scale. As soon as a tilapia farmer reaches a volume of 5,000-10,000 metric tons, it will start to consider building its own feed plant. As soon as a group of farmers in a country exceeds a similar volume, a local or international feed producer may start looking at establishing a local production capacity. So we need to work at supporting more farmers to reach this level of scale so that the business case for local feed production improves as well.
Luckily there is also a lot happening on the sustainable ingredients front. Sub-Saharan Africa has quite a number of startups focusing on black soldier fly (BSF) production. Some of these startups have already started to do trials to include BSF in aquaculture feeds – especially in catfish feed, which needs more protein, but also for tilapia. We hope that, soon, at least part of the fishmeal used in these feeds will be replaced by more sustainable ingredients such as BSF protein.
To realize sub-Saharan Africa’s potential, investment is needed across the supply chain
The need for investment doesn’t stop there. Being such a nascent industry there is a need for investment in:
- Creating a better supply of high-quality fingerlings. This includes genetics and hatchery operations.
- Better access to inputs in general – for example, through online input market places.
- Market channel development – such as fish shops and both B2B and B2C trade platforms.
- Disease prevention – for example, vaccines, farm management software, and so on.
In the final quarter of 2021, we are launching the Aqua-Spark Africa Fund – a fund dedicated to aquaculture in sub-Saharan Africa (will focus on the entire aquaculture sector, not on tilapia alone.) It will initially close at $50 million and will grow to $300 million over the next six to eight years. This will kickstart the first phase of development: the most fundamental investments will be made so as to further develop the framework for the growth of sub-Saharan Africa’s aquaculture sector.