Challenges, changes for the African fertilizer industry

Africa will be home to more than half of all the new people on earth between now and 2050.  The continent will need more energy, and greater, more efficient agricultural production.  Africa has been blessed with many of the resources.  The trick for its fifty-plus governments will be to craft the right policies and incentives to make optimal use of them.  Algeria, Egypt, and Mozambique, in particular, have been blessed with abundant natural gas, which can power the region’s economies and be turned into fertilizer and ultimately more food.

Nexant makes some predictions about the region’s supply and demand of natural gas and fertilizer in its latest edition of Strategic Business Analysis – Fertilizers.  Half of the natural gas produced and imported to the region is used for making electricity.  About a fifth of what is left is combined with nitrogen from the air to make ammonia, the foundation of nitrogen fertilizer.  Last year, African farmers used 4 million tons of urea to replenish their soils with nitrogen.  According to the International Fertilizer Development Center, they could use two to three times that.  But these farmers are unlikely to get the chance.  On the current trajectory, they will see two or three percent more urea every year until in 2035, the end point of Nexant’s projections. (See our white paper.)

This low average growth rate has many causes.  Businesses seeking to invest in natural gas production, or in factories to convert that gas to soil amendments, are put off by political instability, corruption, and the challenge of finding reliable distributors and consumers.  Farmers, many of whom are smallholders, lack access to fertilizers or the funds to buy them.  The result is low crop productivity, high prevalence of hunger, and the destruction of natural habitats to increase cropland.  Add to this water resource issues and climate change.  Signatories to the Abuja Declaration have committed to make strides against these forces, but they face many challenges.

These challenges are felt less keenly in Egypt and South Africa, for instance, where per-hectare urea application rates approach those in developed countries.  Nexant’s report runs separate analyses for Sub-Saharan Africa and for each country that is a major supplier or consumer of natural gas and nitrogenous fertilizers.

Author:

Priyanka Khemka, Consultant