Lonrho signs deals to boost John Deere in Africa

Lonrho boosted its bet on African agriculture by doubling to four the number of countries in which it has exclusive rights to sell John Deere farm equipment.

The hotels-to-transport group - one of the remnants, with Lonmin of the conglomerate whose operations once spanned assets from Ghanaian gold to UK newspaper The Observer said it had won the licence to sell John Deere products in Africa's newest country - South Sudan.

South Sudan, which split in July from Sudan following years of civil war, is, despite boasting notable oil reserves, woefully poor, with 90% of the country earning less than $1 a day, and having just 40 miles of paved roads, according to the US Central Intelligence Agency.

However, "it has a vast natural resource base and huge agricultural potential, with more than 90% of the land being suitable for farming", Lonrho said.

"Significant foreign direct investment and international donor funding is forecast to support large scale agricultural development following the independence of South Sudan."

'Strong demand'

In Tanzania, which already boasts a reasonably-developed agriculture sector, noted in particular for 700,000-1.2m bags of coffee it produces every year, Lonrho bought the country's sole John Deere dealership group, Lonagro Tanzania.

The farm equipment market in Tanzania, which relies on agriculture for some 45% of economic output, "is already substantial and is set to increase rapidly as the Tanzanian government is giving significant attention to the agriculture sector".

Tanzania has launched a public-private partnership scheme named, Southern Agricultural Growth Corridor of Tanzania, or Sagcot, to boost commercial activity, and close the gap with neighbouring Kenya which, for instance, has a far higher share of vegetable imports to the important European Union market.

The country is Africa's fourth-ranked farm equipment market, worth some $125m-175m a year.

Lonagro Tanzania is believed to have run up a small?loss last year?on revenues of about $5m.

'John Deere confidence'

The deals bring to four the number of African countries in which the company is the exclusive John Deere dealer, with Angola and Mozambique, where Lonrho said it had seen "strong demand for John Deere products as the mechanised farming market expands across Africa".

And they were viewed by analysts at Panmure Gordon as reflecting "the confidence that John Deere has in Lonrho as a long term strategic partner in Africa".

"Typically John Deere would expect to achieve circa 30% market share and we are encouraged that John Deere see Lonrho as the strategic partner capable of improving the business in Tanzania and establishing the franchise in South Sudan," Panmure analyst Damien McNeela said.

He restated a "buy" recommendation on Lonrho shares with a price target of 21p.

The shares closed unchanged at 9.69p in London.

Source: http://www.agrimoney.com/news/lonrho-signs-deals-to-boost-john-deere-in-africa--4022.html

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