Polish tractor maker Ursus signed a huge contract with Tanzania's National Service Corporation Sole. The contract was Ursus' third deal in Africa, a market that many Polish entrepreneurs are looking to boost.
The latest Ursus deal worth $50 million (44 million euros) provides for the delivery of 2,400 tractors, tools and spare parts and includes equipping an assembly hall and service centers located in Tanzania. It's Ursus' third deal in Africa.
"We believe that our currently realized contracts will facilitate negotiations with prospective partners because Ethiopia is the benchmark for other African countries," CEO Karol Zarajczyk said. The Sole deal also covers sugar cane trailers and the construction of a tractor assembly plant in the country.
“We hope that the bridgehead gained in Ethiopia will open the way for further expansion of Africa and it will guarantee dynamic development of the company for the next two to three years," he continued.
Firms in Ethiopia have purchased over 3,000 tractors, paying a total of $120 million, with Sole buying the bulk - 2,400 machines - for $55 million.
"The tractors will be produced in Poland, but assembled in Tanzania," Zarajczyk said. "We will employ about 200 people there," he continued, adding he was urging the Polish government to promote this kind of enterprise.
Mulling market entry in other African countries
The company is carrying out negotiations in Angola, Tanzania and Nigeria, the CEO said. "During the next decade the average rate of increase in the development of African countries is predicted to reach annually even 7 percent," he said.
"This will strengthen our position as a partner of African entrepreneurs. Winning the tender is also a proof of the fact that a Polish brand is able to successfully compete on the international market," he went on.
A contract concluded in 2013 with the Sugar Corporation was Ursus' second agreement in Africa. The contract was to deliver tractors and spare parts as well as equipping service centers with the Ethiopian company METEC. To realize the contract, Ursus opened an assembly plant in the city of Adama in May 2015.
Polish bank Bank Gospodarstwa Krajowego (BGK) granted a credit line to the Ethiopians for the purchase of the tractors and trailers.
Poland could see a rise in the number of investments in Africa in 2017, including greenfield investments, according to Poland's information and foreign investments promotion agency PAIiIZ. The investments are expected to take place above all in the foods, mining and machinery industries.
Small & medium-sized enterprises are already present in Africa. Blue-chip IT group Asseco Poland signed a contract in Ethiopia for the implementation of a billing system for the local energy market, while Polpharma pharmaceuticals plans to build a drug factory in Algeria. Kulczyk Investments bought a gold mine in Namibia, while Lubawa security equipment will provide specialized products for the Nigerian police forces.
The Economy Ministry, Foreign Affairs Ministry and PAIiIZ launched the "Go Africa" project in 2013. Since its start, Polish business missions have presented their offers in seven African countries: Nigeria, South Africa, Zambia, Senegal, Ghana, Morocco and Algeria. Meanwhile, Poland's 2013 exports to Africa rose 22 percent on a yearly basis to $4.5 billion, while in 2014 the annual growth rate of exports was 17 percent.
The "Go Africa" project aims to increase the share of trade with Africa in Poland's total foreign trade to 3 percent from 1 percent in 2013.
"The program has now been running for two years. Of course, such a big project requires some 'start-up' time, but one can already see that this time was well spent by our entrepreneurs," PAIiIZ deputy head Monika Piatkowska told the Polish press agency PAP.
"Any ties with Africa, including business ones, call for extra patience. Polish entrepreneurs know that the profits - which may be a lot higher than in Europe - require time. It is not a matter of higher risk, the risk is not much higher than in Europe. It is rather about a particular mindset present in that part of the world in all dimensions of life,” Piatkowska said.
Poland is focusing in 2016 on promoting farming products in Africa and it will likely be food companies whose investments grow fastest, Piatkowska believes.
Polish foods will be promoted above all in Botswana and Mozambique, but also in South Africa, Tanzania and Morocco.
Apart from the foods industry, also extraction, construction, electrical appliances and IT industries plan to be active in Africa in 2016. Further out, also pharmaceutical and furniture enterprises should make investments.
"Africa is a good place to seek opportunities for business development," Deputy Economy Minister Andrzej Dycha said in January. "Poland's economy has matured enough to operate on the markets more distant from the EU and the closest neighborhood such as Russia, Ukraine and Belarus," he said.
Ursus is the only Polish manufacturer of tractors. Of about 1.5 million tractors now in Poland, about 700,000 are made by Ursus.
The company owns three production plants: in Dobre Miasto, in Opalenica and the biggest in Lublin, with a total workforce of 700.
The group belongs to a large local investors' group in the Lublin region in eastern Poland. In 2014 Ursus recorded a 51.5-percent year-on-year increase in revenues, connected inter alia with the realization of the contract with Ethiopia.