Papua New Guinea’s agricultural industries have great potential but investors have to learn to fend for themselves. That was the message at the 35th Australia Papua New Guinea Business Forum & Trade Expo in Port Moresby.

From left: Innovative Agro’s Ilan Weiss, Trukai’s Greg Worthington-Eyre and NKW’s David Stewart

‘If you look at every agriculture sector in PNG, whether for export or domestic consumption, the information is not out there,’ said Ilan Weiss, Executive Director at Innovative Agro Industry, during the 35th Australia Papua New Guinea Business Forum and Trade Expo.

For him, the one challenge that the agricultural industries face is not having enough ‘credible’ information.

‘If you want to do a feasibility study on a sector, or a part of a sector, the information that would be easily accessible in other places is non-existent in Papua New Guinea,’ said Weiss.

The lack of information means feasibility studies take longer, cost more and require more resources than elsewhere. The only option is for the company to acquire its own information, explained Weiss.

‘My best advice is have a good relationship with the retailers around the country to get the information that you require if you are looking at domestic consumption.’

Finance

Weiss added that there is a lack of finance in PNG, especially for ‘greenfield’ or start-up agriculture.

‘There is no easy access to public or private funding for this sector; there is a lack of grants and concessional finance is almost non-existent.

‘The only solution is to be self-sufficient, especially if you are working in remote PNG.’

‘To bridge this we [Innovative Agro] have gone down the track of public-private partnerships, international finance and getting the trust of the domestic banking community and financial sector.

‘We haven’t taken up a PNG loan yet, for economic reasons, but we have been offered by Bank South Pacific (BSP) financing for greenfield projects.’

Self-sufficient

Weiss also pointed to a lack of infrastructure, roads, energy and water. ‘There is little or nothing out there.’

He said with the company’s Ilimo dairy farm, it was necessary to invest in three different energy systems.

‘You had better be ready to pay a few hundred thousand kina to PNG Power just for the hook up—not for the electricity bills. That gets you expensive and not too reliable electricity.

‘Then we had to set up a solar farm that would support cheaper electricity. On top of that we had to invest in a diesel generator just for those times when solar and PNG power aren’t available.’

‘The only solution is to be self-sufficient, especially if you are working in remote PNG.

‘You have to make sure your supply chain and production chain are all controlled by you. There are no other providers you can trust.’

Port costs

Trukai CEO Greg Worthington-Eyre. Credit: Trukai.

Greg Worthington-Eyre, Chief Executive of Trukai Industries, said it is important to have geographical proximity to markets.

‘In this country, anything that [has to be transported] on the water—you just lose significant value.’

Worthington-Eyre says in 2017, not long after the National Agriculture Summit, ‘we saw something like an 89 per cent increase in port handling charges with the establishment of new contracts’.

‘When people talk about moving product around the country, and even to import or export, you have got to get through some of the highest charges in the world for port management facilities—which I think dilutes value and dilutes the opportunity.

‘It is fantastic if you have US$5 million dollars in your container but if it is less than US$100,000 you have to question whether it is worth pursuing.’

Landowners

Developing good relationships with the landowners is another challenge for investors in PNG agriculture.

Worthington-Eyre says ‘one of major constraints’ the company faces is land titles. ‘When you have villages that have been owned under customary title and then all of a sudden something happens with that land, then all come out looking for a slice of the cherry.

‘That often forces land disputes and everything then gets locked up in the court system.’

One way of ensuring harmony with landowners is to partner with a company with close landowner connections, such as NKW Group, which was founded by landowners to provide services to the Hidden Valley mine in Morobe Province.

David Stewart Divisional Manager for Fresh Produce with one of Papua New Guinea’s larger landowner groups, NKW Holdings, says the company has a ‘moral duty’ to develop a sustainable agriculture business.

The company is aiming to export fresh produce into the South Pacific, Australia, Singapore and China.

What this may mean for business

• Transport costs are comparatively high and infrastructure poor in PNG, so gross margins have to be substantial to compensate.
• Developing agriculture in PNG requires finding your own information and planning to be self-sufficient, especially with energy.
• For domestic production, develop close relationships with retailers and understand their needs.
• Careful risk management is essential in PNG, especially when dealing with landowner issues.