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Agribusiness to create wealth in Africa

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Agriculture and agribusiness account for nearly half of the GDP in Africa. However, this sector has long been neglected. As climate change continues to wreak havoc around the world and the war in Ukraine threatens Africa’s food supply, African governments are turning their attention to the issue of food security. The COVID-19 pandemic raised prices of goods and shipping globally. Shortages in commodities and agricultural inputs such as fertilizers from these external shocks have highlighted the need for intra-African trade to be stepped up. Accelerating industrial development of agricultural inputs in Africa is also imperative for self-sustainability.

Leaders across the continent are realising the critical role Agribusiness can play in economic transformation and employment creation. The agricultural sector employs 65 to 70 percent of Africa’s workforce. It is interesting to note that women make up more than half of Africa’s farmers and produce about 90 percent of the continent’s food supplies.

Unfortunately, Africa has the lowest productivity per capita in the world because farmers lack access to agricultural inputs and tools for land preparation and harvesting. Good policies, government support, and investments in the sector have the potential to jump-start this critical sector and boost the economy. The focus is shifting from production agriculture to agribusiness, which ranges from small and medium enterprises to multinational corporations. Small-holder farms must not be overlooked and improving their access to resources and energy can transform the sector’s productivity.

Africa recently hosted the 27th iteration of the “United Nations Climate Change Conference of the Parties” COP27 in Egypt. As the world grapples with the issue of climate change, one of the COP expectations is that each government will adopt and effectively implement their Nationally Determined Contributions (NDCs) to facilitate climate change mitigation and adaptation discourse. Africa is already experiencing severe adverse effects from climate change due to its high dependence on rain-fed agriculture and limited capacity to adapt. Drought has already brought on food crises in many countries across Africa.

Experts are advocating for a nexus approach to food systems, energy, and managing climate change. Africa’s approach to improving efficiency in food systems and agricultural value chains can have ripple effects on climate adaptation and mitigation. Post-harvest losses in Africa are estimated to cost billions. Lack of energy for storage and post-harvest processing infrastructure exacerbate this problem. Additionally, inefficient agricultural value chains and population growth further compound the problem. Expansion of agriculture into forests has reduced Africa’s carbon sequestration capacity, which has a negative effect on climate change. These interrelated issues must be dealt with to improve agribusiness.

Africa has more than half of the world’s agriculturally suitable unused land. Furthermore, energy is a key enabler for improving yields, water efficiency and post-harvest storage. Currently, only 5 percent of Africa’s farmland is irrigated even though some of Africa’s impressive water resources are untapped.  Irrigation can boost crop yields by up to four times. Renewable energy has the potential to enable small-holder farms to tap into groundwater available in shallow aquifers.

Africa’s abundant natural resources as well as rapidly growing local and regional markets could open many opportunities for the continent to establish itself as a major player in global agribusiness. Private sector interest is also unprecedented. Foreign investors have demonstrated a keen interest in Africa’s agribusiness sector. Connecting investors to small holder farmers and local communities is a challenge to avoid acquisitions that can take advantage of weak institutions.

Improved access to local and regional markets will help African farmers to showcase their products and expand their businesses. Energy-efficient transportation and at-scale investment in road infrastructure and agriculture-related energy infrastructure is critical to realizing the potential of the sector.

Boosting research and development for resilient crops and staples for African agriculture could be a key policy recommendation. Furthermore, investing in research to develop climate monitoring systems and data can improve food security by building resilience.

A third of Kenyan GDP is agriculture-dependent.  With diminishing scales of arable land for production, the various stakeholders in the agricultural value chain must quickly adopt interventions to address productivity, innovation, and policy to achieve sustainability in the agribusiness systems. The inclusion of youth, women, and persons living with disability in the agribusiness value chain can be a game-changer.

Developing downstream agribusiness activities such as processing, improving access to upstream inputs such as fertilizers, developing commercial agriculture and providing support and linkages for smallholders and small enterprises is key to creating productive value chains.

Agriculture has become central to Africa’s agenda. However, the emergence of globally competitive industries based on agriculture will only be achieved through good policies, sustained public and private investments, public-private partnerships, and robust processes along the entire value chain. Africa is at crossroads, it can move forward and overcome the many food security and economic challenges that besiege the continent, or it can lose its competitiveness and miss important opportunities for growth.