The power of entrepreneurs and the free market is driving Africa’s economic growth from food production, as business wakes up to opportunities of a rapidly growing food market in Africa, that may be worth more than $1 trillion each year by 2030 to substitute imports with high value food made in Africa. This is the main conclusion from the latest Africa Agriculture Status Report (AASR), launched today at this year’s African Green Revolution Forum (AGRF) in Cote d’Ivoire.
According to the report, agriculture will be Africa’s quiet revolution, with a focus on SMEs and smallholder farmers creating the high productivity jobs and sustainable economic growth that failed to materialize from mineral deposits and increased urbanization. Despite 37 percent of the population now living in urban centers, most jobs have been created in lower paid, less productive services rather than in industry, with this service sector accounting for more than half of the continent’s GDP. Smart investments in the food system can change this picture dramatically if planned correctly.
Commenting on this year’s report findings, Dr. Agnes Kalibata, President of the Alliance for a Green Revolution in Africa (AGRA) which commissioned the study said: “Africa has the latent natural resources, skills, human and land capacity to tip the balance of payments and move from importer to exporter by eating food made in Africa. This report shows us that agriculture involving an inclusive transformation that goes beyond the farm to agri-businesses will be Africa’s surest and fastest path to that new level of prosperity.”
To succeed, Africa’s agricultural revolution needs to be very different to those seen in the rest of world. It requires an inclusive approach that links millions of small farms to agribusinesses, creating extended food supply chains and employment opportunities for millions including those that will transition from farming. This is in contrast to the model often seen elsewhere in the world of moving to large scale commercial farming and food processing, which employs relatively few people and requires high levels of capital.
The report highlights the opportunity for Africa to feed the continent with food made in Africa that meets the growing demand of affluent, fast growing urban populations on the continent looking for high value processed and pre-cooked foods. Furthermore, it advocates that this opportunity should be met by many of the continent’s existing smallholder farmers. Currently part of this growing demand for Africa’s food is met by imports. These amount to $35bn p.a. and are expected to cost $110bn by 2025 unless Africa improves the productivity and global competitiveness of its agribusiness and agriculture sectors.
The report acknowledges that the private sector holds the key to the transformation of the food system so far. “Impressive value addition and employment is being created by SMEs along value chains in the form of increased agricultural trade, farm servicing, agro processing, urban retailing and food services. Large agribusinesses like seed companies, agro processors and supermarkets are also playing an increasing role in the food value chain in many regions,” said Peter Hazell (IFPRI), the technical director of the report.
However, the study is clear that left to the private sector alone, growth in the agrifood system will not be as fast as it could, nor will it benefit as many smallholder farmers and SMEs as it could. Government support is needed to both stimulate and guide the transition. As a high priority, governments need to create an enabling business environment and in particular, meet targets to invest ten percent of GDP in agriculture, agreed at the 2003 African Union (AU) Summit as part of The Comprehensive Africa Agriculture Development Programme (CAADP).
The report also urges governments to nurture a globally competitive food production sector through measures such as increasing infrastructure investment in secondary cities and towns, improving the reliability of energy and water supplies, building more wholesale market spaces, promoting open regional trade, identifying and investing in first mover crops and introducing stricter standards for food safety and quality.
The authors also call on governments to stimulate new private public partnerships for more innovative financing and insurance provision which can lead to increased resilience for farmers and their households. While globally agricultural insurance is a $2 billion business, Africa accounts for less than two percent of the market. Other fiscal stimulus measures suggested include improving financial regulations, developing better credit-reporting processes, opening up special economic zones, supporting digital warehouse receipt systems and sharing risk with lenders through credit guarantees and matching funds.