Agriculture, Africa’s best bet for growing inclusive economies – Report

Approximately  70 percent of Africa’s population is involved in agriculture as smallholder farmers working on parcels of land that are, on average, less than 2 hectares.

“As such, agriculture remains Africa’s surest bet for growing inclusive economies and creating decent jobs mainly for the youth,”says Dr. Agnes Matilda Kalibata President AGRA.

In Kenya, the economic growth rate for 2017 for the first quarter stood at 4.7 percent mainly as a result of poor performance of the agriculture sector given the ongoing drought which greatly hampered agricultural production. The agricultural sector recorded a growth of 4 percent in the first quarter compared to 5.1 percent in the same period in the previous year.

However, according to the 2017 Africa Agriculture Status Report, 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.  

The report states that 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 materialise from mineral deposits and increased urbanisation.  

Despite 37 percent of the population now living in urban centres, 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.

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 precooked 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.

The report points out other new opportunities to target support presented by digital technology such as satellite tracking and big data. These can help locate new high value agri-economic zones and smarter financing and food security policies, especially in the face of climate change.

“Smart support is just as important as scale of support for Africa’s highly diverse group of farmers and agribusinesses. To step up their game, businesses needs assistance tailored to distinct groups of viable small farms and agribusinesses at different development stages, rather than blanket support for all,” added AGRA President, Dr. Kalibata.