Maize, Rice, Beef, oh my! Africa’s food market is currently valued at US$313 billion a year. It’s believed this could triple if farmers modernised their practices and had better access to credit, new technologies, irrigation and fertilisers.
Africa is a continent ripe with opportunity.
It almost seems that every time we turn our head, there are experts talking about Africa’s oil and gas opportunities, its wealth of natural resources, its manufacturing potential, its rising hospitality sector; tapping into that burgeoning consumer class whose tastes are also getting more…luxurious.
At first glance, agriculture is not necessarily the sexiest of topics, compared to some of the ones above. However, agriculture is an area that has been on the tip of people’s tongues more and more as of late, and the World Bank zeroed in on this even further with its recent report in March, Growing Africa: Unlocking the Potential Agribusiness, which predicted that the continent’s agricultural sector could become a US$1 trillion industry if governments and the private sector radically reconsidered policies and support for farmers.
Africa is home to more than 50 per cent of the world’s uncultivated land, says the World Bank, and the continent is at a crossroads with taking concrete steps to realise its potential or continuing to lose competitiveness.
We reached out to a roundtable of experts from various fields to give their two cents on how they see Africa’s agricultural sector developing over the next couple of decades. But more than that, they share insights from their unique backgrounds to not only answer the question “What is Africa’s true potential?” but “How can Africa get there?”
Larry Seruma is the founder and chief investment officer of Nile Capital Management, an investment management firm based in Princeton, NJ. He manages the Nile Pan Africa Fund, a mutual fund focused exclusively on African companies.
In your opinion, what do you think is the biggest challenge for African farmers today?
The biggest challenge is access to credit by farmers. Banks find it very risky to lend to farmers – part of the risk to farmers is from uncertainty of output as impacted by weather, lack of hedging instruments or insurance products. On the private side, the return profile of an agricultural venture does not bode well in a private equity investment vehicle – which is one of fastest growing investment vehicles in Africa. In some countries, especially with respect to land titles, is a hindrance for farmers to obtain collateralised finance.
What’s the biggest misconception surrounding agribusiness in Africa?
The biggest misconception in Africa is that you need large scale commercial farming to obtain economies of scale or for a successful farming. Actually it is possible to have small farm shareholders and have economies of scale.
Which country/countries hold the most agribusiness opportunity today and why?
Many countries offer promise, but the stand outs are Mozambique, Ghana and Uganda. These countries are likely to be energy independent in a few years – which will drive the cost of “value added” or agricultural processing/manufacturing lower.
Which commodities turn your head and which ones have the potential to become key producers for Africa?
The commodities that turn my head are sugar and beef. Context: Africa is about 1 billion people projected to be 2 billion by 2050. More aptly, Uganda’s population is about 33 million projected to be more than 100 million by 2050.
What is one piece of technology that you believe has been positively impacting farmers in Africa?
I would say, mobile phones as they can inform farmers about weather changes, planting or sell them farm insurance. This has the ability to improve yields as the main risk of a farmer, as we commonly say is, “one rainfall away from bankruptcy”. That said, improved seeds and irrigation are a close second.
Any final thoughts you’d like to share?
A successful agricultural sector is a mix of big and small creating sufficient scale to take advantage of the technological advances that are available.
Cliff Schmidt started Literacy Bridge in 2007 to address global poverty and disease by making practical agriculture and health knowledge accessible to those who need it most. He led the development of an audio-based mobile device called the “Talking Book” for farmers with minimal or no literacy skills, living in rural areas without electricity or Internet access. Cliff has received the Microsoft Alumni Foundation Integral Fellow Award by Bill and Melinda Gates and was awarded a membership by President Bill Clinton to the Clinton Global Initiative.
What do you think is the biggest challenge for African farmers today?
The biggest challenge for most African farmers is access to knowledge and skills training — there is no better long-term investment in a farmer. When smallholder farmers, in particular, have the relevant knowledge and skills, they are able to significantly improve their crop yields and ability to leverage the agriculture value chain, often with little or no additional investment.
Of course, other inputs like credit, irrigation, and fertiliser address important challenges; but investing in farming knowledge and skills will always improve the leverage of these inputs and can even lead to strong results without these inputs.
What’s the biggest misconception surrounding agribusiness in Africa?
There is a misconception that more private-sector agribusiness necessarily means more food security for those at the greatest risk. Farmers with the least food security are the hardest to reach and integrate into the value chain. Most agribusinesses will not favor the poorest of the poor because they require a greater investment and longer timeframe to achieve a profitable outcome.
There is another misconception that NGOs programs must be the solution for long-term investment in the populations at greatest risk; however, NGO programs without a sustainable business plan risk that their program funding may not be renewed, leaving their long-term dependability in question.
Which country/countries do you believe hold the most agribusiness opportunity today and why?
Literacy Bridge started in Ghana in 2007, so I am clearly biased. But if you are looking for a country with an attractive business environment, a committed government and a huge opportunity for growth in the agriculture sector, I think Ghana should be at the top of your list.
Which commodities turn your head and which ones have the potential to become key producers for Africa?
I look for commodities that are produced today at average yields far below the achievable yields under rainfed conditions. Then I consider the lowest relative cost of inputs required to close this yield gap (e.g. farmer education, mechanization, seeds, fertiliser). Given these factors and global demand, I believe maize, rice and cocoa are among the commodities with the greatest potential growth in Africa. With relatively modest investments in farmer education and basic inputs, millions of small farms can easily double their yields of crops that are in high global demand.
What is one piece of technology that you believe has been positively impacting farmers in Africa?
My organisation, Literacy Bridge, created the “Talking Book” — a simple and durable mobile device that serves as a household library of actionable knowledge for smallholder farmers who haven’t had a chance to go to school, so they cannot read or write. We use Talking Books in our partnerships with local government agencies and agribusinesses to deliver an ICT-based agriculture extension service.
We capture expert knowledge into audio recordings that we deploy and track on Talking Books. Users are guided by local-language audio prompts to the category of their choice, like “health” or “agriculture” and then to each message in the category. Users can rate the content and leave recorded feedback.
They can also copy an audio message from one Talking Book directly to another.
A recently published study showed that the average farmer increased their crop production by an average of 48 per cent with minimal additional inputs. Our programs have also produced a disproportionately high number of farmers who have won best farmer awards based on the knowledge they learned from Talking Books.
Any final thoughts you’d like to share?
For African agribusiness to reach its potential, we need to address the challenges faced by the vast number of smallholder farmers in the more remote rural regions of every African country. This is where illiteracy, poverty, and poor infrastructure vary significantly from what is found in the more educated and prosperous regions, typically closer to urban centers.
Stuart Bradley is a Senior Partner at Phatisa. He has 15 years of private equity experience in Africa with CDC Capital Partners, Aureos Capital and Phatisa Group. Stuart has a strong track record in private equity across industries as diverse as agribusiness, manufacturing, services and telecommunications where he has successfully concluded, managed and exited numerous private equity investments. Stuart is the co-founder of Phatisa Group, which was lead adviser to the Pan African Infrastructure Development Fund and successfully first closed at US $625 million with purely African capital. Phatisa manages the African Agriculture Fund, which has final closed at US $243 million.
What do you think is the biggest challenge for African farmers today?
One of the biggest challenges is infrastructure.
If we use the example of maize, the staple food of Southern and Eastern Africa, roughly 80 per cent of this crop is grown by small scale farmers. These smallholders plant at the beginning and harvest at the end of the rainy season. They will sell some of their production at harvest to generate income (when there is a glut in the market and prices are depressed) and store the balance in a rudimentary fashion for their own consumption. What they have not consumed before the next rains will spoil because their traditional storage facilities are not water or disease proof. Post harvest losses in Africa can be as high as 30 per cent of the total harvest and cost the continent up to US$ 4 billion a year.
What’s the biggest misconception surrounding agribusiness in Africa?
That agriculture is an asset class where you can make good financial returns.
This can only happen with a solid investment strategy built around an investment team that has a deep understanding of the sector across the continent and a strong local network and on the ground presence. At Phatisa we have built a team that combines traditional private equity investment skills, African agriculture sector experience and a track record of managing agri and FMCG businesses across the continent. We have offices in Nairobi, Lusaka, Johannesburg, Accra and Port Louis from which to adequately source and manage these investments.
Which country/countries do you believe hold the most agribusiness opportunity today and why?
Phatisa considers investments across the sub-Saharan region. Access to a large (preferably domestic) catchment population, potential to build platform assets, the right arable conditions (farming assets) and supportive regulatory environment are some of the considerations for making investment decisions on a geographical landscape. Today we have investments covering a wide geographical base, ranging from Zambia, Sierra Leone, DRC and Cameroon.
Which commodities turn your head and which ones have the potential to become key producers for Africa?
We have made investments in palm oil (oils and fats) and soya (in conjunction with poultry and meat production) where we see huge opportunities to supply basic food to an ever-increasing population and growing affluent middle class.
What is one piece of technology that you believe has been positively impacting farmers in Africa?
Affordable cellular technology is one of a number of innovations that can make a significant impact in the agri sector and its development. Its take up has been phenomenal and means that small scale farmers can have access to commodity prices at the time of harvest, access payment systems, confirm receipt and sales proceeds and secure loans from micro-finance facilities using cell phone banking.
Any final thoughts you’d like to share?
Africa does have its own set of unique challenges and one needs to have deep knowledge and experience when investing in the continent. However, right now the macro fundamentals when compared with other regions of the world are really stacked in Africa’s favour – a young and growing population that is rapidly urbanising and increasing the consumer sector.
Deborah Walliser is the CEO of Got Produce? and a leading expert in hydroponics. She designed and built some of Arizona’s first commercial floating lettuce systems to withstand extreme temperatures and pioneered change in water policy and local food production. Working with top chefs and fortune 500 companies Whole Foods and Wynn Resorts, she brought exceptional products to consumers and revolutionized fresh food marketing and production. Her techniques in ponds systems and multi crop integration have since been utilized across Africa to provide fresh produce to harsh regions.
What do you think is the biggest challenge for African farmers today?
The biggest challenge is a lack of knowledge about programs available to them, and simultaneously, a lack of knowledge of current technology by government funding groups. Many government and NGO’s provide assistance in financing or general knowledge of agriculture, business plans, but do not understand or have access to new developments in technology or don’t know how to fund them under current programs budgets. With some workshops on the ground to teach and enable these individuals or small businesses these obstacles can be overcome, thus allowing the African countries, businesses and people to grow economically through agriculture products.
What’s the biggest misconception surrounding agribusiness in Africa?
That the return on investment just isn’t there or that there are limits to what can be achieved due to arid land, lack of financial resources, and limited or poor water. The industry as a whole does not see the potential for the myriad of crops that can be grown. With new hydroponic methods we can eliminate the need for fertile land and water or seasonal production fluctuations.
Because the age old method of intercropping can now be utilised in a controlled hydroponic system Africa can offer high quality crops for local consumption or for export.
Which country/countries do you believe hold the most agribusiness opportunity today and why?
Any country that has these characteristics: public-private-partnership, access to financial lending resources, and has educational resources available. Areas with political stability or a MCC compact country possess most of these qualifications. We are seeing great possibilities in western Africa and the South African development region.
Which commodities turn your head and which ones have the potential to become key producers for Africa?
Fresh produce items such as leafy greens, vining crops and berries. The variety of crops that can be grown with new hydroponic methods opens doors for great African advances in the fresh produce industry and allow for new culinary markets and food establishments. Through new technology – hydroponic greenhouses- the cost to produce a crop is greatly reduced and the needs for water and land are fraction of traditional farming. Additionally, bio-energy plantations will continue to grow in popularity
What is one piece of technology that you believe has been positively impacting farmers in Africa?
Hydroponics. This technology crushes any barriers to success that traditional farming methods have stumbled upon. It has a zero carbon footprint, requires 60 per cent less water, the need for fertile land becomes obsolete and output is 10X greater than traditional farming.
This technology enables economic autonomy, sustainability, solves issues of nutrition and access to food, and at a lower price point- it creates a solution where once there were barriers. By using similar technology to what’s on our cell phones, we can run and operate a commercial scale operation anywhere in the world; thus bringing the power of modern technology to remote areas without the tenuous learning curve and risks traditionally associated with hydroponics.
Any final thoughts you’d like to share?
Foreign investors are flocking to Africa and there is a reason. They see the opportunity and growth potential in the continent. The global need for food is increasing with each new birth and we are simultaneously experiencing natural resource shortages –especially water. We now have a way to rapidly expand food production and a cheaper price than traditional farming while using a fraction of the resources. Perhaps the silver bullet we’ve all been looking for.
The need for large quantities of land becomes less relevant with the new methods of growing hydroponically. A one acre greenhouse can produce what 100+ acres of land could produce.
Guy Pfeffermann is the CEO of the Global Business School Network, which he founded in 2003 on the principle that skilled management is critical to successful international development. After 40 years as an economist at the World Bank, including 15 years as Chief Economist at the International Finance Corporation, he saw too often how lack of management talent was impeding economic and social development in communities throughout the developing world. Now as CEO of GBSN, which started at the IFC and is today an independent nonprofit, Guy oversees programs and events that harness the expertise and passion of a worldwide network of leading business schools to strengthen the institutions and educators who deliver management education for the developing world.
What do you think is the biggest challenge for African farmers today?
Agricultural progress is the springboard of economic and social development. No country besides city-states and small oil emirates has experienced satisfactory growth without first raising agricultural productivity.
The biggest challenges for African farmers may well lie outside the farm gates. In Nigeria, 40 per cent of farm products rot in transport because of bad roads and lack of refrigeration. Strong exchange rates that are prevalent in oil and mineral exporting countries, as well as countries receiving massive foreign aid, make imported foodstuffs cheaper and discourage agricultural production. In short, farmers anywhere in the world respond to incentives and where they see opportunities to produce and sell at a profit, they will do so. Africa is no different. It will be critical to help farmers develop the skills to navigate changing markets and create viable business plans.
What’s the biggest misconception surrounding agribusiness in Africa?
Plainly, that agribusiness is a business. Younger generations are leaving traditional farms because they don’t see agriculture as a viable or exciting way to raise their living standards. However, as more technology becomes available and as global and local markets become more accessible and transparent, there is huge potential for agricultural entrepreneurs to grow their businesses.
It is important to consider that the development of agribusiness is more than just increasing farm output, though this is a vital component. It’s increasingly evident that important value-added components of agribusiness occur at different points on the value chain – such as in developing trade partners and distribution channels, deal flow, and market access.
Despite there being several hundred Agricultural technical education and training programs currently offered by universities and educational institutions in Africa, there are very few institutions offering business, management and leadership training for the agribusiness sector. Unsurprisingly, findings from a needs assessment conducted with a number of development organizations revealed that managers working in the agribusiness sector possess technical competencies and qualifications in Agriculture but lack the business, management and leadership skills and tools to support the quality of project strategy, execution and management that enables innovation and far-reaching impact in activities across the agribusiness value chain in Africa. This gap must be filled to ensure that public and private agricultural development investment translates into improved incomes and job creation for Africa’s poor.
What is one piece of technology that you believe has been positively impacting farmers in Africa?
There are all kinds of mobile apps that have come out to give people commodity prices on the spot, so they know what the prices of their crops should be.
This is allowing them to get fair prices for their products and making a huge difference in their businesses. Technology that provides weather forecasting is also an invaluable tool.
There are also some fantastic advances in veterinary telemedicine that allows agribusiness operators to diagnose illnesses in their animals. Similar things are being done with crops. Access to mobile technology is providing connectivity that allows agribusiness operators to run their businesses in more effective ways than ever before.
Any final thoughts you’d like to share?
Africa is brimming with energy and, in many countries, entrepreneurship. However, it is woefully short of management skills, so much of this energy is wasted.
That is true in agribusiness as well. Even a short exposure to business training grounded in local realities can boost the growth prospects of agribusinesses.
Unfortunately, there is a lack of capacity to actually provide the necessary training in Africa’s business schools, though this is slowly changing. African business schools are better equipped than only a few years ago to design and deliver courses that are tailored to the needs of agribusiness operators. At the Global Business School Network we have seen this first hand as we have worked with local schools and international experts to develop programs to teach agribusiness entrepreneurs what they need to know to prosper and grow. For example, over the past two years GBSN has worked with the Association of African Business Schools to design agribusiness management training programs that will teach international best practices with local relevance across Africa.
On another initiative we worked with Kenya’s USIU to help them develop relevant case studies to teach a certificate program for agribusiness entrepreneurs.
We have seen a great need for more training on the business processes and principles required to run and grow agribusiness operations and are working with global partners to help build this capacity throughout the continent.