World Bank report projects $1 trillion food market in Africa by 2030
A new report by the World Bank has called for new strategies on how to help Africans seize the continent’s agribusiness opportunity. The report, titled, “Growing Africa: Unlocking the Potential of Agribusiness,” says Africa’s food systems, currently valued at $313 billion a year, could triple if governments and business leaders re-align their policies to support agriculture, farmers, and agribusinesses, which together account for nearly 50% of Africa’s economic activity.
Currently, agriculture and agribusiness together account for nearly half of Africa’s economic activity, according to the report launched on March 4, but that has not stopped the continent from being one of the biggest net importers of food in the world. All it would take to change the status quo, the report shows, is helping African farmers and agribusinesses to be assured of access to adequate capital, electricity, better technology, and infrastructure, including irrigation - to grow their food and compete in the global market.
World Bank Vice President for Africa, Makhtar Diop, said the government has a big role to play as it can work with private sector players to link farmers with urban consumers so as to make agribusiness a “catalyst for ending poverty.”
Agribusiness – a form of farming engaged in as a large-scale business operation embracing the production, processing, and distribution of agricultural products and the manufacture of farm machinery, equipment and supplies – is yet to be embraced by many African countries despite the huge opportunities it presents for fighting poverty.
Consequently, despite its favourable climate, the report shows that Sub-Saharan Africa’s agricultural sector and agribusinesses are underperforming with many developing countries such as Brazil, Indonesia, and Thailand now exporting more food products than all of Sub-Saharan African countries combined.
For long described as a continent that can feed itself, Africa’s agricultural exports are falling, imports of food are up and the volume of food aid is also rising, making African countries some of the most food aid dependent nations in the world. Africa, according to the report, holds about 50% of the world’s uncultivated arable land, comprising as many as 450 million hectares that are not forested, protected, or densely populated. It says the continent (Africa) uses less than 2% of its renewable water sources for agricultural purposes, compared to a world average of 5%.
The report argues that these adverse trends can be reversed through good policies, sustained public-private investment, and strong public-private partnerships backed by open, transparent procedures and processes along the entire value chain.
“We cannot overstate the importance of agriculture to Africa’s determination to maintain and boost its high growth rates, create more jobs, significantly reduce poverty, and grow enough cheap, nutritious food to feed its families, export its surplus food, while safeguarding the continent’s environment,” said Makhtar Diop.
For Sub-Saharan Africa, the report says the food stuffs with most potential include rice, grains, poultry, dairy, vegetable oils, horticulture and processed foods.
Broken value chains
The report takes an in-depth look at value chains – the process of taking products from farms to markets – which it says is Africa’s main undoing.
While private participation in markets is said to be high in countries such as Uganda, which have a “hands off” policy on the operation of grain markets, the report says African farmers continue to receive low prices for export commodities relative to world prices and relative to prices received by farmers in other regions.
One of the key impediments is poor infrastructure or lack of all - weather rural roads – which are crucial for rural areas to develop and gain access to markets. It says recent improvements in main roads mean that a disproportionate share of the high transport costs for farmers are incurred within the first few kilometers from the farms - as rural roads are still in very poor conditions.
Joseph Kanyankole, a small holder farmer in a rural village of Kikaada, Kibaale District in Western Uganda, is a victim of this type of situation. He told The Independent on March 6 that the biggest problem they face are the “ugly” feeder and main roads and the unreliable markets for their produce mainly maize, beans, cassava and bananas.
“We have talked about these problems many times and now we are tired,” a disappointed Kanyankole said.
He said because of the difficulties in accessing the nearest markets of Kakumiro and Mubende urban markets, they have chosen to depend on middle men who at times exploit them by offering abnormally low prices than those in the urban markets.
“We have no alternative,” he said in a resigned voice.
The other issues which Kanyankole raised were the lack of cheap finances, unpredictable weather conditions among others, which directly falls in the bracket of those highlighted by the World Bank report. Indeed, Kanyankole’s situation sums up the frustration of millions of farmers countrywide. As regards agricultural finance, the report credits Uganda for its warehouse receipt system, which links warehouses to banks and the commodity exchange.
Also, it highlights DFCU Leasing - one of the premier leasing finance facilities that finance major assets such as transport vehicles, farm equipment, cotton ginning equipment and heavy tractors, among others. One of the most noticeable impacts of DFCU Leasing is the provision of appropriate transport, which has enabled producers of perishable food products to access markets in urban centers. Additionally, the AgriFin programme, which is supported by Centenary Bank, is credited for making it easier for agribusiness to thrive.
With hopes high that Uganda’s economic prospects could be enhanced in the near future following the discovery of crude oil, experts have been wary of the negative impact it could have on the agricultural sector, as priority is expected to shift to the so-called ‘black gold’ at the expense of crops.
These worries are not far-fetched. The report shows that the two largest importers of food in Africa are both oil producers and exporters, Nigeria and Angola.
However, Prof. Augustus Nuwagaba, an economics don at Makerere University, along with other experts, have always argued that Uganda would neglect agriculture at her own peril. In an interview, he suggested that the sector needs firm support because it has been and would continue to be the lifeblood of Uganda’s economy for centuries.
He was of the view that Uganda should go the “China way” by establishing an agricultural bank to finance the sector at very low interest rates. Also, there should be favorable agriculture insurance products targeting farmers since the sector is feared because of the seasonality and high risks involved. The government, he said, has a bigger role to play.
“All these should be done by the government and not the private sector,” he argued, adding that because it is profit-oriented, the private sector cannot be of much help.
He also suggested that farmers’ cooperatives should be revived for stronger collective bargaining, but quickly adding that these are all issues that have been under discussion for years though the implementation is not forth coming.
Fabian Kasi, the Centenary Bank managing director, noted that without roads, warehouses, accessible markets, stable exchange rates and protection from exploitation by middle men, the sector would continue to limp. All in all, most Ugandans would agree with the World Bank that the ball was indeed in the court of the government. For instance, several institutions that were set up to boost the agricultural sector – NAADS, NARO, PMA, etc are limping themselves.
But in response, Tress Bucyanayandi, the minister of Agriculture, Animal Industry and Fisheries, said the government was indeed aware of the importance of the sector in the country and its role in making it thrive. It was for this reason that the government and donor agencies were putting in place storage facilities in Lira, Gulu, Kigumba among other places to facilitate the sector’s growth. He said the government was undertaking an ambitious programme to upgrade the road network across the country to improve accessibility to market centres.
He added that they had indentified ‘priority crops’ to ensure food security, which include beans, cassava, rice and maize but more attention was also being put on diary production, fish farming and on other cash crops such as coffee, tea and cotton.
But he largely agreed with the findings in the report, which pointed to modern technology, cheap financing, improved seeds, fertilizers, irrigation systems and more importantly embracing value addition to win external markets.
On the sensitive issue of land for agribusiness investments, the report warns that such acquisitions could threaten people’s livelihoods and create local opposition unless land purchases or leases are conducted according to ethical and socially responsible standards, including recognizing local users’ rights, thorough consultations with local communities, and fair market-rate compensation for land acquired.
Also, the report says there is need to utilise the regional integration of markets by implementing trade liberalization schemes, the need to guard against fraud and corruption in the sector and to focus on value addition.nGoing forward, the World Bank says agriculture and agribusiness should be at the top of the development and business agenda in Sub-Saharan Africa. Strong leadership and commitment from both public and private sectors is needed.
“African farmers and businesses must be empowered through good policies, increased public and private investments and strong public-private partnerships,” said Gaiv Tata, the World Bank director for Financial and Private Sector Development in Africa. “A strong agribusiness sector is vital for Africa’s economic future.”