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Opinion | May 25, 2013

SEIZING EMERGING OPPORTUNITIES FOR PROMOTING AGRIBUSINESS IN AFRICA: A way to promote Africa’s growth and prosperity

Agribusiness plays an important role in economic development as it contributes a major portion of GDP, foreign exchange earnings and employment in many developing countries.

Agriculture and business combined in selling the foods grown in Africa, now accounts for nearly 50 percent of the continent's economic activities. According to the World Bank, Africa's Agriculture and food market is worth 310 billion US Dollars and has the opportunity to grow to 1 trillion US dollars by 2030. For this projection to be realized, there is an urgent need to grow and expand Africa's food markets.

Agribusiness forms an integral aspect of the development of African economies to the extent that agriculture employs 65% of Africa's labour and accounts for 32% of the continent's gross domestic product. The sector also plays a significant role in enhancing food security on the continent and also helps alleviate poverty through wealth creation.

Despite being home to half of the world's fertile uncultivated land and abandoned water resources, African farmers still record the smallest amount of produce from crops globally.

It is saddening to hear about the fact that Brazil, Indonesia and Thailand alone export more food than that of all Sub-Saharan African countries combined.

Africans import half the rice they eat and pay 3.5 billion US dollars and even more every year for it- which is such a great and huge amount to spend on just one variety of food.

THE EXISTING CHALLENGES
The agribusiness sector of the majority of African countries faces numerous challenges.

Within the various African countries, businesses are unable to maximize their potentials because of inconsistent policies, high transportation costs, poor infrastructure, lack of capital, and poorly functioning input markets; including for seeds and for fertilizers. Fragmented markets and price controls also hamper production. Many of the agricultural products produced in the region, such as maize, rice, and palm oil, are not competitive globally or have low profit margins as a result of some of these challenges that are prevalent on the continent.

In many African countries, most crops are produced by small-sized farms with limited mechanization and capacity, resulting in very low yields. For instance, Senegal with all its efforts in trying to remain competitive among it's neighbours is unfortunately still held back by the difficulty farmers have in accessing capital, land, finance for irrigation expansion and appropriate crop varieties.

Another case in point is that of Ghana in rice production. Although Ghana produces rice locally, its output in the rice production sector is characterized by poor grain quality, lack of cleanliness and poor packaging which serve as deterrents to consumers and this is inhibiting the performance of the sector, partly accounting for why there is so much importation of rice into the country.

Cocoa is Sub-Saharan Africa's most important export crop and its production within the region is valued at 4 billion US dollars per year. With the crop being of so much value and contributing so much to the economies of the countries which produce it, one would expect that much attention would be given to the production of the product in order to maximize production. Ghana, one of Africa's largest producers of cocoa although has upgraded technology and management in cocoa production, but is still experiencing low yields because of ageing farmers, ageing trees, disinterest of the youth in getting involved, among other causes.

THE WAY FORWARD
To address food security, job creation, and also wealth creation within poor economies, particularly in African countries, African Agriculture has to be commercialized both on the input side; supply of fertilizers, supply of various mechanization technologies, and high yield and disease resistant crop varieties, and also on the output side by adopting new business models.

There are about 50 to 60 percent post harvest losses in the production of Agricultural products in Africa. If the continent can add value, if Africa had strong and reliable energy sources to be able to help farmers and communities process their foods, store it, before they are taken to markets, hunger would be reduced- because it will probably make 50 to 60 percent more food available in the supply chain.

Seizing emerging opportunities for promoting agribusiness in the new global context is imperative for Africa's prosperity. Economic performance over the years and its impact on poverty in the continent has shown that prosperity is not only due to resource endowments, and that poverty is not due to the lack of resources. Several African resource-rich countries have remained poor, while other resource poor countries have become rich by climbing the ladder of value addition. Such developments demonstrate that prosperity and poverty are the results of policy choices. There is therefore the need for greater interventions in developing the informal valid chains and also linking them with the formal valid chains. There should be purposeful policy reforms to open up and restructure African economies along market-oriented lines to improve linkages to global trade networks.

The United Nations Industrial Development Organizations (UNIDO) in its book titled 'Agribusiness for Africa's prosperity' presents seven strong actions that should be taken to grow Agribusiness in African countries to skyrocket the development of African economies. These pillars as they suggest are 'enhancing agricultural productivity', 'upgrading value chains', 'exploiting local, regional and international demand', 'strengthening technological efforts and innovation capabilities', 'promoting innovative and effective sources of finance, stimulating private sector participation', as well as 'improving infrastructure and energy access'.

Improving agricultural productivity will require the use of new varieties of crops and the use of chemical fertilizers for growing crops. It requires mechanization and also requires research and development. This is directly linked with providing infrastructure. Infrastructure is needed to move products around. There are cases in Africa where there is surplus production of food at one place and hunger just a few miles away in another location. Good infrastructure is needed to link farmers to markets and within that context energy is needed; energy to enhance food processing, energy for cooling systems to store products, and also energy systems to ensure that there are good chains to link products to various consuming markets.

There is also the need for Entrepreneurship; new agricultural entrepreneurs who are ready to risk capitals in Agribusiness supply chains. There should be the involvement of the private sector in Agribusiness. That is, private participation in Agribusiness and other agricultural activities should be highly encouraged and entertained. To further ensure this, foreign direct investment should be liberalized; with fewer restrictions on entry, establishment, ownership and operations in Africa's domestic economies to speed up development in the Agriculture sectors.

The relevance of good governance and institution building also cannot be neglected in developing Africa's Agribusiness. Africa needs political leadership with a strong political will to invest in Agriculture and also create the necessary environment and conditions necessary for improving productivity.

Productivity levels in African agribusiness are low partly because educational levels fall well short of the standard required to achieve technical efficiency in agriculture and manufacturing. To address this challenge, there is a need for strong institutions, research and education of farmers and all those who are involved in Agribusiness activities on the continent.

An African agribusiness revolution is within reach, provided the continent can focus on supporting small-scale farmers to help meet national and regional demand for food. Africa can feed itself. And it can make the transition from hungry importer to self-sufficiency. Politicians and leaders in Africa should put agricultural expansion at the heart of decision-making; about everything from transport and communications to education and innovation.

Agriculture is one of the areas that Africa has competitive advantage, but unfortunately this advantage has not been well utilized. But there is hope! Africa can still do a whole lot more.

Africa's agribusiness sector if given much attention to ensure efficiency in the sector, could increase incomes, boost jobs and reduce hunger and environmental degradation while building shared prosperity.

Charles Yeboah Frimpong
University of Ghana
Member, The Institute of Chartered Accountants (Ghana)

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Charles Yeboah Frimpong
Charles Yeboah Frimpong, © 2013

This author has authored 5 publications on Modern Ghana.
Author column: CharlesYeboahFrimpong

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