At a recent event in Nairobi, early-stage venture backer Village Capital brought to a close its programme by inviting a number of startups in the agribusiness space to present their solutions for assisting smallholder farmers.
This saw the likes of Ghana’s Farmerline, which expands access to information to farmers, Rwanda’s Atikus Insurance, an initiative that extends access to credit via reimagined risk solutions, and Mifugo Trade, an online livestock marketing platform, pitching to investors for much-needed financing to scale their businesses.
And in Africa, agriculture is big business.
Across much of the continent, according to the World Bank, agriculture’s contribution to GDP is more than 20%, while in some countries, such as Ethiopia or the Central African Republic, it is higher than the 40-50% mark. Yet farmers, overwhelmingly based in rural areas, traditionally lack access to required networks and finance, with only 1% of commercial loans going to smallholder farmers. This relative underdevelopment of a vital sector, according to UN Food and Agriculture Organisation (FAO) agribusiness economist Eva Gálvez Nogales, is due to a lack of collaboration between various stakeholders, including government and investors.
Nogales is an open proponent of economic “agrocorridors”, which she believes can serve as a strategic tool to bring private capital and large-scale investment to agricultural projects in Africa. This, she believes, will benefit smallholder farmers and boost food security.
Agrocorridors are development programmes that foster agriculture along lines of transportation such as highways, railroads, ports or canals. They integrate investments, policy frameworks and local institutions.
Nogales’ report on the subject for the FAO, ‘Making economic corridors work for the agricultural sector’, highlights a couple of global success stories with agrocorridors, notably the Poverty Reduction and Alleviation Project in Peru, which began in 1998.
The novel approach relied on “star connector firms” that were able to quickly expand commercial networks along 13 corridors in the country, with the result being a “flowering” of overlooked market opportunities. Peru is now the world’s third-largest exporter of artichokes, produced through outgrower contracts and processed in several corridors. The government continued the approach after the bilateral agency responsible for it had departed, and it has been duplicated in a number of sister programmes. In Africa, thus far, the benefits of such agricultural corridors remain mostly overlooked, though Mozambique and Tanzania have started programmes aimed at implementing them. Nogales says implementation is hard work as it requires all stakeholders to rally around an agenda.
“It is a very recent development,” she says. “What has been going on for the last two decades is more transportation corridors linking ports to different cities and production areas to areas of consumption.
“The natural next level in terms of corridor evolution would be trade corridors, but that hasn’t been promoted in Africa for the time being. But for the last two years there has been this movement towards agrocorridors.”
Peru may have seen success with agrocorridors, but there is no “one size fits all” approach, with the FAO report saying effective corridors need to be geared to the competitive advantages of a country rather than “conceived as a miracle method to make a desert bloom”. Nogales says they “should be developed in areas where there is already economic density and untapped growth potential that can be maximised”.
“The idea is not to just invent everything from scratch but to build on what is already going on in terms of transportation and different initiatives,” she says. Collaboration and awareness of mutual benefits are key. Agrocorridors, in principle, give policymakers a framework with which they can assist both consumers and farmers; farmers are provided with better access to markets and credit, and investors are offered supply opportunities to link up with those producers.
“It is about increasing market access and doing that in a way that benefits farmers the most,” says Nogales, adding, “The main challenge for agrocorridors is how to upscale good initiatives that are already taking place but making them wider and attracting other startups, businesses and foreign agribusinesses to follow the examples that are already in place.”
The government’s role in this is crucial, with the development of agrocorridors requiring incentives and the provision of a better investment setup through aspects such as reduced transaction costs.
“The main duty of government is to provide an enabling environment,” says Nogales. “Investments are happening with or without the government’s intervention, but the benefit of agrocorridors for governments is that they can massage and influence investments so they are beneficial for farmers and certain communities.”
Connectivity, competitiveness and the sense of community are the primary aspect of successful corridors, with stakeholders coming together to identify “soft” targets and harmonise approaches in order to avoid disputes that emerge in the wake of “hard” infrastructure investments. Agriculture as a sector could arguably benefit, but advocates say there are also possible advantages in terms of food security and the environment.
“Corridors can in fact allow for better management of environment risks and practices such as unsuitable monocropping,” says Eugenia Serova, director of the FAO’s Rural Infrastructure and Agro-Industries Division. “The key is for inclusive coordination of stakeholder interests both in the planning and execution phase.”
Extension of this collaboration across borders, increasingly happening within other sectors in various regions of Africa, can only increase the impact of economic agrocorridors. Such an approach has already been tried in Southeast Asia, with the Greater Mekong Subregion corridor programme bringing together Cambodia, Vietnam, Thailand, Laos, Myanmar and some Chinese provinces. Though still in its early stages, there are already improved bridges and customs procedures at border towns and contract farming is beginning to span national frontiers.
Nogales sees this expansion of corridor schemes as potentially beneficial to Africa in the long term too, noting that countries have been hindered by relatively small markets and trade with neighbouring countries. Increasing intra-regional integration could be important for economic growth, but if market opportunities are to be deepened, partnerships and collaboration between government and private sector players may be required both within individual African countries and beyond. Tom Jackson