Food crises highlight need for action on agribusiness

Africa’s potential as a global agribusiness powerhouse has been discussed for decades. But turning this potential into reality has proven to be easier said than done. The continent does of course already play a vital role in world agricultural commodity markets. Ghana and Côte d’Ivoire are the world’s top cocoa producers. East Africa is a leading source of coffee and tea. South Africa exports a wide range of fruits and boasts a world-famous wine industry. On the whole, however, much of the continent’s potential in the sector remains untapped.

The reality is that Africa is still a net importer of food as a continent – although many African countries are net exporters. Subsistence farming remains prevalent and smallholders account for around 80% of the continent’s output. Initiatives to make production more efficient, cultivate a more diverse range of crops, or bring larger areas into food production often remain stuck on the drawing board.

Even so, amid alarming threats to food security, governments and other stakeholders are putting increased emphasis on Africa’s agribusiness sector. African Development Bank president Akinwumi Adesina claimed last year that, with sufficient investment and the removal of trade barriers, the continent’s agricultural output could more than treble to $1 trillion by 2030.

With Africa agribusiness at a crossroads, we look at four key trends that are shaping the sector.

Agribusiness is vital to overcoming Africa’s food security challenges

Much of the renewed interest in agriculture in Africa stems from the painful rise in food import bills over the past few years. The spike in food prices began with disruption to global supply chains during and after the Covid-19 pandemic. The situation escalated with the Russian invasion of Ukraine, which had a huge impact on the price and availability of grain in Africa.

According to the United Nations World Food Programme, around 160m people in sub-Saharan Africa are currently facing acute insecurity – roughly double the level seen before Covid and the Russia-Ukraine war.

Given that prevention is clearly better than cure when it comes to addressing hunger, the obvious long-term solution is for Africa to ramp up its own food production. “Africa needs to learn to feed itself and contribute to feeding the world,” said Senegal’s then president Macky Sall at a food security summit last year.

Unsurprisingly, therefore, a host of initiatives have been launched over the past two years to modernise the agribusiness sector in Africa. In May, for example, African governments agreed a target at a summit in Nairobi to triple the use of fertilisers over the next decade.

Meanwhile, Nigeria’s president Bola Tinubu put his plan to boost domestic food production at the centre of his new year address in January, claiming that his government will bring an additional 500,000 hectares of farmland into production for growing staple crops. Nigeria, which is among the African countries with the highest dependence on food imports, has endured food price inflation in excess of 30% over the past year.

The urgency of investing in agribusiness becomes even more obvious when population growth is factored into the equation. Africa will be the main driver of global population growth over the rest of this century. By 2050, the continent could have another billion mouths to feed as the population expands to 2.5bn. Without a modernised agribusiness sector, the challenges of food security are only going to grow larger.

Better infrastructure is the key to unlock agribusiness growth

Any presentation on African agribusiness will almost inevitably include the statistic that Africa contains 60% of the world’s uncultivated arable land.

This seemingly striking figure, implying that the continent has vast tracts of virgin land that are simply waiting to be ploughed, is in fact almost meaningless. It tells us nothing about the quality of the uncultivated land, or about the other ways that the land might be used, nor about the economic viability of bringing this land into commercial food production.

It is not land that African agribusiness lacks – but infrastructure. Farmers struggle to bring their goods to market without good roads. Crops are left to rot in the absence of cold storage facilities. Smallholders are far more vulnerable to drought where irrigation is lacking. Without substantial investment in a wide variety of agribusiness infrastructure, there is little hope of bringing the most modern and efficient growing methods to the continent.

There are some encouraging signs that the shortfall in agribusiness infrastructure is beginning to receive more serious attention. A potential game-changer, particularly for smaller-scale farming operations, is the growing availability of solar power. The electricity generated by cheap-to-operate solar panels can be used in many different ways across the agricultural sector.

Solar panels can help to power cold storage facilities in areas where grid electricity is unavailable. Solar-powered pumps for use in irrigation systems are also seen by many experts as having great future potential.

But, as with all forms of infrastructure on the continent, the biggest obstacle is financing. Sara Mbago-Bhunu, director of the east and southern Africa division at the International Fund for Agricultural Development, told African Business in April that a heightened perception of risk around African agriculture makes it harder and more expensive to attract financing. Concessional capital is almost always required to help agribusiness infrastructure projects get off the ground.

Innovation in inputs is badly needed

As well as infrastructure, high-quality inputs are vital if agriculture in Africa is to become more productive.

One of the key inputs is fertilisers, which have played a vital role in boosting yields in other regions over recent decades but are still under-utilised in Africa. Asia uses seven times as much synthetic fertiliser per hectare than Africa – and enjoys much higher yields for crops such as maize and rice.

As noted, African leaders are aiming to triple fertiliser supply by 2034. The pathway to achieving this ambitious target is unclear; previous targets for increasing fertiliser application have been missed by a large margin.

Again, financing is a challenge, given that development partners are reluctant to provide funding for synthetic fertiliser plants due to environmental concerns. The EU has dragged its feet over proposals to help fund new synthetic fertiliser production facilities in Africa since 2022.

Supplying African farmers with improved varieties of seeds is another important priority. Many development organisations emphasise the importance of selecting drought-tolerant seed varieties in light of climate concerns.

Dutch seed company Solynta in June announced a partnership with pharma and biotech giant Bayer to distribute seeds of hybrid varieties of potatoes in Kenya. This aims to allow farmers to plant high-quality varieties of easily-transportable “true seeds”, as opposed to tubers that are often contaminated by the time they are planted.

Charles Miller, director of strategic alliances at Solynta and a board member on the African Seed Trade Association, says that using improved varieties of true potato seeds can “dramatically change the yield outcomes for most farmers in Kenya”. At present, he says, the average yield for Kenyan potato farmers is 8-10 tonnes per hectare.

Using the right inputs, including improved seed varieties, could raise output to as much as 40 tonnes per hectare, while costs for farmers would be “roughly the same” as the traditional approach of planting tubers.

African agribusiness is vulnerable to climate shocks – but modernising can boost resilience

No discussion of African agriculture is complete without a mention of climate change.

More prolonged and severe droughts in particular are making life more difficult for the agriculture sector in Africa. The years-long drought in the Horn of Africa, which led to massive crop failures across the region, was made at least 100 times more likely due to climate change according to analysis from climate science group Carbon Brief.

The reality of climate change increases the need to invest in high-tech production methods to help improve resilience to shocks. Vertical farms and climate-controlled greenhouses, for example, provide routes to more localised and climate-resilient food production.

But there is also a huge need to focus on much simpler “nature-based” methods to improve climate resilience in African agriculture. Re-establishing traditional methods of agro-forestry on degraded land is one way to boost incomes while also helping to mitigate threats to climate and biodiversity.

Farming credits

And the global push to combat climate change could even be a financial opportunity for some segments of the agribusiness market in Africa.

Global companies are looking to “offset” their carbon emissions by funding projects that remove carbon from the atmosphere. African agriculture and forestry businesses can meet this demand by selling carbon credits in return for increasing the storage of carbon in trees, plants or soils.

While the voluntary carbon market has proven highly volatile in recent years, the sale of carbon credits has the potential to generate significant income for African farmers and landowners.

Through the Africa Carbon Markets Initiative, the continent is aiming to generate $6bn in carbon revenues by 2030.