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Soil wealth: Africa’s potential next growth frontier

Article - November 24, 2015

Despite possessing all of the attributes for agriculture, the African continent continues to spend in the region of $50 billion a year importing food


On the topic of agriculture and food production in Africa, experts are as quick to point out the cruel realities that currently prevail as they are the continent’s vast potential for the future. For example, Africans are much more heavily involved in growing and harvesting their own food than people in other regions, yet on average they yield less and still rely heavily on imports. More than 70% of sub-Saharan Africans are farmers, compared to just 2% in the US. Although many parts of Africa have crushing poverty rates, and on the whole it remains the poorest continent in the world, it spends up to $50 billion each year importing food from wealthier countries. Still, the growing and selling of food crops in Africa accounts for nearly half of the continent’s economic output and the continent possesses the largest resources of unused fertile land in the world, making it an epicenter for the future and for innovations in farming worldwide.

“Africa must feed itself,” says Dr Akinwumi Ayodeji Adesina, President of the African Development Bank Group (AfDB). “It is inconceivable that a continent with abundant arable land, water, diverse agro-ecological richness and sunshine is a net food-importing region. Africa has 65% of all the arable land left in the world to meet the food needs of 9 billion people on the planet by 2050. This represents huge untapped potential – and Africa cannot eat potential. Only by rapidly transforming the agriculture sector can Africa meet the growing food needs of its urban population, while boosting incomes for millions of its farmers – the majority of whom are women – and creating much-needed jobs. We must think differently: grow agriculture as a business, to become a wealth-creating sector, not one for managing poverty. This will allow the younger generation to see agriculture as a viable business.”

Adding to the urgency of improving agriculture in Africa are the realities faced by a rapidly expanding and urbanizing population. Africa’s population is expected to grow by 200 million by 2030: the fastest rate in the world. Urban food markets in Africa are set to increase fourfold over the next 15 years, exceeding $400 billion by 2030. Meanwhile, a growing middle class is also seeking greater diversity and higher quality in its diets. Overall, the continent’s food requirements are set to double over the next 30 years or sooner. Yet most crops are still produced by smallholders with limited mechanization and capacity, leading to poor yields. For example, the average maize yield in Africa is about 30 bushels an acre. In the US, it’s more than five times that. Fragmented markets, price controls, and poor infrastructure also hamper production, according to the World Bank. 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. This means that Africa will require major agribusiness investments in processing, logistics, market infrastructure, and retail networks.

Dr Adesina urges policy makers and food producers to focus on value-added products, pointing out that whereas Ghana, Côte d’Ivoire and other African cocoa exporters produce about 70% of the world’s cocoa, they only account for about 3% of the chocolate market. “Many rich folks in the United States, the Netherlands and other countries are farmers,” Dr Adesina says. “In Nigeria, people are leaving banking, medicine, and other fields to go into farming.”

Carlos Lopes, Executive Secretary of the United Nations Economic Commission for Africa, adds, “In Africa, agribusiness and agro-industries account for more than 30% of national incomes as well as the bulk of export revenues and employment. Scaling up agribusiness could be the next growth frontier. It could offer immediate value addition through commodity-based industrialization that exploits forward and backward linkages with the rest of the economy.”

Mr. Lopes cites another example of the potential of the value that can be added to Africa’s agricultural products: 90% of the total income from the retail sale of Africa’s coffee goes to consuming countries, leaving just 10% of the overall value to the entire production and supply chain. “Despite possessing the world’s largest reservoir of unused arable land, Africa has the lowest agricultural productivity, amounting to approximately 10% of global agricultural output,” he explains. “Cereal yields in Africa average only 1.2 tons per hectare, compared with more than 3 tons per hectare for Asia and Latin America and about 5.5 tons per hectare for the European Union. Ironically, Africa has been a net importer of agricultural products since the 1980s. The continent spends between $40 billion and $50 billion yearly on imported agricultural products. More importantly, Africa is exporting jobs by not being able to increase its value addition. Africa can feed Africa. It is well endowed and has the markets.”

Many entrepreneurs see the potential for important changes in the near future. “In the next 15 years […] innovations in farming will erase these brutal ironies,” The Bill and Melinda Gates Foundation wrote in their annual letter this year. “The world has already developed better fertilizers and crops that are more productive, nutritious, and drought and disease-resistant; with access to these and other existing technologies, African farmers could theoretically double their yields. With greater productivity, farmers will also grow a greater variety of food, and they’ll be able to sell their surpluses to supplement their family’s diet with vegetables, eggs, milk, and meat. With the right investments, we can deliver innovation and information to enough farmers in Africa to increase productivity by 50% for the continent overall.”