Just when hope was rising for a steady economic recovery, Africa and the rest of the world were hit by a new COVID-19 variant at the end of 2021. Omicron, the new variant spread fast in many African countries, and although it has been described as a milder strain, resulting in less hospitalizations, the resulting flight bans and disruptions to the global supply chain had and are still having an impact on doing business in Africa. While economists and the global public health community continue try to understand the impact of the new variant, its emergence poses a threat to the Continent’s already fragile economic recovery. Nevertheless, the general view is that the worst of COVID is behind us.
As we start the post COVID-19 era, the major challenges for the development of agribusiness ecosystems in Africa appear to be climate change, soil health, water for irrigation and biodiversity loss. These issues are likely to present the biggest threats (and opportunities in the case of water for irrigation), to agricultural production and agribusinesses.
Operating in such a fluid environment requires agility and tenacity. According to the World Bank and the International Monetary Fund (IMF), growth in Sub-Saharan Africa is expected to remain at below 4% in 2022 and 2023.
Going forward, the Continent’s economic recovery is pegged on rising commodity prices, the advancement of COVID-19 vaccination to enable a return to normal business, a recovery in global trade, an increase in intraAfrican trade and a rise in agricultural output.
In 2021, we spoke to many businesses across the Continent operating in the agricultural ecosystem. What was clear was their determination to keep moving forward, their resilience and innovation. What they need is support in the form of enabling policies, laws and regulations and the delivery of public goods such as infrastructure, increased access to innovative and appropriate finance and help in addressing the challenge of climate change.
This report builds on the inaugural 2020 Africa Agribusiness Outlook and presents the results of our conversations across the ecosystem. We increased the number of key countries for our oneon-one interviews and improved the online survey to cover new areas of interest emanating from discussions with captains of industry. The result is a barometer that provides insights into priority areas of interest to the private sector that, if resolved, would boost their investment into the agricultural sector and help them scale and become more competitive.
Agenda for Action
More flexible financing structures for agriculture and agribusiness sector
Increase productivity on small farms.
Catalytic financing for the entire value chain, not just technology
Blended finance initiatives for agribusinesses
Increase access to small, affordable, smart technologies for small farms
Promote climate smart agriculture as a key driver for transformation
Increased public-private initiatives that fund and accelerate developments
Develop inclusive supply chains involving smallholder farmers.
Access to finance for climate adaptation initiatives or climate smart agriculture
Develop multi-stakeholder platforms and partnerships for driving agricultural Transformation
Supporting farmers adopt better production technologies like regenerative agriculture practices
Doing business in the new normal
The unanticipated growth that some agri SMEs are having has not come without its fair share of challenges. The overall feedback that we heard from these respondents is that the recent growth was not planned for, hence systems, infrastructure, processes and technology are not adequate to support and manage business expansion.
Against the backdrop of the unexpected growth opportunity that COVID-19 has presented, growing companies are
experiencing significant funding needs. Funders and financiers need to ramp up support in order for companies to take advantage of this growth.
Some respondents indicated that the majority of the funding that has been available from 2020 and part of this year is geared towards ensuring that existing businesses are able to adapt and mitigate the negative effects of the pandemic. There is not enough funding going into supporting companies that are growing during this period. Growing companies urgently need funds for scaling that will allow them to invest in new production facilities, re-engineer processes, attract and retain talent,
expand operations including farmer engagement, access new markets and digitize further.
Innovative financing for agriculture
We believe blended finance offers promise for innovative approaches to financing the agricultural sector by helping address the issue of risk, which for a long time has been the main reason cited by financial institutions as to why they do not support the agricultural sector. Financial technology offers another pathway for innovation in financing the sector while governments and central banks could support agriSMEs by introducing legislation that facilitates the delivery of innovative finance, such as factoring, supply chain finance, climate finance, gender and youth finance and warehouse receipts.
GROWING AFRICA’S AGRICULTURE
Founded in 2006, the Alliance for a Green Revolution in Africa (AGRA), is an African-led African-based organization that seeks to catalyze Agriculture Transformation in Africa. AGRA is focused on putting smallholder farmers at the center of the continent’s growing economy by transforming agriculture from a solitary struggle to survive into farming as a business that thrives. As the sector that employs the majority of Africa’s people, nearly all of them small-scale farmers, AGRA recognizes that developing smallholder agriculture into a productive, efficient, and sustainable system is essential to ensuring food security, lifting millions out of poverty, and driving equitable growth across the continent.
Agribusiness Outlook 2022 is an initiative of AGRA and KPMG Advisory Services Limited, in partnership with AGRA PIATA members.
How can I reach the Agribusiness Outlook team?
+254 786 220 002, +254 733 614 611
Alliance for a Green Revolution in Africa (AGRA)
West End Towers, 4th Floor
Kanjata Road, off Muthangari Drive, Off Waiyaki Way
P.O. Box 66773
Please provide us with your feedback on the inaugural Agribusiness Outlook 2020, or engage us if you would like to take part in the next survey.