How Africa can win in global processed food market
Africa has been exporting most of its farm produce raw, and experts say that by exporting raw materials, the continent is exporting jobs as well as money which could be saved to improve the welfare of its people.
Africa accounts for 75 per cent of the world’s cocoa production, with 65 per cent of this being produced in Cote d’Ivoire and Ghana, but the continent only receives 2 per cent of the $100 billion annual revenues from chocolates globally because it only exports raw cocoa beans, according to information from African Development Bank (AfDB).
This pattern, the Bank says, is the same for other commodities in which Africa is a major producer. It produces 146 million out of the 268 million tonnes of cassava in the world – or 55 per cent, 5.4 million of the 5.6 million tonnes of cowpeas (Black-eyed pea), 9.62 million of the 28 million tonnes of millet and 29 million of the 69 million tonnes of sorghum globally.
In 2014, AfDB estimates showed that Africa earned just £1.5 billion from coffee exports yet Germany, a leading processor, earned nearly double that from re-exports.
“Africa cannot continue to just dig up what it grows and sell it abroad, and then buy back finished products, because what that means is exporting jobs,” Dr Jennifer Blanke, Vice-President, Agriculture, Human and Social Development at the African Development Bank told The New Times at the sidelines of the African Green Revolution Forum held in Kigali last week.
“Africa can actually dig up what it produces at a much higher scale, and then transform [it] into what we want to eat here in Africa, and then also export it. That’s when you see that the jobs will really be created,” she said, adding that this is a huge opportunity which will also benefit the per centage of the population working in agriculture on the continent,” Blanke recommended.
African countries need policies to unlock the huge potential of these commodities by developing agricultural value chains and agro-allied industries that process and add value to them, said Akinwumi Adesina, President of Africa Development Bank during a Public Lecture of the Food and Agriculture Organisation (FAO) in August.
“This will allow them to become more competitive in global value chains, raise incomes for their farmers, instead of being stuck at the bottom of global value chains,” Adesina observed.
Quality assurance is also critical in food production as it can help to ensure that people are safe, sustain trade and help build economies, according to experts.
“In order to get ourselves organised and impact on imports substitution and also tap into export potential, we have to tackle the issue of food safety in value addition and food processing,” said Dr Abdullahi Aliyu Ndarubu, Managing Director of Harvestfield Industries, in Nigeria.
Bridging investment gaps
Agribusiness and food sector is not getting enough finances to make quality and standards products, experts said during the conference in Kigali, whereby they underscored the role of leadership in ensuring that agricultural businesses across the continent have access to the funding they need to seize the opportunity to convert Africa into a net exporter of produce.
Dr Blanke estimated that the current annual total of financing provided to African agricultural businesses stands at around $7 billion in contrast with the $40 billion that she believes is actually needed.
Commercial banks rarely lend to the agricultural sector, and when they do, the interest rates are extremely high (at between 17 per cent and 30 per cent), while the credit duration is short, leaving the sector without access to affordable long-term finance, experts argued, calling for incentive-based risk sharing initiatives to increase funding to the sector.
To de-risk the sector, and attract more investment, the CEO of Kenya’s Equity Bank, James Mwangi, recommends that agriculture financing and farmers’ needs need to be interconnected.
“The flow of funding is dependent on whether the farmer is connected to such institutions as credit reference bureaus, markets and payment systems,” said Mwangi, explaining that, “It is only then when we complete digitising the whole system and link together all the players that we shall remove the remoteness associated with farming and make the industry attractive to financiers”.
While it is slowly growing, value addition remains insignificant in many parts of the continent, shows Alliance for a Green Revolution in Africa (AGRA)’s 2018 Africa Agriculture Status Report whose focus is Catalyzing Government Capacity to Drive Agricultural Transformation.
The AGRA study adds that Africa has been a net food importer since the 1980s and its food [import] bill is set to rise threefold by 2025 to $110 billion.
Meanwhile, it states, the rates of urbanisation and a growing middle-class are expanding national, and inter- and intra-regional markets for agricultural products, with agriculture and agribusiness together projected to be a US$1 trillion industry in Africa by 2030.
The sector, the report says, currently accounts for 61 per cent of employment, 25 per cent of Gross Domestic Product (GDP), and represents 9.16 per cent of total exports and 13.4 per cent of total imports.
Recent figures from the World Bank show that Africa’s food market was estimated to be $330 billion in 2013.