Small and medium-sized agricultural enterprises can drive Africa’s economic growth

Evidence from around the world shows that no region has developed a strong economy without first establishing a successful agricultural sector. Africa is not an exception, especially considering that 70% of its population depends directly on agriculture for their livelihood, mostly as smallholder farmers. Agriculture is indeed Africa’s surest path to inclusive growth, development, and prosperity.

To achieve this transformation, smallholders will have to transition from farming for survival to farming as a thriving business. While we are already seeing early signs of this change, farmers require the catalytic actions of many other players to fully realize their potential.

The biggest difference for these farmers is coming from entrepreneurs especially the small and medium-sized enterprises (SMEs). These SMEs are delivering formerly unavailable, inaccessible and unaffordable services to millions of farmers. They are improving how farmers access yield improving seeds and fertilizers, and they are making it possible for smallholders to obtain mechanization services; irrigation equipment; and post-harvest technologies. They are also giving farmers access to ICT technologies that improve farming efficiency as well as providing farmers with skills and knowledge of the best farming practices through village-based extension agents.

70% of Africa’s population depends directly on agriculture for their livelihood, mostly provided by smallholder farmers

SMEs in Africa have also become anchors of financial flows into the agricultural sector.  They are innovating and creating products that unlock funding from traditional financial institutions which benefit actors along entire agricultural value chains.

The greatest role that the SMEs have played is giving farmers access to structured markets. They are aggregating produce from individual farms and linking the farmers to national, regional and global markets. This is not only boosting the farmers’ incomes but is also increasing their appetite to invest more in their farms to raise productivity.  This is an effective poverty reduction tool.

For example, in the past five years, the SMEs we work with have aggregated over 600,000 metrics tons of commodities worth USD 177m, benefiting close to 800,000 farmers in ten African countries.

In the process, SMEs are increasing capital flows in Africa as global multi-nationals take advantage of the market the SMEs create to do business with the continent. These SMEs are therefore not only the anchors of a growing food and beverages industry, they are also fanning the fire of an industrialization push that is beginning to catch on in most countries with monumental impacts on entire economies.

 

Written by Dr. Agnes M. Kalibata, President of the Africa-based, Africa-led Alliance for a Green Revolution in Africa (AGRA) and former Rwandan Minister of Agriculture and Animal Resources.

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