DIAZ: Agribusiness, killing two birds with one stone

Months hardly go by before images surfaces of farmers throwing away tomatoes or chopping up cabbages for livestock following a bumper harvest every once in a while.

Many of this intriguing instances have occurred in Africa  and in particular parts of very fertile land  regions.

Such occurrences are however mostly juxtaposed with picture of people short of food,  in counties in semi desert and arid hard climate areas, plus climate changes causing drought is a big challenge for food production in the region .

Put together, this two images are perplexing to the wider public and tell of a great disconnect in the agriculture sector and participating value chain players.

On one hand, abundance and waste paints a picture of thriving products but also reveal a mismatch in other parts of the value chain such as access to marketplaces which would be of benefit to thousands of small-holder farmers across the country.

On the other thoughts , the image of millions facing acute starvation in the face of plenty elsewhere anchors down the mismatch in growth of  agriculture in a Region that can adequately produce food.

Agribusiness

In my opinion, agribusiness refers to creating a complete value chain involving production, distribution, retail and getting products to end users/customers and providing value addition to manufacturers and various industrial business.

According to data from the United Nations (UN) the value add of agriculture is estimated at 3.5 trillion dollars or an equivalent four percent of global GDP and supporting nearly one third of the global workforce.

The chain begins largely with input providers who make available resources such as fuel, feeds, fertilizer, chemicals, labour and machinery.

At the end of production, other service providers are mostly middlemen including wholesalers, marketers, distributors and retailers who support movement of products to deliver the final products for consumption. The pride of nations is to see thier products sold globally and branding buy "Africa Build Africa".

Agribusiness in advanced economies has yielded in big multinational corporations such as Monsanto and Deere & Company.

Top agriculture producers features developed economies such as China, US, Russia, France and Germany where production largely features irrigation, mechanisation and technology and new best agro practices that are being adopted globally.

In Sub-Saharan Africa however, production in the sector is much lower despite a greater reliance on the sector as the main occupation and having the land , rivers, water and resources.

According to the Food and Agriculture Organisation (FAO), 67 percent of the world’s population is dependent on agriculture which makes up an estimated 39.4 percent of GDP and 43 percent of global exports.

Kenya which falls within developing economies, the agriculture sector has opportunities,  and currently facing competitive forces including food importation ,  having recorded contractions all year after a series of failed rain seasons.

Moreover, the sector has suffered from investment  of arable land especially to  real estate business too.

Reforms

According to the World Bank Group, the challenge in bringing agribusiness to life in countries in East Africa, per say,   would involve integrating small-scale farmers into the market to make the sector stronger which would reduce the country’s reliance on exports.

The African food market was estimated to have a value of 313 billion dollars in 2013, with the value tipped to triple by 2030 with investments in infrastructure, smart business and trade policies.

The reforms would help tackle post-harvest losses, build storage facilities and dedicated agriculture port terminals and facilities for processing agricultural products.

At the same time, the infrastructure would help reduce transaction costs and help subsistent farmers to scale up to commercial agriculture.

Financing

Like in any other business, agribusiness could do with more financing to achieve set targets. 

For instance here Kenya, Bidco Africa is looking at agro solutions for the  farmers, and is  buying thousands of tones of Soya and sunflower for raw materials to produce edible oils and develop by products for animal feeds, plus support  Kenyan farmers gain more  revenue, in 2023 and beyond. 

While developing countries may lack in adequate financing, development finance institutions (DFIs) can step in to provide the much needed resources.

The World Bank Group and its private sector financing arm, the International Finance Corporation (IFC) have been mobilizing financing for the sector while crowding in other private sector investments to the sector.

Since 2000, the pair have mobilized over one billion dollars in an estimated 10 countries in Latin America including Colombia and Bolivia.

Closer home in Madagascar, a World Bank Funded project has helped cocoa farmers improve the value of exports while sorghum producers have benefited in Cameroon.

The World Bank has also supported government reforms in Cote d’Ivoire, Ethiopia, Ghana, Senegal, Kenya and Malawi including the development of warehouse receipt systems to improve integration of producers, traders and processors into value chains.

Further support should be provided by governments and other players in the private sector in de-risking SMEs in the agriculture sector and support to access loans and innovative insurance which could cushion against risks brought forth by shocks such as climate change effects/droughts.

By ensuring a thriving agricultural sector, Kenya could easily settle its long-standing challenge of food insecurity and re-capture the much needed value for millions of small-holder farmers across the country.

The future growth of agri-business will need more partnerships with development partners, international programs, and investment by private and public projects. We look forward to a stronger and better economic position towards second half 2023.

Chris Dias, Group Director Bidco Africa - @diazchrisafrica