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Africa’s agricultural market could triple if farmers were able to tap into middle-class demand

According to the new World Bank report, Growing Africa: Unlocking the Potential of Agribusiness, Africa’s agricultural market could triple by 2030 if farming on the continent modernises its practices and gets better access to credit, new technology, irrigation and fertilisers.

Currently valued at US$313 billion a year, Africa’s agricultural market could reach $1 trillion over the next two decades if the continent’s farmers were able to tap into the growing demand from the burgeoning middle class, with more expensive tastes, an anticipated four-fold increase in urban supermarkets in Africa and higher commodity prices.

More specifically, the World Bank said that processed foods, poultry, dairy, rice, vegetable oils, horticulture and feed grains for domestic markets were likely the most opportune areas in Africa’s agribusiness.

According to the Bank, countries such as Kenya, Ghana, Cameroon, Malawi and Zambia were already active in the buoyant agricultural markets. “Africa is now at a crossroads, from which it can take concrete steps to realise its potential or continue to lose competitiveness, missing a major opportunity for increased growth, employment, and food security,” the report said.

Despite a decade of strong economic growth complemented by a surge in private sector investment in the region, Africa’s share of agriculture exports globally has declined with countries such as Brazil, Indonesia and Thailand exporting more agricultural product than all of sub-Saharan Africa, the Bank added.

Meanwhile, the region presents more than 50% of the world’s uncultivated agriculture land. The report also highlighted how the lack of efficient facilities, particularly that of storage, resulted in lower harvest yields.

Aside from getting access to better technology and credit, the Bank also said that the continent’s farmers should look at improving policy and regulation relevant to the sector. The report outlined how regional trade could be boosted by reducing check points, tackling bribery along main freight corridors, cutting bureaucratic red tape and transaction costs.

Further, the report discussed the need for governments to safeguard the land. The 2008-2009 global food price crisis sparked a scramble for land in parts of Asia, Africa and Latin America, and in turn generated fears of land grabbing. Casualty to this development was Madagascar’s president, who was toppled in 2009 after he negotiated a deal with a South Korean company to lease half the island’s arable land to grow food and ship it to Asia.

By controlling 50% of unutilised capacity globally, the continent will play a significant role in meeting the growth in global demand for agricultural produce.

We certainly expect to see more investment in the sector regardless and that will bring the required technology and credit as outlined in the report. With that said, we believe the focus should be on Africa’s governments to present a secure and supportive environment for investment in the agricultural sector. Land ownership, for example, is a sensitive topic on the continent and would need the role of the government to ensure that the interests of all parties involved are fully represented and protected.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.

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