Can smallholder farmers transform Africa’s agricultural output?
Much has recently been written about Africa’s agricultural potential. It is estimated that over 60% of the world’s available and unexploited cropland is in sub-Saharan Africa.
The continent’s agricultural sector, however, faces various challenges – from insufficient irrigation systems and use of fertilisers, to poor storage and transport facilities leading to post-harvest losses.
The vast majority of African farmers are smallholders. However, recent years have seen increased investment in large-scale commercial projects. But should Africa’s agricultural development be driven by commercial farmers or smallholders?
Mohit Arora, head of agriculture at Standard Bank Africa, believes that with the right support, smallholder farmers could transform Africa’s agricultural output if they are integrated into a free market and financial system supported by appropriate legal frameworks that address land rights and contractual rights.
In an interview with How we made it in Africa, Arora used the example of India, where the government prioritised smallholder farming. The government provided a market mechanism where smallholders were treated fairly. “That meant that any trade between a farmer and any other counterparty had to be verified by the government.” A minimum price for certain key commodities was also guaranteed. In addition, Indian banks were incentivised to lend to the agricultural sector. These measures transformed India from a country unable to feed itself, into an agricultural powerhouse that not only has been feeding well over a billion people for a few decades but will export US$10bn of food this year.
According to Arora, besides government intervention, smallholders can also be supported through microfinance.
In addition, Africa’s smallholder farmers should be assisted through extension services and improved technology. “Attention to extension services is not quite up to the level that it should be. Meaningful contributions from the government is to get extension services going, basic extension services – help the farmers get their financial planning right, what commodities are they going to plant … African agriculture doesn’t really need high-tech technology – it needs basic technology at this stage,” explains Arora.
“If you look at the south of Brazil, tobacco farmers don’t have more than 10 or 20 hectares… and Brazil is a tobacco powerhouse. In India, 80% to 90% of the farmers are smallholder – and India is one of the world’s top producers in many commodities … An interesting one in India is milk. The majority of the farmers do not have even more than a few cows, [yet] India produces the world’s largest amount of milk,” he says.
Many opportunities, but challenges remain
“Africa is turning out to be a gold mine of opportunities,” says Arora. “All the categories of the value chain are growing.”
However, Standard Bank faces various challenges in servicing the continent’s agriculture sector. One of the key challenges include financial and market risk management by the bank’s agriculture clients.
“As banks get involved, they expect the financial management to be of a certain level to be able to get comfortable and lend. A lot of lending is happening, but banks can do much more if clients organise themselves in a manner that is more conducive to financing by major banks. We often aim to not just lend but to advise clients on enhancing their financial and risk management practices so that they effectively access wider financial markets as they grow,” says Arora.
Grooming talent, particularly by providing staff with continent-wide exposure, is also not easy as moving people across Africa can be a challenge. “As Africa is moving towards trade integration it needs to look at easing the flow of people to support trade (in line with people policies within the trading blocs of the EU, Latin America and the Middle East). We can actually do a lot more if we can rapidly develop talent … It is not easy to move people across countries. Even within the trading blocs, it is not that easy to move,” notes Arora.
Africa has got its work cut out when it comes to agriculture, but Arora believes that governments are generally steering the sector in the right direction.
He reckons more needs to be done to build awareness about the positive things happening on the continent. “A lot of brilliant things exist in Africa, but it doesn’t market itself that well… In countries like Ghana, Zambia, they are doing some really brilliant stuff in agriculture. Awareness particularly in the Western markets is building, but it is not quite at the level that it should be.”