Is the future of African agriculture in the hands of big business?

Donors and NGOs have traditionally played a significant role in African farming. In recent times, private companies have, however, become much more active – both by investing in the sector and extending finance for projects. So is the future of agriculture in Africa in the hands of the private sector?

This issue was recently raised during a session on agriculture at the World Economic Forum on Africa.

Tanzania’s agriculture minister, Prof Jumanne Maghembe, said that unless governments and farmers in Africa start to view agriculture as a business, the continent will not be able to reach productivity levels found elsewhere in the world.

Maghembe said that for a long time agriculture was seen a government-funded programme where smallholders received subsidies and only produced enough for themselves to eat.

He, however, called for a paradigm shift. “We need to realise that agriculture . . . requires investment.”

Robert Berendes, head of business development at global pesticide and seed company Syngenta International, said that many African countries have created the right conditions for the private sector to enter the market.

According to him, Africa is not the place to be if one is looking to turn a quick profit. “I think it is quite the opposite from a fast return on the dollar that is driving us, it is the view that there is a long-term opportunity, and [Africa] is critical for world food production.”

Berendes noted that private companies investing in Africa’s agricultural sector should be in it for the long haul.

He said that the private sector is looking at the African market with solutions that are tailor-made for the continent. He believes that companies operating in the agricultural space are also being very inventive.

An example of such innovation is an insurance product called Kilimo Salama, which was rolled out by the Syngenta Foundation for Sustainable Agriculture and other partners. Kilimo Salama enables smallholder farmers in Kenya to insure their agricultural inputs against adverse weather conditions. To be covered under the scheme, farmers only need to pay an extra 5% for a bag of seed, fertiliser or other inputs. Payouts are determined by automated weather stations that monitor the rainfall.

It is expected that products like Kilimo Salama will increase productivity since only about half of Kenyan farmers invest in improved seeds and soil inputs. A key reason for the low demand is the fear among farmers that poor conditions, such as drought, will render their investment worthless, robbing them of both their crops and their savings.

“The reality is if you want to be successful as the private sector in Africa, you have to work with the smallholder farmers,” said Berendes.

Ladi Balogun, MD and CEO of Nigeria-based First City Monument Bank, said that the private sector and small-scale farmers both have an important role to play. “I don’t think that the concern will be that big business will get the whole agricultural pie to itself. It is just not practical, it is not going to happen.”

He said a lack of credible data on Africa’s agriculture sector is one of the private sector’s main concerns. “No big business likes to take an investment decision without the data. You will find that it will continue to be a challenge for big business to play across the spectrum in agriculture, simply because a lot of the information to make those decisions are not there.”

He argued that the entry of large companies should be seen as a positive development. “We should welcome it, because the more people see that you can have credible companies going into this sector, the more capital . . . will start flowing in.” This, according to Balogun, will create employment and give smallholder farmers the opportunity to participate in outgrower schemes.

“We should also remember what we are trying to achieve here, it is not necessarily to make millionaires out of every farmer. It is to remove poverty from the rural areas,” he added.