Agricultural hubs are the best way for African countries to organise production and help take advantage of its status as a new centre of global food security. Omri van Zyl from Deloitte Africa’s agribusiness unit is a pioneer of this model and is currently exploring it with the government of Botswana among others.
“Agricultural hubs are the best way to pull together funding, technology and expertise to help countries organise production,” says Van Zyl. For many developing countries, and quite a few in Africa, agriculture represents the best opportunity to lift a country out of poverty and improve its development trajectory as it addresses food security, raises incomes and spurs demand for other goods and services over time.
Africa’s changing profile from being a centre of production to one that actually provides consumers with rising incomes is also a key factor. In South Africa for example, the introduction and expansion of social grants has turned about 15 million people into consumers of food products.
Van Zyl says Africa’s comparative advantage in agriculture rests on a number of key features, starting with the 600 million hectares of arable land the continent has available. Africa has relatively low levels of agriculture production and relatively low levels of technological sophistication. This means that the yield from the land currently being farmed can be improved significantly.
The continent also has vast water resources in Central and Western Africa and relatively low labour costs. Geographic proximity is also a source of advantage as the continent is located close to Europe, India, China and the Middle East.
But Van Zyl points to even bigger policy trends and global influence that is shaping agriculture on the continent. “First, there is a rising awareness among African governments of the need to assist inward investment,” he says. This has led to an increase in African investors showing faith in African projects. Three out of five investors in African projects are African.
Van Zyl also notes that governments are recognising the need to spread the income from mining and resources to other sectors while the need for home grown agro-processing industries is becoming more apparent. Moreover, there is renewed global interest in agriculture in Africa.
An agricultural hub is usually led by government but brings together private players in food production technology, farmers as well as funders. “The starting point is to understand the strategic intent of the organisation,” says Van Zyl.
The next component is to undertake an economic and financial analysis. This is to gain an understanding of the food production capabilities based on weather and rainfall patterns, as well as the location of inputs such as water.
The government of Botswana has been able to determine that the suitable location for its crops output is the greener North West, while livestock industry can be located in the relatively arid lower regions of the country.
Van Zyl notes that many African countries battle to find suitable skills and experience, which means that the countries will have to invest heavily in education and training.
“A number of African countries may suffer from brand perceptions,” says Van Zyl, pointing to a need to constantly improve the investment climate.
Van Zyl argues that countries that will do well are those that open themselves to investors. He cites the example of Zambia, which opened itself up and hosted farmers from Zimbabwe when their country’s land reform programme drove them to search for other opportunities.