Food for thought

Many consumers, especially in the developed world, give little to no thought to where the food they eat originates from, and the intricate production, processing and distribution chains necessary to ensure that it arrives and is fit for human consumption. Knowledge of the subject is essential to sustaining and improving these processes, bearing in mind that the world’s population continues to grow. While such growth has slowed over recent decades,¹ pressure on global resources continues to increase. According to the United Nations, the 46 least developed countries in the world host some of the world’s fastest growing populations. Many are projected to double in population size between 2022 and 2050, putting additional pressure on resources in countries where they are scarce.²

Of these 46 countries, a significant number are in Africa. Today, a fifth of Africa’s population (278 million people) is undernourished, and 55 million of its children under the age of five are stunted due to severe malnutrition.³

In affluent countries, access to education and training, water and electricity, funding and other elements essential to the food and agricultural value chain, is more widespread. However, in many African countries, these ’luxuries‘ are not readily available, and the daily struggles just to ’get by‘ inhibit the ability to grow and prosper.

While, in 2021, 52% of people employed in sub-Saharan Africa were active in agriculture, and roughly 45% of the world’s area suitable for sustainable agriculture production expansion was located in Africa, the continent had the lowest average agricultural productivity per worker globally.⁴ The low productivity and agriculture yields are attributed to a number of reasons, including, inter alia:
• lack of access to inputs;
• limited access to technologies and advisory services; and
• low input use efficiency under rainfed conditions, where climate change and associated climate variability results in frequent droughts and floods, reducing crop yields.⁵

Agriculture in Africa is critical for the provision of employment and nutrition to the population, and ultimately, for wealth creation and prosperity. With almost half of the world’s suitable arable land – and with human capital that is available and expanding – there is enormous potential for Africa, provided that the necessary ingredients available are combined correctly.

According to the African Development Bank Group, current productivity levels within Africa are low. Raw produce is exported abroad, where it is refined and processed, and then sold back to Africans at a much higher price, with the majority of consumer goods being imported. The lion’s share of the economic benefit derived, therefore, remains abroad. With the correct training and resource allocation, the growing, processing and ultimate sale can all be realised on the continent, greatly increasing the value add and wealth generation per capita within Africa.

So, what does Africa require to enable this:
• access to funding on terms that are commercially viable for African farmers. This should be combined with education on how best to utilise the funding to ensure that it is effectively deployed and managed. The likes of development finance institutions (DFIs) could play a pivotal role, provided that they are willing to be flexible with their payment terms, to cater for the cyclical nature of the agriculture industry;

• education and transfer of skills – this includes farming in a way that is smarter and more sustainable, with the likes of artificial intelligence and new technologies (with the assistance of local and international experts in the field) creating platforms to unlock this, to achieve greater efficiencies. In recent years, there has been a vast increase in agri-tech developed, with the likes of ‘Farmers Friend’ launched by IQ Logistica, which is a mobile application tool that allows farmers to manage their farming operations and easily view, manage and access all of their operational data to mitigate risks;

• new policies (to the extent that adequate ones are not in place), improved disaster management (to counter the risk of disease, drought, floods and other consequences of climate change) and access to emergency funding/assistance at short notice; and

• acknowledgement from African leaders that policy, education practices and resource allocation will need to be refined to enable and unlock all of the above with a resounding consensus that ‘Africa is open for business’.

It is only through continued and consistent engagement by all stakeholders that meaningful progress will be made. There is an abundance of skills and knowledge within Africa, including corporate advisors who are au fait with the landscape, that can be drawn on to assist with capitalising on the opportunity. In addition, increased cooperation with players outside the continent (e.g. multi-nationals partnering with local entrepreneurs) would assist Africa to overcome the challenges facing it and achieve a successful and sustainable outcome.

1. Major Trends in Population Growth Around the World – The National Library of Medicine. (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8393076/#:~:text=Continuing%20Gowth%20of%20the%20World%20Population%20at%20a%20Slowing%20Pace&text=The%20slowing%20pace%20of%20the,1980%2C%20and%205.0%20in%201950)
2. World Population Prospects 2022 – United Nations Department of Economic and Social Affairs (https://www.un.org/development/desa/pd/sites/www.un.org.development.desa.pd/files/wpp2022_summary_of_results.pdf)
3. Over 20 million more people hungry in Africa’s “year of nutrition” – OXFAM International (https://www.oxfam.org/en/press-releases/over-20-million-more-people-hungry-africas-year-nutrition#:~:text=Today%20a%20fifth%20of%20the,stunted%20due%20to%20severe%20malnutrition.)
4. Revitalizing African agriculture: Time for bold action – UNCTAD (https://unctad.org/news/blog-revitalizing-african-agriculture-time-bold-action)
5. Increasing Agricultural Productivity in Africa: Can STI help Africa to make a quantum leap in agricultural productivity? – Food and Agriculture Organisation of the United Nations (https://www.fao.org/science-technology-and-innovation/increasing-agricultural-productivity-in-africa-can-sti-help-africa-to-make-a-quantum-leap-in-agricultural-productivity/en#:~:text=The%20low%20yields%20are%20largely,and%20floods%20reduce%20crop%20yields.)

James Moody is a Corporate Financier | PSG Capital

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication
www.dealmakersafrica.com