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Innovation and private sector financing are transforming agribusiness in Africa

Article - December 7, 2014

Organic farming and ethanol from sugar cane are just some of the innovations that are helping to transform the agricultural sector across Africa. However, ensuring food security for the continent´s one billion people remains the first priority.


New global markets for everything from bananas and cocoa to cut flowers and organic vegetables, green energy generated by locally-grown biomass and a new emphasis on sustainable, yet profitable, farming techniques are all helping to transform Africa’s agribusiness industry.

This year marks two significant milestones for the continent and its ambitious efforts to transform the agricultural and agribusiness sectors:  2014 is the Year of Agriculture in Africa and the tenth anniversary of the Comprehensive Africa Agriculture Development Programme aimed at ensuring food security for Africa’s one billion people.

“Agriculture forms a significant portion of the economies of all African countries,” notes Dr. Nkosazana Dlamini Zuma, the Chairperson of the African Union Commission.

“It can therefore contribute towards major continental priorities such as eradicating poverty and hunger, boosting intra-African trade and investments, rapid industrialization and economic diversification, sustainable resource and environmental management, and creating jobs, human security and shared prosperity,” she says.

Africa certainly has the potential to become a world agricultural power. The continent has more than half of the world’s agriculturally suitable, yet unused, land and its vast water resources have hardly been tapped.

Agribusiness , whether multinational or African, is becoming an important player in realising this potential. Indeed, the World Bank reports that “private sector interest in African agribusiness is unprecedented.”

But the challenge is for all stakeholders to channel investment intelligently to guarantee jobs, increase opportunities for Africa’s millions of farming smallholders, ensure the rights of local communities and protect the continent’s sometimes fragile environment.

More specifically, African farmers, large and small, need to boost production, especially crops destined for export and become more competitive on the world market; irrigation, transport, storage and processing infrastructure must improve to cut costs and raise revenue; and there must be a reversal of past policies such as state intervention in agricultural markets and the lack of public investment in the sector.

Other goals include more financing tools for farmers, a strengthening of land administration systems, better access to modern agricultural inputs and technology, and stronger safety mechanisms for investors considering a stake in Africa.  

“African farmers and businesses must be empowered through good policies, increased public and private investments and strong public-private partnerships,” says Gaiv Tata, World Bank Director for Financial and Private Sector Development in Africa. “A strong agribusiness sector is vital for Africa’s economic future.”

International organizations are keen to help through financing and other measures.

The World Bank Group has boosted its annual agricultural investment from $4 billion to $6 billion over the past five years, while the International Finance Corporation (IFC) has pledged to increase its investments in African agribusiness over the next five years to $2 billion.

“The IFC is stepping up efforts to support Africa’s agribusiness sector,” the organisation says. “We are developing new products such as local currency financing, risk sharing facilities and comprehensive support to farmers through intermediaries.”

At the same time, the IFC is working to further integrate its advisory services with investments to provide more comprehensive support.  

“An efficient and competitive private agribusiness sector in Africa will have a strong impact on reducing poverty and improving lives since most of sub-Saharan Africa’s poor live in rural areas that depend on agriculture,” the organisation says.

The World Bank has identified five core areas to ensure higher and sustained growth: facilitating agricultural markets and trade; improving agricultural productivity; investing in public infrastructure for agricultural growth; reducing rural vulnerability and insecurity; and improving agricultural policy and institutions.

Multinationals and non-governmental organisations can and are playing a role in most of these areas and many have already taken the plunge into the African agribusiness sector with large investments that will help not only the corporate bottom line, but also the continent’s people, its future and its economic sustainability.

In Ghana, rice producer and distributor GADCO, with help from Western investment funds, banks and charitable organisations, focuses on high-quality local output, the creation of a modern value chain and assisting small farmers. With 1,000 hectares of rice under cultivation and a milling facility in the Volta Region, GADCO is on its way to becoming the country’s largest rice producer.

Eventually, it plans to supply both domestic and regional consumers as it sees Africa has a definite growth market driven by urbanisation, population growth and rising incomes.

“Ghana relies on imports for 70 percent of its rice consumption and demand continues to grow,” the company says. “Most locally-produced rice is grown by smallholder farmers, and with limited access to modern seed and agricultural inputs, productivity tends to be low.”

Through its outgrower project, GADCO provides these local smallholders with inputs, extension programmes, training and the use of its modern mill. The company then buys their rice for marketing so they benefit from high-quality processing and value chain integration, which means higher earnings.  

Another company betting on Africa is Addax Bioenergy, a subsidiary of the Malta-based energy and investment group AOG, which has developed a sugarcane bioethanol and renewable electric power facility in Sierra Leone.

GADCO is developing a greenfield 10,000-hectare sugarcane plantation, the construction of a bioethanol refinery and a biomass-fuelled  co-generation plant which began operating this year.

By 2017, the project is scheduled to turn out 85,000 m3 of bioethanol a year and produce sufficient “green power” that will eventually account for 20 percent of Sierra Leone’s total electricity requirements.

“This is a great achievement for the people of Sierra Leone,” President Dr. Ernest Bai Koroma said. “The Addax Bioenergy initiative is the largest private sector investment in Sierra Leone’s agricultural sector to date and provides a great example of successful investment in our country.”

“Green” innovations in African agribusiness is also the trend in Uganda, where conventional agricultural methods are giving way to organic production with enthusiastic support from the president, central government agencies, agricultural associations, NGO’s, exporters and universities.

Uganda, known as “The Pearl of Africa,” is blessed with a varied climate and the right terrain to grow just about anything, either for export to lucrative foreign markets where the demand for organic produce is growing by leaps and bounds or for local and regional consumption.

In the decade since the country adopted the Uganda Organic Standard in 2004 it has become the model for Africa and the world in this agricultural subsector. With more than 400,000 internationally certified organic farmers, the country is the first in Africa in this category and the second in the world after India.

And what do these environmentally-friendly farmers produce? Coffee, fresh and dried fruit, avocados, vanilla, cotton, chillies, honey and a host of other products with a total value of around $600 million per year.

Praising the country’s organic farming sector, the United Nations Environment Programme said:   “Uganda has taken an apparent liability – limited access to chemical inputs – and turned this into a comparative advantage by growing its organic agricultural base, generating revenue and income for smallholder farmers.”

As Africa advances in so many areas to meet the needs of its burgeoning population, join in on globalization and take its rightful place in the world, agribusiness will play a vital role as an investment magnet, a job generator and, most importantly of course, a provider of food.