How to Cre­ate Wealth Through Agri­cul­ture in Africa

But while both the em­ployed and the un­em­ployed across Africa have been en­cour­aged to en­gage in agri­cul­ture, the fo­cus has been on hunger re­duc­tion. Not much has been done to fa­cil­i­tate wealth cre­ation through agri­cul­ture.

Financial Nigeria Magazine - - Sustainable Development With Access Bank Plc - By Mo­jisola Oje­bode

This month, in­ter­na­tional lead­ers, farm­ers, agribusi­ness ex­ec­u­tives and de­vel­op­ment ex­perts from across the globe will get to­gether in Des Moines, Iowa, in the United States, for the yearly sym­po­sium known as the Bor­laug Di­a­logue, to re­flect on key chal­lenges fac­ing global food se­cu­rity and nu­tri­tion. The in­ter­na­tional sym­po­sium is or­gan­ised an­nu­ally by the World Food Prize Foun­da­tion.

Africa is ex­pected to fea­ture promi­nently in the three-day pro­gramme, be­gin­ning from the 18th. Pres­i­dent of the African De­vel­op­ment Bank (AfDB), Ak­in­wumi Adesina, who is the 2017 World Food Prize Lau­re­ate, will speak at the event. And the theme of the con­fer­ence is: “The Road Out of Poverty.”

Part of the rea­son Africa will fea­ture in the dis­cus­sions is be­cause the con­ti­nent con­tin­ues to be af­fected by food in­se­cu­rity, ex­ac­er­bated by con­flicts and cli­mate change. Africa's food in­se­cu­rity has be­come a global con­cern.

This year, the Bor­laug Di­a­logue will look at agri­cul­ture's po­ten­tial to lift peo­ple out of poverty. As Adesina and oth­ers have ar­gued, for Africa to be food-se­cure, the agri­cul­ture sec­tor should not only fo­cus on solv­ing hunger problems; it needs to fo­cus also on solv­ing eco­nomic problems. African agri­cul­ture has the po­ten­tial to gen­er­ate wealth and im­prove the lives of an es­ti­mated 767 mil­lion peo­ple liv­ing in ex­treme poverty on the con­ti­nent – and lift them out of poverty.

Food in­se­cu­rity is the most ba­sic form of poverty. Ac­cord­ing to the World Food Pro­gramme, hunger leads to a vi­cious cy­cle of poverty. When peo­ple lack nu­tri­tious foods, they are weaker or sick, and, there­fore, less able to work to earn the money they need. Data from the In­ter­na­tional Mone­tary Fund's World Eco­nomic Out­look shows that African coun­tries dom­i­nate the rank­ing of the 25 poor­est na­tions in the world. Only four – Haiti, Kiri­bati, Afghanistan and Solomon Islands – out of th­ese 25 na­tions are not in Africa. Over 41 per­cent of the pop­u­la­tion of sub-Sa­ha­ran Africa lives in ex­treme poverty – that is, they live on $1.90 or less daily.

Ac­cord­ing to the World Bank, the vast ma­jor­ity of the global poor who live in ru­ral ar­eas and are poorly ed­u­cated, or not ed­u­cated at all, are em­ployed in the agri­cul­tural sec­tor. And about 46 per­cent of the world's pop­u­la­tion lives in ru­ral ar­eas. In Malawi, Bu­rundi, Ethiopia, Niger, and South Su­dan, this fig­ure climbs to over 80 per­cent.

Al­most ev­ery coun­try in Africa is turn­ing to the agri­cul­ture sec­tor to help cre­ate more jobs for un­skilled labour­ers. Most coun­tries have re­alised that agri­cul­ture has the po­ten­tial to meet the needs of the more than 41 per­cent of il­lit­er­ate African adults and ru­ral poor across the con­ti­nent.

But while both the em­ployed and the un­em­ployed across Africa have been en­cour­aged to en­gage in agri­cul­ture, the fo­cus has been on hunger re­duc­tion. Not much has been done to fa­cil­i­tate wealth cre­ation through agri­cul­ture.

For Africa's agri­cul­ture to be­come glob­ally com­pet­i­tive, the con­ti­nent needs to di­ver­sify from trad­ing pro­duce to de­vel­op­ing value chains in the sec­tor. It's time we took ad­van­tage of our rapidly grow­ing pop­u­la­tion for the pro­duc­tion, pro­cess­ing, mar­ket­ing and dis­tri­bu­tion of our own prod­ucts. African gov­ern­ments have huge roles to play to achieve this.

Take the case of co­coa as an ex­am­ple. Cur­rently, our farm­ers cul­ti­vate co­coa that is then ex­ported to de­vel­oped coun­tries at rel­a­tively low prices. The ex­ported co­coa is then pro­cessed into choco­lates and bev­er­ages, which are im­ported to African coun­tries at higher prices. This trade pat­tern is part of what en­sures that our farm­ers are stuck in a poverty trap. Seventy per­cent of the world's co­coa beans come from four West African coun­tries: Ivory Coast, Ghana, Nige­ria and Cameroon. How­ever, only two per­cent of what is pro­duced is pro­cessed lo­cally in th­ese coun­tries.

To change this, we need to in­vest in build­ing our lo­cal pro­cess­ing ca­pac­ity so that we can con­sume lo­cally-man­u­fac­tured prod­ucts, and also ex­port some for for­eign ex­change. This in­volves a paradigm shift from sim­ply in­creas­ing yield to pro­duc­ing fin­ished goods. Such value ad­di­tion will help pre­vent waste, feed Africa and boost the in­come of farm­ers and agribusi­ness op­er­a­tors.

Var­i­ous food tech­nolo­gies are cur­rently avail­able in dif­fer­ent parts of the world to make food pro­cess­ing pos­si­ble. Such tech­nolo­gies are avail­able for farm

prod­ucts such as maize, cas­sava and other lo­cally pro­duced sta­ple foods. With ac­cess to th­ese tech­nolo­gies, maize farm­ers can in­crease the value of their crops by pro­cess­ing it into maize flour to feed both hu­mans and live­stock. Ed­u­ca­tional in­sti­tu­tions in African coun­tries could also be sup­ported to carry out and im­ple­ment re­search to pro­duce high-yield­ing va­ri­eties of crops and im­prove food nu­tri­ents. Cer­tainly, this ap­proach would be fi­nan­cially de­mand­ing at the out­set. How­ever, the pay­off could be huge.

Ac­cord­ing to stake­hold­ers, Nige­ria loses over $2.5 bil­lion an­nu­ally due to a weak­ened co­coa pro­duc­tion ca­pac­ity and lack of pro­cess­ing ca­pac­ity for the crop. In Kenya, the com­mer­cial maize flour mar­ket is ex­pected to rise from $315.8 mil­lion in 2015 to $444 mil­lion by 2020 at a CAGR (Com­pound An­nual Growth Rate) of 7.1 per­cent; while the mar­ket for posho maize flour is ex­pected to in­crease from $658.2 mil­lion in 2015 to $840.2 mil­lion by 2020 at a CAGR of 5 per­cent, ac­cord­ing to Frost and Sullivan. (Posho, which ac­counts for the bulk of the maize flour mar­ket in Kenya, pro­vides in­fe­rior-qual­ity flour at cheaper prices for price-sen­si­tive con­sumers.)

Ac­cord­ing to Adesina, Africa im­ports $35 bil­lion worth of food ev­ery year. This fig­ure is pro­jected to grow to $110 bil­lion by 2025. By ex­pand­ing do­mes­tic pro­duc­tion and pro­duc­ing fin­ished agri­cul­tural goods that meet global stan­dards, African coun­tries can re­duce im­por­ta­tion of food items in favour of in­creased ex­ports.

But in or­der to do so, we must en­sure that African prod­ucts are ap­peal­ing to Africans. Over the years, I have ob­served a dras­tic re­duc­tion in the ap­petite of Africans for lo­cally pro­duced foods that used to be very pe­cu­liar to dif­fer­ent tribes and eth­nic groups. Younger gen­er­a­tions of Africans liv­ing in ur­ban ar­eas have in­creas­ingly de­vel­oped ap­petites for for­eign foods.

To boost the out­put of the agri­cul­ture sec­tor and im­prove its prof­itabil­ity – as well as pre­pare for the fu­ture chal­lenge of feed­ing a much larger pop­u­la­tion – there is a need to ex­pand do­mes­tic food pro­duc­tion, in­crease the stan­dard of fin­ished prod­ucts and raise the ap­peal of lo­cally-pro­cessed foods for ur­ban dwellers. Many times, con­sumers move away from a lo­cal prod­uct be­cause qual­ity is not guar­an­teed. One way to re­store con­sumers' con­fi­dence is to main­tain good qual­ity and im­prove pack­ag­ing, while keep­ing prices as af­ford­able as pos­si­ble.

For us to sig­nif­i­cantly im­prove out­put and ac­cel­er­ate agri­cul­tural de­vel­op­ment, gen­er­ous in­vest­ment in ru­ral in­fra­struc­ture is es­sen­tial and should fea­ture high on our list of pri­or­i­ties. To be sure, in­fra­struc­ture projects re­quire huge cap­i­tal out­lays; they also in­volve long ma­tu­rity pe­ri­ods and of­ten­times low rates of re­turn.

How­ever, ru­ral in­fra­struc­ture is a strong de­ter­mi­nant in the abil­ity of farm­ers to ac­cess in­sti­tu­tional fi­nance and mar­kets. Given that most agri­cul­tural ac­tiv­i­ties take place in ru­ral ar­eas, ru­ral in­fra­struc­ture can trans­form sub­sis­tence agri­cul­ture in many parts of Africa and other de­vel­op­ing coun­tries into mod­ern com­mer­cial farm­ing sys­tems.

Ru­ral agri­cul­tural in­fra­struc­ture in­cludes phys­i­cal in­fra­struc­ture (road con­nec­tiv­ity, stor­age, pro­cess­ing and preser­va­tion fa­cil­i­ties); re­source-based in­fra­struc­tures (ir­ri­ga­tion and pub­lic ac­cess to water, farm power/en­ergy and ru­ral elec­tri­fi­ca­tion); in­put-based in­fra­struc­ture (im­proved seeds, fer­til­izer, farm equip­ment and ma­chin­ery); and in­sti­tu­tional in­fra­struc­ture (ex­ten­sion and ed­u­ca­tion tech­nolo­gies to im­prove ru­ral lit­er­acy, agri­cul­tural re­search, in­for­ma­tion and com­mu­ni­ca­tion ser­vices, fi­nan­cial and credit in­sti­tu­tions, ex­ten­sive mar­ket­ing plat­forms and health ser­vices).

As proven over time, ad­e­quate in­fra­struc­ture raises farm pro­duc­tiv­ity and re­duces farm­ing costs. In­vest­ing in in­fra­struc­ture gen­er­ally plays a strate­gic role in pro­duc­ing mul­ti­plier ef­fects in the econ­omy. Ac­cord­ing to a re­search by the World Bank, this means that dou­bling in­fra­struc­ture cap­i­tal raises Gross Do­mes­tic Prod­uct (GDP) – one of the pri­mary in­di­ca­tors used to mea­sure the health of a coun­try's econ­omy – by roughly 10 per­cent.

The wealth cre­ation po­ten­tial of the agri­cul­ture sec­tor can be­come a re­al­ity in Africa if we look beyond just grow­ing crops and rearing an­i­mals for food, to ap­ply­ing tech­nol­ogy and adding value to har­vested prod­ucts.

Mo­jisola Oje­bode

African De­vel­op­ment Bank Pres­i­dent, Ak­in­wumi Adesina

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