International investment - the key to unlocking Africa’s agricultural potential?

This past September, the African Development Bank (AFDB) doubled down on its commitment to invest $24 billion for the Feed Africa strategy it launched in 2015. The initiative focuses on scaling technologies for African farmers and bringing potentially productive land under cultivation. As the eye-popping figures put forward for the investment targets show, that work carries significant costs.

Not only does the continent’s agricultural industries need to be dramatically expanded and modernized, but the technological and logistical infrastructure underpinning them must also be remodeled in order to capitalize on the vast potential which the continent holds – and keep up with the UN’s breakneck projections for demographic growth.

Meeting these challenges will require a mixture of governmental impetus, organizational expertise, and international investment, but success could propel millions of Africans in rural areas out of poverty and onto the forefront of global agribusiness.

Huge potential for an underperforming continent

At present, Africa accounts for some 300 million of the 821 million people who lack adequate food in the world. A staggering 58 million children on the continent are not growing properly due to malnutrition. Things could be very different: large and growing populations, vast swathes of land and climates conducive to cultivation mean Africa could feasibly become the world’s breadbasket. However, as the AFDB’s Dr. Akinwumi Adesina points out, a mere 10% of the 400 million hectares of African savannah have been used for farming to date. 65% of the uncultivated arable land in the world is found in Africa.

The AFDB’s commitment is part of an effort to address a major stumbling block for agriculture across the continent: a lack of investment in infrastructure, research, and other critical building blocks of successful agricultural sectors. Given that agriculture makes up 30% of African GDP and employs over 60% of its working populace, the potential socioeconomic gains to be had by revitalizing farming are obvious.

The work to be done

Achieving such a turnaround, as the AFDB has made clear, will require more than a little elbow grease. As well as expanding operations to take advantage of available arable land, African economies must also recalibrate their agricultural industries. Substantial profits are being missed out on due to the fact African exports primarily consist of raw materials rather than processed goods. The price of the former is subject to far greater fluctuation than the latter, contributing to economic instability. In the cocoa industry, for example, Africa dominates with 75% of global production but reaps just 5% of the profits.

The continent also lags far behind other parts of the world in terms of applying modern farming techniques. In sub-Saharan Africa, 96% of arable land depends on rainfall as opposed to irrigation. Compare that to the 38% of arable land which is irrigated in Asia, and it’s easy to see why the latter enjoys far superior yields. African farmers also use under 10kg of fertilizer per hectare of land compared to 144kg per hectare in Asia, meaning they deplete up to eight million tons of nutrients from the soil every year.

A failure to applies technological advancements across the continent compounds these issues. Over 60% of work on Africa’s farms is done by humans, primarily women, children and elderly workers. Just 25% is performed by animals, and less than a fifth has been automated. Despite the advantages which trials of drones have demonstrated in the farming sector, a mere 26% of African nations have implemented regulations pertaining to their deployment.

Portfolio of investors

Much of the onus lies on individual African governments to modernize attitudes towards farming and increase investment into the sector. At present, a mere three percent of budgets are spent on agriculture across Africa, less than half the spending seen in countries like Bhutan, India, and Nepal. But it will take a mix of stakeholders to meet overall investment needs. Another crucial stakeholder are governments in Asia, the Middle East, and Latin America, who have the money to invest in Africa’s agricultural sectors and the know-how to help them move forward. Many of these countries, including agricultural powerhouses like China, India and Brazil, were on hand at last September’s Africa Green Revolution Forum.

In some markets, however, smaller players have proven just as impactful. One notable newcomer is Qatar, which has focused considerable attention on agricultural investment in Africa over the past several years. Qatar’s Hassad Food announced a $500 million investment in Sudan this past June, and Qatar’s national investment authority (QIA) has promoted its plans to invest $1 billion in African markets. In 2018, Qatar’s Sheikh Faisal bin Thani Al-Thani, director of regional investment funds at the QIA, visited key African markets such as Uganda to seek out opportunities in parallel to those the country is pursuing in Sudan.

Singapore is another small player with an outsized impact. Singaporean companies Olam and Wilmar have demonstrated how investment in the sector can stimulate economic growth when managed adroitly. Olam has maintained a decades-long presence in Tanzania and Uganda, while Wilmar’s presence in Nigeria helped create 30,000 jobs in the Nigerian palm oil sector.

A race against the climate clock

Africa’s agricultural challenge faces time pressure for more reasons than just demographics. The continent is projected to suffer more than other regions of the world as a result of climate change, making it imperative that domestic authorities and international investors work together to make African agriculture more productive and more resilient. In Senegal, for example, an anticipated 10% decrease in rainfall makes expanding irrigation a matter of urgency.

Initiatives such as Feed Africa and the support of outside partners are a crucial part of the puzzle, but African governments must also be proactive in improving their policy frameworks to prepare their countries for the impact of a changing environment on food supplies and national economies.