After a bountiful harvest, images of farmers tossing away tomatoes or chopping cabbages for livestock rarely go unnoticed for several months.
Numerous instances of this intriguing phenomenon have occurred in Africa, specifically in regions of extremely fertile land. In counties with semi-desert and arid climates, where climate change has caused drought, such occurrences are frequently juxtaposed with images of starving people, and climate change-induced drought poses a significant challenge to food production in the region.
Together, these two images are confusing to the general public and reveal a significant disconnect between the agriculture sector and its value chain participants.
On the one hand, abundance and waste paint a picture of prosperous products, but they also reveal a mismatch in other parts of the value chain, such as access to markets, which would benefit thousands of small-holder farmers across the nation.
On the other hand, the image of millions facing acute starvation despite plenty elsewhere anchors the mismatch in agricultural growth in a region capable of producing sufficient food.
Agribusiness
Agribusiness, in my opinion, refers to the creation of a complete value chain that includes production, distribution, retail, and the delivery of products to end users/customers, as well as the addition of value for manufacturers and various industrial businesses.
According to United Nations (UN) data, agriculture contributes an estimated $3.5 trillion to the global economy, or 4% of global GDP, and employs nearly a third of the global workforce.
The chain begins primarily with input suppliers who provide resources such as fuel, feed, fertilizer, chemicals, labor, and equipment.
At the conclusion of production, the majority of other service providers consist of wholesalers, marketers, distributors, and retailers who facilitate the delivery of consumable goods. The pride of nations is for their products to be sold globally and branded with “Africa Build Africa.”
In advanced economies, agribusiness has produced multinational corporations such as Monsanto and Deere & Company.
Top agricultural producers include developed nations such as China, the United States, Russia, France, and Germany, whose production relies heavily on irrigation, mechanization, and technology, as well as new, globally adopted best agricultural practices.
In Sub-Saharan Africa, despite a greater reliance on the sector as the primary occupation and the availability of land, rivers, water, and resources, agricultural output is significantly lower.
According to the Food and Agriculture Organization (FAO), 67 percent of the world’s population relies on agriculture, which accounts for approximately 39.4 percent of the global gross domestic product and 43 percent of global exports.
The agriculture sector in Kenya, which belongs to developing economies, has opportunities and is currently confronting competitive forces, including food importation, having recorded contractions throughout the year due to a series of failed rain seasons.
In addition, the sector has been negatively affected by investments in arable land, particularly by the real estate industry.
Reforms
According to the World Bank Group, the difficulty in bringing agribusiness to life in East African countries would be integrating small-scale farmers into the market to strengthen the sector and reduce the country’s reliance on exports.
The value of the African food market was estimated to be 313 billion dollars in 2013, and it is expected to triple by 2030 due to investments in infrastructure, intelligent business practices, and trade policies.
Reforms would aid in reducing post-harvest losses, constructing storage facilities, agriculture-specific port terminals, and processing facilities for agricultural products.
Moreover, the infrastructure would aid in lowering transaction costs and assisting subsistence farmers in transitioning to commercial agriculture.
Financing
Similar to other industries, agribusiness could benefit from additional funding to achieve its goals.
In Kenya, for instance, Bidco Africa is evaluating agro solutions for farmers and purchasing tens of thousands of tons of Soya and sunflower for raw materials to produce edible oils and develop by-products for animal feeds, as well as assisting Kenyan farmers to increase their revenue beyond 2023.
Development finance institutions (DFIs) can provide much-needed resources to developing nations if they lack adequate financing.
The World Bank Group and its private sector financing arm, the International Finance Corporation (IFC), have mobilized financing for the sector while attracting additional private sector investments.
Since 2000, the duo has mobilized over one billion dollars in approximately ten Latin American countries, including Colombia and Bolivia.
A project funded by the World Bank has helped cocoa farmers in Madagascar increase the value of their exports, while sorghum farmers in Cameroon have benefited.
In addition, the World Bank has supported government reforms in Cote d’Ivoire, Ethiopia, Ghana, Senegal, Kenya, and Malawi, including the development of warehouse receipt systems to enhance the integration of producers, traders, and processors into value chains.
Governments and other players in the private sector should provide additional assistance in de-risking small and medium-sized enterprises (SMEs) in the agriculture sector, as well as assistance in gaining access to loans and innovative insurance that could mitigate risks posed by shocks such as climate change effects and droughts.
By ensuring a thriving agricultural sector, Kenya could easily resolve its long-standing issue of food insecurity and reclaim the much-needed value for millions of small-holder farmers across the nation.
Future expansion of agribusiness will require an increase in partnerships with development partners, international programs, and private and public sector investments. We anticipate a stronger and more advantageous economic position by the second half of 2023.
