Agriculture offers Africans a pathway to economic transformation, especially for the top performers across the continent.
It accounts for two-thirds of the livelihoods in Africa. Yet, although the sector has pushed forward in modernization and technical advancement, many challenges remain.
Low productivity plagues countries with the obvious problems in urban centers where many cities depend on food imports to meet local demand. The story in these centers come as a surprise for a region that should be a net exporter of crops.
Considering the fact that Africa provided 8 percent of the world’s total agricultural exports in the 1970s…today that number is a mere 2 percent.
The challenges are known. Africa’s fertilizer usage and mechanization levels are trailing global levels. Agricultural technology usage also remains low.
Farms in the region are small, with the average size of a farm falling below three hectares and the majority of farms still smaller than two hectares.
The agricultural industry is effectively dependent on smallholder and subsistence farmers alike. Scale therefore becomes a major hurdle for many agricultural businesses, with greenfield ideas generally ignored by investors.
Yet, all things laid out, many countries are still making a great effort to overcome these challenges. We look at a few high-performing countries.
Rwanda is an example of a country that has utilized agricultural growth to reduce poverty. The country largely focuses on it staple crops, which, on the surface, appears to be contrarian economics.
But the view of the government is that while export crops generally attract higher values on the international market, staple crops provide the obvious pathway to reducing the national demand for imported food products.
The reduction in imported foods and the relative low cost of local production largely serves to moderate prices for locals and reduce poverty levels.
Some commercial farmers have attempted to introduce high-yield seeds and specialized fertilizer, but that has been met with little success as the increased yield is offset by low seed production from the crops (i.e., the crops do not produce sufficient seeds for the next batch of crops).
As a result, the Rwandan government has mainly targeted increased know-how for local farmers with regionally important crops. Grain and maize production has therefore skyrocketed inside Rwanda, with locals and the greater East African population as potential consumers.
Ethiopia is another example of a country that has utilized agricultural growth to reduce poverty. Agricultural GDP growth, which is north of 11 percent since 2000, has helped to reduce poverty in Ethiopia by nearly 35 percent.
The leadership has also focused on production of staple crops for the country as a strategy for reducing poverty and the food deficit in the local market. The country has also managed to attract foreign investors, with large hectares of land available for commercial production.
For example, a few Middle East countries, including Saudi Arabia,—clearly lacking arable land—import a significant amount of agricultural products from Ethiopia. It should also be noted that multiples on agriculture investment in the country are more in line with the mindset of investors a few years removed from KKR’s highly priced investment in Afriflora.
Mali always seems like the unlikely candidate for any celebrated list on agriculture. But the country in the desert makes amazing use of the Niger River. Nearly fourth-fifths of the population depends on agriculture for a living, with agriculture also accounting for nearly 40 percent of Mali’s GDP.
Mali, however, still faces a struggle with feeding the local population as the biggest crop production comes from cotton—a major cash crop. Rice and grains, including maize and sorghum, serve to feed the local population. Increased production would serve well for a relatively young growing population.
The challenges are greatly manifested in the northern region of the country, where drought and population migration weigh heavily on social and economic systems.
That said, the government has made great efforts to strengthen transportation to enable agricultural product availability in large populated areas.
Furthermore, the government has targeted political stability (as much as it can) and an increasingly attractive business environment as key components in transforming the Malian agriculture industry and boosting foreign investment and participation.
Agriculture continues to underpin growth in Cote d’Ivoire. The government has rightfully supported and promoted the country’s wide selection of cash crops.
Fertile land, favorable climate, and abundant water resources are vital to the country’s regional dominance in the agricultural space.
The next phase in the agricultural development for the country will begin and end with value-added processing, particularly for cocoa.
Recent announcements to coordinate with Ghana on the promotion of cocoa highlights how important President Alassane Ouattara views the issue.
As other partnerships emerge, including with Europe, local entrepreneurs will have the opportunity to learn best practices and push forward modernization of agriculture techniques.
Local entrepreneurs must develop the skills to turn their local raw products into final products for international markets (or the true benefit of agricultural advancement will be lost).
Kurt Davis Jr. is an investment banker with private equity experience focused on Africa and the Middle East. He earned an MBA in finance, entrepreneurship and operations from the University of Chicago and J.D. in tax and commercial law at the University of Virginia’s School of Law. He can be reached at kurt.davis.jr@gmail.com.
