For Africa to increase its pace of industrialisation and meet its wider prosperity goals, its agricultural sector needs to thrive. Agriculture is a huge part of the continent’s economy, especially in the sub-Saharan region, where it accounts for 18% of gross domestic product. With the right conditions it could account for considerably more.
Opportunities for growth abound. Africa holds 65% of the world’s remaining uncultivated arable land (a greater expanse than the entire cultivated area of the US) and has a young population. While not all of that uncultivated land may be accessible or available, the application of the right technology, information, knowledge and technical expertise could result in a far larger proportion of African land contributing to feeding the world as well as Africa itself.
However, there remain major obstacles to exponential growth, the most significant being the form that most African agricultural enterprise takes. The vast majority of African farms are smallholdings. According to the thinktank ODI, there are around 33 million smallholder farms in sub-Saharan Africa, representing 80% of all farms in the region and contributing up to 90% of food production in some countries.
Without access to cash, smallholders cannot expand by hiring workers or buying new equipment, or spend on technology to make their farms more productive
A report from KPMG and Alliance for a Green Revolution in Africa (Agra) suggests that increasing investment and improving the productivity of smallholdings could bring about a transformation in African agriculture. But it also acknowledges the significant challenges involved in orchestrating the activities of such a disparate sector. The report draws its many insights from interviews with CEOs and other C-suite executives in the agribusiness sector across 16 countries.
So what solutions do these executives think could unleash the power of smallholders?
More funding options
Time and again, those interviewed pointed to funding as the heart of the problem. Without access to cash, smallholders cannot expand by hiring workers or buying new equipment. Nor can they ride out rough years – such as 2021 is likely to be – or spend on technology to make their farms more productive. Access to funding is particularly important in Africa, where agricultural value chains for smallholders are rarely complete, and there is no guaranteed market for their goods.
One of the impediments to funding is that most smallholders do not have the required collateral to meet banks’ lending demands. What’s more, the interest on loans is often too high for smallholders to meet, or the repayment term too short. According to KCB Bank in Kenya, smallholders are typically considered high-risk by the financial services sector.
But there are options for improving access to capital, respondents believe. For example, governments could encourage assistance to the sector, and lenders themselves could come up with more finance options structured to meet the specific problems the sector faces.
Encouraging farmers to build cooperatives and consolidate land would also help them attain the necessary size to gain access to finance. And direct assistance on the administrative side – with things like filling in forms and doing due diligence – would help smallholders access what aid and finance is already available.
Close the infrastructure gap
A second key hurdle smallholders face in improving productivity remains the infrastructure problem. The African Development Bank puts Africa’s annual infrastructure financing gap at US$68bn–US$108bn, which severely hampers potential growth. Without reliable access to water, electricity and transport infrastructure, it can be hard for farmers to irrigate crops or take produce to market.
Executives surveyed for the Agra report said their infrastructure priorities are to increase advocacy for governments to invest more in key infrastructure, to increase public-private partnerships that will accelerate the delivery of such projects, and to expand access to water and low-cost irrigation technology.
Since most of the executives surveyed also agreed that smallholders were an integral part of their business model, there is certainly existing appetite for more private funding for projects that assist smaller farms.
Agtech to the rescue?
Technology has the ability to transform African agriculture faster than almost any other approach. Survey respondents ranked it as towards the top of their priorities, with 52% saying it is critical to thriving during Covid-19. Some businesses have been quick to transform. In Zimbabwe, for example, Zoom is used to contact larger farmers, and agronomic advice is shared with others via WhatsApp.
Precision agriculture – such as soil analytics, predictive weather data, and the use of drones to deliver seeds – has also been touted for some time as a game-changer for productivity in farming. But for agtech to take off in Africa it needs to be more affordable, accessible and relevant for the African context; regulations covering GPS technologies also need to be updated.
Larger companies are already using digital technologies across their operations – for routing collection trucks, providing virtual training to smallholders, and monitoring stock levels, for example. However, the patchy provision of some of the key enabling infrastructure such as wifi and LAN connectivity makes productivity gains smaller than they could be.
Africa is in a wait-and-see moment. The continent has not been hit as hard by Covid-19 as many other regions, and much of the impact on the agricultural sector is likely to be felt in 2021. But while there is plenty of uncertainty, it remains true that Africa has huge capacity to increase productivity by orchestrating its smallholder farmers through improved infrastructure, better funding options and targeted use of technology.