Agricultural Development & Sustainability in Africa
According to the survey, economic growth throughout Africa remains resilient (despite overall economic expansion this year being at its slowest in five years).1 Largest growth is expected in Sub-Saharan Africa (SSA) where it will be greater than the emerging markets average, with Ethiopia, Kenya, Tanzania, Mozambique, Zambia and Ivory Coast leading the pack with an expected growth of more than five percent in 2015.2 In addition, the capital value of Foreign Direct Investment (FDI) is at its highest level in five years – with the US, France, UAE, Portugal and China driving investments and diversifying the economy away from mining and natural resources.3
Agriculture is emerging as a growth driver of Africa’s economy. Despite being a relatively underdeveloped and untapped sector 31 percent of respondents in a recent FDI Markets survey by Ernst & Young expect agriculture to be the driver of economic growth in Africa over the next two years.4 The United Nations also predicts that agriculture is expected to see huge investment and that the sector will quadruple by 2020, reaching $45 billion a year.5
Africa is home to nearly a quarter of the world’s arable land but currently only produces ten percent of agricultural output globally.6 Agriculture currently only accounts for a third of Africa’s GDP.7
The Alliance for the Green Revolution in Africa (AGRA) estimated in a recent report the sector’s value could triple from $280 billion today to around $800 billion in 20308 – substantial by any measure – cementing it as the most promising growth opportunity in Africa (followed by mining and metals). The current population relying on agriculture stands at 530 million people. This could grow to over 580 million by 20209, and demonstrates the huge potential economic value to the African economy if cultivated and supported sustainably.
In a recent Deutsche Bank report (April 2014), it was found that agriculture is already generating a quarter of GDP in SSA as a whole.10 The continent already has a booming business in palm oil, rubber, coffee and cocoa as well as bananas, beans and flowers, positioning agriculture as a key priority for the future for sustainable growth.
Challenges remain in how to further develop and sustain economic growth in agriculture. For example, questions remain on how to turn Africa’s small farms into sustainable businesses that generate growth and income. In addition, much of Africa’s farming is subsistence-based.
According to Dr. Agnes Kalibata, President of AGRA, the investment is worthwhile. She argues that agriculture is “eleven times more effective at reducing poverty than growth in any other sector”11 an argument supported by the World Bank, noting that poverty has been reduced by 33 percent in Ethiopia since 2000 driven mainly by agriculture.12
There remain substantial infrastructure challenges that must be solved in order for the agriculture sector to thrive. For example, a better inter-continent roadway system would reduce the cost of delivering goods throughout Africa and decrease the food import bill, currently estimated to be $45-50 billion per year, which exceeds exports by 30 percent. The continent’s reliance on the volatile global food markets creates an increasingly unstable situation.13
Food loss in the form of wasted crops is of key concern. As it stands, farmers are unable to produce bumper crops without a large percentage going to waste due to a lack of storage facilities and channels to market. With one in four people currently undernourished in Africa14 there is a pressing need for more food to make it safely from the farm to the table.
Untapped investment opportunities in power grids and other utilities are key to developing a sustainable future as well as investments in appropriate technologies such as irrigation (just five percent of Africa’s cultivated land is currently irrigated15) and fertilizers.
Much work remains to develop a sustainable future for Africa’s agriculture industry and the continent as a whole. Tackling the insufficient infrastructure is a starting point and will positively impact the entire economy. If these issues are addressed the development of the agriculture sector will go a long way towards future economic growth of the continent.
It’s time to unlock Africa’s potential.
1 EY’s Attractiveness Survey – Africa 2015: Making Choices, EY, http://www.ey.com/Publication/vwLUAssets/EY-africa-attractiveness-survey-2015-making-choices/$FILE/EY-africa-attractiveness-survey-2015-making-choices.pdf
2 EY’s Attractiveness Survey – Africa 2015: Making Choices, EY
3 EY’s Attractiveness Survey – Africa 2015: Making Choices, EY
4 EY’s Attractiveness Survey – Africa 2015: Making Choices, EY
5 “Denting youth unemployment through agriculture,” United Nations, http://www.un.org/africarenewal/magazine/special-edition-agriculture-2014/denting-youth-unemployment-through-agriculture
6 “Agribusiness and Development: How investment in the African agri-food sector can help support development”, European Commission
7 “Agriculture will drive Africa’s rise to economic power”, The Guardian http://www.theguardian.com/global-development-professionals-network/2015/jun/03/agriculture-africa-rise-to-economic-power
8 “Agriculture for Africa’s Economic Transformation”, Alliance for a Green Revolution in Africa (AGRA), 2015
9 Agriculture for Africa’s Economic Transformation”, AGRA, 2015
10 “Agricultural value chains in SSA: From a development challenge to a business opportunity”, Deutsche Bank, 2014
11 “Agriculture will drive Africa’s rise to economic power”, The Guardian
12 “Agriculture will drive Africa’s rise to economic power”, The Guardian
13 “Africa Progress Report 2014”, Africa Progress Panel, http://www.africaprogresspanel.org/publications/policy-papers/2014-africa-progress-report
14 “Agriculture for Africa’s Economic Transformation”, AGRA, 2015
15 “Agricultural value chains in SSA: From a development challenge to a business opportunity”, Deutsche Bank, 2014