Agriculture will be Africa’s quiet revolution with a focus on SMEs and smallholder farmers creating the high productivity jobs and sustainable economic growth failing to materialise from mineral deposits and increased urbanisation.
This is according to the Africa Agriculture Status Report (AASR) commissioned by Alliance for a Green Revolution in Africa (AGRA).
The African agrarian revolution would be different from the European and the Asian green revolution as it will focus on smallholder farmers, the report revealed. According to the report, “Africa’s recent pattern of growth, based on ‘urbanisation without industrialization,’ has increased rather than reduced the need for an agricultural transformation,” especially given the fact that many urban jobs are in the services sector, which are essentially low-productivity jobs.
Currently, “The aggregate annual food import bill is about US$35 billion, and is estimated to rise to US$110 billion by 2025,” the report states. This would put a strain on Sub-Saharan African fledgling economies unless governments and other stakeholders put their concerted efforts in building an agro-based economy. Despite the efforts in urbanisation, where countries like Kenya have invested a lot in road expansion, as well as in the mining industry, the report strongly believes that the key to Africa’s growth lies within the agriculture sector. Majorly, the key contributors to the African agricultural growth are small and medium enterprises (SMEs) and smallholder farmers. The report says that Africa has about 51 million farms, of which 80% (or 41 million) are smaller than 2 ha (hectares) in size. These farms already bring forth 70% of Africa’s total food requirements, and their numbers are still increasing in most countries. The report emphasizes the importance of smallholder farmers by affirming that, “They provide around 80% of the food consumed in both Asia and Sub-Saharan Africa.”
With the increasing number in urban population, there is a growing demand for traditional food and also a shift to processed foods. Apart from the urban population boom, the number of Africans earning higher incomes has also increased. For example, the number of Africans earning between US$2-20 rose from a little over 100 million in the 1990s to 400 million at present. The challenge is, is that with such increase, there is a shift in preferences to processed foods which are expected to increase five- to tenfold between 2010 and 2040. It is this shift that puts burden on farmers to produce more while incorporating the latest technological advances.
Why The Focus Is In Smallholder Farmers And SMEs
Agriculture has always been looked at as a large-scale enterprise thanks to the American and European agrarian revolutions, where land consolidation was the norm. While larger farms present a pleasant mechanization platform, they kill employment. With smallholder farmers, however, the employment numbers are significant. For instance, the Kenyan dairy sector shows that for every 1000 litres of milk, there are 23 full-time jobs for the self-employed, 50 permanent full-time jobs for employees, and three full-time casual labor jobs. Citing the example of small-scale farming in Brazil, the report says, “Farmers using mixed cropping on 8-hectare plots generate one job, while large-scale mechanized monocultures take 67 hectares to create one job.” With world population expected to hit 9 billion by 2050, a profitable rural smallholder farm will create the needed job opportunities for the workforce.
Furthermore, as said before, the large population creates even more opportunities for adding value and creating employment within the broader agri-food system. “This sets the ground for an ‘inclusive’ transformation of Africa’s agri-food system, one that focuses on linking many more smallholders to high-value markets, and adds value and employment along value chains through growth of small and medium enterprises (SMEs),” said Dr. Kanayo F. Nwanze, the 2016 Africa Food Prize Laureate, as well as immediate former president of International Fund for Agricultural Development (IFAD) in the report.
The rising demand for food is projected to reach US$150 billion by 2030, with good business training; Smallholder farmers and SMEs could capture as much as US$30 billion from the windfall. With increased incomes and the impact they have on the national economic development, coupled with increasing the national exports like horticulture in Kenya and cocoa in Ghana, the small-scale farmers have proven that they are the stimulus to achieving the Sustainable Development Goals (SDGs). In Ghana, small-scale farmers produce 20% of the world’s cocoa, while in Kenya, the horticulture sub-sector generates over US$300 million in foreign exchange earnings annually.
Nevertheless, smallholders and SMEs face a variety of challenges such as low access to both inputs and output markets, land insecurity, no access to financing, limited knowledge and information, and lack of information on available technical support.
Governments Need To Cushion Smallholder Farmers And SMEs
To cushion farmers against challenges, governments and donors need to develop national agricultural development strategies, which are supposed to ‘guide government policies and investments, and help integrate the roles of different players, including the donor community and the private sector.’ In a nutshell, governments are supposed to provide an enabling business environment for farming and agribusiness through favourable macroeconomic policies. However, in many countries, there is lack of political goodwill and public support in the field of agriculture. The report says that, “A real challenge is to find ways of convincing governments to actually commit to this (agricultural) agenda and undertake what many of them have already promised to do (e.g. through CAADP).”
Nevertheless, there are efforts by some governments to foster agribusiness. For instance, Ethiopia established the Agricultural Transformation Agency (ATA) to coordinate activities between government ministries and departments and across central and local governments, while Nigeria has its own ATA in the ministry of agriculture, but less impactful. Rwanda also has a focused national agricultural strategy that has had some success, i.e., where the government increased its expenditure in agriculture to 10.2%, exceeding the CAADP projections. These are among the national first mover strategies towards agricultural revolution. For effective management, governments need to focus on fewer first-mover projects.
Apart from Rwanda, many African governments are “Only about half-way to achieving their Comprehensive Africa Agriculture Development Programme (CAADP) goal of investing 10% of their total budgets in agriculture.” Though most countries are under investing in irrigation, farm to market roads, ICT and Research and Development (R&D), the report suggests that such initiatives will boost agribusiness and bolster economic growth.
The government should also engage the private sector so as to commercialize more smallholders and SMEs. Public-private partnerships can deliver financial services and insurance to small farms, as well as organizing small farms into groups for marketing purposes. Non-governmental organisations also rely on the government through subsidies, especially in the setting up of their operations, while SMEs require easy access to credit and attaining business management skills. Government can, therefore, set up training institutions for entrepreneurship and agribusiness.
African smallholder farmers rely on rain-fed agricultural practices, which face an ultimate climatic challenge occasioned by the ongoing climate change. In order to mitigate them from such shocks, governments consider policies that can help stabilize food supplies and prices such as maintaining national food reserves or freeing up markets for greater regional and international markets, or buying food from farmers for school feeding programs. Furthermore, to manage weather risks, with better policies in place, insurance companies and mobile paying technologies can help cushion farmers from risks.
Technology And Insurance
In a recent article in Kenya’s Daily Nation, over 3,000 smallholders are benefitting from a digital marketing portal called ‘Selina Wamucii.’ The portal helps farmers access global markets for their fresh produce, hence solving the farmer’s poor earning problems and difficulties in meeting market standards. Such portals help middlemen who reduce product cost at the supply level and help farmers reap big from their efforts. Many farmers in Africa sell their products at a price far below the market level, hence incurring a lot of losses which causes some to lose confidence in agriculture or produce less-desired products.
Technology has also made it easier for farmers to access finance. The AARS report says, “Recent development and diffusion of information and communication technology (ICT) has been quickly changing the agricultural finance landscape in Africa.” So far, Africa is the leading continent in the mobile finance market at 7.7%, followed by East Asia and Pacific at 2%. Due to poor infrastructure, the banking systems in rural areas are poor, hence many farmers rely on cash-based transactions. However, with the development of the mobile banking systems, it is now easier for small-scale farmers to access credit facilities and other savings services offered by banks.
For instance, in Kenya, the Mpesa Mobile Money Transfer Platform is widely used, especially due to its Lipa na Mpesa option, which allows users to pay bills and also buy goods with money on the phone. Various banks have tapped into this, creating a mobile platform where users can transfer money from their bank accounts to their Mpesa accounts and vice versa.
While mobile banking may present an innovative milestone in encouraging money transfers and access of financial services in rural areas, it also presents a potential for abuse if some regulations are not put in place. Rapid development in digital finance presents with it a myriad of problems including cybercrime and abuse of funds, especially where legal measures have not yet been put in place. There is a need for consumer protection laws that restrict unauthorized sharing of personal information and distribution of consumer information to bolster trust. Countries in the SSA region have put in reforms in the arena of e-money. For instance, in 2015, Ghana adopted guidelines for e-money, checking how financial institutions conduct their businesses.
Though a vital part in business dynamics, the insurance sector is not fully embraced by Africa’s smallholders and SMEs. There have been attempts in some countries such as Kenya, Ethiopia, Burkina Faso, Mali, Mozambique, Senegal and Zambia through donor initiatives, but few have reached a commercial scale. Dominated by international players like NGOs, the sector is slowly picking up.
Insurance services reduce vulnerability in case of shock by providing quick access to liquidity and increasing initiatives to invest in agriculture. However, farmers need to double up their efforts in ensuring quality for better insurance payouts. Nevertheless, the environmental shocks are very unpredictable, making insurance premiums exorbitantly high. Meanwhile, if governments step up to provide long-term solutions such as investments in data (weather, yield), risk financing arrangements and enabling legal environment, there is room for insurance growth. The Kenyan Government, for example, has been supporting innovative insurance to cover crops and livestock production using index insurance.
The road to creating financial growth and poverty eradication in Africa is not always smooth sailing. Africa suffers from varieties of problems from perennial droughts, flooding, and lack of resources. Though there is a need to develop industries and tap into the rich African mineral deposits, the continent has no financial muscle to pull this off.
With the population of the continent rapidly growing and perpetual food shortage, the continent needs to move back to the silent revolution that has always been providing financial gains even without much of the government’s interest. In the 1970s, there were attempts that bore the African Green Revolution, the Maize Revolution in Eastern and Southern Africa, which collapsed due to the over-reliance on the subsidies and state-led approaches that proved costly.
With the new revolution, smallholder farmers are the real investors who need little external support to succeed. One of the much-needed supports is access to information on agri-based opportunities and the technical skills that go with them. In Kenya, one of the local media stations, The Nation Media Group, entered into a partnership with a local university – Egerton University – through a weekly magazine, Seeds of Gold, and a TV programme with the same name to enable farmers access agricultural information, ask experts questions, and access markets while, at the same time understanding agri-business financing, insurance, and other relevant information.
Through the internet and media, the channels of accessing information and markets, are open. However, the infrastructure is still poor…one of the reasons that the government’s need to invest in rural road network development for easier access. Through partnerships with China, some countries are developing road networks.
However, there is little that is being done by governments to bring forth a share of the world’s billions into the pockets of farmers. The AARS report laments that, “On average, some (countries) have never spent much more than 5% of their total budgets on agriculture, compared to 15–20% in Asian countries at the time of their Green Revolution, and compared to the 10% goal set through the CAADP process.”
Therefore, if there is a real need to turn around the fortunes of the African continent, there is a need for ‘high-level political leadership to drive successful agricultural transformations, as is happening in Rwanda and Ethiopia today.’ Farmers also need to organize themselves to have a bigger voice to drive the political agenda. Together with the several donor agencies interested in agriculture, the future of agriculture seems promising.
Article by Musungu Okach