Agriculture in Africa 2021
The Oxford Business Group’s report, Agriculture in Africa 2021, takes a close look at the state of the agriculture sector in the continent, and its capacity to improve in the wake of COVID-19. The contribution of agriculture to GDP in developing economies has long been used as a heuristic for economic development. In particular, Agriculture in Africa highlights the important tensions between relative size of the agriculture sector, and export earnings, which offer an insight into overall agricultural productivity. The report notes that Chad’s agriculture sector constitutes 50% of GDP, much exceeding the continent’s average, yet earnings from exports trail the continental average. The report identifies some solutions to solving Africa’s productivity problem.
The “green revolution” is being touted by some – namely the Alliance for a Green Revolution in Africa – as the potential silver bullet to lagging productivity. Fertilizer, irrigation, and high-yield seed varieties have seen production value increase by 11% on the continent between 2010 and 2016. The projected figures are optimistic: an anticipated increase of 21% for agricultural production between 2020-2029 in sub-Saharan Africa. The report however identifies a few barriers to green revolution, the most formidable being access to arable land. Approximately 90-95% of land in sub-Saharan Africa is held under a communal customary tenure system, which makes it difficult to discern ownership and to register property. As a result, land dispute cases often overrun the local legal system and hinder much-needed progress. The Organisation for Economic Co-operation and Development (OECD) has suggested that the arduous process takes on average 58 days to complete and costs up to 8% of the property value. Thus, streamlining the land tenure system, as has been done in North Africa, could unlock bountiful new arable land.
Agro-industrialisation is another key area requiring development, the report notes, as the majority of agricultural products are exported in their raw form for value-added processing overseas. Over 75% of sub-Saharan processing enterprises that do operate tend to function on an artisanal, or semi-artisanal scale, which hinders large-scale market entry. Agricultural industrialisation has the potential to add more high skilled jobs to the economy and increase export revenue. Both continental and national efforts are underway to attract greater private investment, such as the Africa-wide Agri-business and Agro-Industry Development Initiative, and the “Special Economic Zone” triangle, jointly managed by Burkina Faso, Mali and Côte d’Ivoire.
Africa has long faced immense difficulties in accessing capital, which is needed to fund growing food demands. Absence of collateral has held back businesses operating as small-to-medium sized enterprises, and many individuals are not connected to the formal banking sector at all. Yet, Agriculture in Africa identifies growing mobile penetration as an opportunity to provide microfinance and mobile money opportunities. Indeed, the traditional finance sector is meeting less than 3% of needs for smallholder financing. Broader financial inclusion may be just the way to achieve the finance needed to optimize agriculture production in Africa.
The report ultimately highlights that although the African agricultural sector is held back by lack of modernization, land tenure issues, and low industrialisation, the vast efforts from dedicated bodies to “green revolution”, special economic zones and fintech initiatives may go a long way.