Currently, there are over one billion inhabitants living in the continent of African. And the African population is set to double by 2050.
With such unprecedented growth, a number of existing challenges around food security will become even more acute if there are not adequate interventions from governments, NGOs and – most importantly – the private sector.
That’s where investing in primary production comes in. Primary production, or the production of raw materials for industry, has become a key investment opportunity within Africa. Food scarcity is not a new phenomenon, but by investing in new technology into Africa’s primary production market, we can see food scarcity become more limited.
Poor utilization of available arable land fit for agriculture production, post-harvesting losses estimated to be 40%, declining productivity, farm degradation and poor production management have resulted in increased food prices.
However, investing in Africa’s primary production market will help the industry create wealth within agricultural production and find solutions to the various challenges that face Africa’s primary production market – ultimately helping feed the fast-growing African population in the years to come.
In this report, we will take a look at Africa’s primary production challenges and how those challenges can turn into investment opportunities for investors.
CHALLENGES FACING AFRICA’S PRIMARY PRODUCTION
Because Africa is huge, diverse, and complicated – it is difficult to make sense of what is going on in the continent. As countries across Africa grapple with the challenges of sustaining high levels of economic growth, plunging commodity prices, and the effects of climate change, revitalizing agriculture must become a priority on the continent.
Food production in Africa needs to increase by 60 percent over the next 15 years to feed a growing population, according to the latest World Bank report. And while the continent is bursting with potential, there are problems that are hindering it from moving forward.
First, African farmers need new technology – higher-yielding, more resilient food crops that deliver bountiful harvests. New techniques are beginning to boost yields in rice and cocoa, among other crops.
Second, African farmers need more electricity, more irrigation, and better infrastructure that links them to lucrative regional food markets.
And lastly, a robust and enabling policy framework is urgently needed. It would help remove existing constraints on agro-industrialization and encourage investments. In order to stimulate agricultural investment, governments need to secure property or tenure rights, develop rural infrastructure and public services, and ensure that their institutions are functioning.
OPPORTUNITIES IN AGRIBUSINESS PRODUCTION
As policymakers struggle to accelerate growth and tackle prevailing headwinds, it investment from private investment that can really help grow this sector to where it needs to be.
The private sector is responsible for most of the investment in agriculture (including through foreign direct investment), and this is expected to continue in the future. At present, investment is mainly from domestic sources, while the relative importance of official development assistance is likely to decrease.
Africa can feed Africa. It is well endowed and has the markets, but it needs more than good technology policies. We take a look at four existing challenges and the investment opportunities each brings:
- Scaling Productivity
Scaling up productivity can come from a variety of activities. A few ways include:
- Tapping water resources for irrigation
- Providing stable prices
- Using seeds with better yields
- Providing basic transport infrastructure
- Providing incentives to invest in agriculture
Lessons drawn from other similar regions, such as Asia, Argentina and Brazil, is a great way to turn Africa’s fortunes around gradually and increasing its agriculture productivity.
- Turning Africa’s Population Growth into an Asset
By 2050, Africa’s youths alone will constitute over a quarter of the world’s labor force. Urbanization, at 3.7%, is taking place at more than twice the global rate.
Agribusiness holds the key to meting urban consumers’ demand for food, particularly processed food. Emerging countries will also increase demand for Africa’s farm commodities.
That means there is a vast potential for establishing production and trade links. This shift from primary production to modern integrated agribusiness could provide lucrative opportunities to many smallholder farmers, as well as generating modern jobs for the continent’s youth.
- Investing in Infrastructure
There are growing opportunities for investment in infrastructure that will overcome the current challenges associated with poor access between farm-level production and downstream activities.
This would open the door to increasing the production of higher agricultural value-added products while continuing to produce popular commodities such as coffee, tea, livestock products and more. While regional integration is expected to help countries reach economies of scale, it should also help minimize high transaction costs associated with fragmented markets and price controls.
- Overcoming Africa’s Energy Challenges
African energy use per capita is currently only one quarter of the global average. Yet Africa’s renewable energy potential is substantially larger than the current and projected power consumption of the continent.
With abundant low-carbon renewable resources, a growing energy demand and falling technology costs, Africa has the opportunity to deliver economically competitive energy solutions for both remote rural and growing urban locales.
GETTING INVOLVED IN AFRICA’S PRIMARY PRODUCTION MARKET
As Africa’s population continues to grow, it will require a significant increase in food supply – providing investors with lots of opportunities to get involved in the primary production market. Instead of increasing the dependence on food imports, which would pose an increasingly large risk in the future, Africa should focus on increasing domestic production sufficiently.
However, there are still a lot of challenges that Africa faces and long-term support, both financially and from the public sector, are needed to get these challenges solved in the next coming years. Additionally, awareness has to be created about these challenges and the new technologies that can help change the continent’s food supply.
Overall, investing in Africa’s primary production market not only will provide private investors with a plethora of investment opportunity – it will also help investors contribute to a pressing issue facing the African people, and ensure that its growing population with always be fed.