Africa’s farmers and agribusinesses could create a trillion-dollar food market by 2030 – a three-fold increase from the current size of the market which is estimated to be worth $313 billion.
This came out of the recent report titled Growing Africa: Unlocking the Potential of Agribusiness which was produced by the World Bank. The report was highlighted by Charles Brewer, Managing Director of DHL Express Sub-Saharan Africa, who said the African agribusiness sector has seen significant growth on the back of shifting socioeconomic dynamics.
“The retail sector is booming in Africa, as is the rapid growth of populations and the African middle class. As a result of this expansion, there is a greater availability of and demand for good quality agricultural produce and processed food products than ever before,” said Brewer.
He said the full value chain of the African agribusiness sector, which entails the full value chain from agricultural production/farming through secondary processing, distribution and retailing to the end user/consumer, was set for further growth. “This expected growth highlights the growing market and many opportunities for South African agribusiness and related value chain role players to expand into Afric.”
According to Hennie van der Merwe, CEO of the Agribusiness Development Corporation (ADC), based in South Africa, Africa provides a new market for agribusiness firms.
“Given its increased spending power, demand for goods and untapped land resources, Africa is currently experiencing a revival in terms of its focus on agribusiness, not only to increase food self-sufficiency, but also to create jobs and economic activity, specifically in rural areas,” said Van der Merwe.
“In the current climate, Africa is increasingly offering greater growth forecasts,” said Van der Merwe. However, he explains that while Africa is well-endowed with resources, it often lacks much of the necessary expertise to unlock the commercial potential of its agriculture resources, whereas South Africa is well regarded for its expertise in commercial farming and agribusiness.
“One of the major limitations on agribusiness development in Africa is a human capacity and human skills constraint. The ability and experience to develop and manage commercial farming and agribusiness ventures are largely lacking in the African environment and that major technology transfer and capacity building would be necessary in this regard.”
Van der Merwe said this is where the opportunity lies for local businesses and farmers to expand beyond their borders and offer expertise in neighbouring countries.
Van der Merwe added that it is vital to have partnerships in place before venturing into projects in Africa. “Partnerships with a local business or association in the specific country are necessary as business owners need to be provided with assistance, guidance and sometimes protection when in the area. It is also essential/indispensable to ensure that all the building blocks for working value chains are in place to ensure and support successful operation. A local partnership will also assist with analysing the market carefully to evaluate what the real market needs, requirements and opportunities are.”
“The market in Africa is there and ready, but the question is how local businesses create a direct link to service the market needs,” concludes Brewer.
Local and international investors have spotted this opportunity and are flocking into South Africa with a view that the country can be a gateway into the rest of the African continent agribusiness activity. Bertie Hamman, a senior manager at Standard Bank’s AgriBusiness division, has noted that the South African agribusiness landscape is likely to see a surge in corporate actions over the next two years. This will result in greater economies of scale in a sector that is currently characterised by fragmentation and relatively low operating margins, compared to other industries.