AFRICA NEWS
Changing landscape of Africa’s agriculture
downstream products (for example
biofuel production and food processing)
would greatly increase. Most African
countries are net importers of food,
and most citizens are net purchasers.
The continent is extremely sensitive to
fluctuating prices on the world market.
Improving the productive capacity of
the agricultural sector is among the
continent’s most crucial challenges.
Studies have indicated that increasing
agricultural production could boost
Africa’s overall GDP growth rate by
one percentage point annually. Such
growth would be additional to the
increasing levels of urbanisation and
the expectation that the number of
households with discretionary income
will reach 128 billion in 2020, with
Africa’s consumer spending reaching
USD1.4-trillion in the same year.
If recent trends continue, Africa will
be playing an increasingly important role
in the global economy in 2040. With a
predicted labour force size of 1.1 billion,
the size of Africa’s labour force will
overtake China and India to become the
largest worldwide.
“However, the further industrialisation
of agriculture remains critical to drive
growth,” says Jacques Taylor, managing
director of John Deere Financial – sub-
Saharan Africa. The use of mechanisation
and technology frees people from the
arduous task of farming whilst enhancing
efficiency and increasing production.
Alongside this, income and other
resources spent on food and clothing is
freed up, to be spent on other goods and
services. Ultimately, agriculture becomes
more efficient (through concentrated
production and vertical integration) with
few farmers feeding more people, at a
lower cost.
According to Taylor, “Investors and
agricultural businesses should be
looking to benefit from Africa’s growth.
Ultimately, this will mean producing
more agricultural products with fewer
resources.” This requires understanding
your home country’s profile; that is,
country risk versus business profile.
Is your home country low, medium,
or high risk in terms of issues such as
corruption, level of democracy, and the
strength of its financial markets? Is the
market opportunity high, medium, or low
in terms of issues such as GDP growth
trends, population size, and gross capital
formation? As an investor or business
owner in Africa, one’s own business
model needs to be critically examined.
In the face of your home country’s
profile, is your current business model
sustainable in the long term?
“Business owners and investors
should find ways to be part of Africa’s
opportunities. For example, expanding
from strategic economic growth hubs
to non-traditional markets, investing in
human resources to ensure top-quality
management is in place, and making use
of cutting-edge technologies,” says Taylor.
He adds, “A growth strategy should
always encompass the broader socio-
economic impact as the key to long-term
sustainability.”
Sources: McKinsey Global Institute,
Swedfund International
Africa’s growth has been accelerating,
and agriculture is beginning to change.
African governments have increased
their investment in agriculture and are
involving the private sector with new
donor organisations, also becoming
involved in the industry.
From 2000, the continent began to
stir. Between approximately 2002 and
2013, real GDP in Africa grew on average
by more than 5% annually — more
than twice as much as in the 1980s
and 1990s. Never before has Africa
experienced such rapid growth rates for
an extended period.
Africa’s growth is typically about
government actions: ending political
conflicts, improving macro-economic
conditions, and creating better
business conditions. Future growth
on the continent will be supported
by external trends such as the global
race for commodities. With world food
production needing to rise by 40% over
the next 30 years, Africa could be an
important part of the solution. There are
almost 600 million hectares of cropland
that can be brought into cultivation in
an environmentally sustainable way.
In addition, major crop yields have the
potential to rise. Africa’s increased
access to international capital and its
ability to form new types of economic
partnerships with foreign investors will
aid further growth.
Should Africa be successful in
increasing the value of its agricultural
output to USD900-billion in 2030, the
demand for upstream products (for
example fertiliser and machinery) and
Africa will be playing an increasingly important role in the global economy in 2040, and with the necessary rise in world food
production of 40% over the next 30 years, Africa could be an important part of the solution.
8
MARCH 2019
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