As global food prices soar, Africa’s agriculture sector is yet to benefit

Agriculture is one of this century’s great opportunities for the continent, yet most of our fertile land is under-utilised.

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Widespread investment opportunities, a booming citrus industry (among others) and solid global demand should mean Africa’s agriculture exports are thriving, but analysts believe most countries are not benefitting from the potential of its great, arable land.

While global food prices soar, most of Africa’s fertile land remains largely under-utilised, with roughly 9 million hectares of land available for agricultural expansion and agro-processing in South Africa alone, according to Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa.

One of the key issues around agriculture is the governance of it. Many countries continue to struggle to implement effective policies that are conducive to agricultural investment. The contentious issue of land reform policies and the lack of adequate infrastructure to get these commodities to market remains a major setback.

Sihlobo suggests that governments step up their game to fill the huge investment gaps because the population is growing, and the demand will remain solid.

Africa – the food basket for many countries – is yet to benefit from global food inflation

There is an attractive investment case to be made for the agriculture sector – South Africa has had a great season, good maize crops, wheat and fruit crops are looking decent and, the citrus industry is booming – yet global food prices are skyrocketing and, we are not at the receiving end of it all.

“What we’re observing globally is, there are drier conditions in South America, particularly Brazil and Argentina but also in the US, we are seeing some bit of dryness in Canada – and those two combined, obviously with what’s happening in China, which is that strong buying pressure for grains and all various agricultural commodities, is what we see driving the global prices and obviously being mirrored in the domestic market.”

Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa.

“South Africa is solidly interlinked on that, particularly for commodities that we are the major participants on. If you look at the correlations just of the prices of grains of domestic markets as well as globally, you will see those correlations are somewhere around 80% – what happens globally matters a lot for us”, he continues.

Is genetically modified still a swear word in agriculture?

As we head to the 10 billion global population mark – set to take place sometime in 2050 – genetically modified crops have made the mass production of food reliable and plentiful, says The Money Show’s, Bruce Whitfield.

Sihlobo believes that the sentiment is somewhat changing now. “You will recall Africa’s resistance to genetically modified crops… I think it was largely some of the NGOs that were backed to a certain extent by European countries that actually were against the genetically modified crops to a large extent.”

Just recently, the European Commission released a study indicating its intentions to review the genetically modified crops policy for the EU region to see what adjustments can be made.

“So, that’s a hot debate that is happening in the EU and I think that if there is a change in policy in the EU, we could pretty much see most African countries also following through that. And, if they do that, there are gains to be seen… we can even contribute now to the climate change story in a sense that we will be able to get more crops, more output from crops, utilising less land than now where you have to plant tracks and tracks of land and still harvesting very little because you are not embracing technology.”

Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa.

The politics and uncertainty around land reform

Amid all the uncertainty that has been happening around land policy, Sihlobo believes that South Africa’s agricultural sector has been solid, doubled in value and volumes since 1994, employment has been solid, exports have been solid and, investments and embracing technology has been good.

Now, the question is: how do we make sure that we don’t distract this momentum that has been there but rather we bring new players in, utilising some of the under-utilised land parcels which are where I think policy should actually enhance on, he says.

“The reality is, if you are farming somewhere in Free State, you are competing with someone in Sinaloa, Mexico – it’s about how do you then in South Africa become much more competitive and I think that commercialisation… is the way to go.”

Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa.

“All of the new black farmers that are coming in – we have to set them up and say okay, how can you be a commercial black farmer but participate in the markets, see other resources that are available like anybody else. If the state does assists, it assists at the entry-level but after five years or so, somebody has to show some entrepreneurial spirit and be able to show if they can run the entity.”

Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa.

For data-driven insights that match foresight with sustainable possibilities, re-visit this feature page regularly to listen to thought-provoking conversations with Absa Corporate and Investment Banking sector experts in the Absa Insights podcast series.

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