Agro-processing has important implications for economic growth, food security, job creation, and poverty reduction in Africa, according to a recent report by the World Economic Forum (WEF).
WEF says in the report that the key role that agriculture plays in the continent’s economy is set to grow in strength and size under the African Continental Free Trade Area (AfCFTA), which was adopted in February 2021.
Dubbed “AfCFTA: A New Era for Global Business and Investment in Africa,” the insight report was released in January 2023.
According to the report, while African countries have accelerated their focus on agro-processing as a result of food insecurity caused by trade disruptions from global shocks, AfCFTA is important in transforming economies from their current dependence on the export of raw materials, which has less benefit to the countries’ economies.
Furthermore, the report says that as much as 80 percent of food production on the continent was produced by smallholder farmers, who always produce low yields.
“Agriculture and agro-processing have high potential for economic growth, employment, and inclusivity; hence, they could spur an increase in intra-African trade,” reads the report in part.
The document says currently, the continent imports about $50 billion worth of agricultural products per year, but by 2030, intra-African agricultural trade is projected to increase by 574 percent if import tariffs are eliminated compared to the present scenario.
According to the report, in particular, the fish and meat industries have great investment potential.
However, the document says that the majority of demand for both fish and meat is met by local production that is not traded, and only 16 percent and 10 percent of demand, respectively, is met by imports.
“They are both expected to see an increase in overall demand given rising incomes, which means there is a tremendous opportunity to scale up production and increase trade through processed goods,” reads the document in part.
“Demand for fish is exceeding local supply, growing at around 4 percent annually for the past 10 years, and demand is also accelerating for meat,” reads another part of the document.
Furthermore, the WEF document says beef production is widely fragmented across the continent, but processing is concentrated in a few countries.
According to the document, this means that there is a major opportunity to scale up production of processed meats such as sausages and canned beef in order to meet the rising local demand.
The document says Southern Africa is more connected through trade relationships within the beef industry, but AfCFTA will unlock opportunities for the northern and western African countries.
“Ghana is an example of a country that has taken steps to boost agro-processing by attracting foreign investment and investing in infrastructure for the preservation, storage, and transportation of crop harvests,” says the WEF report.
“Ghana intends to process more of its cocoa domestically rather than exporting via the raw beans so that it can reduce dependence on raw material exports, therefore shifting its status and strengths towards the value chain and becoming a top trader of processed goods,” adds the document.
The document outlines important opportunities for the private sector, including value addition, using regional differences to develop food value chains, and meeting inputs and infrastructural needs.
Furthermore, the WEF report says Africa’s wide range of climates, high percentage of arable land, and counter-seasonality to the northern hemisphere contribute to the sector’s competitiveness.
“Agro-processing specifically has a unique strength for investors and African countries alike. It is described as the most important sub-sector of manufacturing because of the greater stability of world prices for processed agricultural products compared to raw products,” reads the document.
It is also significant for the establishment of new companies, the diversification of rural economies, and the creation of new job opportunities, noting that scaling agro-processing has important inclusivity effects as well, according to the document.
The document says that women make up 70 percent of employment in the overall agricultural sector as well as the majority of the domestic agro-processing workforce.
“Increased intra-African trade through the AfCFTA will help in reducing dependency on foreign agricultural inputs with positive effects for continental food resilience,” reads the document in part.
“Each region has natural advantages that, if better coordinated to benefit African partners, can help to create full regional value chains,” according to another part of the report.
The document cites South Africa as an example, saying that its integrated value chain, from inputs, equipment, packaging, and specialized logistics to marketing and retail, is an example for other African countries.
A McKinsey report shows that Africa’s agricultural potential will require an 800 percent increase in fertilizer application for main nutrients, a $65 million-plus investment in irrigation, and over $8 billion in investment for storage through local warehouses.
The WEF report suggests that companies have already found those areas to be lucrative opportunities to develop value chains across the continent.
Speaking to The Citizen, agriculture stakeholder Audax Rukonge said the continent is currently spending billions of dollars importing agricultural products annually.
He said the amount probably exceeded the foreign aid received by the continent annually. He named imported foodstuffs as sugar, wheat, rice, and edible oil, as well as meat and milk, in small amounts.
He said Tanzania imports foodstuffs when there are shortages. There is a need to invest in edible oil production, he argues, in order to benefit from the 400 million market in the Southern African Development Community (Sadc) and the East African Community (EAC).
“Tanzania spends Sh500 billion to Sh700 billion annually for cooking oil importation. When the amount is multiplied by eight countries, the country can earn over Sh5 trillion annually from edible oil alone,” he said.
Mr Rukonge, who doubles as the former executive director for the Agriculture Non-State Actors Forum (Ansaf), said Tanzania and the continent should invest in agro-processing.
According to him, investing in agro-processing will enable the countries to fetch up to 75 percent more as compared to when the products are traded in their raw form.
“Our focus should be to industrialise the continent, something that will force owners of industries to increase their hunt for raw materials. This was the case in the middle 1880s that triggered the colonialization of Africa,” he said.
“The market should be the driving force, not production. However, the market needs to have a link with those involved in value addition,” he added, insisting that investment in value addition should be a matter of paramount importance.
He said the continent should attract 65 percent and 35 percent of foreign and domestic investment, respectively, but the percentages should be overturned with time because there is no country in the world whose economy has developed based only on foreign investments.
“Domestic investment should be identified and receive the government’s support regardless of its owners. The most important thing should be the companies’ contribution to the country’s economy,” he said.
The Southern Agricultural Growth Corridor of Tanzania (Sagcot) chief executive officer, Mr Geoffrey Kirenga, said the government’s priorities in agriculture, livestock, and fisheries should be maintained.
According to him, the government’s push has been responded to by citizens’ massive investment in the sector coupled with increased use of technology, thereby improving efficiency, production, and competition.
“That will only happen through massive investment by the government and the private sector. Importantly, Tanzania should continue improving its business environment as outlined in the country’s blueprint,” he said.
“The government should fully utilise the available human resources, especially through the engagement of the youth,” he said.
He added that Tanzania should have transformative ideas in order to become competitive and a major exporter.