Bet the farm and save the world

The world population is expected to reach about nine billion by 2050 — and we are all going to have to eat. If you can feed us, you are sure to be sitting in the pound seats.

The countries of Africa are well placed to do this because together they have two-thirds of the world’s arable, uncultivated land. Yet investors and entrepreneurs are ignoring what they think is dirt but is actually a gold mine, according to African Development Bank (AfDB) president Akinwumi Adesina.

Adesina was speaking on the theme of Transforming Agriculture for Wealth Creation in Africa at the bank’s 52nd annual meeting, which is taking place in Gujarat, India.

As former minister of agriculture in Nigeria, Adesina said he and tycoon Aliko Dangote — Africa’s richest person — used to disagree a lot.

“He was the country’s biggest importer of food. I wanted him to be the biggest exporter,” Adesina said. “Then one day he came into my office and banged on the door. He said: ‘Minister, I’ve changed my mind, I’m going to become a producer. I’m going to invest $300-million into rice production.’ I went home that day and told my wife. It was my best day as minister of agriculture.”

Dangote went on to increase that investment to $1-billion. “If the richest black man in the world is betting on agriculture, doesn’t that tell you that is the way to go?” Adesina asked.

Ada Osakwe, chief executive of Agrolay Ventures, an investment firm, said she always asks of potential investments: “Is it lucrative, does it make money and does it make business sense? When I look at African agriculture, to me it ticks all those boxes.”

Lamenting the need to boost African agriculture is something that spans decades. “Africa has simply got it wrong a lot of times with agriculture,” said Adesina. “In the past it was the backbone of African economies, but when they found oil and gas they forgot all about agriculture.”

Africa may have the land but it imports about $35-billion a year in foodstuffs. “The land is basically sitting there idle and at the same time you have hunger and famine on the continent,” said Khaled Sherif, the bank’s vice-president for regional development, integration and business delivery. He said a large portion of this uncultivated arable land is in South Sudan, where the population is starving at present.

“Young people are going to be the future of agriculture in Africa,” said Adesina. “That is where you are going to make a lot of money. I firmly believe future millionaires and billionaires in Africa are not going to come from gas and oil but from agriculture.”

The AfDB estimates that transforming African agriculture will require investments of $30-billion a year. Currently, investments stand at $7-billion.

The bank’s role over the next decade will be to catalyse the additional finance needed. It will also increase its own investments in agriculture to $2.4-billion a year from $600-million.

Although on the development bank’s agenda, agriculture is not a development activity but a lucrative business, said Adesina. “The faster Africa looks at it like that, the better off Africa will be.”

With a pencil-thin moustache and polka-dot bow tie, Adesina is reminiscent of a high-school teacher desperate to get his unruly students interested in the subject. “Agriculture is cool. It’s about the coolest thing you can imagine,” he enthused.

But the new generation’s limited interest in farming is a looming problem. It is simply not a career choice to which African youth are drawn. Many would rather risk crossing the ocean to Europe, even if they end up at the bottom of the Mediterranean Sea. As a result, the average age of a farmer in Africa is 60.

Where young people are keen to get into farming, they are deterred by poor access to finance.

The AfDB says only 5% of global bank lending goes to agriculture as it is perceived as highly risky. Accessing finance as a young farmer is even more difficult.

“If you go to a bank and are 21 years old, they will tell you to bring your tax receipts for the past 40 years,” Adesina said. “The banking system is not well set up to support the ideas of young people.”

But the AfDB has a plan to counter this and Adesina says he knows it will work because he has done it before. During his tenure as Nigerian minister of agriculture, Adesina and his team “set up a system to de-risk lending. We put up a facility of $350-million and that was able to leverage $3.5-billion.”

The success of this will be replicated through AfDB funding across many African countries.

Millicent Omukuga, general manager of operations at Kenya’s Agricultural Finance Corporation, said data was key for farmers to access finance.

“We want farmers to have data and facts,” she said. “If a tea farmer comes to us, that farmer must know how many acres they have, how many tea bushes are optional per acre and how much each tea bush can be expected to yield. Without data they will keep on farming as a hobby.”

The AfDB has taken an additional decision to use the funds to back countries to industrialise agriculture and add value to the commodities they produce.

Sherif offered the example of Egypt, which is the world’s largest wheat importer and is anticipated to bring in 12-million tonnes this year. The fertile soils of South Sudan are not far from Egypt, but the imported wheat is grown in Kansas in the United States.

“Wealthy nations process what they have. Poor nations sell raw materials,” said Adesina. (See “Bitter deal on cocoa” below)

Finding the funding is only part of the solution to the agriculture conundrum in Africa.

Vera Songwe, the Western and Central African regional director for the International Finance Corporation, emphasised the challenge of leadership, politics and policy on the continent.

“Many of us believe there would be no famine if there was leadership and political clarity and vision,” she said. “Land is not about money. A lot of land reform is just about getting the policy right … Once there is clear direction on policy, people are willing to invest. The first partnership is that between the private-sector farmer and public-sector policymaker.”

Lisa Steyn was hosted by the African Development Bank at its annual meeting in Gujarat, India.


Bitter deal on cocoa

Côte d’Ivoire produces 42% of the world’s cocoa every year. Ghana produces another 19% and Cameroon produces a further 5%. West Africa alone may produce 66% of the world’s cocoa, but it manufactures almost nothing.

A 30% drop in cocoa prices last year took a toll on the farmers and the economies of the producing countries, but chocolate manufacturers enjoyed huge increases in profits — $120-billion — because of this decrease in a key input cost.

Clearly, Africa’s cocoa producers are price takers, not price makers.

The primary reason for the slump in prices was a bumper crop last year and again this year. The producing countries have no way to store the excess supply, with no warehousing facilities to speak of. And if they were to try to hold on to the cocoa, it would simply spoil.

When a bumper crop is expected, commodity markets short cocoa prices, which causes the price to fall even more.

“By having the ability to store the cocoa, you can influence the supply and the price,” said African Development Bank vice-president for regional development, integration and business delivery Khaled Sherif. “If we can limit supply, we can maintain prices to the advantage of cocoa producers.”

Côte d’Ivoire, Ghana and Cameroon could become a cocoa trade bloc that affects the world price for cocoa in the same way that the Organisation of the Petroleum Exporting Countries affects the world oil price, said Sherif.

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