The agriculture sector employs more people in Africa than any other industry and it also accounts for almost half of the continent’s GDP.
Yet inefficiencies in the sector have held back production in the sub-Saharan African region, hindering the sector’s growth and stymieing the industry’s ability to achieve cross-border trade and long-term food security.
This represents a fairly significant socioeconomic challenge, but it also provides private equity investors with an opportunity to support one of the continent’s biggest industries while contributing to job and wealth creation.
For investors, returns from the farming industry can be enhanced through investment and implementation of modern farming techniques.
In turn, successful agribusiness investments stimulate growth through the access to new markets and the development of a vertically integrated supply chain in the form of food processing, packaging and assembly, transportation, distribution and retailing.
Most importantly, well-targeted investments, alongside close collaboration between governments, donors, entrepreneurs, the international community and investors can make a significant and lasting contribution to Africa’s 2050 goal of being able to feed itself, as referenced in the African Development Bank’s Feeding Africa action plan.
Businesses that succeed after investments in their production and processing capabilities go on to create jobs and stimulate the wider supply chain.
Most importantly, they help to reduce Africa’s crippling reliance on food imports.
A March 2017 article by the Rockefeller Foundation says that one third of the world’s food, “never makes it from the farm to the table” and in developing countries, about 40% of produce is lost immediately or soon after harvest because of poor farming techniques and technologies. Inadequate storage facilities, poor processing, weak transport networks and poorly structured markets all work against Africa’s ability to feed itself, and most fruits and vegetables never make it to market for these reasons.
These facts are even more tragic in the context of the famine in South Sudan. The UN has also warned of a high likelihood of famine in Somalia and Nigeria.