Agribusiness in Africa

By ASV Client Relations

Agriculture is widely considered to be the mainstay of African countries as it plays a key role in economic development. For instance, the sector accounts for 14% of total GDP in Sub-Saharan Africa, and employs the vast majority of its citizens. 

Of essence, cash crops comprising coffee, tobacco, varied fruits and cotton – are important foreign exchange earners for the majority of African countries. In terms of the sector’s significance across the region, in terms of scope, employment-levels, and value addition – significant variations are observed.

Within lower-income countries such as Chad, the sector’s scope (i.e., over 50% of GDP), in conjunction with its employment-levels in relation to subsistence farming (i.e., over 75%) – tends to outpace the region’s average. Furthermore, this discrepancy bestows a negative impact on overall agricultural productivity and export earnings – in comparison to the continent’s mean average.

Regional Disparities

Regionally, the sector is particularly disparate. As such, in North and Southern Africa, well-established irrigation systems and savvy mechanisation endeavours have contributed towards higher net yields. This development shows that these regions tend to consistently outperform their peers as pertains to attained gross outputs, and is an occurrence that is comparable to their South-east Asian and Latin American counterparts.

Within wealthier regions, such as South Africa, the sector’s significance to the economy is, on average, minimal – standing at 3% of GDP, as highlighted by FAO (UN Food and Agricultural Organisation).

Economic Impact

In terms of the sector’s overall economic impact, its significance has been gradually declining over the years. In this regard, from 1990, for instance, agriculture contributed one-fifths towards GDP in Sub-Saharan Africa, whilst declining to 18% by 2000, and by a further 15% in 2015. Of pertinence, FAO additionally projects that this declining trend will account for a 13% drop by 2029, whilst concurrently accounting for a rise in trade and production.

As per employment figures, the sector has encountered a similar trend. A case in point is the World Banks estimations of declining employment figures by 62% in 1995, and 52% in 2020.

Future Prospects

These challenges notwithstanding, the region has experienced increased agricultural production and export frequencies – over the years. This positive trend has been attributed to the expansion of arable land and access to vital inputs such as fertiliser and high-quality vegetation. Hence, gross production value increased by 11% between 2010 – 2016, as forwarded by the AGRA (Alliance for a Green Revolution in Africa).

Promisingly, both FAO and the OECD predict an increase of 21% in agricultural and fish production between 2020 – 2029 in Sub-Saharan Africa.

Trade and Investment Opportunities

Overall, agriculture in general, and agribusiness in particular – will continue to play a significant role in the region’s economy. In this view, FDI in agribusiness ventures will continue to be a critical component in advancing the region’s long-term economic prospects.

This manifestation presents investors and enterprises from advanced economies with the following viable trade and investment opportunities within the region.