Agriculture Investment In Africa

African agriculture has immense untapped potential. The World Bank projects the agriculture sector could be valued at $1 trillion by 2030 (4). It plays an unparalleled role in sub-Saharan Africa with the sector constituting 23 percent of the region’s GDP and farmers forming 60 percent of the population (1). The agricultural sector also contributes to food security within the region, counteracting some of the negative consequences associated with climate change and the rising food demand resulting from population growth (2).

 

Despite the importance of agriculture, the sector remains under-funded with farmers adversely affected. Supply chains linking primary agriculture and the processing sectors in sub-Saharan Africa, for example, remain fragmented with inputs passing through at least three intermediaries before reaching the farmer. This has led to an average of 20 to 50 percent mark-up on import prices across major agricultural inputs (1).

Figure 1: Percentage of agricultural expenditure in terms of total GDP

Limited public agriculture investment in Africa has also exacerbated the issue. For instance, the African Union’s Comprehensive Africa Agriculture Development Programme (CAADP) has set a target of 10% of GDP for public expenditure in agriculture yet actual spending has been significantly less in many countries such as Guinea-Bissau (0.15%) and Malawi (3.61%) (5). Debt financing has historically also been difficult to attain with nominal interest rates amongst the highest in the world at above 20 percent in 2019 – resulting in less than 10% of agricultural producers in Africa having access to credit funding (3).

 

Private capital has the capacity to plug this funding gap and consequently alleviate food security concerns in the region by increasing food producers’ access to the capital they need to invest in food production and processing. Brigg Macadam helps owners of agribusiness projects raise this crucial debt and equity financing from institutional lenders and investors. We work with project owners to make their projects investor-ready, put in place financing strategies, identify and approach the right institutional investors, and secure favourable investment agreements.

Reference:

(1) McKinsey. (2019) https://www.mckinsey.com/industries/agriculture/our-insights/winning-in-africas-agricultural-market

(2) Financial Times. (2018) https://www.ft.com/content/3316885c-b07d-11e8-87e0-d84e0d934341

(3) United Nations. (2013) ‘Agriculture in Africa’. https://www.un.org/en/africa/osaa/pdf/pubs/2013africanagricultures.pdf

(4) The World Bank. (2013) ‘Africa’s Food Markets Could Create One Trillion Dollar Opportunity by 2030’. https://www.worldbank.org/en/news/press-release/2013/03/04/africas-food-markets-could-create-one-trillion-dollar-opportunity-2030
(5) Shimeles, A., Verdier-Chouchane, A. and Boly, A. (2018) ‘Introduction: Understanding the Challenges of the Agricultural Sector in sub-Saharan Africa’. https://link.springer.com/chapter/10.1007/978-3-319-76222-7_1

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