Transforming our economy through agro-industrialisation
Agriculture is the backbone of Africa’s economy. For 70 per cent of the population, it is the primary source of livelihood and accounts for about 25 per cent of the continent’s GDP.
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However, Africa’s agricultural productivity and yields are among the lowest. Yields in African agriculture are less than half of those achieved in Asia.
Although the volume of agricultural production has doubled over the past three decades, the increase is largely on the extensive margin, owing to the expansion of the total area cultivated as opposed to increased factor productivity.
Furthermore, the vast majority of agricultural activities are at subsistence level with farm sizes remaining small with more than 85 per cent of land holdings less than two hectares.
These predominantly subsistent smallholder farmers use rudimentary farm technologies and inadequate levels of modern inputs.
Why agro-industry?
From the point of view of sustainable economic growth, food security and poverty reduction, the contribution of the agro-industry is paramount.
Studies show that due to their forward and backward linkages, agro-industries have higher multiplier effects in terms of job creation and value addition.
Agro-industry stimulates businesses well beyond the closest links with its direct input suppliers and product buyers. It has the potential to bolster a range of ancillary services and supporting activities in the secondary and tertiary sectors.
Furthermore, since most agricultural products are bulky and perishable, many agro-industries and small-scale agro-processing enterprises must be located close to sources of raw materials.
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Their impacts on rural off-farm activities, employment and poverty alleviation in general are, hence, enormous. The ever-increasing demand for value-added food and agricultural products, both domestically and globally, presents a huge opportunity for the agro-industry as a formidable sector in Africa.
Demand for food has been increasing due to population growth and increased incomes. Unfortunately, Africa is still a net food importer.
Despite the increase in volume of production and the vast arable land that the continent is endowed with, the agricultural sector is yet to satisfy the increasing demand for food.
Urbanisation and population growth present an enormous opportunity for the proliferation of agro-industries in Africa.
It offers huge market opportunities for the food processing industry. The agro-industry, in particular the food packaging and processing subsector, could fill the persisting gap between the supply and demand for food.
Moreover, urbanisation and population growth imply access to cheap labour for the medium and small-scale agro-businesses and enterprises.
The African continent, particularly Ghana, has all the right ingredients for the development of agro-industries: untapped agricultural raw materials, a cheap and readily available labour force, huge demand for agro-processed commodities particularly of processed food and garments, as well as changing global sentiment towards Africa’s manufacturing.
Hence, with the right policies and political will, Ghana can transform its economy through agro-industries.
Challenges to agro-industrialisation
Availability of physical infrastructure is key for the development of a competitive agro-industry in Africa.
Access to infrastructure, such as roads and railways, energy and electricity, water and communications at the lowest possible cost is critical for the development of globally competitive agro-industries.
Interruption in electricity or lack of transportation infrastructure, for instance, seriously disrupts the whole supply chain and entails substantial production cost.
Access to finance is an archetypal problem that suppliers of agricultural raw materials, mainly small-scale farmers, face in Africa.
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One of the most important factors that hinder farmers from improving their farm practices through adoption of modern technologies is their access to finance.
Limited access to international and regional markets hinders the development of the agro-industry in Africa. Lack of entrepreneurial and managerial skills is also a key constraint that needs to be addressed.
Despite the significant role that agro-industries play in the economy, many of the activities pose serious environmental effects, which if left unchecked, could create environmental pollution, emissions and the use of dangerous machinery which are safety and health hazards, including discharge of organic or hazardous wastes into water supplies and emission of dust and gases that affect air quality and produce toxic substances.
If growth momentum is to be sustained, Africa has to undergo proper structural transformation. In light of the low performing agricultural sector and the minimal size of manufacturing and expansion of services mainly in the non-tradable sectors, the agro-industry could be the next natural stage that could help the continent achieve structural transformation and propel it along the global value chain.
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Policy recommendations
In order to materialise Africa’s potential for agro-industrialisation, policymakers and development practitioners need to focus on getting the fundamentals right.
Emphasis should be placed on increasing competitiveness through closing the infrastructure and skills gap, reforming regulations and institutions, deepening value chains, attracting foreign direct investment through preferential taxes, and creation of industrial clusters for agro-allied industries.
Then the bank recognises that agriculture can make an impact in African economies only when its production and distribution chains are substantially developed, its links to markets reinforced, and its transition to business-oriented activities accelerated.
Increasing the number of African youth accessing agribusiness employment and economic opportunities should be another pillar of the bank’s current agro-industrialisation agenda.
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To champion gender mainstreaming and woman empowerment, the bank must aim at promoting female agribusiness entrepreneurs along the value chain, through improved access to financing and credit, and funding of agricultural infrastructure projects led by women.
The writer is the Registrar, Chartered Institute of Agriculture, Ghana
Email: [email protected]