Have you been thinking about starting an African business in agriculture? You may be one of the many people who associate more traditional economic activities in Africa straight away with agriculture. Images of women who are bending to the ground to weed their plots – children wrapped around their backs; farmers who proudly sell two sacks of produce on the local market; failed crops after another late arrival of the raining season leaving thousands and sometimes millions food insecure.
These images of Africa’s agricultural sector still stand today, but what is shifting is the outlook for the sector in the context of Africa’s growing economies, and frankly, the prospects are simply phenomenal! In order to make informed decisions and consider highly profitable activities in Africa you simply need to be informed about Africa’s agricultural sector. You may not even have thought about ‘farming’ as a profitable or possible business venture – you know what: you should.
Here are some golden facts you should consider:
1) Tap into a sector that will feed Africa…..and the world.
Africa has the fastest growing population in the world – and every single person needs to eat several times a day – every day. The demand for food will always be there and it will grow immensely. No other sector in African can possibly match that. But it gets even more interesting. According to the World Bank, around 60% of the world’s arable land that is currently not under cultivation is found in Africa. Did you hear that? 60% on a single continent! With an ever growing world population, many predict that Africa will become the world’s food basket. Well, not everything in this outlook is ethical (the world rarely is) and land grabbing by foreign companies – facilitated by African states – is already happening at the expense of millions of Africans. So you need to make sure, you are leading a responsible business. But coming back to our point: With a business in agriculture you will not only be tapping into Africa’s growing demand for food, but also into a market that is globally on the rise. What an incredible outlook!
2) AgriBusiness is becoming hip & trendy
The success stories of new businesses in the agricultural sector are increasing and word is spreading fast about the great potential in this sector. As a result, agricultural entrepreneurship and commercial farming are becoming increasingly trendy – even among the young. In Kenya for example, ‘doing agribusiness’ is becoming hip; an increasing number of university students are skipping the job search to build agribusinesses instead. Join the trend.
3) Great prospects for agricultural business financing
There are many organizations and companies that offer access to financial capital (you just need a strong Africa business concept that works!). Among them are banks, development institutions, and private equity firms. Many private equity firms that operate in Africa have now included agriculture as a key focus, development institutions are supporting private sector initiative in agriculture as part of the wider context of poverty reduction in Africa, and some banks are showing an increased readiness to make loans available.
In Nigeria for example, lending in that sector has sky-rocketed:
Speaking at the International AgrikExpo in Lagos in June, the Agricultural Minister Adesina said the financial sector is seeing the profitability and viability of the sector and are lending more than ever: “Bank lending to seed companies and small agricultural input retailers rose from zero in 2011, to $ 10 million in 2012 and $53 million in 2013. Bank lending to fertilizer companies rose from $ 100 million in 2012 to $ 500 million in 2013. It is remarkable that the default rate has been zero percent over the past two years.” (quote Vanguard)
4) These countries drive the sector forward like no other
Agriculture is without a doubt a top sector for doing business across Africa and is a development focus for most African governments. Taping into a sector that is part of a country’s national development agenda is always helpful, as it usually makes the operating environment more conducive for you. But there are some countries, who stress on agriculture like no other. They are: Nigeria, Ethiopia, and Angola, while a significantly growing commitment can also be witnessed in Zambia and Mozambique. Include those countries in the top of your list if you want to do business in agriculture.
5) Become rich, while fighting poverty
This is a difficult statement for me to make as a food security expert who has worked in rural development in a charitable context for over 12 years. But you know what, it’s a true statement and a healthy and ethical one to. And here is why: Input, motivation, and efficiency are increased among various stakeholders when they all benefit out of their involvement. Important is that we build responsible businesses where small farmers or employees receive the share they deserve. Building successful businesses that create hundreds and thousands of jobs is a crucial aspect in Africa’s ongoing fight against poverty. And looking at some of the new African-lead enterprises, I see success stories and gains for the wider community, which many governments and NGOs were simply unable to build. In fact, just look at the many businesses that earn a fortune by enabling millions of Africans access to ICT or micro-credits, which in turn allows poverty-stricken segments of Africa’s societies to be empowered and even start their own businesses in the agricultural sector.
I personally believe that doing business in Africa’s agricultural sector is both profitable and meaningful. Go for it!
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