Africa: The Answer to Global Food Security

Search Koios
Tags
Koios Subjects
Subscribe to the Koios Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Archives

Africa: The Answer to Global Food Security

Africa Food SecurityFor many people, especially those of a certain age, Africa is permanently associated with hunger. Our minds retain indelible images of malnourished children with swollen bellies, parched landscapes, and gaunt and dying cattle in Biafra, Sudan, Ethiopia, and the Sahel, to name just a few of the areas afflicted with famine over the past 50 years. It may therefore come as a surprise that Africa probably holds the key to feeding the two to three billion people who will add to the world’s population by 2050.

A recent report by the consultancy PwC makes precisely this argument. Companies from an increasing number of countries – principally China, but also E.U. countries, the United States, India, Malaysia, Egypt, and the Arabian/Persian Gulf countries – have leased or purchased huge tracts of farm land in Africa and have also set up processing facilities for commodities like cocoa, cotton, palm oil, rice, and maize. Africa has an estimated 60% – about 1.4 billion acres – of the world’s uncultivated, arable land, fertile soil, water, and a tropical climate that allows two crops per year. Agricultural productivity is low, so even modest improvements in farming techniques, irrigation, fertilizer, pest control, and seed technology can lead to huge increases in crop yields.

Africa’s population is set to double, to 2 billion, by 2050, but with the right kind of investment it should be able to feed not only itself but much of the rest of the world.  The PwC report points out that the collapse in oil prices may prove to be the tipping point for a resurgence of African agriculture, especially in oil- and gas- producing countries many of which swung from net food exports to a dependence on imports during the resource boom years: “The collapse of oil prices and the concomitant effect on the exchange rates of these nations suggests a unique opportunity for agriculture to redress some of these imbalances. Africa has a US$35bn agriculture deficit and Nigeria alone may account for some 15% of that deficit. Exchange rate devaluations obviously push up the cost of food to domestic consumers but, equally, they can also boost the returns of domestic producers and create opportunities for exporters.” Depreciating currencies also drive up the cost of imports, lending urgency to governments’ efforts to spur agricultural production.

Investment in African agriculture is not without its challenges. Infrastructure is often poor, and difficulties with transport and storage can lead to big post-harvest losses. Climate change may come to affect Africa more than any other continent, increasing the frequency and severity of droughts.  Land ownership and usage rights are often ambiguous, and it is not unheard of for governments to force local farmers off the land in order to sell or lease it to foreign investors. And these investments, even with the most scrupulous attention paid to local occupancy rights and equitable treatment of farm workers and out-growers, will be painted in some circles as a vicious land grab.

The opportunities, however, are there, and growing. Although agriculture so far accounts for only 5% or so of the $15b in private equity investment in Africa from 2008 to 2014, PE funds have begun to dedicate more resources to it, including giants like Carlyle and Blackstone. The size of deals in agribusiness tends to be much smaller than in infrastructure, mining, or energy, but in terms of impact and profitability, especially in the current economic climate, they are likely to out-perform.

 

About The Author

Managing Partner of Koios Associates, an advisory firm specialized in doing business in emerging and frontier economies. Over 25 years of experience in more than 60 countries in Africa, Asia, the Caribbean, Europe, North America, and the Middle East.

Personal Website



Have your say!

Leave a Reply