BUILDING A RESILIENT ECOSYSTEM FOR AGRIBUSINESSES IN AFRICA: FROM SURVIVING TO THRIVING THROUGH COVID-19
Globally, ecosystem stakeholders are establishing measures to respond to the socio-economic shock of COVID-19 on populations and businesses alike. More specifically, governments and some development organizations are at the forefront of devising and implementing action plans to buffer the impact of the pandemic on businesses. Given the current state of stagnation of most economies, governments, and development organizations in Africa have an even bigger issue to tackle: hunger not killing faster than COVID-19.
Predictions around the pandemic’s impact are alarming as the World Food Programme (WFP) estimates that the number of people facing acute food insecurity stands to rise to 265 million in 2020, a 100% increment from 2019. Within Africa, South Sudan had 61% of its population in a state of food crisis in 2019, while three other African countries also had at least 35% of their populations in a state of food crisis, including Sudan, Central African Republic, Zimbabwe. In West Africa alone, over 40 million people face food shortages in the coming months.
‘’In West Africa alone, over 40 million people face
food shortages in the coming months.’’
The structure of most African economies is such that agriculture is the largest contributor to a country’s gross domestic product (GDP). For instance, agriculture contributes to approximately 25% of the GDP in low-income countries, many of which are in Africa, as compared to only 1% of the GDP in the European Union. Despite agriculture and agribusinesses playing such an important role, the food import bill is expected to grow
from US$35 billion in 2015 to over US$110 billion by 2025. However, with the advent of COVID-19, most economies have closed their borders, slowing down cross-border activities and ensuring that most food-exporting countries to Africa have closed their borders, forcing many African countries to look inward in order to self-sustain.
As such, amid this global structural upset, there is an underlying opportunity for governments to shift the dynamic and develop their own ‘’agro-economies’’. Building resilience in the private sector will save many countries, especially those on the brink of a food crisis, and build a sustainable economic recovery.
According to the AGRA Africa Agriculture Status Report (2019), the private sector is crucial for food security as 80% of Africa’s food consumption is marketed and handled mostly through private operators. The report forecasts that SMEs (agribusinesses) will continue playing a pivotal role over the next 10–20 years (2030-2040). Therefore, as the businesses are innovating, re-inventing themselves and adapting to the ‘’new normal’’, governments have an important role to play in supporting and stimulating private sector investments – financial and institutional, in the food supply chains.
‘’… the private sector is crucial for food security as
80% of Africa’s food consumption is marketed and
handled mostly through private operators…’’
The current trends show that agriculture and food value chains are expanding, and agribusinesses drive this growth. However, the major challenges agribusinesses in Africa are battling include, among others, poor enabling environment (policies, infrastructures, innovations) and limited access to finance. Governments and development organizations should take ‘’In West Africa alone, over 40 million people face food shortages in the coming months.’’ ‘’… the private sector is crucial for food security as 80% of Africa’s food consumption is marketed and handled mostly through private operators…’’ the opportunity presented by the pandemic to build resilience for the sustainable growth of businesses and the economy at large.
Supporting Private Sector Innovation Through Institutional Investments and Reforms
Governments and Development Organizations across the continent must build resilient ecosystems and structures addressing the existing challenges of the private sector and developing policies that enable emerging innovations such as the digitalization of businesses. As mentioned, some of the top challenges faced by companies in agriculture in Africa include access to finance and a poor enabling environment. It is imperative that governments make it a top priority to ensure that supply chains are rebuilt to be as resilient as possible; they have two shovel-ready courses of actions aimed at addressing existing challenges:
• Enhance financial resilience by promoting policy reforms: Governments and development organizations have to develop and effectively utilize financial instruments to support the restructuring activities of agribusinesses. Evidence from the World Bank’s enterprise surveys
details how poor access to finance, electricity, and other infrastructure by MSMEs, in addition to policy constraints, are debilitating investments. Some organizations such as the African Development Bank (AfDB) are leading the charge with initiative such as their COVID-19 relief fund for Agriculture. The AfDB developed The Feed Africa Response to COVID-19 (FAREC) to
pave the way for a comprehensive intervention that will build resilience, sustainability, and regional self-sufficiency in Africa’s food systems and help farmers cope with coronavirus related disruptions to the agricultural value chain. FAREC forms one part of the Bank’s COVID19 Response Facility (CRF) of up they have pledged to finance with $10 billion.
Improve enabling environment for doing business in the sector: Prior to COVID-19, African countries had the lowest ratings for doing business in Africa, particularly in the agriculture sector. According to the World Bank – Enabling the Business of Agriculture (2019), fourteen Sub-Saharan African countries are among the 20 lowest-scoring countries in terms of
favourable regulations for farmers’ agricultural activities. The report argues that countries with better regulation experience, on average, higher rates of food security. According to the AGRA report, key support measures from the government should include public investment in infrastructure, policies, and regulations to reduce transaction costs and increase capacity to manage supply-chain risks. As such, the government can ensure a sustainable food system by providing adequate support to the private sector.
On the other hand, the current trends indicate that, at the core of restructuring their business models, digitalization will become an integral part of doing business across all sectors, including the agricultural sector. As such, development organizations and governments have to develop ecosystem policies that conform to the evolving trends of digitalization for businesses. According to a Statistica report, the value of the African eCommerce industry reached USD 16.5 billion in 2017 and forecasts that industry revenues will reach USD 46 billion by 2024 at a Compound Annual Growth Rate (CAGR) of 14.2% between 2020 and 2024. However, this growth rate is expected to be further compounded 2020 with the increased global demand for digital services across several industries. including the food sector. Governments have to put policies and measures in place that enables convenient sharing of new digital revolutions the continent is experiencing. Some key policy reforms to consider include:
• Food quality control through enforced standards to avoid food fraud: With the revolution of the food marketing shifting from the open market to a more structured market in the form of supermarkets and e-supermarkets, there has been a growing concern about food fraud.
According to the United States’ Grocery Manufacturers Association, food fraud affects approximately 10% of all commercially sold food products and costs the global food industry between USD 10 billion and USD 15 billion annually. Regulatory bodies have had to put systems in place that enable the control of the food sold through e-platforms. For instance, the National Agency for Food and Drug Administration and Control (NAFDAC) oversees controlling food and drugs at the retail level in Nigeria. The organization, and its counterparts in other African countries, need to develop control measures for digital service providers in the food sector to protect consumers.
• Sensitization on ethics for digital marketing of food products: Regulatory buddies must develop ethics and code of conduct for the digital marketing of food items. In addition, there is a need for sensitization on ethics to be maintained by the food providers.
There has been a rapid growth of SMEs in the African agricultural sector. This offers governments and development organizations, across the continent, a unique opportunity to restructure and build resilience for sustainable socio-economic development and avert the looming food crisis.