Africa’s vast lands have for a long time not been exploited for agricultural production. In fact, 61% of the world’s unused arable land is found in Africa. Little effort is being made to exploit this vast resource to feed the continent. On the flip side, the Food and Agriculture Organization says 239 million people in the region were undernourished as of 2018.
Since long before the COVID-19 pandemic, these chronic food crises have been driven by a variety of factors, including economic shocks, climate, and conflict, according to Brookings Institute.
How Africa has failed to combine the advantage of available arable land with a ready market locally has been debated for long. There are other factors that have come into play including undeveloped infrastructure as well as poor distribution chains.
Reliance on governments for the growth of this sector has remained a pipedream despite the African Union, through the Maputo Declaration on Agriculture and Food Security affirming to commit 10 percent national budgetary allocation to agriculture development.
Agriculture in the region has mainly been seen as a form of feeding the population rather than a viable income earner capable of bringing economic liberation for rural as well as urban communities. In what almost sounds a contradiction, agriculture in Africa is the main income earner and employs the majority of the population. It contributes 16.2% of the GDP of Africa, and gives some form of employment to over 60% of the population.
The distinction however is that most farmers produce for their subsistence rather than engage in it as a full business venture. This explains why the continent spends $35 billion in foreign currency annually importing food, a figure that is set to rise to over $100 billion per year by 2030.
The food and agribusiness sector is projected to grow from $330 billion today to $1 trillion by 2030 according to Dr. Akinwumi Adesina, President of the African Development Bank.
The emergence of private entities, with global expertise and sometimes able to reach unused capital abroad is gaining momentum. Twiga Foods, for example, has managed to revolutionize the food retail sector in Kenya, currently reaching six cities with a reach of over 7 million.
In 2019, Twiga Foods raised $23.75 million in a Series B equity round helping it becoming Kenya’s only end-to-end distribution for fresh and processed food, sourcing from more than 17,000 producers and delivering three times a week on average to over 8,000 retailers.
Twiga operates a mobile-based, cashless platform to aggregate urban retail demand, offering thousands of small and medium-sized vendors convenient one-stop-shop ordering.
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The common denominator for companies making a revolution in Africa has been their ability to leverage technology while at the same time, able to venture out in the tricky fundraising rounds abroad. These companies have been able to work with private equity (PE) as well as capital funds to increase their efficiency.
Agricultural tech (agritech) is a $7.8 trillion industry with investments reaching $2.6 billion. In Africa in particular, agritech startups are showing impressive growth.
Financial institutions are reluctant to invest in the agriculture sector, as they judge the risks to be too high. Less than 5% of loans granted are destined for agriculture.
On the other hand, many individuals, especially employees of private and public institutions, have access to funds, which they could potentially invest in, in agriculture. These funds are currently being accessed by young entrepreneurs who use digital platforms to support farmers.
One of the avenues being used in this manner is crowdfunding. This is defined as the practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet.
Global crowdfunding financing reached $34 billion in 2015 and more than 70% of it was through lending, according to a 2016 report by research firm Massolution. Most crowdfunding financing still takes place in North America ($17.25 billion) and Europe ($6.48 billion), about 70% of the global total. The use of crowdfunding in Africa is on the rise. In 2015, it was reported $24.2 million was dispersed in Africa through crowdfunding sources, which is less than 1% of the global total volume and about 21 percent of emerging market activity.
Such a company that is using this model is Farmcrowdy a leading agritech company in Nigeria focused on providing the necessary tools and technology for farmers and agribusinesses to boost food production with better yields, lower costs, and smarter marketing.
The company has raised US$15m for 25,000 farmers and cultivated on over 17,000 acres of farmland. The products are varied, from chicken rearing to rearing bulls for the beef industry in Nigeria. The company has set a standard for agricultural crowdfunding.
Senegalese company BaySeddo uses digital channels to encourage inclusive and social investment in the agriculture sector. In the 18 months since its launch, BaySeddo has mobilized 125 million CFA francs (around €190,000), which has been invested in various agricultural projects, enabling Senegalese farmers to sow 136 acres of land, breed 10,000 chickens, and sell 220 tonnes of onions.
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In Kenya, Ifarm360 is a digital trust platform that empowers smallholder farmers to farm as a business, by connecting their high yield farming projects to crowd investors live from across the world, supporting production and market linkages.
After successful farm phases in rice, capsicum, garlic, and French beans value chains, Ifarm360 is brightening with overwhelming investor confidence. The farmers are vetted and trained to ensure quality production with Ifarm360 pre-agreeing product prices with established buyers hence guaranteeing stable prices.
According to Netherlands-based CTA the advantages of this kind of entrepreneurial approach are multiple: developing agricultural investment, local production and national business, and increasing skill levels and revenues.
“This approach demonstrates the continued value of getting younger people involved in agriculture: the people behind these businesses are generally aged under 35 and are aware of the potential that digital technology and social mobilization can bring to the sector,” CTA notes.
However, as more and more companies get into the agritech scene in Africa, there is bound to be more need for capital. Equally, companies have to factor in issues like climate change, political risks, and the ability to get reliable insurance cover for crop failure.
This explains why most of the crops being funded through this model are short-season one like vegetables and fruits rather than longer-term crops like maize, wheat, dairy, and commercial crops like coffee and tea.