The world’s population is constantly growing, and with it the interest of investors in Africa’s arable land. The continent has vast untapped potential – but can local producers compete with foreign companies?
The wind whistling through Berlin on Monday (19.01.2015) was icy. Three Italian tourists carefully navigated the frozen puddles on the sidewalk as they scurried to the Brandenburg Gate, ignoring the black limousines gliding past them in front of the exclusive Adlon Hotel.
These limos were unloading delegates to the day-long “Agribusiness in Africa” conference, which aimed to bring together entrepreneurs and development experts from around the world.
They hoped to answer the question: If African governments fail to invest in the continent’s youth and infrastructure and provide longer-term loans for small and medium-sized businesses, is there a danger that others will reap the fruits of Africa’s agriculture?
A 2013 Stanford University study suggests Africa is home to 60 percent of the world’s uncultivated land suited for crop production. But Africa accounts for only 3 percent of global agricultural exports. As the world’s population continues to expand, investors have started looking to the continent’s soil in search of profits.
“The advent of the agribusiness phenomenon is a huge opportunity for Africa,” Fadel Ndiame said. He works for AGRA, the Alliance for a Green Revolution in Africa. The organization helps smallholder farmers improve their skill set – something they desperately have to do if they want to compete against large foreign companies moving to Africa.
“I think we need to use the partnership with Europe as an opportunity rather than as a punishment or something you do because there’s an ultimatum,” Ndiame said.
Ndiame was referring to the free trade agreements between the European Union and several African countries that were signed just before a deadline last year – after which European governments had threatened to impose higher import tariffs on African products.
Opponents of the agreements, known as EPAs, were afraid that companies from Europe would displace less competitive African producers. Fadel was more optimistic, saying that joint ventures could provide a solution to overcome African companies’ productivity gap, which might otherwise make it hard to compete with European firms on the open market.
More profit for small farmers
Fadel said he believes foreign capital and expertise could help promote local development. Bruno Wenn of the German development bank KfW agrees. Wenn, who has worked in various development projects in Africa for over 30 years, says that African governments need to do more to develop regional markets and to support the medium-sized companies that have begun to develop in the region. Like their counterparts in Germany, these firms could become the motor that could drive development, innovation and jobs.
“Banks in a lot of African countries are reluctant to provide long-term finance for mid-sized companies,” he said. “They are ready to provide short-term capital but with short-term capital you cannot go for long-term investments. This is unsustainable.”
A few steps away is Shingirirai Nyamwanza. The 34-year-old is the managing director for Africa of Global Clover Network, an NGO based in Tanzania, which seeks to inspire young people to choose agriculture as a career path. Until recently, this had been hard work, she said.
But seven or eight years ago there had been a shift in young people’s perceptions: “Once’s there’s a dollar sign, people are going to gravitate toward it.”
And this, she said, is a hugely positive development. “We talk about 60 percent of the world’s arable land being in Africa, so if you don’t engage African young people to do that, guess what, they’re going to send other people to capitalize on this. So again in 30 years, you have a population that’s disenfranchised.”
African governments, she said, need to drive the agribusiness agenda and make it attractive for young people. “Or else, you’re looking at your second or third colonization of Africa. If you don’t own your own land as a people, there’s not much you can leverage. And you get into all sorts of other political and social issues.”