A lack of investment in agriculture and the technology to support effective productivity will harm Africa’s potential to be the world’s breadbasket.
Given the impact on food supplies from Russia’s war on Ukraine, Covid-19, and rapidly rising global temperatures, the productivity of African food systems is more critical than ever.
By 2050, many developed countries in Europe and East Asia, which are now among the most productive, will already be ageing. According to the UN, Italy and South Korea will have 13 million and 10 million fewer people of working age. Many countries with growing, working-age populations will be in Africa, but these are the same countries that produce the lowest yields of food per hectare globally.
60% of employment
This is despite the fact that the farmer is at the heart of the African economy. According to the World Bank, agriculture accounts for around 60% of employment in sub-Saharan Africa. If Africa can raise its productivity levels, that future demographic shift will drive a virtuous cycle of economic growth, job creation, rising incomes, and food security.
Growing working-age populations without productive jobs or food security is a recipe for discontent.
Africa’s yield gap, the difference between average farmers’ yields and those of the most productive farmers, is 90%. This means Africa could feed itself, and become a major food exporter if the average farmer could invest in increasing their yield to levels of the most productive.
This would require farmers to gain access to improved seed varieties, fertiliser, and tools to increase productivity.
According to the African Development Bank, Africa’s agriculture market could increase from $280bn in 2023 to $1trn by 2030. We know it can happen. In 1980, Vietnam’s cereal yields were similar to those in East Africa today, just below two tonnes per hectare. Today, Vietnam’s yields have tripled.
A key problem is agricultural finance. Simply put, African banks are not good at lending to farmers. There is a glaring data disconnect: farming contributes 29% to total African GDP but only receives 3% of bank loans. This agri-financing gap is estimated at $240bn for Africa as a whole, and $13bn in East Africa’s core agri-markets with dairy, coffee, oil seeds soya bean and sunflower, maize and potatoes accounting for 44,000 farmers.
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The funding deficit has persisted for many years as risk-averse banks largely avoid lending to small farmers, or demand farmers pledge their land – worth many times the loan value – as collateral. This deters loans for business investments that could make an enormous difference to agricultural output.
More farmers are reachable through smartphones and mobile money accounts, making finance more accessible. Mobile money accounts across Africa grew from 30m in 2012 to 560m in 2021. Such transformational growth has enabled new digital lenders to offer financing to small farmers, empowering them to make crucial, time-sensitive investments and supercharge productivity.
Loan qualification
Trailblazing firms such as Ugandan fintech, Emata, are providing solutions. Emata believes farmers should be applauded as entrepreneurs and producers. Its solution is to partner with agricultural cooperatives and allow farmers to use their production track record with the cooperative as the evidence they need to qualify for loans.
Rather than struggle with loan sharks, farmers use a five-minute application process on their phones. With that finance, they buy improved seeds, fertilisers or other tools to raise their productivity. The approach has achieved a 95% repayment rate.
Innovators such as AcreAfrica and Pula are revolutionising weather-linked insurance, and others are linking farms to markets through technology, bypassing inefficient middlemen.
But African entrepreneurs and innovators face obstacles. Despite the aforementioned demographic realities, Africa still only receives around 1% of global venture capital financing, and that which arrives is highly concentrated in a few tech hubs.
Take the case of Waddah Hago, a young agricultural engineer who saw that farmers in rain-fed areas of Sudan couldn’t apply seeds, fertilisers or pesticides during rainy seasons because tractors would get bogged down in the mud. He launched a drone-based company to provide land drainage advice and spraying services at a fraction of the cost, but could not get financing to scale up.
These tech-led approaches replace the centralised, top-down developmental approach with localised, economically sustainable, and scalable African solutions from the ground up.
By realising the huge potential of African agriculture, and empowering farmers through technology, the yield gap can be tackled, and a virtuous growth cycle can be established. This will benefit Africa and, increasingly, all of us.
