Africa needs to close a persistent gap between the perceived risks of agriculture and its investment potential if the continent is to build more resilient food systems and unlock jobs, according to agribusiness executive Jane Acilo.
Only about 4 percent of investment flowing into Africa goes to agriculture, highlighting what Acilo described as a mismatch between investor perceptions and the sector’s potential.
“The biggest barrier preventing capital from reaching farmers would be the risk-to-return perception gap,” Acilo said in an interview on the sidelines of the Africa Food Systems Forum.
Investors often view African agriculture as a high-risk, low-return proposition because of political instability, currency volatility and other challenges, she said. But the absence of consistent mechanisms to price those risks can result in a broad-brush assessment of the continent, pushing up borrowing costs and limiting access to finance.
Dollar-denominated lending can also be poorly suited to farmers whose revenues and cash flows are largely generated in local currencies, Acilo said.
Forums such as the Africa Food Systems Forum can help change that perception by giving investors a clearer understanding of opportunities across the continent, she said.
From Farms to Factories
Beyond financing, Africa needs to move more of its agricultural production up the value chain, according to Acilo.
Smallholder farmers will struggle to capture the full economic benefits of agriculture without stronger infrastructure, access to markets, inputs, technology and policies that protect producers from being squeezed by intermediaries, she said.
Governments have a central role in providing infrastructure and creating markets, while farmer cooperatives can strengthen producers’ bargaining power and enable them to operate at greater scale.
The larger opportunity, however, lies beyond primary production.
“The greatest untapped opportunity in the value chain would be in industry, what I call value addition,” Acilo said.
African countries frequently export raw agricultural commodities only to import processed products at higher prices, she said. Building processing industries around locally produced commodities could retain more value within African economies while creating employment for young people and women.
Factories and other industries linked to agriculture could generate “millions of sustainable jobs,” she said.
Regional Specialization
Acilo also called for greater coordination among African countries to develop regional specialization in agriculture.
Rather than having individual countries attempt to produce a wide range of commodities, African governments could identify what grows best in different regions and develop policies around those comparative strengths, she said.
She cited the possibility of East Africa specializing in coffee and West Africa in cocoa as examples of how regional production could be organized around areas of strength.
Such coordination could allow Africa to produce at greater scale and reduce its exposure to external disruptions, according to Acilo.
“If we can have those kinds of policies set in place, it provides a good base for us to be able to tap some of the opportunities as a collective,” she said.
Turning Potential Into Action
The continent still faces uncertainty over how quickly governments can translate discussions into coordinated policy. Acilo said she could not identify a single factor preventing such decisions, but argued that bringing policymakers and private-sector players together is an important first step.
She said the growing focus on Africa’s food systems provides an opportunity to turn those discussions into concrete action.
“I’m hoping that a lot of decisions that take place here are implemented across Africa because the potential is really great for Africa,” Acilo said.
For Acilo, the opportunity is ultimately about moving Africa beyond its traditional role as a supplier of raw commodities and toward greater control of the food-system value chain from production and processing to regional markets and industry.
“Africa really is the future and we really have to take the bull by the horns and be able to dominate in the food system value chain,” she said.
