The agricultural power of Africa
In its latest flagship report, ‘How global companies can help Sub-Saharan Africa reach its Food and Agricultural potential’, Rabobank has called for international agri-businesses to increase their engagement with the region, by acting as significant catalysts in Africa’s agriculture development.
Rabobank sets out four zones of opportunities and five keys to success to improve Africa’s farming capacity and help it meet the world’s increasing need for food.
Presented in Washington yesterday by Rabobank executive board chairman, Piet Moerland, during the Rabobank Duisenberg Lecture held in conjunction with the Annual Meetings of the IMF and World Bank, the report comes at a time when rampant increase in demand for agricultural commodities and stagnating supply growth have created an era of scarcity and higher price volatility. At the same time the gap between Africa’s actual and potential agricultural output is widening.
In a statement, senior Rabobank analyst and report co-author, Bill Cordingley, said: “With recent developments and fewer growth opportunities in the global F&A sector, we believe that global companies will need to look to markets such as Africa to sustain future growth rates. There are increasing numbers of global F&A companies engaging with Africa, as illustrated in this report, but they need to go beyond the initial investment and knowledge building stage where many of them stop. The more challenging step is to identify specific value chain opportunities and credible local partners who can co-invest or become a supplier. Nothing works in Africa without partnerships or supply chain alignment. But for those companies that get it right, the rewards will be considerable.”
Rabobank believes many more agri-businesses need to change their mindset and take steps now to commit to Africa on a long-term basis. In both helping Africa reach its farming potential and addressing the increasing requirements of Africa’s emerging urban consumers, global farming companies will need to adapt their business models to the circumstances on the ground. But there are some overall principles that Rabobank identifies both in terms of where global companies should focus their efforts and the keys to how they can deliver a successful outcome. The report identifies four zones of opportunity where global food and agriculture companies should focus:
- Increase production sustainably – address the yield gap in existing farming operations, expand operations where possible and develop new land resources
- Add value by building sustainable supply chains for all players – reduce risk, improve productivity and access to capital and markets; minimise waste and locate processing close to production
- Become regionally and globally export competitive – utilise market access and insights; unblock infrastructure bottlenecks. (In particular, Rabobank identifies export opportunities for African cocoa, coffee, cashew nuts, palm oil and sugar)
- Address African consumers’ increasing and changing requirements – the local market will be key to success
Rabobank’s report also identifies five keys to success in creating a sustainable African strategy:
- Adopt an inclusive approach – build trust, mutual respect and create mutual value along the value chain, respecting local rights and interests
- Make a long-term commitment –demonstrate trust by co-investing in infrastructure and supporting local market development
- Establish supply chain partnerships – develop robust, multi-year supply agreements that align interests along the chain, combining local and global approaches and expertise
- Bring unique capabilities, not just capital – include access to technology, expertise, markets, customers and leadership so global companies are “needed” not just “used”
- Reduce risk in the supply chain and secure finance – facilitate supply chain finance, and improve prospects for commercial finance being made available to local and regional food and agricultural companies.