Africa exports over $35bn worth of agricultural products to other regions of the world but only around £8bn intra-regionally. This can change with the AfCFTA, which will enable the private sector to play a far greater and more beneficial role in the production and distribution of food. Neil Ford investigates.
A great deal is written about food relief programmes and support from the multilaterals in helping to tackle short-term food shortages – and rightly so. The human cost of failing to implement emergency measures can be devastating.
Yet long-term solutions, such as reducing trade barriers, improving access to agricultural inputs and developing new transport infrastructure all have the same goal in common: the creation of a stronger and more nimble private sector.
Venkataramani Srivathsan (Sri), Managing Director and CEO of Africa and the Middle East at Olam Group, told New African that the continent had exceeded expectations in managing the Covid crisis but few countries had done well in terms of food security because of poor infrastructure.
Yet despite lockdown measures, most companies had maintained their factory and cultivation operations, with most disruption at the level of logistics and distribution, he said.
However, Sri noted that the pandemic “has provided all of us an opportunity to build back better and also has brought in a greater realisation of the importance of environmental standards”.
Pressure was already growing on large companies to enact improved environmental and workforce standards with suppliers across the food supply chain. Corporate social responsibility strategies need to be put at the heart of their operations, permeating all of their activities, rather than ringfenced in local development budgets.
Sri said that genuine environmental improvements are difficult to achieve but possible “if all the stakeholders – public, private and communities – collaborate”.
An integrated and responsive private sector needs a wide variety of players, from smallholder farmers to SMEs and on to big corporations, to create robust supply chains. The UN’s Food and Agriculture Organisation (FAO) estimates that up to 80% of Sub-Saharan Africa’s food supply comes from smallholder farms. Most currently supply fairly narrow markets: either consumers within their immediate area or a defined export market beyond Africa. Enabling them to target a wider range of markets requires trade with other parts of the continent to be opened up.
The private sector’s role in exporting food and agricultural products beyond Africa is particularly well developed: the continent exports $35-40bn in food products a year. The South African citrus fruit, Eastern African coffee and tea, and West African cocoa and pineapple sectors are all well developed, with smallholders, huge farms, marketing boards and logistics operators all playing key roles in exporting produce to European and Asian consumers.
Yet intra-continental cross-border food trade is worth just $8bn a year. As we discussed on page 21, the lack of infrastructure limits intra-African trade, while both private and public sector investors are reluctant to develop the required rail, road, storage, irrigation and marketing infrastructure because of the limited size of intra-African agricultural trade. The African Continental Free Trade Area (AfCFTA) could be the key to breaking this negative cycle. Just as the erosion of tariff and non-tariff barriers drove trade in food products within the European Union, the same process can boost trade between African states.
Agricultural producers across the continent embody entrepreneurial spirit when opportunities present themselves, so governments need to ensure that the free trade area becomes a reality.
Countless articles have been written on the AfCFTA coming into effect in January but it would be a mistake to regard its creation as an event. Rather, it will be a long process of negotiation between government officials, as duties are first reduced and then hopefully removed entirely.
The benefits of more integrated food supply chains, says Sri, are enormous for food security. Drought, flood and pest infestations in one part of the continent are usually accompanied by ideal growing conditions elsewhere.
A greater focus on intra-regional trade can ensure that more consumers have access to a wider range of produce from more suppliers, evening out food supply problems and stabilising prices.
Some investors are very enthusiastic about the AfCFTA’s potential, including South African water infrastructure firm Khato Civils, which now plans to expand its operations across the continent.
Chairperson Simbi Phiri said: “AfCFTA gives us a chance to have a business without borders. We will now be able to go into places like Zimbabwe, Zambia and other countries to compete. It also gives us a chance to compete with multinationals from India and China in other African countries. The agreement will lay to rest some of the restrictions that were imposed by colonial legacies of the past.”