According to the Africa Agriculture Status Report 2020 released in September last year, today, and even more so tomorrow – Africa’s rapidly growing cities and food markets offer the largest and fastest growing opportunity available to the continent’s 60 million farms, and half of these farms involve young people, contrary to widely held perceptions.
The report, titled “Feeding Africa’s Cities: Opportunities, Challenges and Policies for Linking Farmers with Growing Urban Food Markets” acknowledges that the Alliance for a Green Revolution in Africa (AGRA) and its partners’ core commitment to smallholders agriculture must now focus “on urban food markets, to position domestic suppliers as competitive, responsive and safe; to provide the right signals and input to those markets; and continue growing opportunities for young people in the agriculture sector”.
The report observes that in the world’s most rapidly urbanizing continent, African farmers and agribusiness must find ways to source and deliver increased quantities of safe and nutritious food to feed steadily increasing populations in large cities and secondary towns.
Despite differing criteria for delineating urban areas – across countries and over time – demographers concur that urban population is currently growing faster in Africa than in any other continent.
Using national administrative definitions of urban areas, adopted by United Nations (UN) agencies, Africa’s urban population will grow at a rate of 3.5 percent per year over the decade from 2015 to 2025, nearly double the rate in Asia and triple that in Latin America.
According to these projections, the African continent will become majority urban by the mid-2030s. Using standardized geospatial definitions of urban, Africa became the majority urban in 2015. Under either the classification system, urban population growth will drive African demographics over the coming decades.
“Growing urban food markets imply longer supply lines than those serving rural areas, expanded wholesale and retail distribution systems, and an increased need for warehousing, cold storage, food preservation, processing, and packaging”, states the report adding that each of these additional value chain stages and costs, lead to generally higher food prices in urban areas.
As a result, in many African countries, the value of urban food consumption already exceeds that in rural areas. Looking forward, all indicators (demographic, economic, and consumer behaviour) suggest that urban food markets will continue to grow rapidly in the coming decades.
Along with growing population, parallel increases in per capita incomes are triggering dietary changes, fueled by an emerging middle class and by 2010, the African Development Bank estimated that Africa’s middle class accounted for over one-third of the continent’s total population, rivaling India’s middle class in size.
It is reckoned that growing per capita incomes lead to pronounced dietary changes, including diversification out of starch staples and into higher-value perishable products like dairy, meat, and horticulture as well as growing demand for prepared and processed foods.
“The combination of growing urbanization, rising incomes and changing diets is collectively fueling rapid growth in food markets, making this arena the single most important commercial opportunity available to African farmers and agribusiness over the coming decades”, states the 2020 status report.
The report is also quick to point out that in their efforts to supply growing urban food markets, African farmers, agro-industries, and policy makers face multiple challenges. “Farmers must find ways to intensify food production in the face of increasing land pressure and rising wage rates. They must simultaneously diversify production to meet shifting demand for high-value perishables such as poultry, dairy, livestock, and horticultural products”, advises the report.
According to the report, in the face of mounting food imports from overseas, African farmers, traders, and wholesalers must find ways to drive down domestic costs of production, storage and distribution in order to remain competitive with external suppliers in Brazil, North America, Europe and Asia.
“Policy makers, too, must adapt to ensure availability of key public goods, policies, and infrastructure required for African farmers to successfully compete in growing urban food markets and at the same time ensure food safety and public health of urban consumers, states the report adding that “planning, financing, and coordinating key public infrastructure and a favourable policy environment become more complex in urban areas”.
Historically, ministries of agriculture have dominated as Africa’s primary agricultural policy makers. Looking forward, as the center of gravity in Africa’s food system moves to urban areas, new, non-traditional actors become central to the effective functioning of agricultural input and output markets, food processing, and systems for ensuring food safety.
“As a result, effective urban agricultural policy requires new form of governance, consultation and coordination that effectively engage this expanding constellation of urban food system stakeholders”, the report further advises.
According to the report, greater reliance on purchased foods flows directly from greater urbanization, greater density of rural settlements, and lesser average distances from rural to urban areas.
Urban households everywhere rely overwhelmingly on markets for their food, denser populations in rural areas reduce land per capita and increase opportunities for specialization, both of which drive greater reliance on food markets for consumption, and lesser average distances between rural and urban areas increases the influence of urban areas on rural, including allowing urban marketing networks to reach more rural areas.
It is also reckoned that urban lifestyles are busier and urban residents on average have much higher incomes than rural residents. Limited time and high incomes increases the opportunity cost of time, especially for women. The result is that consumers seek convenience in many things, including food. This search for convenience is at the root of the rapid rise in demand for processed food documented across all regions of Africa, particularly for highly processed foods and food away from home.
However, to accomplish the demands of the urban population in terms of food markets, farmers are challenged to also embark on a crop mix shift towards high-value crops, and firstly there should be a change in farm production mix towards higher value crops such as fresh fruit and vegetables and animal products (poultry and eggs, dairy, and meat).
This is a direct response to changing consumer demand. This shift at farm level could be inhibited by surging imports of the high value products, but in the absence of such a surge, the shift would have to come from local production.
“Growth in urban populations and incomes are the fundamental drivers of the opportunities that African urban areas will generate for food system participants over the coming years”, submits the report adding that “regulatory response to the increasingly rapid rise of overweight and obesity (diabetes, hypertension, and others) may also lead to variations across countries and modify the particular types of processed foods that get produced”, submits the report.
The report also contends that local food cultures and emerging concerns about the health effects of poor diets among the non-poor are likely to lead to flourishing innovation without meaningfully altering the basic dynamic of more purchased, perishable processed, and prepared food.
According to the report, rapid urbanization has transformed the face of Africa over the past few decades. Paired with rapid growth in per capita income since 2000, it generated dramatic change in the foods that African consumers demand and drove big farmers, micro-enterprises, and consumers.
Yet the continent now finds itself at a point of profound uncertainty, in the midst of a five-year stagnation of growth and dealing now with the massive challenge of the Covid-19 pandemic accentuated by severe regional crises in the Sahel and East Africa. The result is that the projections of just five years ago now have little if any likelihood of being realized”, states report.
The report is however quick to point out that this does not mean that transformation in the directions will stop. First, it is very likely that urbanization will continue at a relatively rapid pace, and urbanization alone will have some, though much less, transformative effect on eating habits and thus on structural change in the economy.
The other reason that transformation need not come to a halt is that Africa has much room for increasing economic growth through improved policy and investment, and both are improving. The most recent example is that few if any border closings were imposed during the Covid-19 pandemic, in stark contrast to previous behaviour by governments faced with food crisis.
It is also submitted that as urban food markets grow, “African farmers increasingly depend on expanding network of intermediaries – assembly traders, wholesale markets, agro-processors, and food retailers – who purchase from farmers and supply food products to urban consumers”.
For low-value non-perishables such as cereal crops, supply chains typically cover long distances and involve storage, processing and packaging. In contrast, higher-value non-perishables such as dairy, poultry, and horticultural products are often produced in peri-urban areas or in farming zones with close road access to major towns.
For the high-value perishables, urban wholesale markets become key transaction points through which farmers can access urban supply chains.
“Food retailing currently accounts for 20 percent of the total value of the agri-food value chain in Sub-Saharan Africa. As a result, its performance is important for food security for consumers in urban and rural areas. Retailing is also crucial as the transmitter of demand signals urban consumers upstream to farmers”, it is argued by the paper.
The few available survey studies of supermarket penetration of the retail sector in Africa show that the traditional and transitional retail stage is still the dominant one, with only about 10 – 20 percent share of supermarkets in total urban food retailing.
While supermarkets attain significant markets share in sales of packaged foods, dry goods, and dairy, open air markets and small shops dominate urban sales of meat and fresh fruits and vegetables.
Wholesale and logistics are the life blood of the agri-food value chain in Sub-Saharan Africa. These comprises traders based in wholesale markets and “off market” in rural and urban areas, integrated brokerage and processing operations, and truckers and ambient warehousers, and cold storage operators. They constitute roughly 20 percent of the value and cost in the food value chain in SSA.
Nearly all the wholesale/logistics segment in Africa is composed of SMEs. It is likely, however, that over time the large enterprise component of this segment will grow. This will be driven by domestic SMEs attaining scale with national and regional operations.
“When conditions are ripe, SME traders and logistics firms proliferate quickly and intensely invest, meeting demand, governments and donors (nor their non-governmental organization partners) do not need to set up warehouses and trading stations or return to the days where government enterprises undertook marketing”, states the report adding that “firms are undertaking transactions with their own capital”.
Unsurprisingly, most African countries are net food importers despite their agricultural potential, natural resource endowments, and intra-regional complementarities. However, the growing food demand is increasingly met through imports from international markets. About two-thirds of African countries are net food importers and in 2018, SSA countries imported $13.7 billion worth of cereals.
Despite this reality, farmers and producers in Africa can potentially meet the rising food demand and provide substitutes for imports from international markets as observed by the World Bank in 2012. Over time, Africa economic growth is creating massive market opportunities.
Intra-Africa food trade forms an essential component of food systems, particularly ensuring that food moves from areas of production surplus to processing, packaging, distribution, retailing, and consumption.
Also, such trade helps create and/or strengthen forward and backward linkages in national and regional food systems that generate socio-economic opportunities for many actors from farmers to the market.