With food expected to become the “new oil” of the 21st century, Africa’s agricultural output is set for explosive growth as the continent’s largely untapped natural resources and potential gains elevated world attention, according to Mohit Arora, Standard Bank’s director of agricultural banking in Africa.
He was speaking at the Produce Marketing Association Conference in Pretoria, South Africa, where he delivered a paper titled “Brace for Agribusiness boom in Africa: Implications for fresh produce.”
Arora said agriculture was expected to feature as one of the driving forces in Africa’s economic resurgence and was already among the key factors contributing towards a swelling interest in Africa’s natural resources.
“Regarding agriculture, the opportunity is immense. Though much is required, and a collective inertia still in large part remains, there are increasing signs of how Africa’s agricultural fortunes are changing. There could be a doubling in African agricultural output within the next decade alone. Demand for upstream products linked to the broader agri-business sector will also result, creating new economic opportunities for a range of African and international enterprises,” said Arora.
He noted that following major increases in food prices in 2008-09, 463 projects covering 47-million hectares, mostly in sub-Saharan Africa, were acquired within a period of only eight months. Also, investors have bought nearly 60-million hectares since the 2009 economic crisis. He said there has also been a notable increase in private equity companies that are investing aggressively in African agricultural sector, with more than 45 private equity investors announcing plans to invest across Africa’s entire agricultural value-chain by 2015.
“With increasing demand for African land, we see investment banks, hedge funds, commodity traders, sovereign wealth funds and corporations competing to buy land in Africa. For example, more than 80 Indian companies have invested an estimated US$2.4-billion to buy or lease plantations in Ethiopia, Kenya, Madagascar, Senegal and Mozambique to grow food grains and other cash crops for the Indian market. The cost of agricultural production in Africa is almost half that of India,” he noted.
Arora highlighted increasing concerns about the earth’s ability to feed a population of 7-billion people, expected to rise to 9-billion by 2050. In order to feed the world’s population in 2050, food production will have to increase by 70 percent, necessitating a total average annual net investment in developing world agriculture of $83-billion. He said two recent global food price hikes have added to the fears.
Much of the new demand for food continues to originate from the developing world’s rising and increasingly affluent population. For many emerging markets, rising demand is being met with diminishing local resources such as arable farm land and water.
Arora said he believes that attention will continue to focus on Africa because it has these resources in abundance. With sub-Saharan Africa holding most of the world’s uncultivated arable land, this could support a projected three-fold increase in the continent’s agricultural productivity by 2030.
“In China, home to 20 percent of the world’s population and less than 8 per cent of its arable land, total cropland is expected to decline from 135-million hectares today, to 129-million hectares in 2020. Almost half of China’s cities face water shortages. Other areas in the emerging world are even more pressed. In 2011, Bahrain, Qatar and Saudi Arabia were ranked as three of the four most water stressed nations in the world. Already, Gulf States import around 60 percent of their food, and natural water reserves are able to support only 30 more years of agricultural production,” he said.
“Given these threats, it is inevitable that attention is increasingly turning to Africa. It is estimated that over 60 percent of the world’s available and unexploited cropland is in Sub-Saharan Africa. Of Sudan’s 105-million hectares of cultivable land, only 16 percent (or 16.6-million hectares) had been cultivated by 2009. A similar ratio is evident in the DRC, where less than 10 percent of the country’s 80-million hectares of cultivable land has been cultivated. The Congo River Basin alone holds 23 percent of Africa’s irrigation potential, with the Nile River Basin holding a further 19 percent,” said Arora.
However, he cautioned that while Africa’s agricultural allure is vast, central to the realisation of commensurate socio-economic benefits is an appreciation, on the part of African stakeholders, of how pivotal and intensely valuable this opportunity is and to position accordingly.
He said what is encouraging is that most African governments have initiated various reforms and policy frameworks to stimulate private sector investment in agriculture. For example, Ethiopia, has introduced the Comprehensive Africa Agriculture Development Program (CAADP) with an estimated budget allocation of US$18-billion by 2020. Similarly, the Tanzanian and Kenyan governments have signed a CAADP agreement to transform their respective agricultural industries.
