Industries in Depth

African farmers need investment – but these 6 factors stand in the way

Hawa Nakawungu, a coffee farmer sprays her trees with pesticide on her farm near Uganda's capital Kampala, July 18, 2009. Nakawungu cut a space-age figure as she paced around her tiny coffee farm, squirting pesticide from a yellow pump mounted on her back.

How can we unlock the promise of Africa's agriculture? Image: REUTERS/Hereward Holland

Alex Gray
Senior Writer, Forum Agenda
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Investment in agriculture is key for economic growth and job creation among Africa’s farmers, but significant constraints remain before they can fulfil that potential. That’s according to Grow Africa's Enabling Environment survey.

The survey gathered responses from 133 companies, domestic and international, in 12 countries, regarding the challenges facing their specific investments.

 Number of companies in each country that took part in Grow Africa’s 2015 survey.
Image: Grow Africa 2015 survey

It found that, while private-sector investors in African agriculture report improvements in the “enabling environment” ­– the overall factors that allow investment into a country – progress is too slow to unlock the sector’s potential to drive economic growth.

Companies were asked to rate their satisfaction with 14 aspects of the enabling environment, report on whether the situation had improved or worsened over the previous year, and indicate the urgency of improvement in each of the 14 areas.

Less than half of respondents felt that their country’s enabling environment was conducive to their investment and 64% said it was “very important” that the enabling environment improved enough for them to successfully implement their investment plans.

Specifically, six factors were listed as holding back investment in Africa’s farmers. They are:

1. Access to finance

Lack of access to affordable finance is consistently cited by private-sector investors within the Grow Africa network as the number one obstacle to implementing projects on the ground.

Only 35% said they could access appropriate finance for their investment. There were more respondents (67%) citing the need for improvement in this area than in any other aspect of the survey. This is also the area in which least improvement was reported – only 13% of respondents said access to finance had improved over the past 12 months.

2. Cross-sector collaboration

Cross-sector collaboration is increasingly recognized as a key component of successfully being able to execute investment commitments. Two-thirds (67%) of respondents recognized that companies cannot overcome specific constraints within value chains and market systems, unless they work with public-sector partners, and they called for improvements in this area.

3. Infrastructure

Dissatisfaction with the quality of physical infrastructure was higher than for any other aspect of the survey, with 55% of respondents saying their needs were not being met. Among the most critical needs cited were access to a stable electricity supply, the ability to transport goods, and public investment in irrigation. Indeed, only 40% of Africans enjoy a reliable electricity supply, a recent report found. This was the second highest priority for improvement according to respondents

4. Skills

While finding skilled labour came in at number four of the top constraints listed by respondents, it was also one of the areas in which the most companies saw progress, with 29% noting an improvement in their ability to access labour with appropriate skills and experience. Nevertheless, they also noted that:

• Smallholders lack the skills to increase quality and quantity of production, and the cost of training is prohibitive for companies.

• Farmer organizations can be poorly managed.

• There is a shortage of commercial managers to oversee operations.

5. Policy

Among other concerns expressed by respondents was the lack of support by government – only 30% of companies felt that their investment was supported by effective national policies for trade, agriculture and investment.

6. Bureaucracy

They also cited a lack of efficiency on the part of government – only one-quarter (29%) said that administrative and regulatory formalities were dealt with efficiently, particularly land issues and lack of clarity on land ownership.


The path forward

In many cases, policies are signed off at regional and sometimes national level, but not implemented consistently, or at all, at a local level. Often this is due to a lack of administrative capacity, but in some cases, the policies have not been sufficiently anchored with the private sector.

The good news is that governments are paying attention to the need to improve the enabling environment in order to attract private sector investment and development funding.

To succeed, three things are needed:

1. National champions at presidential level

2. Greater accountability and measurement of progress on agricultural targets. The CAADP Implementation Strategy and Roadmap, signed off by heads of state in 2014, provides a framework for doing this, but it needs national leadership to ensure progress is tracked and, more importantly, gaps swiftly responded to.

3. Improved dialogue between ministries and the private sector. National Agriculture and Food and Security Investment Plans (NAFSIPs) should be informed by a better understanding of which public investments will do most to leverage vital private-sector investment, and bring development partner funding in their wake. A key priority for the Forum's Grow Africa secretariat will be to strengthen public-private sector dialogue around investments through national and commodity-specific platforms that support the national agricultural agenda.

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