Access to finance is the biggest priority for most agribusiness small and medium-scale enterprises operating in Africa, the 2022 Africa Agribusiness Outlook report published on Thursday by AGRA and KPMG has said.
Flexible financing structures that support business growth and provide flexibility to respond to market shocks and emerging innovation, remain the number one ranked priority for business leaders.
President of the Alliance for a Green Revolution in Africa (AGRA) Dr. Agnes Kalibata and Benson Ndung’u who is CEO & Senior Partner, KPMG East Africa launched the report at a virtual ceremony.
“Agribusiness holds the key to Africa’s economic recovery in a challenging world. The resilience and determination of the continent’s agribusinesses to keep moving forward are inspiring. At AGRA, we are committed to supporting the development of policies and innovative financial solutions to help address challenges that SMEs and businesses, in general, continue to face,” Dr. Agnes Kalibata noted.
The report says despite the importance of the agricultural sector in many African countries, both in contribution to GDP and livelihoods – the sector remains one of the most underserved markets by the financial sector. In sub-Saharan Africa, they account for 30%-45% of GDP. But only 3-5 percent of commercial bank credit in sub-Saharan Africa goes to the agricultural sector. The current traditional, formal financial system does not work well for the agricultural sector which calls for innovation and boldness in the design and provision of financial services to this important sector, the report observes.
The second edition of the Africa Agribusiness Outlook report is on the theme: “Making Africa an even better place to do agribusiness”. The report highlights the results of a survey of CEOs and senior executives working in agribusinesses across the African continent and makes recommendations for improving the operating environment for agribusinesses operating in Africa.
The report is urging governments and investors to catalyse private sector action by providing the right, supportive policy, legislative and regulatory environment as well as financial instruments and incentives. It also raised concerns about the lack of implementation of laws to help cushion players in the agribusiness sector. Some of the major areas of concern include government interference and high-interest rates. The report also observes taxes on digital services and products which raise the cost of goods and services, as well as pose a challenge of adoption of digital services by smallholder farmers who are cost-conscious, is another major challenge governments need to address.
The report expressed concern there is low investment by the government in the agricultural sector as government investment does not match the GDP contribution of the agricultural sector to the country. It called for more flexible financing structures for agriculture and agribusiness sector that support business growth and provide flexibility.
Dr. Kalibata and Mr. Ndung’u in the foreword of the report noted the long-awaited African Continental Free Trade Area (AfCTA) which was launched in January 2021, offers hope for more people to be lifted out of poverty. The report recognized technology as critical to surviving the negative impacts of COVID-19 with 64% of respondents ranking this as a high priority. This was significantly higher than the 2020 survey results where only 53% ranked this as a high priority.
Mr. Ndung’u noted: “Any response to any challenge that the agricultural sector faces, requires a systemic multi-sectoral approach.” “Collaborations and partnerships will help drive agricultural transformation since they lead to knowledge sharing which is key for Africa’s agribusinesses in supporting the building of healthier, more sustainable, and more equitable food systems,” he added.
The report also noted African governments are not taking enough action against climate change.
The report is calling for more action to tackle the problem as a sure way to improve food security and agricultural production on the continent.
“The agribusiness leaders we spoke to expressed their concern for climate change, indicating the negative impact on their supply chain and operations as well as profitability,” the report noted.
