Food industry experts on African energy constraints

A 2020 report by the FAO revealed over 280 million Africans are malnourished, and around 94 per cent of them are in Sub-Saharan Africa. The lack of food security and access to nutrition has been aggravated by the ongoing Covid-19 pandemic, with a recent Oxfam report stating that the West African Sahel countries – Burkina Faso, Chad, Mali, Mauritania, Niger, Nigeria, and Senegal, are experiencing an exponential rise in hunger, recording a 67% increase within the last year.

This is surprising considering that the agriculture sector accounts for over 65% of the continent’s workforce, reflecting low productivity per agricultural worker and an urgent need to increase productivity in the region.

However, this cannot be achieved without adequate energy/electricity availability and access, which has proven to be a key catalyst for the scaled increase in production.

There has always been a dependence of agriculture on energy, and increased energy use is required to sufficiently increase agricultural production across cultivation, irrigation, harvesting, processing, and transportation. Due to this dependency, developing regions in the global south, like SSA, who are energy-poor are unable to reach their potential in agricultural production.

Currently, only around 2% of Africa’s total electricity consumption is allocated to the agriculture sector, compared to over 20% in Asia. This is largely due to the unavailability or lack of access to electricity sources by smallholder farmers, who are mostly in remote and rural areas. These smallholder farmers are responsible for producing over 85 per cent of all agricultural produce in the continent.

As a result of lack of access to energy access and the consequential low adoption of agricultural mechanization, only around 5% of all cultivated land in SSA is irrigated, compared to 85% in Asia. Other stages of post-harvest production like processing and storage are also significantly affected by energy poverty in SSA.

This issue is expected to persist over the next number of years as expected population explosion in the region and resulting increased demand for food leads to increased demand for electricity and higher agricultural productivity and yields. The potential negative effects of climate change and extreme weather events in the region make this issue even more pressing.

Given that the agriculture sector in SSA accounts for around a quarter of the GDP and two-thirds of the labour force, there is a need to leverage the potential of agriculture for economic growth in the region.

The electricity sector is facing disruption with decentralized renewable energy systems. Since most smallholder farms are located far from the grid (remote), the initial approach with grid extension is often cost-prohibitive. Decentralized energy generators can be sited on the farms, reducing the cost of electrification by avoiding expensive distribution networks. As the cost of these systems reduces, they are becoming attractive electrification technologies thereby facilitating adoption by these smallholder farms.

Solar-powered electricity sources can also be an attractive option, especially since the sub-Saharan African region is not lacking in an abundance of direct sunlight. Renewable energy sources can also enhance funding opportunities as they align with environmental sustainability agendas.

Every food-producing region in the world presents its own unique set of obstacles and incentives that need to be carefully reviewed when it comes to investment. Farrelly Mitchell provides tailored support to investors throughout the food and agribusiness industry, including due diligence on investment targets, feasibility and financial modelling, M&A support, risk analysis & management, and much more.

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