The difficulty of raising capital for the agri-food sector in sub-Saharan Africa has created an opportunity for private equity investor, who are in a position to invest profitably and knowledgeably in one of the world’s highest-potential regions.
Global Demand
The FAO forecasts that global demand for agricultural products will increase by 50 percent between 2015 and 2050, driven by population growth, rising incomes and accelerating urbanisation. However, agricultural production is constrained by a limited supply of land resources and a primary production sector that is reaching peak capacity in many agricultural regions.
The agricultural sector in Africa has the natural resources needed to meet this shortfall. Sub-Saharan Africa has almost 50 percent of the world’s uncultivated arable land; vast pools of untapped water resources; and a large, growing and under-utilised agri-labour force.
Access to Capital
In ‘The Mystery of Capital’, economist Hernando De Soto Polar proposed that the inability of people in low-income countries to access capital is the main constraint on economic development. The reason they can’t access capital, according to De Soto Polar, is the lack of a simple, unified legal property system, which would allow people to leverage their assets, thereby gaining access to capital, which would drive productivity and create wealth.
The agri-food sector in Sub-Saharan Africa seems to bear out this theory. Primary production is dominated by smallholders, who lack clear title to their land. The wider agribusiness sector is largely comprised of micro, small and medium enterprises, who also find it difficult to access the financial resources which would allow them to exploit local and international demand.
As a result, the agri-food value chain is under-developed by international standards, with little value-add in the sector, either through processing, manufacturing, distribution or marketing. Primary production dominates the industry, accounting for 72 percent of the agri-food contribution to GDP. This is in stark contrast to the US agri-food sector, where value-add makes a contribution thirteen times greater than primary production.
Private equity African experts
Access to capital is crucial to unlocking Sub Saharan Africa’s vast agricultural potential. At Farrelly Mitchell, we offer targeted support to public and private stakeholders in this key emerging sector. Our consultants specialise in areas such as green finance, rural development & community empowerment, and market intelligence & insights, providing invaluable services to smallholders & SMEs, as well as larger agribusiness and government entities.
We provide invaluable guidance on program design and implementation, capacity building and training, institutional development, and much more, helping our clients foster resilient and sustainable food systems in developing countries and allowing them t contribute to the growth and development of the agrifood value chain. To drive productivity, create wealth, and ensure sustainable development in high-potential regions, contact us today.
