Dr Thulasizwe Mkhabela is an agricultural economist and is currently Senior Partner at Agriculture House (thulam@agrihouse.co.za) and Managing Director at Outcome Mapping (thulasizwe.mkhabela@gmail.com). Picture: Supplied
AGRICULTURE in Africa is poised on the precipice of a breakthrough that has been long in the making. To fully appreciate the importance of agriculture in Africa, it’s vital to view the sector beyond what happens in the farm. Hence the emerging phenomenon of adopting the agri-food sector approach.
This comprehensive view of the sector makes it possible to have insight into the value created along the value chain and thus appreciate the upward and downward linkages of the sector to the broader economy. The transformation of the African agricultural sector is vital not only for the food security of hundreds of millions of Africans, but also for the African economy and sustainable development on the continent.
The transformation under way is evidently from a subsistence-oriented agriculture sector into one that is more commercial, profitably productive, and smallholder and entrepreneur-led. This comes at a time when food systems across the continent are responding to rapid urbanisation, rising incomes, changing diets and the impetus given by the recent UN Food Systems Summit.
Agricultural value chains are becoming more urbanised and consumer driven, with a greater emphasis on quality and food safety. These dynamics are creating many new growth opportunities within Africa’s food systems. Output and employment in agriculture continue to grow, and a great deal of value addition and employment is being created along value chains in the form of agricultural trade, farm services, agro-processing, urban retailing and food services. However, these changes are not just happening on farms and in national governments.
This think piece seeks to highlight the crucial role played by the private sector through small and medium enterprises (SMEs) in driving this transformation. The midstream of the food value chain is particularly important; as it is the closest the market gets to the farmer. This midstream consists of traders, truckers and processors. They connect the farmer with the downstream — retailers.
The midstream constitutes about just under half of the total gross value of the value chains in sub-Saharan Africa with exception of South Africa. The South African scenario is that of sophisticated value chains dominated by few large and well-established agribusinesses – often multinationals, albeit some being of South African extraction. This is the same as the share from farms, and together they are the essence of food value chains in Africa.
It is generally accepted that about 80 percent of the midstream of the value chains comprises SMEs. These SMEs are the engines of the value chain transformation, and of off-farm rural employment. This sector of the economy has often been referred to the “Hidden Middle” because it is often hidden or omitted from the policy debate — but it should not be confused with a “missing middle” as it definitely exist and it is thriving.
Contrary to prevailing perceptions, this article posits that not only is the private sector present, but that it has already taken off, and is ready for support and investment to thrive further. In fact, this Hidden Middle is dynamic, and undergoing and driving a quiet revolution.
There are lesson that should be learnt from this dispensation, given that the role of the public sector (governments) is to create an enabling and/or conducive environment for the private sector through policies, provision of public goods such as research and development, and to support entrant or start-ups to become bankable.
All stakeholders in the private sector must learn from this burgeoning growth and transformation and help governments replicate it at scale across the continent, with improved support from public infrastructure and sound policies.
Governments and donors need not reinvent the wheel and step in directly to provide warehouses or transport or aggregation facilities, for example. The private sector is already providing these services. The role of government is instead to remove the constraints facing entrepreneurs in the agri-food sector and help the transformation under way proceed further and faster.
Governments should also look to the private sector for lessons learnt and best approaches from international best practices. There is also scope for governments to involve the private sector to assist in better targeting public sector interventions and measuring their effectiveness thereof.
There is a good example under way in KwaZulu-Natal where the provincial Department of Agriculture and Rural Development has enlisted the assistance of the private sector to evaluate the success of their direct funding over the years and draw lessons learnt in order to improve their interventions.
Just to reiterate, the provision of infrastructure and policy investments are the way in which governments can help. This amplifies the role of the private sector in driving agricultural productivity, opening up markets and facilitating increased private investment in the sector, particularly in light of the Africa Free Trade Area following the ratification of the Africa Continental Free Trade Agreement.
Roads connect farmers to input and output markets, while public investment in more and improved wholesale markets in secondary cities and rural towns helps connect farmers’ products to where the demand is. Access roads are particularly important in agriculture for ensuring quality products reach the market in good time,hence the often used reference to the first and last mile.
As the processing sector grows, it will create value addition and markets, but it will need and seek more raw material supply — something the right policy and regulatory framework fix can help with.
Dr Thulasizwe Mkhabela is an agricultural economist and is currently Senior Partner at Agriculture House (thulam@agrihouse.co.za) and Managing Director at Outcome Mapping (thulasizwe.mkhabela@gmail.com).
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