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August 31, 2015 | Last Updated 11:31 PM
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Business & Technology
Dec 20 2012 8:02AM
Food businesses are set to surge in Africa
GROWING: Agribusiness experts believe the outlook in African agriculture is very positive as the continent progresses. Picture : Rudolph Nkgadima
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Bernard Sathekge

Agribusiness is set to surge in sub-Saharan Africa in the next few years, say analysts. And that’s despite the prospect of volatile food commodity prices.

Prof Mohammad Karaan, dean of the agrisciences faculty at the University of Stellenbosch and a key member of the National Planning Commission (NPC), believes that, despite recent volatility in the commodities sector, the outlook is increasingly positive as African agriculture takes advantage of market opportunities.

The past few years have seen severe food crises with some countries hit hard by high food prices as the world has struggled with poor harvests.

The worst US drought in more than 50 years has pushed grain prices to record highs. Drought in the US, which supplies half the world’s exports of corn and much of its soya beans and wheat, prompted calls for action for relief programmes.

However, Karaan points out volatility in certain commodities and a relatively short supply of basic commodities could be expected, along with labour unrest even as some backtracking of food prices leaves prices above long-term averages.

He believes prices will be driven by more-favourable markets and supply expansion. “The trick is for states and markets to drive production. The challenges remain in investment, developing infrastructure and enhancing ecological sustainability,” said Karaan.

In addition there will be a need for increasing production, stabilising transaction costs, restoring farm profitability, improving labour relations and overcoming political and policy difficulties.

Herman Marais, the managing partner at Agri-Vie, the sub-Saharan private equity fund investing in food, said the key lies in investor confidence.

“The increasing flows of investments prove the disciplines of private equity investment can help address rural development challenges and food security.

“With the challenges in the global food situation, investment in Africa’s agriculture has become more of an imperative as it contributes to creating jobs, improving food security, reducing poverty, improving skills and generating income,” said Marais.

He added that Africa has more than 60% of the globe’s arable land that’s not used.

Investing in sustainable food will go far to unlocking opportunity, while maintaining a symbiosis between commercial agriculture and Africa’s traditional small holder farming system.

However, Marais said, climate will be the key determining factor in the short-term given that it is uncontrollable.

He insisted there were huge opportunities in the sub-Saharan region.

Karaan said agribusiness leaders also need to play a more prominent role in fostering Africa’s agricultural potential.

This includes engaging with government, being more vigilant of commodity price fluctuations and global supply conditions.

“They need to use smarter agricultural risk mitigation measures while exercising influence over the value chain.

“This will contribute to improvements in infrastructure and to developing a sustainable agricultural sector. Africa could rise to the challenge.

The production potential is undoubted.”

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