How smallholder farmers in Africa can compete against imports

NAIROBI — Constraints and risks faced by smallholder farmers in Africa make it difficult for many of them to compete against imports, according to speakers at last week’s AGRF virtual summit. Because of this, grocery stores across the continent are flooded with food from abroad, reducing access to a market worth billions of dollars for many local farmers and agricultural companies. “What are we doing? We are exporting wealth and we are importing poverty,” said James Nyoro, governor of Kiambu County in Kenya. The continent imports, on average, about $72 billion per year of food. Some of the top food imports include wheat, vegetable oil, sugar, rice, dairy, meat, fish, and maize — products that are all produced on the continent. There are many factors at play, including inefficiencies in the supply chains that transport food from rural to urban areas and across borders, overstretched urban food markets, insufficient levels of local processing, excessive taxes on local production, and low productivity. But this can be turned around, according to speakers at the summit, through investment in supply chains and agricultural industrial parks, programs to upgrade markets and improve administration between cities and rural areas, and programs targeting productivity. The African Continental Free Trade Area also provides a game-changing opportunity to remove barriers to trade and empower farmers. “Having a continental free trade agreement, with harmonized regulations, will go a long way.” --— Thomas Kehoe, deputy director of agriculture in Africa, the Bill & Melinda Gates Foundation A smoother link between rural areas and urban markets As the urban population on the African continent rapidly increases, cities are the largest and fastest-growing agricultural markets, with between $200 billion to $250 billion per year in food sales. But getting food from rural areas to these cities can be a challenge. A major barrier is the lack of good infrastructure, such as roads, as well as having cold chain systems in place, speakers said. For example, Lagos, Nigeria, is dependent on other states to provide its food, particularly the northern part of the country, said Abisola Olusanya, special adviser on agriculture to the governor of Lagos State. But by the time food reaches Lagos, about half of it is damaged, she said. Consumers get less food at higher prices because the overhead costs are still the same. The COVID-19 pandemic exposed the fragility of these supply routes, making it even more difficult to get goods from rural to urban areas during the lockdowns, said Mandefro Nigussie, state minister at the Ministry of Agriculture in Ethiopia. There is a need for significant investments to ensure that food makes its way to cities in an efficient way, said Khalid Bomba, CEO at the Agricultural Transformation Agency in Ethiopia. There is also a coordination issue — long supply chains can pass through multiple political boundaries en route to the cities. The Federal Ministry of Economic Cooperation and Development in Germany is investigating potential projects that would look at improving the administrative cooperation between rural and urban authorities to ensure that food supplies are protected despite shocks like a pandemic, said Dirk Schattschneider, deputy director-general of food and rural development at the ministry. Nyoro said that when food reaches cities, sometimes there are not adequate wholesale and retail markets for the food. As cities grow, some of these markets have stretched beyond capacity. During the pandemic, some of these markets were closed down because they were not hygienic and didn’t allow for social distancing, said William Asiko, managing director of Africa regional office at the Rockefeller Foundation. These markets need upgrading so that they are clean, have transparent systems on pricing, and have mechanisms to ensure quality and reduce food loss, speakers said. The Rockefeller Foundation is working on “smart markets” for Africa, such as ones that use solar energy, and have points of hygiene and places to safely store food, Asiko said. Boosting local processing and reducing taxes Countries across the continent need to expand their ability to process foods locally, speakers said. One of the challenges when it comes to agriculture is that the continental-wide focus has historically been on production and exports of primary, unprocessed commodities, said Caroline Pomeyie, CEO at Oceansmall, a seafood processing company in Ghana. Processing the food helps to ensure it has a longer shelf life, helping to reduce post-harvest loss. Because of this, governments should support the creation of agricultural business hubs, with processing facilities, close to where the food is actually produced, speakers said. This would include infrastructure upgrades, such as to roads and electricity, as well as providing tax incentives to companies who invest. Ethiopia, for example, has created agricultural industrial parks where the government has invested in infrastructure to encourage investors to engage in value addition and processing of food, Bomba said. These efforts are headed by the prime minister’s office. Another hindrance is that many countries tend to tax goods that are produced locally, speakers said. They also place a tax on imports from neighboring countries. In Ghana, for example, there are many taxes on companies engaged in processing or trading locally, but companies that import goods from abroad receive tax rebates, Pomeyie said. This puts local producers at a disadvantage. Border posts and checkpoint costs can also increase the cost of doing business as food travels from rural to urban areas, whereas food arriving at ports might not face the same sort of bureaucratic hurdles. Low productivity also makes Africa’s agriculture less competitive on the global stage. Efforts to increase yield so that the cost per unit is decreased are critical, Nyoro said. There is also an element of education needed for urban populations on the benefits of nutritiously-dense, traditional foods that are produced on the continent, so that they can substitute them for the high calorie, processed food imported from abroad that have become popular in urban areas, Bomba said. Some of the traditional foods highlighted during the summit include African eggplant, okra, and amaranth. Continental-wide free trade In 2018, nearly all of the countries on the African continent signed the African Continental Free Trade Area agreement, creating the largest free trade area in the world. It connects 55 countries that have a combined gross domestic product valued at $3.4 trillion. The agreement entered into force in May 2019. It provides an opportunity to alleviate many of these restrictions and barriers by reducing tariffs and allowing free movement of commodities goods and services across Africa, speakers said. It would work to create more consistent regulation across the continents and create a larger market for producers to sell their products. If in the course of implementing the free trade area, infrastructure is improved and trade policy is more predictable, there should be less volatility in prices of food, said Thomas Kehoe, deputy director of agriculture in Africa at the Bill & Melinda Gates Foundation. It is also expected to encourage investment from the private sector. “Having a continental free trade agreement, with harmonized regulations, will go a long way to providing the private sector with the confidence that there will be a sizable market that they can serve in order to hit the scale that they require to be profitable,” Kehoe said. But while this agreement has a high level of political backing across the continent, there is a long road ahead in terms of implementation, said Harry Hagan, group head of east and central Africa at the U.K. Foreign, Commonwealth & Development Office. The responsibility for its implementation predominantly falls on national governments, which will need to ratify agreements and pass them through national parliaments, he said. “That is not an insignificant amount of work and will take quite a long time. We will need that continued political drive to move that along,” he said.