With food expected to become the “new oil” of the 21st century, Africa’s agricultural output is set for explosive growth as the continent’s largely untapped natural resources and potential gains elevated world attention.
Mohit Arora, Standard Bank Group’s director of agricultural banking in Africa, says agriculture was expected to feature as one of the driving forces in Africa’s economic resurgence and was already among the key factors contributing towards a swelling interest in Africa’s natural resources.
Regarding agriculture, Mr Arora says the opportunity is immense. Though much is required, and a collective inertia still in large part remains, there are increasing signs of how Africa’s agricultural fortunes are changing. There could be a doubling in African agricultural output within the next decade alone. Demand for upstream products linked to the broader agri-business sector will also result, creating new economic opportunities for a range of African and international enterprises.
Following major increases in food prices in 2008-09, 463 projects covering 47-million hectares, mostly in sub-Saharan Africa, were acquired within a period of only eight months. Also, investors have bought nearly 60-million hectares since the 2009 economic crisis.
Investment banks, hedge funds, commodity traders, sovereign wealth funds and corporations are competing to buy land in Africa.
Mr Arora highlights increasing concerns about the earth’s ability to feed a population of 7-billion people, expected to rise to 9-billion by 2050. In order to feed the world’s population in 2050, food production will have to increase by 70%, necessitating a total average annual net investment in developing world agriculture of US$83-billion. He says two recent global food price hikes have added to the fears.
Much of the new demand for food continues to originate from the developing world’s rising and increasingly affluent population. For many emerging markets, rising demand is being met with diminishing local resources such as arable farm land and water.
Mr Arora believes that attention will continue to focus on Africa because it has these resources in abundance. With sub-Saharan Africa holding most of the world’s uncultivated arable land, this could support a projected three-fold increase in the continent’s agricultural productivity by 2030.
However, he cautions that, while Africa’s agricultural allure is vast, central to the realisation of commensurate socio-economic benefits is an appreciation, on the part of African stakeholders, of how pivotal and intensely valuable this opportunity is and to position accordingly.
What is encouraging, says Mr Arora, is that most African governments have initiated various reforms and policy frameworks to stimulate private sector investment in agriculture. For example, Ethiopia, has introduced the Comprehensive Africa Agriculture Development Program (CAADP) with an estimated budget allocation of US$18-billion by 2020. Similarly, the Tanzanian and Kenyan governments have signed a CAADP agreement to transform their respective agricultural industries.