Sectors
Agriculture

1. PRIMARY PRODUCTION

In most African countries, agriculture is the engine of economic growth, and agricultural growth is the cornerstone of poverty reduction. Approximately sixty-five percent of Africans rely on agriculture as their primary source of livelihood. Small-scale farmers are responsible for more than ninety percent of Africa’s agricultural production.

Agriculture accounts for 30 to 40 percent of Africa’s total gross domestic product (GDP), and almost 60 percent of its total export earnings. By raising productivity, investments in agriculture contribute to growth and poverty reduction both directly and indirectly. Higher farm wages and lower food prices lead to powerful real income effects. The welfare benefits are large when spread across all consumers, even if some producers end up being worse off.

2. PROCESSING

The food processing industry in Africa is an exciting and fast-growing space. Africa has historically been known for a wealth of fertile regions where fresh produce is grown, harvested and distributed both for local consumption and exports. Now, this sector is being closely watched by private equity funds keen to maximise investment opportunities across the continent. The African market has recently seen a trend where companies are moving away from solely producing raw consumables and increasingly investing in value-add processing units and branded food products.

When food products are sold to wholesalers, supermarket chains and organic food retailers, the highest margins are captured from adding flavours, food colouring, packaging and branded labels (comprising the second half of the value chain). For example, fruit juices, pastes, syrups, purees and concentrates are more expensive than raw fruits and vegetables. Ice cream, yoghurt and cheese are priced higher than milk; and the same is true for biscuits, pasta and bread when compared with raw grain and flour. This trend has subsequently repositioned food processing as a manufacturing and Fast Moving Consumer Goods (FCMG) sector rather than an agricultural sector.

3. MARKET DISTRIBUTION

The marketing function is especially critical in allowing new farmers into the main stream, for their success and sustainability will be determined more by their equitable participation in markets rather than by their increasing competence in production. There should therefore be no doubt that the creation of a prosperous and equitable agricultural sector depends on the agricultural marketing environment.

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