Whether for profit or social motives - and often both - an increasing number of investors are targeting opportunities in African agriculture. At the same time innovative approaches for deploying aid to support farming businesses linked to smallholders are emerging. This blog provides a snapshot of who is doing what, where and how.

13 October 2012

McKinsey: Investment in agriculture the best bet to create jobs in Africa

By 2035 Africa is expected to have a larger working age population than China or India. The number of 15 – 64 year-olds on the continent will be three times higher than Europe and five times higher than North America. The McKinsey Global Institute’s report, Africa at work: Job creation and inclusive growth, calls for targeted investment to accelerate the creation of stable employment opportunities, especially in the agriculture sector.

The McKinsey report notes:
  • Africa has shown impressive growth since 2000, outpaced only by the East Asia region, with the natural resources sector (oil, gas, mining) being the single largest contributor.
  • Natural resource sectors make crucial contributions to Africa’s GDP, government revenue and export earnings but they employ less than 1% of Africa’s workforce.
  • Africa will add 122 million people to its labour force by 2020 – more than any other region. By 2040 it will have a larger working age population than India or China.
  • Economic growth reaches most people through employment income so Africa’s challenge is to ensure that economic growth translates into more stable wage-paying jobs.
  • If large numbers of stable jobs can be created Africa could benefit from a demographic dividend at a time when Europe and China have declining working age population. If not, the risks of growing inequality leading and social unrest are clear.
  • As countries develop both the share and number of jobs in agriculture typically decline. But countries with rich natural endowments of arable land and favourable climates – like many countries in Africa – can defy this trend. Thailand is an example. It grew the number of stable agricultural jobs from 519,000 in 1960 to almost three million by 2008.
  • McKinsey estimates that 14 million stable wage paying jobs could be created in agriculture by 2020, if development of the sector was accelerated.
  • Furthermore, of the potential 15 million additional jobs that could be created in the manufacturing sector, a large proportion are likely to be agriculture related. Agriculture today accounts for about half of all manufacturing jobs in Africa.

5 October 2012

The missing middle of African agriculture

A good article: Spotlight on African Agriculture by Lion’s Head Global Partners which goes beyond the often sterile debate of mega farms versus smallholders.

The article focuses on the “missing middle” – i.e. medium sized farming businesses of a few hundred hectares, which are starved of capital. Those farms can be the engine of growth for primary agriculture helping address food security and stimulating job creation throughout the agricultural value chain.

The authors, who have first-hand experience of investing in a seed potato farm in Tanzania, wonder why development finance institutions (DFIs) are not doing more in the sector:

“Yet so many DFIs find this sector too risky. . . A DFI setting out to promote African agriculture should find the blended return between financial and development payback very compelling. If DFIs don’t give extra weight to development outcomes, then they are no different than other institutional investors.”

Exactly right.