Rising food demand to create opportunities in Africa's agricultural sector

A combination of rapid population growth and increasing economic prosperity will create substantial demand and opportunities for the agricultural sector of Africa, according to a new report from global professional services firm Deloitte. The firm identifies Ethiopia, Nigeria and Tanzania as the key agricultural markets in terms of investment potential.

Key economic indicators suggest that Africa is poised for massive economic growth over the next few years. Cumulatively, Africa has the second largest continental population in the world, behind only Asia, which is particularly telling as population growth is one of the primary drivers of GDP.

According to a new report from Big Four accounting and advisory firm Deloitte, titled ‘Agricultural Opportunities in Africa,’ the continent will be home to 20% of the world’s population by 2030. In the next five years alone, Africa’s population is expected to grow by 200 million people. Moreover, more than 40% of the working age population is between the ages of 15 and 24, making it the youngest population on the planet.

These indicators have already begun to manifest themselves economically. Between 2000 and 2016, the per capita GDP in the region of Sub-Saharan Africa (SSA) doubled from $1,900 to $3,800. However, a dip in oil prices has sent the continent into an economic slowdown in recent years, exposing Africa’s dependence on certain commodities and distinct lack of infrastructure in other areas, particularly as to its power and energy sector.

The continent wants for foreign investment, and one sector in which this has been forthcoming is that of agriculture. As per Deloitte’s report, agricultural value in Africa more than doubled over the decade between 2006 and 2015, primarily as a result of foreign direct investment (FDI) inflows.

Moreover, initiatives such as the New Partnership for Africa’s Development (NEPAD) and the Comprehensive Africa Agriculture Development Programme have all drawn considerable multilateral interest from communities across Africa. As a result, public expenditure in the agricultural sector has been growing at more than 7% annually since 2003, taking many countries to a position of food security.

In essence, the continent is ripe for investment in the agricultural sector, as current trends are sure to create demand over the next few years. The report from Deloitte delves into market nuances across Africa to compare the ease of doing business and availability of agricultural resources across countries, with the aim of determining the main farming destinations on the continent.

Based on these criteria, the report found three countries that were highly lucrative spaces for investment, namely Ethiopia, Nigeria and Tanzania. In addition, the report shortlists six crops, namely cassava, maize, wheat, rice, ground nuts and soya beans, as the most lucrative based on market sentiment and demand across the continent and the globe. Correspondingly, Ethiopia was found to be the best destination for wheat, Nigeria for cassava, while Tanzania emerged as the best market for maize.

Ethiopia

Economically, Ethiopia is one of the most agriculture-dependent countries in the world. In the last 15 years, the value added from the agricultural sector has constituted 45 % of the GDP, which is twice the SSA average and ten times the average across the world. The country is home to nearly 12 million smallholder farms, which are responsible for 85% of the country’s employment and 95% of the agricultural GDP.

Despite the fact that maize and teff are the most widely produced crops in Ethiopia, the country is still the largest producer of wheat in the entire SSA region. Moreover, as the demand for wheat is expanding, the country’s wheat production levels are growing simultaneously, in light of government plans to increase the production per hectare from 20% in 2015 to 31% in 2020. This is primarily to reduce the Ethiopia’s reliance on imports for wheat, which comprise 52% of the total agricultural imports.

Nigeria

Despite being the largest country by GDP in Africa, Nigeria was particularly hard hit by the fall in oil and commodity prices in 2014. As a result, the country has been on a diversification drive, in a bid to reduce dependence on oil for GDP. The agricultural sector has been a key beneficiary of this new direction, particularly in the agro-processing domain.

Among the country’s agricultural products, one of the largest and most economically lucrative is cassava. Currently, Nigeria produces more than 50 million tonnes of cassava; a figure that is expected to double by 2020. In terms of production per hectare, Nigeria currently generates 13.6 tonnes of cassava per hectare, which is expected to increase to 40 tonnes per hectare over the same period.

Tanzania

Tanzania is another country that is highly dependent on its agricultural sector. In the last ten years, the sector has contributed around 31% of the national GDP, which could be attributed to the fact that the country has climatic conditions that are the most conducive to agriculture in the whole SSA region.

Tanzania produces a range of products, including cash crops for export such as tobacco, cashew nuts, coffee, tea and cotton. However, the most lucrative crop for investment in the country is maize, which occupies 4 million hectares of the country’s planted area, making it the largest in Southern and Eastern Africa. Smallholder farmers produce 80% of the crop in Tanzania.