It’s a multi-billion-dollar business that is struggling, with millions of lives on the line.
The business of food is a major industry in Africa, but the lack of investment is threatening it.
Grain SA expects that South Africa will, this year, need to import about 770,000 tons of maize, its staple.
Speaking at the 6th African Grain Trade Summit in Kigali, Rwanda, Michael Hailu, the Director of the Technical Centre for Agricultural and Rural Cooperation (CTA), said Africa spends at least $25 billion on food imports, according to reports. Nigeria alone ate 5 million tons of rice in 2013, while importing 2 million tons of this. It spends over 350 billion naira ($1.78 billion) a year importing rice.
“To decrease imports, we need to solve the problems we have in the agricultural sector so that the continent can be a bigger agricultural investment option,” says Dennis Matangira, Senior Managing Partner at Databank Agrifund Manager, which invests in African agriculture.
It is risky, according to Matangira, because of poor rainfall, a lack of technology, support and seeds, expensive inputs and uncertainty around land tenure in many countries.
“African agriculture productivity is way behind the rest of the world. Investments in technology and modern farming methods are what made the difference in high productive regions. If Africa has to be food secure, adequate investments will need to be made. It’s not so much about the size of the land, but the productivity of the land under use,” he says.
African entrepreneurs want to solve this problem and make money from it.
Fertilizer companies, like Avison, are taking the bull by the horns. It has created a semi-organic fertilizer in which Databank has invested. According to Matangira, this fertilizer enhances soil fertility.
“Increasing yields from currently utilized land is the only solution for necessary, sustainable, production increases,” he says.
Databank invested in Avison in 2014 and has helped build three fertilizer plants.
“When you apply semi-organic fertiliser, you introduce macro- and micro-nutrient elements to the soil. That gives life back to the soil, making it productive. After years of using 100 percent chemical fertilisers, micro elements are depleted, the soil gets damaged by the fertiliser and yields are reduced. This fertiliser counters that,” he says.
Avison mixes organic material and chemical fertilizer which returns higher yields that Databank claims tripled revenue in 2015.
“If you use purely organic fertilizer, like bird manure or chicken manure, without blending with chemical fertilizer, the yields are not as great. There is less work with this because you only apply it once before planting and there is no need for boosters,” says Matangira.
“We use satellite technology to map the soil and use 13 years of historical data to determine the production capacity of the soil. In conjunction with this we do comprehensive soil classification and soil potential maps. Armed with this information we can pinpoint the specific needs within each hectare. Now we can fairly accurately estimate how much the farm can produce each year. If you know the soil can never produce more than 5 tonnes a hector you won’t fertilise for more and can save time and money.”
Below the empty road to Jasper van der Linden’s farm in Mookgophong, a two hour drive from Johannesburg, lie healthy crops as far as the eye can see. There is a vast field of wheat waving in the wind.
Van der Linden says his farm is an agricultural paradise. He claims his yields have increased by around 40% since he began using Avison’s fertilizer.
“The protein levels in the wheat have also increased. The top grade is 13 percent but now I have it at 15 percent. I grew up on a farm and I have been farming my whole life. I farmed two years in the US and in Sudan and many parts of Africa and I have never seen a combination like this that has such great outcomes,” he says.
“Too many yields are lost in the continent and we need such inventions to improve it. This puts a smile on my face because it means I will make more money than most farmers.”
The World Bank estimates that food production and processing in Africa could generate $1 trillion a year by 2030. All it needs is investment, innovation, rain and canny, hardworking farmers.

Satellites And Sweat Coax Wealth From The Soil

Countries in sub-Saharan Africa are set to clock up the fastest pace of growth since the global financial crisis struck five years ago, despite the weak global environment. But it has not prevented the finances in many of their economies from deteriorating. The question is, should we be worried?
Budget deficits in the region have swelled in the past decade, as governments have ratcheted up their spending. According to research from UK-based Capital Economics, the combined shortfall for the region in 2012 amounted to 2.5% of gross dom-estic product (GDP) – a key financial health ratio – compared with just 0.5% in 2000. Ironically, the trend has nothing to do with excessive borrowing. Over the same period, government debt as a share of GDP plunged to 33% from 70% – a respectable level.
However, the improvement in debt ratios has been driven largely by debt relief from Western donors. As these countries grapple with their own fiscal constraints, this is likely to dwindle. At the same time, prices for exported commodities, the mainstay of the region’s economies, are starting to subside after reaching historic peaks in the past decade. This means that governments will have less to spend on financing their own development, and may have to borrow more to do so.
The marked acceleration in spending that has taken place across the region is generally viewed as positive. Most of the money is invested in capital projects, which will ultimately boost growth potential. Sub-Saharan Africa needs an estimated $93 billion a year for infrastructure development. But some governments are pumping increased amounts of money into what is known as current spending. This includes the salaries of civil servants and subsidies on necessities like fuel, electricity and food. These eventually become unaffordable.
The biggest spenders on subsidies in the region are Angola, Ghana, Nigeria, Mozambique and Zambia. Ample oil revenues mean that Angola and Nigeria can cope with the financial burden, but the finances of the other three countries are not as healthy. In Ghana, fuel and electricity subsidies swallow nearly a quarter of official revenues. Power subsidies alone account for 17% of revenue in Mozambique and 20% in Zambia.
Yvette Babb, Standard Bank’s Africa strategist, believes that countries in sub-Saharan Africa are trying to address the burden of fiscal subsidies. She says that there has been a strong improvement in the way that fiscal budgets have been managed. She also says that the debt burdens of countries in the region are generally still “enviable” when compared with the US and Europe.
However, there are significant exceptions. The region’s two main offenders are Ghana, its biggest cocoa producer, and Zambia, its top copper producer. Both countries’ economies are growing at a heady pace of more than 7%, so there is little justification for fiscal slippage.
In what was seen as a bid to garner support ahead of the 2012 elections, Ghana overhauled its government salary structure in 2010. The public wage bill was pushed up to nearly half of overall spending. This had disastrous effects on the country’s financial credentials. Ghana’s budget deficit ballooned to about 12% of GDP in 2012, nearly double its official target, from just 4% in 2011. Its debt had reached 50% of GDP at the end of 2012, up from 41% a year earlier.
Ghana’s government has pledged to narrow its budget deficit to 9% in 2013 and 6% by 2015, but there is widespread skepticism that these targets can be achieved. In what was seen as a step in the right direction, the country scrapped fuel subsidies worth $500 million in May.
Despite partial cuts in fuel and maize subsidies in 2013, Zambia’s budget deficit is also expected to widen, reaching 8.5% of GDP in 2013 from 2.8% in 2012. After a broad-based increase in civil servants’ salaries, the country’s budgeted wage bill will climb to more than half of official revenues in 2014, from 40% previously.
One of the strategies that Ghana, Zambia, and several other sub-Saharan African countries have deployed to deal with their fiscal challenges is tapping international capital markets. In 2013, governments from the region raised more than $5 billion in global sovereign bonds – including several debuts. That compares to issuance of just $1 billion a decade ago.
More bonds are in the pipeline, with Zambia, Kenya, Tanzania and Senegal all likely to enter the market. And there is ample appetite from investors. In 2012, Zambia’s debut $750 million Eurobond was 15 times oversubscribed. Provided the money is allocated wisely, the trend is set to continue.

Tag: Maize

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