Headlines and Articles
Investing in sustainable agriculture – Wealth Daily
Serial entrepreneur challenging the way startups launch – Fast Company
Food inflation has food makers competing on prices – OWH
Nigeria eyes private funds to spark agriculture boom – AFP
Expected income drop has farmers watching spending – DSM Register
No plows, cows, sows: Not your father’s youth farm group – KTTZ
Stanford scientists discover novel way to make ethanol – Stanford News
You cannot modernize the economy in Africa without starting with agriculture.
~ Prof. Calestous Juma
Entrepreneurial Value Chains in Africa
Projections of a 9 billion global population and its need for doubled food production by 2050 are cited often, becoming the common language of the challenge and opportunity facing the global agri-food system. Nowhere is that challenge more vivid than in many parts of Africa.
On the one end of the value chain stands consumers, with an emerging middle class in many African countries now demanding much more from agriculture and the food industry. There are now more than 50 cities in Africa with more than 1 million populations, some exceeding this mark substantially. I’ve visited four of those cities in the last three weeks in Dar es Salaam, Tanzania (4.4 million), Accra, Ghana (4.0 million), Kumasi, Ghana (1.8 million), and Kampala, Uganda (1.97 million). These metropolises are part of Africa that is projected to grow to a 2050 population of 2 billion people, double that of today.
Proliferation of fast food restaurants, a sure sign of emerging middle class affluence, is lacking today in most of Sub-Saharan Africa, though there are some chains from South Africa present. A friend works with the owner of the first three Subway restaurants in Tanzania and Kenya. Three! I saw a KFC store in Accra, and a billboard advertisement. However, not a Starbucks in sight. No McDonalds either. Even without these global brands, there are many more local restaurants than you would have seen three, five, or ten years ago and supermarkets that carry a variety of local, regional, and global brands.
On the other end of the value chain is where the challenge lies, agriculture. The systems of efficient agricultural production, processing, and logistics present in other parts of the world have largely not emerged as yet in most of Africa, but need to very quickly. There is much public sector and NGO activity related to development of agriculture, but what is lacking is private sector competition, innovation, and subsequent wealth creation.
Imagine you are a native of a country in Sub-Saharan Africa and an aspiring Ray Kroc (McDonald’s founder), someone who wants to create a number of restaurants that specialize in quick-serve, high quality, consistent food items. You’re confident in demand so long as you can create the right atmosphere and serve high quality items at an affordable price.
You begin to think about supply of key ingredients, and start with ground beef. You research beef products available, but find out there are only 3 beef abattoirs in the entire country where you want to launch, none processing more than 200 cattle in one week. After visiting them, you have serious concerns about basic safety and quality control standards.
You then decide that perhaps imported beef, from the U.S., EU, or Brazil, is an option for higher quality, consistent beef products. After discovering the high per kilo price of imports, however, that doesn’t seem realistic for a start-up restaurant that aims to have price points for the masses.
You turn to research about beef production in your country. Maybe there is a source of high quality cattle and you can create an alliance with them for processing the animals. After some research, you find out that there are no feedlot-style cattle producers in the entire country. Zero.
We use the term ‘value chains’ a lot in agriculture and food industry. Value chains are the set of actors and activities that bring a basic agricultural product from production in the field to the consumer. The challenge in Africa is not just development of value chains, it is creation of value chains from the bottom-up.
It is extremely difficult for someone from the U.S. or another country with highly developed agriculture to appreciate the task. Those who want to see production of various agricultural commodities and food ingredients can’t set their sights on just one value chain activity. You can’t plop a Midwestern crop production operation down, for example, as there is no developed market and logistics for all that it could produce. You can’t create a meat processing business because there is no modern packing facility to source meat from and there are few livestock producers of scale to provide the basic input anyway.
The missing element has been value chain entrepreneurs, those willing to build entire value chains with all the associated problems and pains in doing so. The market wants high quality, consistent ground beef, for example? A value chain entrepreneur will do what it takes to deliver that product to the market place and it will likely involve level of direct investment and partnerships in beef production, beef abattoirs, beef processing, and cold chain logistics. There is simply no other way. The value chain will, of course, develop over the course of time, and entrepreneurs and companies will become more specialized in more specific parts of the value chains. But for now, it all needs to be done.
I have had the opportunity to meet during my most recent travels (and prior travels to Africa) the value chain entrepreneurs that will make good things happen. Perhaps fittingly, I think the most interesting projects are those where farmers are involved. Sometimes farmers from abroad, the U.S. and Brazil, for example, partnered with someone they’ve met from Africa. Other times, it’s African farmers who are developing their operations beyond production agriculture and into processing, wholesale, and retail activities. Sometimes, it’s agribusiness people coming back to start their own operation, or young professionals returning to near their home villages to develop their own agricultural businesses.
Capital is needed to develop entrepreneurial value chains in African agriculture, but there are two types of capital to keep in mind. One, certainly important, is financial capital. Scalable agricultural production, processing, and logistics simply cannot be developed without financial investment. Secondly, and I believe more important, is human capital. What is desperately needed is the human talent and spirit that can gather resources, identify opportunities, overcome obstacles, and build companies that will ultimately deliver affordable, high quality commodities, ingredients, and food to the emerging consumer base in Africa. That is, entrepreneurs.