Opportunities for Improvement in Africa’s Agro-processing Sector

By: Katie Collier

Date: April 27th, 2021

The agro-processing industry plays a pivotal role in the agricultural supply chain by virtue of its upstream and downstream linkages. Our last post referenced the constraints of the African agro-processing sector, including limited access to finance, technology, and infrastructure. In this blog, we will reference certain solutions that have been proposed by industry actors to alleviate agro-processing issues.

Increasing private sector investment is a crucial component to improve this industry. The United Nations Development Programme (UNDP) suggests that lack of investment stems in part from an unawareness of regional and national investment plans. Implementing new government policies can, in part, fill this gap to attract private sector engagement and awareness of opportunities. Most countries have also struggled with translating investment plans into tangible projects. The UNDP suggests that developing more bankable projects could act as an incentive to increase participation and investment from the private sector. Multiple CEOs have affirmed that an increase in bankable projects would lead to greater private sector involvement.

Establishing organizations and institutions with goals of improved investment could also be an element of this effort. Agricultural chambers, agribusiness foundations, and commodity alliances can boost private sector investment in agro-industries by organizing private firms to make investments. In addition, institutions which promote regional commodity value chains can strengthen these economies by solving challenging value chain issues and mobilizing private actors to invest in value chains in an organized fashion.

With the correct financing in place, infrastructure development may subsequently benefit. The International Fund for Agricultural Development (IFAD) suggests building agro-processing facilities closer to farmers to save time and transportation costs. These facilities also can provide a safer storage place for farmers’ goods, thereby reducing persistent problems of post-harvest losses. IFAD’s Community Agriculture Infrastructure Improvement Programme, created infrastructure closer to rural Ugandan farmers and required the facilities to be managed by farmers or farmer’s cooperatives. This same farmer-focused model may also be successful at improving infrastructure if implemented elsewhere in Africa.

Farmer’s associations and cooperatives can also promote the agro-processing industry in other ways. Improvement in the raw materials stage of the good is essential to improve the processing stage. Farmer-based organizations can overcome challenges that farmers may not be able to individually. Oriented production, contract farming, and greater access to technology are a few advantages farmers can achieve through grouping. Multilateral organizations, like the African Development Bank Group and the UN’s Food and Agriculture Organization, can provide support to these associations through financial and marketing tools and skills.

Greater market access is vital to bolster the position of African agro-processors. Certification scheme implementation will boost opportunities to compete in modern markets. By complying with up-to-date standards, both farmers and processors will be able to compete and profit in more opportune markets. Likewise, adoption of technology is a critical step to move the agro-processing industry forward. Creating free trade areas at a regional level can increase processors’ access to and affordability of local technology. These could circumvent the high imported costs of agro-industry equipment and support local technology development, while adding value to the farmers’ goods.

Digital technologies developed by the private sector can be deployed to support agro-industry growth. However, the existence of these technologies does not ensure farmer or processor uptake and use. Thus, private actors’ solutions must create value for agro-industry participants to incentivize use and provide in-person support. Governments can invest in farmer registries (which is foundational data used in many digital applications) and design policies to increase digital access and literacy to support digital technology adoption. Certain digital technologies, like digital food balance sheets (FBS), can also support private sector investment. Recorded yields, commodity prices, and trade levels from FBSs can better inform private actors when making investments in the agro-processing industry.

Solutions, such as those mentioned above, can play an important role to resolve issues and generate opportunity in the agro-processing sector. They can also serve social and political functions by easing chronic poverty and food security issues. These and other potential solutions should be further explored to build valuable and resilient agro-processing sectors and African economies.