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African agribusiness partnerships driving growth on the continent



Africa’s dynamic agribusinesses are rapidly developing new markets for African food products across the continent through organic growth and global partnerships. Despite coming relatively late to large-scale food production and export, the continent has a number of advantages driving its ability to boost food production and access new global markets.

The world’s population is growing even as incomes are increasing. This is changing diets, driving the demand for food globally. Africa’s population and income are also growing, with increases in the volume and variety of foods consumed tracking middle-class formation in key regions across the continent. All this is happening at a time of investment in transport and logistics infrastructure supported by legislation alive to the benefits of developing competitive trade within Africa.

This is also all happening on a continent with 60% of the world’s unused arable land.

“Africa’s agriculture sector is undergoing rapid change. Advances in the scale of aggregation and investment in processing and associated industries is promoting the large-scale accumulation and movement of African commodities like grains, cocoa, pulses, sugar and edible oils amongst others, within African countries, between African regions and even globally,” says Junaid Jadwat, executive, agribusiness sector, consumer client coverage at Standard Bank.

Family-owned agribusinesses expanding

These changes are being driven by local family-owned agribusinesses expanding their processing, warehousing and distribution capabilities into neighbouring territories, or across regions. “Local companies like Bakhresa Group, Bidco Group, Export Trading Group, Mohammed Enterprises Tanzania Limited and Willowton, with local expertise and strong distribution capabilities, are expanding across borders in their home regions and diversifying across the consumer value chain into higher value FMCG processing,” adds Jadwat.

“The resilience and growing strength of Africa’s family-owned agribusinesses point to their strategic advantage in local knowledge and established relationships,” explains Jadwat.

Standard Bank, present in 20 African markets has worked with many of these family-owned businesses, often for generations, and shares many similarities with them. Standard Bank is focused on driving growth on the African continent, which they call home. The bank has people on the ground who understand their markets, the detail of their client’s businesses as well as the conditions under which they operate. Standard Bank also understands local legislation, along with the challenges of moving goods, managing money and providing liquidity across the continent.

Most importantly, however, Standard Bank along with many of its African agribusiness clients, “can see the opportunity that the continent presents for agribusiness and agri-trade – while providing the global infrastructure to leverage this opportunity,” says Jadwat.

Global agribusinesses partnering with local players

One of these opportunities is the growth potential increasingly realised through partnerships between global agribusiness companies and local or regional players. Established global agribusiness players like Louis Dreyfus Company, Olam, and Wilmar have partnered and are continually looking to partner with locals to pursue opportunities for expansion across the continent, bringing skills, global standards/benchmarks, as well as a strong supply network and scale. “It would be exceedingly difficult for a newly arrived global agribusiness to access these networks without working with a local partner”, explains Jadwat.

“At the same time, many African commodities businesses are at that stage in their development where they are increasingly seeking access to the international trading and distribution networks that the global FMCG multinationals have – if they are to expand volumes and access a wider footprint of global consumers and a larger basket of consumer goods,” he adds.

For more than 20 years, Land O’Lakes has been supporting dairy farmers in Africa by administering funds for US Aid in addition to providing access to markets and technical assistance to improve farmers’ yields and competitiveness. In 2015 Standard Bank was lead debt arranger for Land O’Lakes acquisition of a 52.5 percent stake in Villa Crop Protection, a leading crop protection company based in South Africa. Land O’Lakes is the second largest cooperative in the United States with 2016 net sales of $13.2b and a clear vision for accessing the African agricultural market.

The synergy provides Land O’Lakes access to a continental agricultural network while providing vital chemical and fertiliser inputs. It also provides Villa Crop Protection’s clients with an alternative and expanded global market for their produce. More recently, Land O’Lakes completed a joint venture in Kenya with the Bidco Group, called Bidco Land O’Lakes Ltd, on their animal feeds business, further expanding their African footprint.

Having worked with many of these businesses for decades, Standard Bank is increasingly providing advisory, debt, trade finance, and global markets solutions that not only underpin the expansion of daily trading operations but also support the evolution and drive the earnings of Africa’s entire agricultural sector. Since the sector employs 70% of sub-Sharan Africa’s labour force and contributes 30% towards its GDP, “investing in and supporting the growth, health and dynamism of African agribusiness is central to the future growth and prosperity of the continent that we call home,” says Jadwat.


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Climate change report shines spotlight on Africa’s agriculture potential



It seems almost incongruous to talk about the opportunity that exists in ensuring the world’s food security by bolstering Africa’s agricultural output when the very pressing and public crisis of climate change could be its undoing.

Particularly in the run up to COP26 and the “reality check” that came with this week’s release of the Intergovernmental Panel on Climate Change (IPCC) Six Assessment Report, it is clear the entire African continent is “highly exposed” to climate extremes, at a relatively “high level of vulnerability”.

With over two thirds of Africans deriving their livelihood off agriculture, climate change-led crises like droughts, floods and cyclones continue to threaten the continent’s economic growth, employment, and food security. And yet, ensuring Africa’s agricultural resilience would not just help Africa. It’s essential for ensuring global food security. 

What’s more, these climate-led natural disasters have the greatest and most disproportionate impact on small- to medium-scale farmers, comprising as much as 80% of Africa’s agricultural output, from maize and wheat to rice, cassava, and sorghum. 

“The UN Report confirmed that climate change is intensifying the water cycle and affecting rainfall patterns, bringing more intense rainfall and associated flooding, as well as more intense drought in many regions,” says Malvern Chirume, African Risk Capacity Limited Chief Underwriting Officer.

“These African farmers are the heart of the continent’s agriculture and are at the mercy of climate change events completely out of their control,” Chirume adds.

Established in 2014, ARC Limited provides natural disaster insurance relief to African countries which have joined the sovereign risk pool.

Along with its partners, which provide premium support, the insurer has already paid over US$65m to seven African countries to provide drought relief and address the economic concerns these countries’ most vulnerable citizens face.

Responding to the climate crisis

Traditionally, countries have responded to climate change-led disasters such as droughts or floods by raising funds for emergency relief. This approach is time-consuming and inefficient.

“It takes far too long for African countries to mobilise the immediate resources they need for relief efforts, to save lives and livelihoods. Our role at ARC Limited is to work with countries to prepare them for the risk exposure they have and how to respond swiftly to climate-related food security emergencies. This includes helping them to establish a rainy-day fund which pays out swiftly, before the problem has become worse, and more funding is needed.”

The ARC Limited model, built on parametric insurance (pre-specified pay-outs based upon a trigger event), has been highly successful, says Chirume.

“We have to date paid out close to $65 million dollars in claims. When one considers that every dollar in insurance pay-outs saves US$4 dollars, this makes the cumulative economic impact around US$240 million. With those funds, we’ve helped more than 5.9 million people whose livelihoods have been affected by climate change impacts,” Chirume explains.

While parametric insurance against natural disasters has enormous potential for the agricultural sector, it has a further economic impact. Because agriculture makes up such a significant portion of the continent’s economy, a downturn caused by a climate shock will echo through the broader economy of any nation affected.

This can bring an economic downturn, a lack of funding for key infrastructure and services at government level, and a loss of jobs as farmers struggle to recover. There is also evidence of migration away from areas experiencing drought, which can have a long-term impact on the regional economy.

Organisations such as ARC Limited have an essential role to play in this way in protecting agricultural value chains and the economies of and employment in Africa. “Our role is to help mitigate and manage the risk, building resilience and ensuring the African country is able to bounce back sooner after a natural disaster,” says Chirume.

With the negative impacts of climate change increasing and their potential to devastate the agricultural sectors and food security of African countries, it has become more important than ever to put sustainability at the heart of interventions.

“Creating an environment that limits the impact of climate shocks on the agricultural sector is about more than just securing economic transformation. At the heart of this investment is the need to ensure basic food security for the continent and the world,” says Chirume.

In its Sustainable Development Series, the World Bank says the African continent could play a leading role in ensuring food security for the earth’s estimated 9 billion people by 2050.

According to McKinsey, Africa’s full agricultural potential remains untapped. It determines that Africa could produce two to three times more cereals and grains, which would add 20% more cereals and grains to the world’s current output of 2.6 billion tons.

Given Africa’s productive potential, the continent could be a key contributor to feeding the world in the future. But to fully realise that potential will require overcoming many obstacles, including how it deals with the impact of climate change on agriculture and food security.

“We need broader collaboration between private and public sector to solve the climate change disaster response problem our continent faces. The problem is so big, that all of us have a role to play,” says Lesley Ndlovu, ARC Limited CEO.

With the support of the United Kingdom and German Government, ARC Limited has been equipped to help the member states of the African Union reduce the risk of loss and damage caused by extreme weather events affecting African populations.

“But there’s so much more work that still needs to go into reaching as many people as possible to help build the resilience of local communities and ensure they have the means to bounce back whenever they are impacted by a natural disaster,” concludes Ndlovu. 



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World Poultry Foundation (WPF) launches video series to help Africa’s farmers improve poultry production



With poultry increasingly a focus for emerging farmers across Africa, the US-based World Poultry Foundation (WPF) has released a series of training videos to help farmers reduce waste and optimise profits.

Feed accounts for up to 70% of the costs of raising poultry, so proper feeding techniques enable farmers to reduce waste, cut production costs and raise healthier birds, says WPF. Water is equally important in poultry farming, with proper water management crucial for healthy birds.

WPF’s training series, with four videos dedicated to production, explains how farmers should store feed, proper feeding of poultry and how to prepare and manage zones of comfort to encourage proper brooding for chicks. The videos also explain the importance of litter in helping to prevent common diseases to improve production and returns.

World Poultry Foundation CEO Randall Ennis says the video series has been developed to address the most common challenges faced by emerging poultry farmers across Africa. “By applying best practice poultry farming methods, farmers can significantly increase their production, their incomes, and the nutrition available to their families and communities,” he says.

The training videos, as well as free checklists and worksheets, are available here



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AFEX Raises $50Million for Agri-SMEs, Africa’s First Warehouse Receipt Backed Commercial Paper



AFEX CEO, Ayodeji Balogun (Source: AFEX)

AFEX Commodities Exchange Limited (AFEX), Nigeria’s leading private commodities exchange company, has announced the first Warehouse Receipt Backed Commercial Paper in Africa, with tech-enabled operations and a 24-hour fast cash turnaround for borrowers. With over $50 million raised for Agri-SMEs, this bridges the funding gap between lenders and borrowers in the Nigerian agricultural sector with a commodity-backed instrument – for the first time.

The AFEX financing deal will help eradicate the high cost of procurement incurred by processors by deploying a discounted value of a warehouse receipt distributed among five leading players in the Food and Beverage, Trading Poultry and Animal Feed segments in Nigeria. The receiving companies are top 10 players in their respective segments. They have now been enabled access to a tool for managing price volatility, enabling up to 30% direct savings on prices.

“With our vision to reach a cumulative total of over $5 Billion in investment to the agriculture sector over the next five years, this financing deal is right on track to achieve this goal’’ – said Ayodeji Balogun, CEO, AFEX Commodities Exchange. “As we move towards building a derivatives market in Africa, we want to be able to reduce exposure to price risk for stakeholders, by enabling them to hedge their positions and trade in commodity derivatives.”

The warehouse receipts, which can then be transferred from commodities to a financial asset and listed under the borrower’s portfolio on the AFEX trading platform, will create a sustainable funding structure and address underfunding in the Nigerian agricultural sector. With the warehouse receipt system linked to financiers, the system allows financiers value and marks the commodities’ price to market on a real-time basis.

“Our mission is to provide low-risk working capital facility for stakeholders in the Agro sector, in a way that is transparent and has a very high viable investment return’’ – said Akinyinka Akintunde, VP Financial Markets at AFEX. “As a licensed commodities exchange and warehouse receipt system operator, we deploy a warehouse receipt system and collateral management infrastructure to increase market confidence for both lenders and borrower.”With AFEX’s goal to support Africa’s food security while promoting a fair exchange of value among players in commodity value chains, this deal’s social impact is delivered through market access for farmers and reduced post-harvest losses. AFEX continues to contribute to the United Nations Sustainable Development Goals 1, 2, 5 and 8; no
poverty, zero hunger, gender equality, decent work, and economic growth.

Also Read Cocoa Pricing: Why Public-Private Sector Partnerships are Key to Sustaining the Livelihood of Smallholders Farmers in Africa


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