Posted on August, 17, 2022 at 10:03 am
The term “disruption” is often associated with high-technology industries, but the agriculture sector on the African continent is going through its own revolution and makes it one of the most exciting parts of the economy in 2022. As one of the largest funders of agriculture projects in sub-Saharan Africa, we are fortunate enough to have access to some of the most sophisticated farmers and agri-processing professionals on the continent. Couple this with the fact that we are one of the largest card issuers and acquirers in South Africa and have access to data-rich consumer insights, we believe we are uniquely positioned to track the journey of agriculture projects from the farm to the consumer’s fork.
These are some of the trends we are eagerly anticipating and watching closely in 2022:
Farmers getting closer to consumers
A key trend that is gathering momentum is the disintermediation of the retailer channel between the farmers and the consumers. While large-scale farmers will continue to prioritise export routes and major retailers, mid-scale farmers are utilising technology to get closer to their consumers with many now selling directly. This is being driven by a number of factors including consumers who are becoming increasingly more conscious around the source of their food and want products which are ethically farmed and organic in nature. Conscious consumerism is on the rise across the world and when you as a continent are a leading producer of primary agriculture products, you are well positioned to capitalise on this trend.
Localisation is real for agriculture
While the Department of Trade, Industry and Competition (DTIC) has come in for some criticism around its approach to localisation – there is a distinction between the industrial policies that are being proposed and the opportunities presented by the agri sector which contributes toward food security on the continent. Unlike their industrial counterparts, the agriculture sector in South Africa is globally competitive on both a skills and technology basis and in many segments is a market-leader. With both the COVID-19 lockdowns and recent events in Ukraine and Eastern Europe impacting supply chains, retailers are looking to have their suppliers close at hand and this represents a real opportunity for small and mid-size farmers and agro-processing businesses.
Converting great into world-class
South Africa enjoys some of the worlds most skilled farmers, researchers and agri-entrepreneurs. Unlike their counterparts in the US and Europe, South African farmers don’t have government subsidies and protectionist policies to fall back on – and this skills base is the envy of the world.
When we deal with US farmers, they are often amazed at how technically skilled and efficient our local operations are. Where we fall short, is the ancillary and support services required to take our services to a new level. Investment in food safety and veterinary controls are an obvious win – Foot and Mouth disease is an absolute shambles in South Africa and we have shortages of animal vaccinations. This means that we cannot export many meat products to Europe. Contrast this to the likes of Botswana and Namibia who have invested in this segment and are enjoying strong export successes. Lastly our logistics channels are in dire need of an overall. Our ports operations are poor and we are in a situation where our fruit exporters are not even worried about the value of the export value of their commodities – they are worried about the quality of the finished product when it arrives at its final destination.
The African Continental Free Trade Area (AfCFTA) is expected to be a game-changer for intra-African trade by providing mutually beneficial trade agreements amongst member states. A look across the continent shows that African governments recognise this opportunity and In Tanzania, the government invested in a bridge which connected sugar producers and milling operations, ultimately saving 160km round-trip here.
Tanzania has a very specific sugar strategy over the next 3 to 5 years while the Ivory Coast has developed a beneficiation strategy around Cashew Nuts with an investment in tax breaks and logistics. In Kenya there has been a significant investment in the Tea Development Agency – connecting 550 000 producers and consumers – this is an example of how you develop low-cost value chains and we are proud to have worked on this model in conjunction with local partners.
To highlight the opportunity associated with the food and agriculture sector, we only need to look at the card data which shows that 80% of consumer monthly spend – excluding bond and car repayments – are going toward food purchases. Recent events around the world have given us an opportunity to develop a modern, productive, and diverse agricultural economy for the consumer of tomorrow.
As one of Africa’s leading funders of agriculture projects, we look forward to working with agri-entrepreneurs and innovators looking to participate in the growth of this sector. By watering our own trees, we will enhance African food security, create meaningful employment and be able to compete in an international marketplace on an even footing.
Source: 702