Small scale farmers not growing because of capital
The CEO of the New Partnership for Africa’s Development (NEPAD), Ibrahim Assane Mayaki said recently during the 12th Comprehensive Africa Agriculture Development Program Partnership Platform (CAADP PP) that agriculture still remains the best sector that offers the continent escape from poverty.
He said of all the challenges that Africa faces, agriculture is one that transcends and embraces all the other.
“Agriculture, which employs or provides livelihoods to 60 percent of the population while contributing 20-30 percent to Africa’s GDP, is the sector that could by itself enable to save the greatest number of Africans from extreme poverty while giving them their dignity back.
“Our continent today runs the risk of missing a unique opportunity to develop and offer its youth the jobs it has the obligation to provide if it wants to avoid social implosion” said Mayaki.
Mayaki added that the scope for growth is all the more important that the situation is highly paradoxical:
“Africa imports the equivalent of $ 50 billion of food every year. Yet more than half of the arable land unexploited in the world is on the continent!” He said to solve the agricultural equation, “we must join forces and continue our efforts to define a common agricultural policy.
According to World Bank report on finance and agriculture banking sectors in developing countries lend a much smaller share of their loan portfolios to agriculture compared to agriculture’s share of GDP. This limits investment in agriculture by both farmers and agro-enterprises.
It also demonstrates that the barrier to lending isn’t due to a lack of liquidity in the banking sectors, but rather a lack of willingness to expand lending to agriculture.
Africa’s agriculture sector has struggled to access the financing it needs for sustained growth. In part, a perceived combination of high risk and modest returns as well as the costs of extending traditional banking infrastructures in rural areas has deterred many banks and financial institutions.
Even when available, much of the agriculture funding tends to be informal and short-term, precluding longer-term investments. This informal funding only partially covers the financial needs of farmers and small agribusinesses, and usually at a high cost.
It also states the need for investing in agriculture is increasing due to a rising global population and changing dietary preferences of the growing middle class in emerging markets toward higher value foods (e.g. dairy, meats, fish, fruits, vegetables, etc.).
According to estimates, demand for food will increase by 70 percent by 2050, and at least US$80 billion annually in investments will be needed to meet this demand, most of which is expected to come from the private sector.