Africa has over 600 million hectares of unused arable land. This is about 60% of the world’s agricultural land. Africa could feed the world if this arable land is used for food production. Unfortunately, for various reasons, including the cost of food production, use of outdated unproductive technology, dependency on seasonal rains, and restrictive land use laws.
The availability and inadequate use of land has played a significant role in the move by many African countries to introduce investment opportunities in the Agriculture industry. Small scale farming, non-mechanized farming, and climate change have been blamed for low food production in the breadbasket for Africa. However, even as African countries seek foreign investors in the agriculture sector, protection of small scale farmers has been a significant consideration. During the Green Revolution Forum held in Arusha Tanzania, it was agreed that support for small scale farmers in critical if food production is to increase to acceptable and sustainable levels.
How Africa is attracting foreign investment to the agriculture sector
For European companies to invest in agriculture in Africa, incentives were necessary. Some of the measures undertaken by African countries include;
- Low-risk investment opportunities. The cost of investment is critical for companies looking for investment opportunities in Africa. Cameroon and Nigeria understand how important this is to foreign investors. This is why the size of agriculture land available for lease has been given priority.
- Regulatory frameworks are critical to foreign investors. Companies seek out investment opportunities in countries that have a record of reliable harvest and strong business ethics. No company wants to work with a government that has too many red tapes. Several companies favor Rwanda and Ghana for agricultural investment because of minimal government interference in the operations of foreign companies in the agriculture sector.
- Countries with great potential for growth are attractive to investors. Some African countries are more known than others. However, agriculture is not all about popularity. Investors look at the growth patterns and future expectations of some countries. Ivory Coast and Mozambique have continued to attract foreign investment because of the subsidies, planned infrastructural development, and land availability.
- Tax exemptions and incentives are used by most African nations to attract foreign investment in Agriculture. The cost of leasing land has been a determining factor for many European companies seeking investment opportunities in Africa. 80% of land in South Sudan is arable. Unfortunately, it is underutilized mainly because of political instability. In a bid to attract investment, the government of South Sudan is leasing a minimum of 60,000 hectares of land at 25 US Cents per acre per year. Senegal is leasing land at $40 per acre per year for a minimum of 20 years with possible extensions to 50 years.
- Exporting entities in Tunisia get benefits such as value-added tax, customs tax, and auxiliary customs duty. Tunisia is offering over 3000 hectares of commercial agricultural land with the option of setting up agro-processing units. It encourages investors interested in massive investment with the possibility of high returns.
Companies practicing agribusiness in Africa for export
Nestle Cocoa Plan
58% of the total cocoa production of cocoa comes from Ghana and Cote D’Ivoire. Unfortunately, most of the cocoa cultivated in these countries is done on a small scale. To get all the cocoa needed for their final products, Nestle Cocoa Plan set up a demonstration farm and training Centre in Abidjan. Local small scale farmers get guidance on the best farming practices to produce the best cocoa. Nestle works with over 40,000 small scale farmers.
This yogurt producing French company has made investments in various countries in Africa including South Africa, Kenya, Nigeria, Ivory Coast, Ghana, Togo, and Benin. In 2016, Danone Africa earned €1.4billion. Danone owns 40% of Brookside Dairy Kenya and is a majority shareholder in Fan Milk Nigeria. Danone works in partnership with local dairy producers. The most productive export markets for the final products of Danone plant based and dairy products include the USA, Russia, and France.
Heineken has 23 running projects in 13 African countries. The raw materials Heineken focuses on include Barley, Sorghum, sugarcane, wheat, and maize. 42% of the raw materials are sourced from Africa and the Middle East. Heineken is involved in the cultivation process through the education of the local farmers in a bid to improve the volume and quality of production. Heineken hopes to increase their local sustainable sourcing of raw materials from 28% to 50% by 2020. It is also working towards a 60% raw material sourcing from Africa by 2020.
Del Monte Fresh
Delmonte is an American company that has been operating in Africa for over 22 years. It is a major producer of fruits and vegetables. It has over 90,000 acres under production and over 40 distribution outlets. In Africa, it operates in Kenya and Cameroon. Del Monte is one of the major exporters of fruit juices and processed pineapples. Some of the corporate social responsibilities Del Monte is involved include financial and product donations to the surrounding communities, schools, and churches.
Support for the local farmers is encouraged by African countries that seek investors for the Agricultural sector. These companies have educated small scale farmers on the importance of quality food production. This has resulted in high yields. Local farmers also have an immediate market for their products since these companies are large volume exporters in the European market.
Many farmers have been drawn to the programs initiated by companies seeking sustainable production of raw materials. Successful companies with branches in various countries in Africa have become agribusiness ambassadors for many nations. Many investors have sought investment opportunities because of the success of some of these companies.