The Interview with Chairman, African Agribusiness Alliance by Business Review Afrika
Professor Danbala Danju is the Chairman, Advisory Board of African Agribusiness Alliance (AAA). He is Professor, Faculty of Economics and Administrative Sciences, Department of Accounting and Finance, Cyprus International University, Turkey. He was formerly the Managing Director/CEO of Bank of Agriculture, Nigeria and a Senior Adviser and later Acting Executive Director at the Board of the African Development Bank, Abidjan. Prof. Danju is a member of the Executive Board of Nigerian Agribusiness Group. He obtained his BSc in Economics from Bayero University, Kano, Nigeria and PhD in Economics from the University of Bradford, U.K.
Tell us more about African Agribusiness Alliance
Answer: The African Agribusiness Alliance is registered in Accra, Ghana as a non-profit private sector led regional platform and network for promoting a globally competitive, sustainable and inclusive African Agribusiness.
It hopes to achieve its mission through access to finance, investment facilitation, business development, and policy advocacy for increased local value addition, generation of employment and wealth, thereby promoting economic growth and development in African countries. The Alliance’s Advisory Board is composed of diverse professionals and experts with several years of industry experience and who are passionate about the transformation of Agribusiness value chains in Africa.
Question: Africa’s Agribusiness sector is expected to reach $1 trillion by 2030, so there is certainly cause for optimism. Consumers’ demand for food in Africa is growing at an unparalleled rate. What is fueling this growth?
Answer: Rapidly expanding population and urbanization of consumers coupled with increasing middle-income cadre of the population with higher purchasing power could explain the growth of consumer demand for food in Africa.
This will, no doubt, fuel the growth of agribusiness over the next decade and beyond. For illustration, by 2050, Africa’s youths alone will constitute over a quarter of the world’s labour force with a huge demand for food. Urbanization, at 3.7%, is taking place at more than twice the global rate. These phenomenal trends present a rare opportunity for rapid increase in the African agribusiness activities in the future.
Question: Why is Africa a net importer of food and Agricultural products despite the vast potentials?
Answer: It is a paradox that Africa with the largest uncultivated arable land in the world would be a net importer of food and agricultural products. Food import bill was estimated at USD35.4 billion per annum (2015) and it is projected to increase to USD111.0 billion by 2025 if nothing is done to reverse the trend.
Africa is exporting jobs by not being able to increase its local value addition for agricultural products. There are many reasons that could explain this unwarranted dependence on imported food items. These include the low value addition through local processing of primary products, dumping of food items into the African countries.
Moreover, some developed countries and emerging economies substantially subsidize their agricultural products which make them to be cheaper in the international market. Added to this is the fact that Africans generally prefer foreign foods to locally produced foods because they have inadvertently formed the opinion that foreign foods are of better quality than the locally produced ones. For instance, the general perception is that imported rice is better than locally grown rice, even when the local ones are of better nutritional value than the imported ones.
Question: How is African Agribusiness Alliance working to project Africa as an ideal investment destination?
Answer: The strategy of the Alliance for projecting Africa as a preferred agribusiness investment destination is to advocate for the government to provide a favourable and enabling investment climate for African agribusiness enterprises and investors through appropriate policies, infrastructural development, research, security of investment and access to finance.
With the right investment incentives, policies and infrastructure, the cost of doing business will be significantly reduced and agribusiness investors would have a good rate of return for their investments. Investment in infrastructure will help overcome the current challenges associated with poor access between farm-level production and downstream activities, such as processing and marketing. This will open the door to increasing the production of higher agricultural value-added products that will drive agribusiness value chain investment.
Question: Agribusiness is gradually becoming the continent’s premier marketplace for global and pan-African business leaders. What significant measures have been put in place by African Agribusiness Alliance to attract investors into this sector?
Answer: The Alliance is initiating business development and access to finance programmes to attract investors to the sector. Poor investment projects that do not fully explore and exploit the vast opportunities in the agribusiness value chains have negatively affected investment in the sector.
Furthermore, because the financial institutions, particularly the commercial banks, do not fully understand the inherent risks along the agribusiness value chains, they are always reluctant to finance agribusiness projects.
The Alliance is putting together programmes and projects that will facilitate business development and access to finance by agribusiness entrepreneurs along the whole value chain. These initiatives will include supporting farmers organizations, small and medium scale agribusiness enterprises, training them in business plan development and corporate governance, agribusiness investment shows and building the capacity of financial institutions to understand the various financing opportunities and risks along the agribusiness value chains.
It will also involve bringing together public and private sector stakeholders to facilitate investment in the sector as well as creating business to business opportunities and deals for existing and potential agribusiness investors.
Question: With the rise in food insecurity during the COVID-19 Pandemic, should agriculture be running as an essential business?
Answer: No doubt, the COVID-19 pandemic has affected all areas of the global economy including the agribusiness sector. In view of the necessity of food and nutrition security to the sustenance of human beings, agriculture should be considered as essential activity during the pandemic to ensure adequate supply of food and avoid famine and food insecurity.
Therefore, the agricultural sector should be given all the necessary support and assistance by the government so that farmers and small and medium scale agribusiness enterprises can sustain food production and processing that will meet the growing demand by consumers during and beyond the pandemic.
Question: What is the sustainable solution to hunger and poverty in Africa, considering the fact that Agriculture has been seen as the engine of growth in Africa?
Answer: An enabling policy framework is urgently needed if Africa is to combat hunger and poverty. It will help remove existing constraints on agribusiness and encourage investments.
This policy framework should also include, but not be limited to: a) ensuring that the right combination of agricultural, industrial and trade policies to encourage sufficient production of agricultural raw material as well as the efficient distribution of produced products; b) recognition and Enforcement of the rights to land and natural resources to secure the transfer of rights to encourage productive use of land and boost investor confidence; c) pursuing innovative access to finance mechanisms; d) creating incentives for the private sector to make investments; and e) using public-private partnerships to finance agribusiness or facilitate capacity building through technical and entrepreneurial skills training, particularly empowering African youths to participate in agribusiness value chains.
A committed implementation of these measures will provide a sustainable solution to hunger and poverty in Africa.
Question: How can African leaders intentionally get youth to embrace Agribusiness?
Answer: In Africa, agribusiness development can be the real solution to youth unemployment. African youths constitute about 40% of the continent’s working age population but makes up 60% of the total unemployed. In almost every African country, youth unemployment rates are about twice as high as adult unemployment rates.
Rapidly changing demands and technologies mean that Africa can use innovations in information and communication technology to attract African youths into the agribusiness sector. Applications such as mobile banking solutions are playing an important role in connecting smallholder producers directly to the market.
This can help leverage existing global knowledge towards strengthening the continent’s technological efforts, its know-how and its innovation capabilities. This would make the continent’s agribusiness systems globally competitive and attractive to young entrepreneurs who can sustainably play in the global market place through quality and cost-effective products and services.
Question; What are the challenges and opportunities for African Agriculture?
Answer: Agriculture is an important economic sector in the majority of African countries. Approximately 75% of Africans rely on it for their livelihoods. Agriculture and agribusiness sectors has been the driver of economic growth in developed and emerging countries. In Africa, agribusiness and agro-industries account for more than 30% of national incomes as well as the bulk of export revenues and employment. Scaling up agribusiness could be the next growth frontier for Africa.
It could offer immediate value addition through commodity-based industrialization that exploits forward and backward linkages with the rest of the economy. Such industrialization could lift many rural households out of poverty while creating jobs across the economy.
Several key opportunities are within reach in agribusiness. The underlying premise of economic diversification should curb the pattern of overreliance on primary commodities to generate export revenues.
For example, there is a huge gap in the price of raw cashew nuts at $90 per ton compared to over $3,500 per ton for processed cashew nuts in consuming countries. This clearly underscores the fact that continued dependence on the export of unprocessed agricultural commodities rather than focusing on increased value addition would likely adversely affect the continent’s future development and growth.
Africa could exploit several opportunities to overcome existing challenges facing agribusiness. First, despite possessing the world’s largest reservoir of unused arable land, about 60%, Africa has the lowest agricultural productivity, amounting to approximately 10% of global agricultural output. Cereal yields in Africa average only 1.2 tons per hectare, compared with more than 3 tons per hectare for Asia and Latin America and about 5.5 tons per hectare for the European Union.
Question: Agriculture is seen as the main creator of jobs, what policies can African leaders implement to strengthen industries and infrastructure for sustainable development?
Answer: Despite the various initiatives at national, sub-regional and continental wide to boost agriculture development, like the Comprehensive Africa Agriculture Development Programme (CAADP), not much has been achieved to improve the industry. Inconsistent and unpredictable public policy has been a constraint to private investment at all levels.
It introduces an element of often arbitrary risk that discourages investments and causes delayed investment decisions on the part of producers, small and medium enterprises, and multinational corporations. There is therefore the need for African governments to have a durable and sustainable long-term development policy for the agriculture and agribusiness sectors so as to attract both domestic and foreign investors.
One critical area that governments in Africa need to focus to ensure sustainable agricultural and agribusiness development is in funding research and development efforts to improve productivity and quality of products. For instance, Nigeria’s $78 million annual spend on agricultural research institutes seriously lags behind $2 billion in India, $1 billion in Brazil and $700 million in China.
In 2015, Action Aid released a report which stated that for every $100 of agricultural output, Nigeria only invests $0.42 in agricultural research compared to $0.94 and $1.40 invested by Ghana and Uganda respectively.
This indicates the serious underfunding of agricultural research in Nigeria compared to some peer countries in Africa. Given that the agricultural sector is a major economic sector and employer of labour, more attention should be given to strengthening infrastructural facilities for sustainable development of the industry.
Agribusiness development could also help African countries to solve the problem of youth unemployment by creating the needed enabling environment that will attract the teeming population of youths into the sector.