On the sidelines of the recent BRICS summit in Durban, Mohit Arora, head of agriculture in Africa for South Africa's Standard Bank, told The Africa Report that India and Brazil provide a good template to lift up rural populations in Africa.
The Africa Report: What should the BRICS countries be discussing in terms of agriculture? What key learnings can countries such as Brazil and India bring to Africa?
Mohit Arora: It goes a little bit beyond agriculture. It appears to me that agriculture is the quickest way of putting together a balanced society. Your middle class basically comes from agriculture. Democracy works only when the middle class is prosperous. If 60-70 per cent of people in Africa are in agriculture-related areas and they are the future middle class, then both Brazil and India provide a very good template with different strengths in terms of solutions on how to bring people up from the rural agriculture areas into middle class.
Often it is not recognised that India has a lot of small farms. It is still the world's largest producer of a quite a lot of commodities, and at a competitive cost. Small is not expensive. Often the thinking in Africa is 'you need to have big commercial farms'. That may have its merit, but you can put together small farmers in a very efficient manner and India provides a clear evidence of that. It is the financing, infrastructure and technology that is made available from the government or independent sources to the rural and agricultural communities which have reduced their transaction costs and built more capital as they go along.
On the other side, Brazil is an outstanding example of technical excellence in agriculture and also financing models. While India predominantly does public sector agriculture financing, Brazil does both... public sector and private sector, in addition to some world beating technology which has been put together over the last 30 or 40 years through [Brazil's agricultural agency] Embrapa.
What innovative ways of financing agriculture are being transferred to Africa?
A lot of capital in agriculture in Africa is already coming from India, estimated at in excess of $2bn in 2010-201. This is not just capital. It is technology that comes with it, [and] a certain way of life which leads to productivity enhancement.
Most of the capital comes in $5m, $10m, $20m, private sector flows that go "under the radar". These investors mix well with the local communities, they integrate properly, they move their families, and usually these monies go into building factories or farms. Once somebody comes in with $5m or $10m equity, [Standard Bank] will provide debt on top of that, or guidance on which country to go to, what to do, what not to do. Proper African beneficiation is happening. Once factories are built, local jobs are created. Wheat, cashews, corn, poultry, these are the sectors that attract a lot of Indian interest.
From Brazil you still see a lot of trade in sectors like sugar, chicken. We are in conversations with some of them as to how they can be in Africa and follow a proper model where they build factories here, rather than import goods into Africa.
There are a particular set of circumstances going in Africa at the moment around land grabs, particularly with politicians and local authorities sometimes give away land, often to BRIC investors. Is this something the BRICS should be talking about?
It's relevant. What has happened is that as the market has developed, a lot of investors have realised that land is not a game. A lot of investments have of late focused on processing assets. It is closer to the consumer side in agriculture than the production side – the mid stream assets, if upstream is farming and downstream is a retail or grocery store. A lot of focus has gone into midstream, a lot of private equity funds, private investors, including some governments, had focused in my mind aggressively on land, and it didn't work out. As far as I can see, the concern has self-resolved itself.