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African food security a priority as imported inflation bites

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This article is part of the dossier:

Africa must invest in Africa

By Estelle Maussion, Nadoun Coulibaly

Posted on June 9, 2022 13:14

Improved taxation systems, investment in energy production, affordable financing and capacity building are the four pillars of African food sovereignty, according to the continent’s business leaders

Since the Covid-19 crisis, and now with the war in Ukraine, Africans, whatever their political persuasion, are unanimous on the need for self-sufficiency in food and life-saving drugs.

Only through the development of local production and processing will the continent rise to the long-standing challenges thrown into relief by the current situation: supply difficulties, inflation, and the growing financial burden on households to meet basic needs. How will Africa be able to strengthen its food sovereignty?

There has been progress in recent years, as shown by the chicken industries in Morocco and Senegal, efforts to develop rice cultivation in Nigeria, Ghana, Mali, Senegal and Côte d’Ivoire, the sugar value chain in Mauritius and the fish industry in Tanzania. But these advances are far too modest in relation to the growth in demand. The amount of food Africa imports is expected to rise to $110bn per year by 2025, according to the African Development Bank (AfDB).

While the public authorities are in the front line, the private sector, which ensures the majority of production, wants to have its say. “We need to be listened to, which is not often the case,” says Youssef Omaïs, the founder and CEO of the Senegalese group Patisen, which trades, produces and distributes packaged food products.

“After the last crisis in 2007-2008, governments promised to focus on local producer networks. But as this requires a lot of effort, we quickly returned to the status quo,” adds Alexandre Vilgrain, who has just announced his retirement as CEO of Somdiaa (Castel group), the leader in flour and sugar in Central Africa.

With food inflation likely to be with us for the long term – bringing with it the risk of food riots – the continent is at a turning point. Here, according to the business world, are the four keys to negotiating this corner at speed.

The number one demand: adopt a tax system that is favourable to local producers and processors. “In francophone West Africa, tax exemptions [VAT, customs duties] favour imports over national production. They even compromise the efforts of the English-speaking countries of Nigeria and Ghana to achieve food self-­sufficiency, leading to trafficking in rice from Benin and Côte d’Ivoire to Nigeria,” points out Grégoire Rota-Graziosi, director of the Centre d’Etudes et de Recherches sur le Développement International (Cerdi) in France. In Ghana, the introduction of the benchmark discount price in 2019 similarly exposed small farmers to global competition.

“It is not a question of declaring war on importers but of regulating imports in relation to local industries so as not to weaken the latter,” argues Patisen’s Omaïs. He calls for the targeting of goods that compete directly with local production.

In order to function fully, this renewed taxation system must be regionalised or, at the very least, harmonised between neighbours. This is easier said than done: while the Economic Community of West African States has made fertilisers a “strategic product without borders” since 2006, many of its members continue to apply customs duties, hindering trade in inputs that are essential for increasing local agricultural productivity.

Powering food production

“You can implement the best taxation there is, but if you don’t combine it with the availability of electricity, it won’t work,” says Somdiaa’s Vilgrain. Access to energy and its cost remain one of the main stumbling blocks for agricultural projects, regardless of their size. In 2018, a study from the AfDB said that 79% of African businesses experienced power cuts over the past decade. It also found that the average cost of electricity for African factories was four times higher than elsewhere in the world.

In the absence of a reliable national grid, many agribusinesses have invested in onsite solutions using fossil fuels. But the movement towards renewable energy is under way. Alongside biomass pioneers such as the Compagnie Sucrière Sénégalaise (CSS) and the Ivorian group Sifca, several players are betting on solar or wind power, encouraged by the lower cost of equipment.

“The provision of public goods is a basic condition for encouraging private investment,” says Jean-Luc Konan, the president of the Cofina banking group in Côte d’Ivoire. Efforts on energy must be accompanied by progress on transport networks, logistics and the cold storage chain. This will help avoid significant post-harvest losses, estimated by the AfDB to be between 35% and 50% for fruit and vegetables, and between 15% and 25% for cereals.

The difficulty of financing agricultural activities has long been identified as an obstacle on the continent. Only Malawi regularly devotes 10% of its national budget to agriculture, as required by the standard set by the African Union since 2003, but it is not just governments that are at fault. “In West Africa, bank loans to agribusiness SMEs remain below 7% of total outstanding loans. When they have access to short-term credit, interest rates are higher than 15%,” says Pierre Jacquemot, a former diplomat and author of a study on food sovereignty published last year.

Things are changing. Commercial banks, particularly in Morocco and West Africa, have developed financial products adapted to agricultural players, reviewing loan conditions, the support offered and the guarantees required. Microfinance and mesofinance are growing, as are fintechs, the latter reducing the cost of credit and facilitating the sale of products, among other things. There is a consensus on one point: there is no miracle solution, but a range of tools to be used according to the type of project and the profile of the entrepreneur

Players in the sector say several aspects need to be accelerated. “The public authorities and the private sector, particularly the banks, must put in place risk-sharing instruments to provide greater support to producers and processing,” says Diakarya Ouattara, the CEO of Coris Bank in Burkina Faso. Cofina’s Konan emphasises the rise of rural financial service providers, such as credit unions, while Oikocredit’s Cédrick Montetcho insists on the need to make the call clauses of guarantees more flexible in case of default, to make these risk-sharing mechanisms more attractive to bankers.

Training at every level

A 2014 study found that sending simple SMS messages reminding smallholders of the sowing and weeding season improved the yield of sugar cane fields in Kenya by 11.5%. Nigeria’s Dangote group uses this example to highlight the importance of training as a necessary step for the proper use of fertilisers, mastering irrigation techniques, preparing to respond to the effects of climate change and complying with health standards.

Digital tools can facilitate the dissemination of knowledge, and African players are investing in upgrading the skills of their teams, but the results are still generally modest in terms of productivity gains. “What is needed are professionals trained throughout the chain: agricultural engineers, food safety experts, quality managers, logisticians, etc.,” says Slim Othmani, the former head of NCA Rouiba and head of the Algerian think tank Care.

Siham Benhamane, head of the Moroccan poultry champion Zalar Holding, adds “The consolidation and transmission of know-how can also be done through peer learning: in Morocco we receive delegations from Senegal, Mali and Côte d’Ivoire.” For him, the key to success lies in this triptych: investment, training and expertise.

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