Transforming African agriculture
The growing importance of unusual publicprivate partnerships
A report by the Economist Intelligence Unit
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Transforming African agriculture: The growing importance of unusual public-private partnerships
Transforming African agriculture:
The growing importance of unusual
public-private partnerships
T
o most of the world, rural Africa is associated
with images of the begging bowl rather than the
breadbasket. But that could soon change thanks to
a rapidly spreading consensus that the way to boost
and sustain economic growth and development on
the continent, while tackling the challenge of food
security both in Africa and globally, is to commercialise
smallholder farming in partnership with agriculture
and food companies.
Just a few years ago, the idea of foisting business
practices on subsistence farmers, who make up
over 60% of the entire population in sub-Saharan
Africa, would have been regarded as illusory by
most governments, smallholder associations and aid
groups. Working with large international companies
to get the job done would have been heresy. But led
by a new generation of African leaders, the past few
years have seen policy-makers, donors and businesses
groping towards unusual but potentially revolutionary
partnerships intended to create efficient, end-to-end
supply chains, which embrace subsistence farmers
rather than exclude them. And while it’s too early to
demonstrate dramatic results in a sector that needs
long-term strategic approaches, the very fact of
building common platforms for implementing businessenabling strategies is transforming perspectives.
“Things are now starting to move very fast,” says
Lucy Muchoki, chief executive of the Pan-African
Agribusiness and Agroindustry Consortium (PANAAC).
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“There is a mechanism for business to start getting
involved in the development of agriculture.”
These new approaches to agriculture vary widely across
Africa. Some countries, like Tanzania, Mozambique
and Burkina Faso, have designated geographical areas
as agricultural corridors, connecting distant foodproducing areas with ports and cities and ensuring
the infrastructure is there to bring in large-scale
investment. Tanzania, for example, has created the
Southern Agricultural Growth Corridor (SAGCOT),
which combines the Tanzanian government and
farmer organisations with dozens of international and
domestic companies and development organisations
in a 20-year programme to invest $3bn-plus in
infrastructure, create 420,000 rural jobs and produce
enough food to export to the region and around the
world.
Other countries, like Ethiopia, Nigeria and Kenya, have
taken a crop-based approach. Ethiopia, for example,
is focusing on bringing in investors to solve blockages
along the value chains of specific crops, like malt
barley, sesame and chickpeas, which it selected as
exciting opportunities for private sector investors. For
malt barley, the Agriculture Transformation Agency
(ATA) which coordinates the partnership initiatives,
has already found investors to set up a malting factory
and forged a partnership with Diageo, a global beer
and spirits company, to work closely with smallholder
© The Economist Intelligence Unit Limited 2013
Transforming African agriculture: The growing importance of unusual public-private partnerships
Interviewee list
Khalid Bomba, chief executive officer, Agricultural
Transformation Agency (ATA), Ethiopia
Dougie Brew, external affairs director Africa, Unilever
Thomas Debass, director of global partnerships, Global
Partnership Initiative, US State Department
Boaz Blackie Keizire, technical advisor and CAADP
implementation specialist, African Union
Anne McCormick, corporate relations director, Diageo
Africa
Lucy Muchoki, chief executive officer, Pan-African
Agribusiness and Agroindustry Consortium (PANAAC)
Salum Shamte, chairman, Agricultural Council of Tanzania;
chairman, SAGCOT Centre
farmers so it could source locally for its newly acquired
Ethiopian brewery. “We work with all the partners to
identify the bottlenecks—policy-related, capacityrelated or infrastructure-related—then work with the
partners to fix them,” says Khalid Bomba, chief executive
of ATA.
While national strategies vary, the attempt to transform
and commercialise agriculture in partnership with other
private and public sector players is a common thread.
The first signs of change came from the African Union’s
planning agency NEPAD, which drew up a pan-African
agricultural strategy in 2003. Its Comprehensive Africa
Agriculture Development Programme (CAADP) aimed to
get signatory countries to commit to increasing public
investment in agriculture to 10% of their national
budgets and to raise agricultural productivity by 6%
a year. CAADP could have ended up as just another
unrealised plan, but as a few pioneering governments
raised their spending to this level, they soon realised it
was not going to raise productivity, bring food security
or take rural people out of poverty. What became clear,
as global food prices rose, was that government alone
could not solve the challenges of agriculture. “There
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is no room to keep speaking politics in agriculture,”
says Boaz Blackie Keizire, Technical Advisor and CAADP
implementation specialist at the African Union. “We
used to have an investment policy, but no investments
in agriculture because there was no-one speaking
the language of business.” At the World Economic
Forum in Dar es Salaam in 2011, Tanzania’s President
Jakaya Kikwete called on companies in the audience
to help them break through the constraints to raising
agricultural productivity, giving birth a year later to
Grow Africa, a pact between eight governments, and a
handful of companies and development organisations,
to commit to defining and doing what is needed to raise
agricultural productivity.
Constellation of interests: trends
driving collaboration
This partnership approach is the result of a new
coincidence of interests in the continent, driven by
three broad trends. First, food security and agricultural
productivity are rising up policy and business agendas
globally, not just in Africa. High food prices are a sign
of the growing global population, the rise in demand
for agricultural produce and unpredictable harvests
as climate change starts affecting weather patterns.
With the global agricultural production system already
stretched thin and stocks depleting, providing food
at an affordable price will require significant extra
agricultural capacity. The greatest potential for adding
that capacity is in Africa, where the kind of green
revolutions experienced in India or Brazil has yet to
happen. Not only is the bulk of the planet’s unused
arable land in Africa, but crop yield on used land in
Sub-Saharan Africa is also the world’s lowest, by far, at
only 27% of potential yield, according to the Food and
Agriculture Organisation’s most recent data. That means
relatively small interventions of the right kind could
yield fast results. Meeting that challenge brings exciting
new business opportunities for agribusiness.
Secondly, international business interest in Africa is
growing generally, especially in agriculture. Over the
© The Economist Intelligence Unit Limited 2013
Transforming African agriculture: The growing importance of unusual public-private partnerships
past five years, international companies have realised
that Africa, far from being a hopeless continent running
at odds to the rest of the world, is actually the last
significant emerging market region. Its population is
set to double to 2bn by 2050 and, despite continuing
poverty, the fast-growing African middle class is creating
a significant consumer market in most parts of the
continent. For agriculture and food businesses, the
coincidence of growing markets, rising food demand
and short supply has made guaranteeing high-quality
supply and working closely even with smaller farmers
more imperative. This , has encouraged a shift from a
hands-off, contracting-out business model towards a
vertical approach, centred around farmers, with the aim
of supplying both the local market and exporting. Such
Room to grow
(Actual crop yield as a percent of potential yield)
89%
East Asia
South East Asia
68%
North America
67%
West and Central
Europe
64%
Australia and
New Zealand
60%
51%
West Asia
48%
South America
45%
South Asia
43%
Pacific Islands
40%
North Africa
Eastern Europe
and Russia
37%
Central Asia
36%
Central America
35%
Sub-Saharan
Africa
24%
Source: UN Food and Agriculture Organisation.
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an inclusive approach to doing business is bolstered by
a more general attempt on the part of big companies
to reduce risk and ensure sustainable growth in poorer
markets by making sure their operations bolster local
communities. “Our first parameter of course is to make
sure we’re making the right business decisions,” says
Anne McCormick, Corporate Relations Director at Diageo
Africa. “But, in doing so, we are also getting better at
understanding and trying to optimise the broader socioeconomic benefits of running our business successfully,
in both the short and the long term.” The spirits and beer
maker gets an unusually high 13% of its global sales in
Africa.
Finally, governments in Africa are increasingly driving
their own growth and development agendas and changing
the way they work with donors and business. Policy
autonomy has been in short supply in Africa. But a new
generation of African leaders, often educated abroad and
conversant in the language of business, is starting to
set its own agenda in major policy areas like agriculture,
infrastructure, healthcare and education—helped by the
commodities boom that has strengthened government
revenues and by the emergence of new sources of
capital, from foundations and patient capital to private
equity and Chinese lenders. As a result, government are
rethinking what the public and private sectors can do
best and what role aid organisations can best play. And
while in areas like healthcare and education, the public
sector will always remain a key player, in agriculture
policymakers recognise their role is inherently limited by
the need to work with farmers and food companies. Even
in countries like Ethiopia, which is pursuing an explicitly
state-led development path, the government has reached
out to the private sector and to a variety of donors to
tackle the challenge of increasing productivity.
Lessons so far
These three trends have encouraged a new approach
to agriculture. With most of the new initiatives only
operating since 2012, it is still experimental. But one
lesson is already very clear: collaborating successfully
© The Economist Intelligence Unit Limited 2013
Transforming African agriculture: The growing importance of unusual public-private partnerships
requires all partners to move beyond their normal ways
of operating. Doing that consistently in the face of both
internal and external resistance and constraints requires
strong support and leadership from the top, as well as
the creation of agile institutions that focus on brokering
mutual interests, articulating gains and identifying and
helping remove constraints.
“Agriculture was held back for years in Africa by an
outmoded debate about whether farming should be
small or large-scale, public or private. But the fact is
it’s everyone working together,” says Dougie Brew,
External Affairs Director Africa at Unilever, a global food
company. “What we need is a body that can actively start
bringing people together and at the same time have a
high enough political profile to add pressure on both
the public and private side when things get difficult, so
things are delivered.”
For governments, the big shift has been to focus on how
to create an enabling environment for private sector
growth around smallholder farmers. That has involved
embracing the language of business to attract investors
and maintain their confidence that risk will be minimised
as governments change. It has also meant countering
criticism that they are working with the enemy and
supporting foreign land grabs rather than helping poor
farmers.
Businesses involved in these partnerships are also being
catapulted far out of their comfort zones, forced to take
a long-term approach to their markets and to focus on
creating winners all round rather than on the immediate
bottom line. In part that is a consequence of operating in
fast-growing frontier markets with big income disparities
and professional capability gaps, where businesses have
to rethink their boundaries and consider how explicitly
they should be involved in development. But operating
within a broad partnership framework like Grow Africa,
companies face one particularly difficult boundary:
defining a pre-competitive space in which they can
work with competitors to create properly functioning
value chains and so build the foundations of successful
business for all.
A Who’s Who of African agricultural partnerships
ATA: Ethiopia’s Agricultural Transformation Agency
was set up by the Ethiopian government in 2010
to help ministries, the private sector and other
non - governmental partners to address the broader
constraints of achieving agricultural productivity
growth and food security, while working with
smallholders.
CAADP: Comprehensive African Agricultural
Development Programme, set up by NEPAD in 2003 and
designed to encourage coordinated national strategies
and investment plans for agriculture among all African
Union members.
Grow Africa: a platform to facilitate public - private
partnerships in agriculture, within the framework of
CAADP. Set up in 2012 by NEPAD, the African Union
and the World Economic Forum. Member countries are:
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Burkina Faso, Ethiopia, Ghana, Kenya, Mozambique,
Rwanda, Tanzania, and, most recently, Nigeria. Its most
advanced projects are the Beira Corridor in Mozambique
and SAGCOT (see below).
NEPAD: The New Partnership for Africa’s Development set
up by the African Union in 2001 to find new, African - led
approaches to growth, development and cooperation.
SAGCOT: The Southern Agricultural Growth Corridor of
Tanzania was started in 2010. Its aim was to create a
risk- sharing model for agriculture in a specific area that
benefits smallholders while rapidly developing food
supply. SAGCOT brings together farmers, the government
and local and international companies, whose interests
are now brokered by the SAGCOT Centre.
© The Economist Intelligence Unit Limited 2013
Transforming African agriculture: The growing importance of unusual public-private partnerships
Domestic companies face even higher hurdles in many
ways. Salum Shamte, Chairman of both the Agricultural
Council of Tanzania and the SAGCOT Centre, is himself
also an agri-businessman. He believes that engaging
the local business community is crucial to the success of
initiatives like SAGCOT. “The local private sector has its
own impediments,” Mr Shamte asserts. “One is finance:
they might need help to be players. The other is attitude.
We need to show them that agriculture can be profitable
if approached correctly.”
The role of donor organisations and NGOs within these
partnerships is also shifting and many organisations
are struggling to work their role out. “The biggest
elephant in the room is that governments have dwindling
resources. The private sector has a lot more resources,”
says Thomas Debass, Director of Global Partnerships at
the US State Department’s Global Partnership Initiative.
“The role of aid is being redefined whether we accept
it or not.” One key role that has emerged in Grow Africa
is the provision of “catalytic finance” and “patient
capital” to overcome the lack of financing for scaling up
successful pilot schemes. But for some organisations the
shift is difficult. “It is very encouraging to see some of
the leading donors and NGOs start to evolve their own
approaches to business,” says Ms McCormick of Diageo,
whose background is in development economics as well
as international business. “Of course they need to keep
challenging business and other stakeholders, but it is
important that business is not just seen to be a form
of CSR cashcow that will be able to keep paying out in
good times and in bad times, but as a partner and valued
contributor to sustainable development.”
For the smallholders, themselves, working within these
new partnerships involves the greatest shift of all –
switching from subsistence farming to seeing themselves
as entrepreneurs, operating to the standards and
demands of large customers while deciding on which
crops it makes sense for them to grow. “It’s not easy
working with smallholders,” says Ms Muchoki of PANAAC.
“You give them seed and then they sell the harvest to
someone else who offers them a bit more money.”
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Tackling problems like this is the role of new institutions,
like the ATA in Ethiopia and the SAGCOT centre in
Tanzania, emerging to broker the interests of the
partners. “We talk to farmers’ associations and educate
farmers so they understand the responsibilities of
entering into long-term supply contracts and the
upsides of getting reliable demand that will last for
years,” says ATA head Mr Bomba. He also sees ATA as the
mechanism to engage the private sector and civil society
and promote the partnerships, as well as coordinating
across ministries. But he warns against just copying
his institution in other contexts. “The key is to think
about function rather than form,” he says. “What is
the value proposition and how do you bring it to your
partnerships? The question is: how to leverage and build
on existing structures, not how to create new institutions
that become part of a larger bureaucracy.”
Future trends
This new generation of public-private partnerships in
agriculture is unusual because they are mechanisms of
transformation, not transactions or goals in themselves.
They are platforms of action, designed to bring actors
together to come up with solutions they could not have
found on their own. Though all partners stress that
being willing to experiment, test and adapt is key, some
future trends are already becoming visible. The first is
that national-based programmes are likely to regionalise,
creating bigger markets and joining forces to overcome
infrastructure constraints.
Secondly, agricultural partnerships could act as a
catalyst for broader rural development – creating jobs
outside of farming in both service and production
sectors. Following recent upheavals in the mining
sector, for example, where workers in largely rural areas
protested against their poor living conditions, companies
such as Rio Tinto and Anglo Gold have started looking
at proactive models to help the rural communities
they operate in to thrive, aware that they need to be
seen as a positive part of the local economy in order to
© The Economist Intelligence Unit Limited 2013
Transforming African agriculture: The growing importance of unusual public-private partnerships
continue operating. They are now working with Grow
Africa, to ensure that infrastructure planning, intended
to transport mining commodities, also benefits local
agricultural producers. Mobile operators have also shown
interest in cooperation, recognising the already huge
impact mobile phones have had on rural communities
but also the significant growth potential remaining in
rural areas. In Nigeria, for example, mobile phones were
used to deliver fertiliser vouchers to farmers – and two
Tanzanian operators are now looking at using similar
models, working through the SAGCOT Centre.
The final, and perhaps most far-reaching, trend that
these unusual partnerships could bring is to spread
the business-enabling, problem-solving ethos beyond
agriculture. For all the soft talk of partnership, inclusion
and sustainability, the real crux of the agricultural
partnerships is how to make the food business in Africa
commercially viable and globally competitive. But many
of the constraints are holding back the entire economy,
not just agriculture: the lack of power and transport
infrastructure, the lack of access to technology and
the drag of politics, corruption and bureaucracy. With
so many of the barriers non-agricultural in nature,
these unusual partnerships, if successful, could go
beyond transforming agriculture to transform Africa –
sustainably.
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© The Economist Intelligence Unit Limited 2013
While every effort has been taken to verify the accuracy
of this information, neither The Economist Intelligence
Unit Ltd. nor the sponsor of this report can accept any
responsibility or liability for reliance by any person
on this article or any of the information, opinions or
conclusions set out in this article.
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