Investing in Agribusiness: Opportunities and Challenges for African Entrepreneurs
Africa is a continent endowed with vast agricultural resources and potential, and the youth population constitutes a significant percentage of its demographic. The combination of these two factors presents a great opportunity for youth entrepreneurs to explore and innovate in the agribusiness industry. Agricultural entrepreneurship is an important sector in Africa that has the potential to drive economic growth, increase food security, and reduce poverty. With a majority of the population being under the age of 30, Africa has a large pool of energetic and innovative young people who can create meaningful impact through agripreneurship.
The agricultural sector in Africa is a major contributor to the continent’s economy, accounting for around 15% of Africa’s GDP and employing about 43.8% of the population as of 2020, according to Statista. Agribusiness is the sector with the highest number of empowered entrepreneurs from the Tony Elumelu Foundation Entrepreneurship Programme. About 44% of the Foundation’s alumni network of young African entrepreneurs operate in this sector.
Despite this, the sector faces many challenges such as low productivity, poor infrastructure, and limited access to finance, which hinder its growth and development. However, the increasing interest and involvement of young entrepreneurs in agribusinesses present an opportunity to address some of these challenges and transform the sector.
Here are some of the benefits and opportunities of youth entrepreneurship in agribusiness:
- Creation of employment opportunities for young people: In Africa, youth unemployment rates are high, with about 60% of unemployed people being under the age of 25. By starting and growing their own agribusinesses, young people can create jobs for themselves and others, thereby contributing to poverty reduction and economic growth.
- Promotion of food security and reducing hunger in Africa: With a growing population and changing dietary habits, the demand for food is increasing rapidly in Africa and this is projected to double by 2050. By starting agribusinesses that focus on producing and distributing nutritious and affordable food, young entrepreneurs can contribute to ensuring that more people have access to food and that they are consuming a balanced diet. It also presents an opportunity for youth entrepreneurs to invest in the production, processing, and distribution of food products.
- Driving innovation and technology adoption in the sector: young entrepreneurs are often tech-savvy and can leverage technology to improve agricultural production, processing, and distribution. For instance, they can use mobile phone applications to access market information, connect with buyers, and access finance. They can also use precision agriculture technologies such as drones and sensors to improve crop yields and reduce post-harvest losses.
This sector also presents an opportunity for technological advancement. This is because technology is revolutionizing the agribusiness industry in Africa, and youth entrepreneurs can leverage this to develop innovative solutions that address challenges in the sector. For instance, they can develop mobile applications that provide market information, connect farmers with buyers, or monitor crop growth.
- Favourable government policies: Several African governments have recognized the potential of the agribusiness industry in the continent’s economic development and have put in place policies that create an enabling environment for youth entrepreneurship in the sector. Such policies include tax incentives, subsidies, and market facilitation programs.
- Access to financing: Various organizations are offering funding and investment opportunities to support youth entrepreneurs in the agribusiness industry. These include government initiatives, private sectors, and development organizations. Additionally, there are various competitions, grants, and incubation programs designed to support young entrepreneurs in the sector.
However, despite the potential benefits, youth entrepreneurship in agribusiness faces several challenges in Africa. Here are some of the major challenges:
- Limited access to finance: Despite the availability of financing opportunities, accessing capital remains a significant challenge for youth entrepreneurs in Africa. Most financial institutions require collateral/credit history, which most young entrepreneurs do not have, making it difficult to secure loans or funding. As a result, many young entrepreneurs rely on their savings, family and friends, and other informal sources of finance to start and grow their businesses.
- Limited access to markets: Many young entrepreneurs struggle to find markets for their products due to poor market linkages and inadequate market information. They also face competition from established agribusinesses, which have stronger market positions and greater resources.
- Lack of technical skills and business management knowledge: This is also a significant challenge for young entrepreneurs in agribusiness. Many young people in Africa have limited exposure to modern agricultural practices and business management, making it difficult for them to compete in the market and sustain their businesses.
- Inadequate infrastructure: Poor infrastructure, such as inadequate transportation, storage facilities, and irrigation systems, poses a significant challenge to agribusiness development in Africa. This makes it difficult for youth entrepreneurs to access markets and transport their products to consumers.
- Limited access to information: Information is critical in the agribusiness industry, from market trends to climate data. However, youth entrepreneurs in Africa face challenges accessing relevant information due to inadequate technology and low literacy levels.
- Fragmented markets: African markets are often fragmented, with multiple middlemen involved in the value chain, leading to high transaction costs and low profitability. This poses a significant challenge to youth entrepreneurs, who often lack the networks and resources to navigate complex market structures.
- Climate Change: Resource depletion and climate change pose major challenges to the global food system. Agriculture depends on the world’s natural resources and future food production will depend on how well these resources are conserved and used. Agriculture is not only impacted by the environment, but also by production techniques that can affect impact land, water, biodiversity, and greenhouse gasses.
The agricultural sector is directly responsible for 12% of global greenhouse gas emissions, mostly due to methane emissions from livestock and rice, and nitrous oxide emissions from fertilizers. It is the largest water-consuming sector and can harm biodiversity and reduce water quality from the runoff of fertilizer, manure, and pesticides. The excessive use of nutrients in agriculture has been a major source of water pollution and is estimated to have reduced biodiversity in rivers, lakes, and wetlands by about one-third globally.
To overcome these challenges, governments, development organizations, and other stakeholders can support youth entrepreneurship in agribusiness through various interventions. Some of the interventions include:
- Providing access to finance: Governments can develop policies that support youth entrepreneurship in agribusiness and create special facilities that cater to the needs of young entrepreneurs. Development organizations, public and private sectors can also support young entrepreneurs through grants and technical assistance.
- Improving market linkages: Governments and development organizations can support the development of value chains and promote the integration of smallholder farmers into formal markets. They can also provide market information and facilitate the formation of farmers’ groups and cooperatives.
- Capacity building: Development organizations, private and public sectors can provide technical and business management training to young entrepreneurs to improve their skills and knowledge. This can include training on modern agricultural practices, value addition, and financial management.
- Promoting innovation and technology adoption: Public sectors, private sectors, and development organizations should encourage innovation and technology adoption by young African entrepreneurs to boost growth and unlock prosperity on the continent.
The agribusiness industry in Africa presents a significant opportunity for youth entrepreneurs to drive economic growth and create employment opportunities. However, the challenges of limited access to capital, inadequate infrastructure, limited access to information, and fragmented markets need to be addressed to fully harness this potential. Governments, development organizations, private and public sectors need to collaborate to create an enabling environment that supports youth entrepreneurship in the agribusiness sector in Africa.
Here are some of the beneficiaries of the Tony Elumelu Foundation Entrepreneurship Programme operating in the Agricultural Industry:
Avotriniaina Stannie launched a little factory named Mahatsara, with the aim of producing dried fruits and vegetables, but have more products like arranged rum with dried fruits.
Through the Tony Elumelu Foundation Entrepreneurship Programme, Stannie has been able to sharpen her entrepreneurial skills to the benefit of herself and her community. The knowledge received during the training has significantly contributed to the sustainable development of her community, and she continues in her quest to create more jobs for rural women.
Since the programme, Stannie has empowered young entrepreneurs around her to contribute effectively and create positive impacts in their communities. Her ambition is to have the biggest dried fruit processing factory in Africa, giving access to nutrients to everyone who needs it, especially in the southern part of Madagascar and in Africa too.
Flavien Kouatcha is a young engineer who is the head of Save Our Agriculture, a company specializing in aquaponics, a system that allows the cultivation of plants and the breeding of fish in the same device. Using fish droppings, he is able to create a natural fertilizer for plant growth. Through the Save Our Agriculture system they are able to create organic gardens with produce such as tomatoes, lettuce, peppers, okra, but also catfish.
He markets its aquaponics units to individuals and professionals in urban areas. The advantage of his solution is that it makes it possible to obtain larger productions than in traditional agriculture, using fewer resources. For example, his urban aquaponics units help smallholder farmers grow 2 to 3 times more volumes of organic food by using only 10% of the water used by traditional agriculture in the same space. Since completing the TEF Programme, Flavien Kouatcha has achieved a turnover of over $120,000 and employed 18 people directly and 42 indirectly.
Israel Mwalyaje runs the Zai Vet Centre Company Ltd which increases the income of people through livestock keeping specifically dairy cows, pigs, and local chicken by enabling farmers to access inputs at cheaper prices and providing them with skills regularly.
From the 2017 Tony Elumelu Foundation Entrepreneurship programme, Rwandan Justin Niyigena learned how to cultivate valuable network and business leadership skills through a series of training to grow his poultry farming enterprise, Breeding Hens LTD. With only 2 years of experience in his agri-business, the seed capital also helped him run his business professionally.
He aspires to become the preferable Poultry farming enterprise in Rwanda. So far, his business has created jobs and continues to contribute to national development through taxes. He is also a role model in his community for the young generation.