Sub-Saharan Africa is the mecca of uncultivated land, holding up to 60% of the world’s remaining undeveloped land. This land is arable, rich in nutrients, perfect for farming and a smart investment. So, why haven’t investors jumped into Africa’s soilbox? They have. Then why have we not seen significant improvements in Africa’s output? Because it has failed.
African nations’ policies were infused with a weak rule of law, political instability, and over inflated trade policies. During the food crisis of 2008, New York Times reported that these African governments’ restrictive political paradigm backfired and ignited widespread rioting and economic distress in Africa. Some of the poorest nations in Africa were significantly affected and many were left without food. To solve the problem, key importing countries bought land in poorer African countries to secure supplies and alleviate cultivation problems. This “race for land” resulted in political upheaval due to the exploitation of cheap labor and poor production by the importing nations. According to Sindiso Ngwenya, Secretary General for the Common Market for Eastern and Southern Africa (COMESA), these projects failed because the underlying issues were never addressed.
Today, private firms have pinpointed Africa as an important investment opportunity. But in contrast to the importing countries, the goals of private firms involve establishing a mutual profitable alliance with small farmers. According to Informa Agra, 45 private firms plan to invest $2 billion in agricultural development and business in the next 3 to 5 years. Hopefully, this will be a boost in the right direction for Africa. McKinsey & Company notes that with foreign private investment, Africa’s agricultural output is expected to grow from $280 billion a year to $880 billion a year by 2030.
Who is taking on the challenge? Africa Enterprises Challenge Fund will provide private sector companies with grants ranging from $150,000 to $2.5 million. Countries will have to match these funds and then are on their way to Africa. Currently, AECF is funded by the Australian Government Aid Program, the Consultative Group to Assist the Poor (CGAP), the UK Department for International Development (DFID), the International Fund for Agricultural Development (IFAD), and the Netherlands Ministry of Foreign Affairs (NMFA). The success stories are countless with this new approach to aid and investment. As of today, private sector companies have invested about $150 million with 40 projects in Africa. According to AECF, 10 more projects will be added by the end of November.
How can this prevent another food crisis? How will private investment drive agribusiness and development in Africa? The project is a 2-way street. Support from African governments needs to meet foreign investors’ plans. Foreign investors will work with the 80 million small farmers in Africa to build an economic partnership, prevent future conflict, increase output, and maintain efficient and sustainable development.
African governments are expected to establish a transparent justice system, helpful bureaucracy, dependable infrastructures, increase the agriculture sector budget, and promote development through the frameworks endorsed by the Comprehensive Africa Agriculture Development Programme (CAADP), the Alliance for Green Revolution in Africa (AGRA), and AECF. These steps are supposed to encourage private businesses to partner with African nations.
Expectations are high, but many believe that actual improvements will be made in the African agribusiness sector. Antoinette Sayeh, head of IMF’s Africa department, states “Africa had demonstrated a new openness to the private sector in recent years… African governments have increasingly withdrawn from the economic sphere and left that space for the private sector.” With assistance from AECF and implementation of a new paradigm from African countries, we could encounter an innovative development project through economic alliance.