By Aman Goel, SITA Task Team Leader, Agriculture
Did you know that Rwanda is one of the world’s safest countries, ranked just after Switzerland? Or that the Ethiopian economy is projected to grow 8.3% in 2017 with Tanzania following closely behind with 7.2%. And that Kenya has improved its transport infrastructure with the opening of a new rail line, speeding up the time to move goods to the Port of Mombasa for export.
Misperceptions about Africa can be major obstacles to businesses trading and investing in the continent. Various opportunities are yet to be explored due to limited understanding of the business environment. But communication gaps and lack of information on the ground in Africa can also inhibit trade and investment. Sometimes simple solutions are all it takes to overcome these roadblocks and create opportunities for companies to do business in the region. The following are a few which SITA has implemented.
Pulses Handbook: Different names for pulses in local languages can create challenges in business negotiations and result in the inability to reach a deal. In response, SITA, in conjunction with the Eastern Africa Grain Council, developed a handbook of pulses, which lists the names of pulses in Hindi, English, Amharic and Swahili. The handbook also provides basic specifications regarding growing season and harvest patterns of each pulse variety. The use of the handbook by Indian buyers and East African farmers facilitates greater understanding and better trade outcomes.
Model contracts: Fragmented value chains reduce the sureties in trade and can contribute to price speculation and fluctuation in cash crops in Africa. Farmers and traders suffer as a result. At SITA, we designed model contracts that base minimum supply price on a clear metric – Cost of Production (CoP) plus an assured minimum profit of 20 percent. These model contracts provide clear negotiating ground. In return, farmers agree to share profits with buyers if prices soar. Such trust building initiatives, backed by credible information, can improve productivity and reduce vulnerability.
Simple practices, great dividends: Africa, especially in rural areas, still lacks access to information that is widely available in other regions. Ginger in Ethiopia is a classic case where limited knowledge about basic agronomic practices destroyed a US$24 million a year market. Planting ginger on flat lands led to waterlogging and the spread of bacterial wilt disease. This could have been avoided by simple practices like raised bed production. To address this, SITA has collaborated with Government of Ethiopia to provide appropriate information to farmers. The training material is catchy and easy-to-follow and includes posters and comic books, which are distributed directly to farmers.
Business opportunities for innovative support service providers: There is huge potential for Uganda to expand its sunflower seed production with its current dependence on imports and idle processing capacity. Even so, until now farmers are yet to embrace this opportunity. Many farmers sell their produce immediately upon harvest for cash to pay for urgent household expenses. This has caused seed prices to drop during the harvest period and processors to be left with no seed supply during the off-season. With low returns, there is little incentive to expand production to fill this supply gap. At SITA, we are facilitating the set-up of new agribusiness service companies to fill noted gaps in the sector. These companies offer solutions such as collateral management, which gives sunflower farmers access to immediate cash while they wait for prices to rise to before selling their seeds. The hope is that higher returns will encourage farmers to expand production, thereby filling the gap in the market and advancing the industry.
Various business opportunities exist for private players to adapt their business models and cash in on opportunities in the African agricultural sector. New products and services like crop insurance, warehousing schemes, microfinance etc. can generate socially responsible financial returns. Africa has arrived! With so many opportunities, now is the time for international businesses to step up and develop tailor-made solutions to serve this important market.