INSIGHTS

Agriculture - Africa's Largest Economic Sector




On average, the Agricultural sector contributes 15% to Africa’s GDP, with the largest contributors being Ethiopia, Nigeria, and Tanzania. While this may seem like a high percentage, it is below the productive capacity of the continent. 60% of the world’s arable land is in Africa, yet, the continent’s contribution to global agricultural production lags behind that of China, which contributes the highest agricultural output with only 10% of arable land. Experts posit that Africa is capable of providing the food needs of the world. However, that will depend on the continent's ability to develop sustainable ways of increasing agricultural production.


Factors such as underinvestment and climate change are the most prominent causes of the lackadaisical performance of Agriculture in Africa. But it is not all gloom and doom, as Africa has begun to show notable improvements towards increasing productivity through tech innovations. As it stands, opportunities for growth still exist.


Agriculture in Africa

Over the years, the agricultural sector has faced a number of challenges which have caused a large portion of Africa's agricultural productivity to remain untapped. Factors such as the increasing effects of climate change, limited agricultural infrastructure, and access to finance all restrict Africa's agricultural output. With a fast-growing population estimated to reach over $2.5 billion by 2050, the rate of agricultural production lags what is needed to meet the demand of the future population. There remains a great need for sustainable agricultural production in order to tackle the looming challenges faced by the sector.


For one, the deepening effects of climate change are more damaging to Agriculture than any other sector in Africa. Because 90% of African farmers are smallholder farmers, most farms are largely rain-fed and highly susceptible to climate effects such as droughts. According to an Oxford Group Agriculture report, countries like Morocco and Ethiopia are steadily moving away from rain-fed farming and placing greater emphasis on irrigation systems. Morocco’s irrigated area now amounts to 18.9%, while Ethiopia successfully increased irrigation by 50% between 2002 and 2014. This raises a cause for concern as only 6% of total arable land in Africa is irrigated, further emphasising the potential for the expansion of infrastructure and irrigation schemes across other countries in Africa.


Infrastructural constraints have long been a hindrance to agricultural productivity. The Oxford Group report outlined that 85% of agricultural output in Africa is produced by small-scale farmers with the remaining 15% contributed by large-scale plantations. These small-scale farmers struggle with limited access to advanced farming resources. As of 2019, it was estimated that 75% of farmers in Africa still use hand tools like hoes and cutlasses to work on plantations. Similarly, segments of small-scale farmers still use low-quality seeds and fertilisers, with Africa accounting for just about 3% of fertiliser consumption in the world. This lack of agricultural resources and infrastructure is partly due to the difficulty some farmers face with access to finance.




Smallholder farmers need investment to cover the majority of production costs. Farmers in many African countries struggle with access to finance as banks and other financial institutions consider agribusiness too risky and are hesitant to provide finance. Fortunately, Africa has begun to benefit from the fast-growing collaboration of Agriculture and Technology, with innovative solutions for micro-credit and micro-finance being made available for small-scale farmers.


...Agriculture and Tech make a great couple

While much is still to be done, there have been significant improvements in the African agricultural sector thanks to the rise of AgriTech start-ups. From drip irrigation suppressing climate change effects to the use of artificial intelligence in preventing permanent damage to crops, AgriTech is rapidly transforming the state of the agricultural sector in Africa. Now, drones hover over plantations and alert farmers about a disease 10 days before it becomes visible on crops, and farmers are less dependent on rain falling down in glory.


But more importantly, AgriTech has facilitated better financial access with the implementation of digital platforms like FarmDrive that now help small-scale farmers receive lending from banking institutions. As mobile penetration rose to 44% in 2017, more farmers now have mobile phones. As a result, they are able to access platforms like FarmIT in Kenya and eMsika in Zambia which provide agronomic support and market linkages. Agrocenta, a Ghanian AgriTech start-up, also developed an online platform to help smallholder farmers trade online with wider market reach. These and several other startups have increased the AgriTech industry to the value of $7.8 billion, with investment inflows reaching $2.6 billion.


A report by Disrupt Africa showed that the number of startups in the AgriTech industry has risen by 110% since 2016. This rise in AgriTech in Africa presents opportunities for technology as a solution to optimising agricultural productivity. In this way, Africa’s untapped agricultural potential can be harnessed.


More growth, please!

The Agricultural sector in Africa is not completely out of the woods yet, as digitalisation in Agriculture is not well spread across African countries. Kenya, Nigeria and Ghana currently lead with the highest number of AgriTech startups, with East Africa showing greater adoption of tech solutions in solving agricultural challenges over the years, compared to other regions.


Composition of total number of AgriTech startups in Africa

Source: AfriKnowledgeBase / Agrinnovating for Africa Report 2018


While the rise of AgriTech has birthed innovative solutions for farmers, growth opportunities exist for digital literacy for farmers. Data needs to be collected and analysed to be better understood by small-scale farmers with low literacy levels. As it stands, the average age of farmers is 60, many of which are not as tech-savvy as the youth in Africa.


Moreso, the youth in Africa shy away from farming due to the perception that it is for the older part of the population. The integration of tech in farming is one aspect that can provide appeal to the youth, and so opportunities exist for more of the younger population to delve into the agricultural sector. With 60% of the African population under 35 and unemployment plaguing nearly one-third of the African youth, youth employment in the agricultural sector will further empower the African economy. The introduction of digital platforms like Farmz2U in Nigeria that help young people get full funding for farming schemes further indicate the various opportunities that lie in the integration of agriculture and technology in Africa.


In conclusion

Leveraging technology and innovative solutions is set to play a major role in the development of the agricultural sector in Africa. As African nations focus on increasing agricultural production, it is important that improved infrastructure, more irrigation schemes and attracting the youth to the agricultural sector gain priority. Overall, a three-way partnership between the government, farmers and the private sector is needed to transform Africa’s largest economic sector.




Want to know more about the Agricultural sector in Africa? Email us at info@afriknowledgebank.com for custom market research on African economies, industries and regulations.


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