How the continent’s new Free Trade Area will bolster its agricultural sector

  • Africa still imports agri-products worth billions of dollars every year despite the fact that agriculture accounts for approximately half of the continent’s workforce and accounts for 35% of its GDP.
  • Africa will no longer need to import as much thanks to the African Continental Free Trade Area (AfCFTA) accord, which will also significantly increase domestic processing capacity.
  • AfCFTA: A New Era for Global Business and Investment in Africa is a new report from the World Economic Forum that lists the advantages of the AfCFTA.

A third of the GDP of the African continent, 50% of the population’s source of income, and the daily source of food for hundreds of millions of people on the continent and abroad all depend on agriculture.

Under the terms of the African Continental Free Trade Area (AfCFTA) agreement, which was signed in February 2021 and is currently in full force, the crucial role that agriculture plays in the continent’s economy is only expected to increase in strength and size.

A new era for African agriculture

AfCFTA: A New Era for Global Business and Investment in Africa, the World Economic Forum’s Insight Report on the agreement, projects that by 2030, the free trade area, one of the biggest in the world by population and economic size, will be home to 1.7 billion people and control $6.7 trillion in consumer and business spending.

Numerous African industries will undergo radical change as a result of the agreement, but given agriculture’s already significant economic contribution and enormous development potential, it stands to gain the most.

The research from the Forum claims that because of its upstream and downstream connections, agriculture has a remarkable potential for boosting intra-African commerce, satisfying local demand, speeding GDP growth, creating new jobs, and enhancing inclusion.

It will boost value addition, satisfy fresh local demand, and integrate smallholder farmers—who produce 80% of Africa’s food—into larger supply networks.

The AfCFTA offers numerous chances for fresh investment, particularly in agro-processing.

Agro-processing and Africa’s agricultural ascension

Agroprocessing has significant effects on food security, job creation, and poverty reduction in Africa. Increasing it adds value to the already cutthroat agriculture industry.

In response to the food insecurity and price increases brought on by trade disruptions from global shocks, not least the Russian invasion of Ukraine, countries throughout Africa have already increased their focus on agro-processing. They have also done so because it has the potential to transition economies away from the long-established but inefficient model of raw material exportation.

African countries can take advantage of the enormous advantage many of them have in their established and sizable agricultural sectors to build wealth, create new jobs, and opportunities at home with improved capacity to process their own agricultural goods, whether that’s grain, fertiliser, or anything else.

Scaling up agroprocessing has advantageous effects on inclusion as well. In the entire agricultural sector, women hold 70% of the jobs, and they also dominate home agro-processing jobs. African women benefit when the continent’s agricultural sector is strengthened.

New investment, new opportunities

The expansion of agriculture and agroprocessing will spur fresh investment from outside the continent as well as from inside it.

The AfCFTA’s new common market can take use of regional variations in intra-African diversity’s competitive advantages and strengths in its food value chains, specializations, and key outputs.

Through the AfCFTA, intra-African trade will increase, reducing reliance on imported agricultural inputs. Currently, the continent imports agricultural goods worth $50 billion a year. If import barriers are removed, intra-African agricultural commerce is predicted to rise by 574% by 2030; this would be a tremendous win for a continent that has previously been constrained by unnecessarily relying on foreign economies.

This increase in intra-continental trade will be beneficial for firms owned and operated by Africans. For instance, the fertilizers business is predicted to grow rapidly. It is anticipated that new agricultural endeavors will necessitate an 800% increase in fertiliser application for primary nutrients. The new investment in irrigation is anticipated to be $65 million, whereas the investment needed for storage would be more than $8 billion.

Under the AfCFTA, African businesses can complete all of this duty-free.

AfCFTA: good for growth

The AfCFTA is paving the way for stronger business partnerships across the continent, with many companies taking up the fresh opportunities. Here are just a few:

OCP: Using neighborhood partnerships
OCP is a Moroccan business that has become a market leader in solutions for customized fertilisers.

OCP Group has concentrated on Africa as a result of its recognition of the AfCFTA’s potential to bring about uniform standards for fertilizer control and to boost intra-African trade in agricultural products and supplies. With locations in 12 different African nations, OCP is a prime example of how to effectively leverage regional alliances to increase reach and influence.

In under three years, OCP created 80 farmer hubs in Côte d’Ivoire and Nigeria that offer a variety of agricultural services and supplies to farmers. Due to its strong collaborations with governments, non-profit organizations, research facilities, and colleges across Africa, the company has been successful in connecting with local farmers. For instance, OCP collaborates with Mohammed VI Polytechnic University (UM6P), which houses 80% of the business’ R&D capability, in Marrakesh.

Coca-Cola: Using distribution and agroprocessing
The Coca-Cola Company, a longtime partner with 50,000 employees across Africa, has achieved success in agro-processing by collaborating with local suppliers and building value chains as essential elements of its strategy there.

Due to Africa’s youthful population, Coca-Cola’s foothold in the continent, along with its bottling partners, is a growing company. Through employment creation, sustainability, and the economic empowerment of women and young people, it is also promoting broader economic growth. The business claims that the AfCFTA will lower prices, provide more nations an equal chance to be Coca-Cola suppliers, and assist Coca-Cola in further developing sourcing, production, and packaging inside African markets.

Yara International: Drawing on close relationships with countries and communities

A Norwegian business called Yara International ASA offers 12 African nations industrial and environmental solutions for crop nutrition. Yara has been successful in bringing more of its value chain to the continent, including a blending plant, a chemical company, and a sales office, especially since the cost of infrastructure, transportation, and production has decreased as a result of the AfCFTA tariff reductions.

Yara has cultivated relationships with farming communities through Yara Crop Nutrition Centers. They help the company understand how to best provide specific agronomic advice and methodologies that can improve farmers’ prosperity and make smallholder and commercial farmers more competitive and attractive to financial investors, including through digital farming technologies and online environments.

To address the issues unique to smallholder farmers in the communities where they operate, Yara has included a social impact strategy into its operations in Africa. In order to improve the abilities of micro, small, and medium-sized entrepreneurs, it has so far established leadership academies in Kenya that are modeled after MBA programs. It expects to continue expanding in 2023. The “Africa for Africa” theme is central to Yara’s strategy, which aims to create a comprehensive, continental field-to-fork value chain by continuing to engage in farmers, merchants, distributors, technology developers, and agro-entrepreneurs—both established and up-and-coming ones.

Considering the future
These businesses serve as examples of the profitable and expanding prospects in agriculture and agro-processing that exist across the increasingly connected African continent. For the benefit of both international investors and African countries, investment will be essential in assisting in the development and strengthening of these value chains. Africans in general will finally reap the benefits.

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