“Africa’s economy needs a vibrant sustainable and resilient agricultural sector to thrive. And if properly harnessed, the sector will advance exponentially. Therefore, Africa must focus on agriculture as its most definitive path to growing inclusive economies.” – Asue Ighodalo, Chairman, Sterling Bank.
Recently, on the 23rd and 24th of September, Sterling Bank held its third annual agriculture summit, albeit virtually, due to the exigencies of the COVID-19 pandemic. As always, the meeting saw key stakeholders in the public and private sector have detailed discussion around the summit’s theme; Fast forward agriculture: Exploiting the next revolution.
Following the outbreak of the pandemic and its devastating effect on agricultural productivity in Nigeria and the rest of Africa; job losses, reduced productivity, fall in effective demand for agro commodities, inaccessibility of raw materials due to border closure, poor marketing and logistics structure, among other things, it has become necessary to discuss a topic that is currently one of the most important source of concern in the agricultural space.
The pandemic has impacted our way of living, including how we interact and do business. Agriculture is business. Therefore, it is important to examine the impact of the pandemic on the sector and then look at ways to take full advantage of the opportunities that this impact presents for the future. This is what the discussions at the summit were centred around, with a core focus on technology, agribusiness financing, scalable innovations, appropriate and enabling government policies, and the impacts of resource availability and climate change.
These core focus areas were disaggregated along the lines of:
- Focusing on the role and impact of technology and data science in stimulating innovation in the value chain.
- Increasing financing to key points of the value chain, particularly smallholder farmers, to modernise their practices and increase output.
- Increasing the involvement of key stakeholders across public and private sectors in developing the right policies to aid the growth of the agribusiness value chain.
- Optimising the sector in Sub-Saharan economies to attract sizeable investments to drive expansion and achieve global competitiveness.
- Understanding the changing regional climate cycles, its impact on productivity and identifying necessary adjustments to deliver growth despite these climate changes.
The summit started with a welcome address by the Chairman of Sterling Bank, Asue Ighodalo. In his address, Ighodalo talked about the objective and significance of the summit, the potential of Africa’s agriculture sector, and the way forward. According to Ighodalo, the main objective of the summit is to mediate discussions to unearth practical solutions to Africa’s unique challenges and facilitate transactions between willing investors and potentially profitable agric-focused ventures.
He also said this year’s summit is significant because it marks a major milestone in Sterling Bank’s drive to play a leading role in the federal government’s effort to make agriculture top priority in trying to meet the country’s economic needs, especially post-Covid-19. “In 2018, when the first edition of the summit was held, the communique issued indicated that Nigeria needs a true paradigm shift or a new approach to primary production that uplifts smallholder farmers in the rural areas.”
“At the end of the 2019 summit, it was agreed that as the most dynamic sector in Africa, the agriculture sector must serve as the key driver to inclusive economic growth, attainment of sustainable wealth, massive job creation, and extensive poverty reduction. The [2019] summit sought to address the weak synergy between the financial and the agricultural sector, being one of the major drawbacks to the transformation of agriculture in Africa,” he said.
He admitted that although some progress has been made since both summits, they are not incremental enough. Therefore, “We must now seek a bold and revolutionary change that disrupts for the better and thereby assures a catalysed growth of the countries in our continent.” To do this, Ighodalo suggests that the continent frame its challenges as opportunities and take advantage of the present potential for a revolution to address food insecurity and insufficiency to drive economic growth.
Also, stakeholders in the public and private sector must take transformative action to enable Africa to feed its growing population, boost economies, create employment, and absorb the shocks of Covid-19. “We must identify, design, and implement the right policies, mixed with scalable innovations and adequate leveraging of data and technology to maximise productivity to radically transform,” he said.
“Developing Africa’s agriculture sector is an urgent mandatory task” – Dr Martins Fregene, Director, Agriculture and Agro-industry, AFDB
Representing Dr Akinwunmi Adesina, the President of the Africa Development Bank, Dr Martins Fregene delivered the keynote address on Day 1 of the agriculture summit. Beginning his address, Dr Fregene expressed AFDB’s pleasure in the increasing interest in the development of agriculture by Nigeria’s financial sector, particularly Sterling Bank. He reiterated the bank’s unwavering support and commitment to all actors “on the epic journey to turn Africa’s agricultural potential into reality.”
For the most part, Dr Fregene’s address was centred on AFDB’s vision for agriculture on the continent post-Covid-19, to build back better and stronger. “Africa should not be in need of food. 60 percent of the estimated 200 million hectares of uncultivated land in the world is in Africa. Africa can indeed be described as the last frontier of agriculture development on the planet. We need to transform these lands into highly productive, profitable, and sustainable breadbaskets,” said Dr Fregene.
AFDB has always been at the fore of advancing Africa’s agricultural sector. To achieve its vision for the continent and sector post-Covid-19, the bank, through some of its existing initiatives, is focused on productivity, value addition, technology, and enabling and inclusive policies.
Productivity and value addition
“The first point of departure is productivity,” Dr Fregene said. “We have to raise productivity. Without it, profitability in any value chain is defeated.” To increase productivity, the bank has launched Special Agro-Processing Zones (SAPZ). These are zones of high agricultural potential where the bank can integrate supply chains with infrastructure, especially in terms of processing, power, water, sewage, and most importantly policies around trade and tax holidays to attract the private sector into these zones.
This not only promotes productivity, it adds value to what is been produced and creates prosperity for rural farmers. AFDB has launched SAPZ in Ethiopia, Togo, and Mozambique, and is working to launch two in Nigeria in the next three years.
Also, the bank is birthing a new generation of commercial farmers by creating access to land development, agro-inputs, and mechanization to help smallholder farmers grow. Through its Transformation of the African Savannah Initiative (TASI), AFDB has established 8000 hectares of maize and soybean in Ghana and hopes to increase it to 20,000 hectares in two years. The bank is currently working to launch TASI in Nigeria, Zambia, Mozambique, Guinea, Gabon, and Uganda with a goal to have 200,000 hectares of maize and soybean by 2025.
Enabling and inclusive policies
Once productivity and value addition is in place, they must be supported with the right policies. Studies show that 60 percent of all food consumed in Africa is consumed in urban areas, the rest is consumed in rural areas. Of the 60 percent of food consumed in urban areas, 100 percent pass through SMEs by means of aggregation, third-party logistics, or marketing. In rural areas, SMEs provide 50 percent of the food consumed. SMEs produce 80 percent of the food consumed on the continent.
SMEs are often described as hidden middlemen who are doing a lot of work without support. To build a strong agricultural sector and robust food systems, stakeholders need to partner with SMEs and provide them with a level playing field via policies that create incentives. This includes access to finance and infrastructure, plus an enabling environment for them to thrive. If this happens, food insecurity will be a thing of the past. The AFDB is investing in basic infrastructures of wholesale markets, storage, facilities for processing, and good roads. These problems increase the cost of operation for SMEs. The bank is also working with member countries to implement SME-friendly policies.
As most SMEs are managed by women and youths, the AFDB is looking to establish a youth investment bank to improve access to finance for young entrepreneurs. And because Africa needs its women to develop its agricultural sector, the bank already launched the Affirmative Finance for Women in Agriculture (AFAWA), a risk-sharing facility that seeks to share risks with banks and build their capacity. AFAWA is currently being financed with $300 million, with a projection to leverage another $3 billion for investment in women in all areas of the value chain.
Technology
The AFDB is investing half a billion dollars in scaling new technologies to 40 million farmers through its Technologies for African Agricultural Transformation initiative (TAAT), a sub-initiative of the bank’s Feed Africa initiative.
As stated by Dr Fregene, TAAT works with seed companies, technology providers, farmers, input suppliers, and governments to bulk up seeds of improved varieties and get them to farmers. In the last two years, TAAT has achieved remarkable results. The initiative has produced 65,000 metric tonnes of heat-tolerant wheat seeds that have been planted in 20,000 hectares of the Awash River region in Ethiopia, and 94,000 hectares in the Gezira Scheme in Sudan.
This variety of wheat can tolerate up to 40 degree Celsius of heat and yield five tonnes of wheat. The AFDB has shared 40 tonnes of these seeds with Nigeria. Also, TAAT has produced 27,000 tonnes of drought-tolerant maize for Southern Africa and hopes to also share this with Nigeria.
According to Dr Fregene, developing Africa’s agriculture is neither luxury nor an option. It is an urgent mandatory task that should be prioritised by governments, financial institutions, and the private sector. “If African countries desire political stability, food sovereignty, and economic prosperity, we must take agriculture seriously,” he said.
Highlights – The role of technology and data in agriculture
Panellists Sieka Gatabaki (Mercy Corps), Dr. Lavar Kumar (IITA), Nneka Eze (Dahlberg), Ayodeji Balogun (AFEX Commodities Exchange Ltd), and Michael Famoroti (Stears Data & Analytics), discussed the role of technology and data in agriculture, including current challenges, existing solutions, and the way forward.
As with several other industries, technology and data play a significant role in advancing agriculture and should be exploited. But there are a number of challenges as to why this isn’t happening quickly enough or in great scale across the industry’s value chain. Some of these challenges, as identified by members of the panel, are data availability, data fragmentation, digital solutions scaling, and access to available data and existing digital solutions.
Balogun: At a macro level, data is extremely useful and technology leads to data. But data is more useful when it is available on a big scale. Big data multiply results. The challenge is that most of the available data is gathered by private players, and with different frameworks. How do we converge this data into a big structure?
At a micro level, how do we get existing digital solutions to the smallholder farmers? Most of the digital solutions in agriculture today are designed to serve them, not necessarily to be consumed by them. So we need to think creatively about the last mile.
Michael: Data is available. There are silos hosting useful data. The challenge is collating it and using it. Over the next five or ten years, we need to demonstrate the value of data to the people collecting it. If collecting data comes at a cost, players across the value chain are less likely to, except there’s a financial benefit. Players need to begin to see data as an input in production.
And beyond promoting or selling the value of data, there needs to be data standardisation.
Eze: Only two percent of digital solutions are focused on macro-agricultural intelligence. However, 35 percent of the solutions are focused on advisory and information services. The information is definitely coming from somewhere but there’s limited investment in comprehensive data collection.
Scaling is also a major issue. There are a lot of digital solutions out there, but now it’s a question of scaling. In East Africa, there are about 21 million farmers using these digital technologies, whereas, in West Africa, it’s about five million farmers.
Kumar: In smart agriculture, one of the major challenge that the private sector, public sector, and producers have, is information. There are improved varieties of seeds available, but those seeking to produce are not aware of the varieties available. Even if they are aware, they are not aware of where they can access these seeds.
For example, there is a National Agriculture Seed Council mandated to ensure seed security in the country and every year, they present data on the seed gap. One of the major challenge they have is, they can always identify best on the area, how much seed is rectified. But there are no agencies involved in producing the seed. And there is AFSTA, Africa Seed Trade Association, a body representing the private sector, also looking for information on where to get improved seed varieties? These are some of the big challenges.
What is a major step to be taken towards digitising the agriculture ecosystem?
Kumar: We have been using the term digitisation broadly, but there are very specific needs for every component of the value chain. There’s an urgent need for the government to establish a blueprint, a bottom-up approach to identifying the specific needs in each component.
Sometimes, technologies are available, but there is a gap, and it can be readily bridged using digital solutions. Still, digital solutions are not ultimate as a lot of people can’t access them due to a lack of the right device or even data. The quickest transformation can be realised through ICT’s because the cost of delivery is cheaper.
Famoroti: The key thing is to move from focusing on digitising the sector itself to focusing on the people in the sector. If you’re able to move people that work in the sector to the digital economy, you’re halfway through digitising the sector. And in this regard, the most fruitful way is through financial services. Countries like Kenya and Rwanda have been successful in that regard.
In Nigeria, the most likely route at the moment is through repayment service bank regulations that the CBN has pushed. At the moment, regulations are not sufficient to address the issue, it’s a very simple way of ensuring that more people get into the digital sector. And once they are there, it’s a lot easier to distribute any sort of data or digital service that are available, to them. As we are interested in digitising the sector, we must understand that technology and data must be accepted and familiar to the people that work in the sector.
Eze: We need to disrupt the current models in terms of finance, investment, and hopefully seed capital flow in some of the solutions that work and can hopefully scale. It’s important to scale to the point where the cost base itself is not the concern. Because the cost base is one of the big challenges; the cost to serve into deep integral areas is quite high.
If we can build the infrastructure that is already serving in different locations across the country or region, we can then start to layer on additional services and products with a lower cost per user. Technology has a role in doing that.
Also, we need to move past the point of just having data, to actually deploying and using it to drive data-based decision making to improve productivity and livelihoods. Getting people to actually use and actively engage with the available technology is the next frontier.
Furthermore, there’s a need for more data collaborations and bundling of services between different players in agriculture. And more blended finance solutions when it comes to investment or funding. 60 percent of tech funding in agriculture is from grants.
Sieka If we are going to change the agricultural space, it is very critical that we address the issue of access to finance. The financing for smallholder farmers in rural areas is mostly done by agribusinesses and less by commercial, financial institutions. There’s a huge opportunity there, but we ought to understand that the risks in agriculture are so significant that it’s a challenge to identify ways to mitigate them. And without clear data strategies to help predict probabilities of repayment or default, it becomes that much harder. There is a $170 billion financial gap to be covered to ensure financial inclusivity for over 500 million smallholder farmers in Africa. It is a huge gap, but also a huge opportunity.
About Agriculture Summit Africa
The Agriculture Summit Africa (ASA) by Sterling Bank is an annual meeting of all actors in agriculture for multidisciplinary deliberations aimed at driving growth in the sector. The summit is also focused on unveiling current agricultural trends, innovations, and opportunities for investment and participation in Africa while showcasing the sector’s transformation trajectory.
Agriculture is one of Sterling Bank’s priority areas of focus. The bank believes the sector has a central role to play in triggering the double-digit economic growth that every African economy must achieve to move into the first world. The bank also believes that the private sector has a critical role to play in supporting the efforts of governments across Africa to enhance agricultural output. Hence, Sterling bank has committed extensive resources to foster conversations and create opportunities to advance the sector.
ASA was inspired by the World Bank’s projection that Africa’s agricultural sector will exceed one trillion dollars within a decade if there is access to adequate capital, electricity, better technology, appropriate seedlings and irrigated land to grow high-value nutritious foods. Accordingly, this year’s summit, like the last two, sought to proffer solutions to age-long challenges that inhibit the growth of agriculture on the continent by bringing together players to develop a roadmap to achieve the expected trillion-dollar agricultural sector by 2030.
