Balancing Financial Incentives and Impact for Agribusiness in Africa
Agriculture and agribusiness although influenced by globalisation yet the combination of these areas is estimated to worth one trillion US dollars in Sub-Saharan Africa according to findings; and this industry will increasingly grow in years ahead. That raises questions about the links between private sector strategies and the economic welfare of a country. Since agribusiness can play a critical role in jump-starting economic transformation and if the globalisation process is to be a catalyst for economic growth and development, in emerging and developed markets then understanding these links is vital.
This article highlights that strategies support from governments and institutional development organisation (both nationally and internationally) and otherwise, can help agribusiness reach its potential but also improve the development of the overall global economy but particularly the emerging markets.
Distributional Impacts of Foreign Direct Investment: Instead of exporting, some food and agribusiness firms are choosing to serve international clients by developing foreign production subsidiaries that is wholly owned by them completely. Similarly, several nations particularly those within emerging markets are actively recruiting firms by offering incentives to have a presence in their country. This type of initiatives; that is combination of opening economies, offering incentives, and firms seeking international markets has contributed heavily to the dramatic increase in foreign direct investment in emerging markets and this needs to continue. The increase in foreign direct investment can be associated to multiple different factors notably globalisation, the higher average returns in emerging markets than developed countries but also, the increasing need to curb poverty and reduce malnutrition rates around the world.
Building skills and entrepreneurship: A major constraint on competitive commercial agriculture and agribusiness is the lack of skills at all levels, from vocational to postgraduate education, including management and entrepreneurial capacity. With very few exceptions, university programs and vocational course need a major revamp to focus on unmet demand from the private sector for operational, technical, and managerial skills. Simultaneously, experiences with developing entrepreneurship through training in business models and practical hands-on training should provide the right type of help to create a new generation of entrepreneurial farmers.
Dynamic value chains that link to smallholders: A common constraint to agro-enterprise/s is that there is a lack of good linkage to the market, and this is particularly so for smallholder agro-enterprise. With the dominance of smallholders in practically all African countries, broad-based economic growth will rely on connecting smallholders to the market scene. The central government failure to provide basic agricultural services, along with the lack of financial markets for deepening agricultural investments, opens opportunities for agribusiness to enter into contractual and other types of partnerships with smallholders to seek raw materials. This setup works best where immediate post0harvest aggregating, processing, packaging, or shipping facilitate the enforcement of contracts, including palm oil, tea, horticultural produce for instance.
Developing Agro-Dealer Networks Along the Rural Input Supply Systems: Working with globally recognized agricultural development institutions around the world can help improve supply linkages needed within the rural agricultural developments in emerging markets. To give example; in certain analysis it came out that in places like Malawi, Kenya and Uganda, the Rockefeller Foundation partnered with local NGOs to build networks of rural agro-dealers and develop agricultural input in supply pipelines. Such systems can pilot initiatives such as:
- Repackaging seed and fertilizer into smaller packages for increased affordability.
- Training rural retailers in technical, product and business management skills. These retailers can then become certified agro-dealers. (These are some examples out several others which can be discussed).
To conclude; although this article has highlighted some key points addressing of balancing financial incentives and its impact for the African agribusiness – in that the opportunities it creates. However, there are still several points that can still be discussed; nonetheless agribusiness presents immense opportunities for growth and contributes hugely towards youth employment in Africa. A growing agribusiness sector also provides powerful growth linkages to the rest of the economy (globally) by providing affordable food, raw materials and a greater demand for processing and service industries.
Strengthening the agribusiness sector will create employment and entrepreneurial opportunities in rural and urban areas and by contributing to the growth of micro and small enterprises with development of market linkages.
Growth-focused agribusiness development will always contribute positively towards the global economy, more importantly it offers a passage out of poverty for the masses particularly within Sub-Saharan Africa. A strong focus and a shift towards this direction is both critical and necessary.