November 19, 2020

Agribusiness in Unprecedented Times: Challenges and opportunities for CEOs in Africa

Agribusiness in Unprecedented Times: Challenges and opportunities for CEOs in Africa

AGRA President, Agnes Kalibata

AGRA President, Agnes Kalibata

By Jimoh Babatunde

The COVID-19 pandemic has led to the collapse of global markets for some sectors and disrupted agricultural supply chains, yet agribusiness CEOs in Africa remain determined to steer their organizations forward.

According to the Africa Agribusiness Outlook, a new report launched by the Alliance for a Green Revolution (AGRA) and KPMG East Africa, about 41% of CEOs interviewed for the survey indicated they would forge ahead with their pre-COVID-19 investment plans.

However, 43 percent of the companies reviewed, majority of them small and medium sized enterprises, would be scaling back their operations due to COVID-19. For these businesses, revenues fell 50 – 80% as soon as lockdown procedures were implemented and identified managing cash-flow as critical to surviving COVID-19.

The Agribusiness Report, released in Nairobi, recently highlights the major challenges faced by CEOs during this period but more importantly, showcases the resilience of the agribusiness sector in Africa and identifies opportunities for businesses which governments and players in the agricultural ecosystem should pay heed to.

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Completed by 182 executives across 16 African countries in Africa, the Report identified several priorities for urgent action;

Access to finance emerged as the greatest priority for businesses. It is important to note that this issue is not just about access to finance, it is about the cost of finance and availability of financial instruments that are adapted for the agricultural sector.

Technology has been a great enabler. It has enabled companies to respond and adapt their operating models after lockdown measures were imposed across the continent. Going forward, technology will be the lever that will help Africa leapfrog into the future.

The future of African agribusiness must include the smallholder farmer. The report found that agribusinesses are incorporating more smallholder farmers into their business models. This is critical to sustainability.

“We believe that there are opportunities for African agribusinesses during this period, which is unprecedented for many businesses. The collapse of global markets has led to the rise of the ‘buy local’ movement. There is a chance to optimise local value chains, thus helping mitigate the devastating effects of the pandemic on the economy,” said Dr. Agnes Kalibata, AGRA President.

“But for this to happen, we need innovative financing solutions to support the agribusiness sector. Financing, specific to the agricultural sector, will help build resilience and enable them to seize the moment,” she added.

The inaugural Africa Agribusiness Outlook Report is a survey that was conducted on CEOs in the agribusiness ecosystem early to mid-2020. Conducted by KPMG East Africa on behalf of AGRA, the survey sought to gain insights into their top priorities, understand how they are addressing challenges and what they see as opportunities in these COVID-19 times.

Anis Pringle, Partner at KPMG noted that “it is about making agriculture attractive, viable and profitable rather than being looked at as a risky endeavour.”

Technology Emerges as a Game-Changer for Businesses in COVID times

Technology also emerged as a game-changer in this period. About 52% of the companies surveyed indicated that technology was crucial to achieving their business goals in this period.

Businesses switched not only to the use of e-commerce platforms to deliver products to consumers but also to deliver services to smallholders in their supply chain. Going forward, technology is expected to dominate operations, impacting costs, and business models.

“For businesses to thrive, they need to operate in an environment that supports them. Creating the right enabling environment is the quickest way to get business to invest in agriculture. We have an opportunity that needs to be treated with utmost priority by government and agencies such as AGRA working in the agricultural sector,” said Dr. Kalibata.

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