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Winning in Africa’s agricultural market

By McKinsey, February 2019 
 
Agriculture in Africa has a massive social and economic footprint. More than 60 percent of the population of sub-Saharan Africa is smallholder farmers, and about 23 percent of sub-Saharan Africa’s GDP comes from agriculture. Yet, Africa’s full agricultural potential remains untapped. In a recent analysis, we determined that Africa could produce two to three times more cereals and grains which would add 20 percent more cereals and grains to the current worldwide 2.6 billion tons of output. Similar increases could be seen in the production of horticulture crops and livestock.
 
While the number of medium-size farms is rising, increased smallholder productivity will be the biggest growth driver
A global trend is that urbanization leads to consolidation of land sizes as people leave rural areas, allowing for more large-scale, mechanized farming. In some countries in Africa, there is, indeed, a rising class of five- to 100-hectare-size farms that have a growing share of the agricultural output.5 However, given the differing stages of development of the agricultural sector across the continent, this trend varies significantly by country. For example, in Nigeria, we found fewer than 100 farms larger than 50 hectares.
 
This suggests two primary categories of farmers emerging in sub-Saharan Africa. On one hand, there is a rising class of emergent farmers who often reside in cities, acquired their land later in life, and are relatively well educated. These farmers are typically already using inputs, have good access to market, and can influence agricultural policies in their countries. However, these farmers often fall into “a missing middle” and can have trouble obtaining access to loans or more sophisticated services to meet their needs. Many farmers in Zambia we interviewed, for example, had land sizes greater than ten hectares but struggled to secure sufficient financing to buy all the inputs they needed to farm their full plots. Financial institutions still considered them too small or risky. The larger farms in Nigeria—many of which were owned by individuals who sought to invest in agriculture after the oil-price drop in 2015 encouraged diversification in income sources—struggled to obtain the agronomic expertise and more sophisticated inputs required for them to achieve their productivity potential.

 

Read more from: https://www.mckinsey.com/industries/agriculture/our-insights/winning-in-africas-agricultural-market

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