From Fields to Futures: Introduction to Agriculture & Food Systems in Sub-Saharan Africa
Context and Investment Insights - Exploring 9 Priority Areas for Climate Action
Dear all,
it's been a great first two months of our Exseede Newsletter. As we celebrate this milestone, we took a moment to reflect and find ways to make your experience even better. Thanks to all of you who provided feedback!
We're shaking things up a bit while keeping our promise to connect with you every week. From now on, our weekly updates will alternate between:
Industry and Investment News Updates
Knowledge Pieces: Deep-dives with facts and figures, data-driven analyses, investment insights, interviews, special features, and more.
We believe this new divide will help you digest our content more easily, without missing a beat. We're excited to continue growing and discovering together.
Today, we’ll kick off a knowledge series on the 9 priority areas defined by the African Union to address climate change. Starting with
#1: Agriculture and Food Systems
🕐 If you only have 1 min, here’s a summary in 5 points:
Context: Sub-Saharan Africa's agriculture contributes 20% to GDP, supports over 50% of the population, faces low productivity, small-scale farming, land issues and relies heavily on food imports due to limited processing.
Vision: Aim to transform traditional agriculture into a modern, competitive agro-industrial sector across the continent.
Investment Outlook: Potential to grow food market from $280B to $1T by 2030. Investment areas we’re particularly excited about span agro-processing, inputs, equipment, logistics, and irrigation.
Selected nations with significant agricultural sectors:
Tanzania 🇹🇿: Diverse agriculture, potential in processing and export.
Uganda 🇺🇬: Rich agricultural potential, opportunities in coffee, tea, and more.
Nigeria 🇳🇬: Dairy, rice, seafood, wine sectors show promise despite challenges.
Active Investors and Funds: AgDevCo, Africa Agriculture and Trade Investment Fund, responsAbility, The Moringa Fund, Kampani actively engage in agro & food sectors.
⏳ For a deeper dive, here's a breakdown::
Context: Key facts and figures
(1) Agriculture contributes around 20% to the GDP of Sub-Saharan Africa. In specific countries like Ethiopia, this can go up to 40%.
Putting it into perspective: On a global average, it's about 10%. Comparatively, in Europe, agriculture makes up less than 4% of GDP, and in highly industrialized nations like Germany, it's as low as 1%.
(2) Over 50% of the population depends on agriculture for their living, forming approximately 40 to 90% of all employment in the food sector. Next to agriculture, there's a minor portion of jobs in food manufacturing and in food services.
Notable variations exist between upper-middle and low-income African nations. For instance, in South Africa, only about 10% of jobs relate to the food sector, while in Tanzania, it's over 90% (Source: OECD).
(3) The region experiences the world's lowest levels of labor and land productivity. Africa has been compensating lack of yield increase with higher land use for decades. To read more on this, check out our recent deep dive dedicated to this topic.
(4) Most farmers in the region work on a small scale and use minimal machinery. Around 80% of farms (which is about 33 million farms) are smaller than 2 hectares in size. Frequently, the harvests are so small that they can't even feed the farmer's own family.
(5) With a limited food processing industry, Africa heavily depends on food imports. The African Development Bank states that the continent spends approximately $75 billion each year on importing over 100 million metric tons of cereals.
This reliance became evident during Russia's invasion of Ukraine, resulting in a shortage of over 30 million tons of food and a rise in wheat prices by over 40% in specific countries.
Investment insights
MARKET
By making substantial investments, specialists predict that the food and agriculture market of the continent could grow from $280 billion to $1 trillion by the year 2030 (Source: AfDB).
The goal is to “move from traditional subsistence agriculture to a modern and competitive African agro-industrial sector that can feed the entire African continent” - AfDB
INVESTMENT AREAS WE’RE EXCITED ABOUT
Investments are essential across the entire value chain. 5 areas we’re particularly excited about related to SMEs:
Agro-processing: Investing in companies that add value to raw agricultural products through processing, packaging, and distribution.
Agricultural Inputs: Investing in the production and distribution of agricultural inputs like seeds, fertilizers, and pesticides.
Agricultural Equipment and Machinery: Supporting companies that manufacture or distribute agricultural machinery, tools, and equipment used in farming operations.
Cold Chain Logistics: Investing in companies that provide refrigerated storage and transportation solutions, helping to reduce post-harvest losses.
Smart Irrigation and Water Management: Companies that develop and implement efficient irrigation systems and water management solutions to conserve water resources.
COUNTRIES
Selected countries in Sub-Saharan Africa with significant agricultural sectors include Tanzania, Uganda and Nigeria.
🇹🇿 Tanzania's agriculture sector contributes about 30% of GDP. With diverse production, including livestock and various crops, there's ample scope for growth. Consumer-oriented products are in demand due to a rising middle class and urbanization. Sectors like fruit/vegetable processing, cashew nut processing, oilseeds, meat, and dairy offer avenues for investment. Initiatives like SAGCOT and incentives for local wheat production further enhance the potential for increased yields, exports, and value-added processing.
🇺🇬 Uganda has fertile soils, favorable climate, and multiple crop harvests. Agriculture accounts for about 24.1% of GDP and 33% of export earnings. Despite having 80% arable land, only 35% is cultivated. Uganda produces diverse agricultural products like coffee, tea, sugar, livestock, and various crops. Challenges include limited use of fertilizers, lack of irrigation, packaging, storage facilities, and modern production practices knowledge. However, investment opportunities are substantial, especially in coffee and tea production, value addition processing, standards compliance, and export. Uganda aims to significantly increase coffee and tea production by 2025.
🇳🇬 Nigeria's agricultural sector presents considerable investment prospects despite challenges. The dairy, rice, seafood, and wine sectors hold promising opportunities for growth. The dairy market, valued at $6.5 billion, remains underdeveloped and dominated by imports. With rising urbanization and demand for dairy products, investments in local production and processing are sought after. In the rice industry, Nigeria's aim for self-sufficiency is driving growth, and with increasing milling capacity and government programs, there's room for enhancing local production to meet demand. The seafood market's demand for affordable animal protein offers a chance for investments in domestic catches and aquaculture.
INVESTORS
Selected active investors and funds in the agro & food sector
AgDevCo is a dedicated African agribusiness investor focused on fostering sustainable and impactful growth.
The Africa Agriculture and Trade Investment Fund is a unique collaboration between public and private sectors aimed at harnessing Africa's agricultural potential to uplift impoverished communities.
ResponsAbility raised a $106mn Climate Smart Food Systems Fund to invest in climate-smart agriculture and food systems
The Moringa Fund is a PE fund investing into Agroforestry in Sub-Saharan Africa and Latin America.
Kampani places $100k - $500k equity investments in family farms
Sources to learn more:
African Union: Climate Change and Resilient Development Action Plan (2022-2032)
Knight Frank: African agricultural investment can be profitable and benefit communities
White & Case: Africa's agricultural revolution: From self-sufficiency to global food powerhouse
2022 Africa Agriculture Status Report: Accelerating African Food System Transformation
Do you have thoughts, feedback, or specific topics in mind that you'd like us to address? Please don't hesitate to share! We're happy to hear from you and learn what interests you most.
Best,
Carolin
for the Exseede Team
Disclaimer: All information provided is not intended to serve as investment advice. Any mention of industries or countries should not be taken as an endorsement.