Category: Africa

http://www.agri4africa.com/index.php?dirname=docs_02newsletters/00010newsletter.php&lookupArticleId=186

Africa, which holds 60% of the world’s uncultivated arable land and has access to plenty of water resources, has the potential to not only feed its own population, but also to contribute to global food security.

However, despite the potential the continent has for agriculture, Africa remains a net food importer. With the African population expected to double to 2bn by 2050 and the urban population growing rapidly, it is becoming more and more vital for Africa to increase its agricultural production and feed itself.

But why is Africa a net food importer?

Bikash Prasad, CFO for southern and eastern Africa at Olam International, told an audience at the Africa Trade Finance Week in Cape Town last week that a major reason sub-Saharan Africa has to rely on food imports is because the region has the lowest actual crop yield (as a percentage of potential yield) in the world.

He highlighted that sub-Saharan Africa’s actual crop yield is estimated at 25% of potential yield, compared to East Asia which has an actual crop yield at almost 90% of potential yield. Prasad estimates that if Africa could double its actual crop yield to 50%, the continent would be able to not only feed itself, but also become a net food exporter.

“Today Africa is producing 700m metric tons of food at 25% yield. If the yield goes to 50%, Africa will start producing 1.4tr metric tons of food and it will become a food exporter,” he said.

For this reason, Prasad argues that increasing agricultural yield is key to Africa reaching its agricultural potential, and suggests five ways the continent can do this.

1. Learn from the best

Prasad suggests that farmers and African economies should learn from the best yield producing practices seen both globally and in Africa. For example, the United Nations statistics division for the Food and Agriculture Organisation (FAOSTAT) released data in 2013 that showed Belgium was the highest yield producer of wheat in the world, producing an average of 8.46 metric tons per hectare.

The highest yield producer of wheat in Africa is Zambia, producing 6.13 metric tons per hectare, compared to the Africa average of 1.97 metric tons per hectare and the world average of 2.79 metric tons per hectare.

Therefore, Prasad argues that African economies and farmers looking to increase their actual crop yield need to learn from the successes of these economies, and implement their best practices.

2. Increase fertiliser use

To improve food production, Africa will have to increase the amount of fertiliser used considerably, stated Prasad. According to FAO statistics, sub-Saharan Africa’s fertiliser application rates in 2008 were 7kgs per hectare, compared to 165kgs per hectare in Western Europe, and the world average of 109kgs per hectare.

3. Increase use of yield-enhancing technologies

Statistics also show that Africa is behind in the use of yield-enhancing technologies such as crop irrigation and agricultural machinery such as tractors.

To illustrate this, Prasad highlighted statistics from the World Development Report 2007 which showed that between 2001 and 2003, 18.4% of the world’s crop land was irrigated, compared to 3.6% in sub-Saharan Africa. Furthermore, during the same period, sub-Saharan Africa was recorded as having 13 tractors per 100km² of arable land, compared to the Europe Economic and Monetary Union having 1,002 tractors per 100km².

4. Improvements needed in infrastructure and energy

Compared to other developing regions, sub-Saharan Africa’s infrastructure coverage and costs indicate that the region lags behind and is cost inefficient. For example, according to World Bank 2008 statistics, the cost of internet dial-up services, international phone calls, power tariffs and road freight tariffs are considerably more expensive in sub-Saharan Africa than in other developing regions.

5. R&D and innovative financing

Prasad added that African economies need to improve their expenditure of agricultural research and development (R&D), such as improved seed varieties. As a lack of access to finance is a major constraint for many smallholder farmers in Africa, he emphasised the need for the promotion of effective and innovative financing in agriculture.

If the right amounts of water, fertiliser, finance and labour are brought together in Africa, Prasad argues that the region has the highest growth potential of any agricultural sector in the world.

http://cfo.co.za/profiles/blogs/bikash-prasad-cfo-south-and-east-africa-at-olam-international

“Africa should be a net food exporter, but it is a net importer at the moment,” says Bikash Prasad, at Olam International, a Singapore-headquartered integrated supply chain managing firm and processor of agricultural products and food ingredients. The Durban-based Prasad has a passion for the continent. “We want to play an important role in the growth of Africa,” he says.

Olam International started in 1989 as a cashew nut producer in Nigeria and still has a strong focus on the continent, says Prasad. “All the corporates are fully aware that there is great potential in Africa, but they are sometimes still reluctant to seize the opportunities,” says Prasad. “At Olam International we believe in Africa and because we were born in Africa with a deep-rooted history and on the ground expertise, we are not scared to invest and grow. Barring a few countries, the continent is stable. We are always vocal about improving food production and agriculture in Africa.”

Prasad recently presented a paper on Agriculture and the food trade deficit at the 8th Annual Africa Trade and Export Finance Conference in Cape Town. He chatted to CFO South Africa about the question why Africa is a net food importer and what can be done about it. Prasad believes that if a CFO is an ambassador for his or her company it is a demonstration of the company’s objective to grow responsibly. For Bikash “it underlines transparency and our desire to engage with all of our stakeholders”.  It also means that the CFOs are fully aware of stakeholder opinion and external issues which can then inform financial decisions, he says.

After starting his career in India (his land of birth) and working with companies like Unilever and Asian Paints, Prasad moved to Nigeria ten years ago to work for Nulec Industries. In 2006 he joined Olam International as Country Finance Controller in Cameroon and he hasn’t looked back since. “In 2009 I moved to Ghana as Cluster Financial Head for West-African countries and, in September 2012, I moved down to Durban and assumed my current position,” Prasad explains. “My most important roles include identifying and supporting opportunities for sustainable growth, corporate governance, developing talent and working with various internal and external stakeholders.”

From its humble beginnings 25 years ago, Olam has grown into a sizable multinational with a presence in 65 countries and a turnover of approximately 20 billion dollars. Temasek, an investment arm of Singapore Government is the largest shareholder for Olam which also has a growing presence outside Africa, including operations in countries like US, Australia, Indonesia, Vietnam, Thailand, China, India, Middle East, Central Asia and Brazil. “We believe Africa can and should be firstly feeding itself and secondly feeding the rest of the world. Almost 60 percent of the cropland that is still available for cultivation is located in Africa.”

But the African potential has remained largely untapped so far,” admits Prasad. “One of the biggest problems is that, compared to Asia, the yield per hectare is only 25 percent of potential yield. If that doubled to 50 percent, Africa could already become a net food exporter. Sub-Saharan Africa has the lowest actual crop yield as a percentage of potential yield anywhere in the world. If the right amounts of water, fertilizer, finance and labour are brought together in Africa, the region has the highest growth potential of any agricultural sector in the world.”

Currently only 3.6 percent of African cropland is irrigated, Prasad explains. “That means most farmers are still wholly dependent on the weather for the crops.” Other indicators that there is massive room for improvement are yield enhancing technologies like agricultural machineries, tar roads, power and the proper utilization and management of fertilizer. “At the same time the local demand in African countries is increasing. The population which is growing at 2.5% per annum will double by 2050 and growing urbanisation at 4.5% means a change in food consumption and demand for imported foods. Rising GDP and income levels also increases the demand,” says Prasad.

Olam not only signals the problems and the potential, but also plays an active role in helping Africa move forward and making sure various countries learn from each other’s experiences. “We are into upstream farming for rice, coffee, edible nuts, palm and rubber and midstream processing for products like cocoa, cashew, wheat, crude oil and so on. We are also active on downstream and distribution operations. We are participating in various parts of the value chain and also see it as our responsibility to spread good agronomical practices.”

For small African farmers, financing is usually a problem. “Most financing is through corporates, traders, farmers’ retained earnings and sometimes micro-finance institutions. We have to find more innovative ways of financing farmers, so they can use the right technologies and inputs,” says Prasad. He sees Public Private Partnership (PPP) as one of the strong catalysts for developments. “Olam has a successful PPP with the government of Gabon. It is really working well, helping to diversify Gabon’s economy and develop the country’s agricultural potential” says Prasad.

Critics sometimes dub the investment in agriculture of multinationals as ‘land grab’, especially when foreign workers are recruited and the revenue is disappearing overseas. “There are countries which don’t have enough people with the right experience to work at the farms, plantations and manufacturing facilities. That means we need to bring in external experts and manpower, which will work and then transfer the relevant skills to nationals,” says Prasad.  He also emphasizes that Olam is very committed to the “local context” as he calls it. “Whether we are operating on concession-based or owned land, it is vital to undertake environmental and social due diligence. We have community as well as legal obligations.”

Olam remains absolutely committed to Africa. “We have invested over USD 1.2 billion dollars in Africa while following our aim for long-term sustainability,” says Prasad. “We also bring innovation and best practices in farming and processing. For example, the 6,000ha rice farm in Nigeria is supported by a central mill which will be fully operational by mid-2014. It will be supplemented initially by approximately 3000 local outgrowers, and gradually scaled-up to include 16,000 farmers.  Many of these outgrowers will be working on the farm (or have family members working on the Olam farm) and are trained by Olam in Good Agricultural Practices which they can then take back to their own fields.   Eventually, the outgrowers will be providing 30-40% of the operation’s rice. Olam is confident that this model can be replicated by other organisations to support domestic drives for greater self-sufficiency and goes to show that large-scale commercial farming can work hand in hand with smallholders. Our coffee plantation in Tanzania is going to start yielding soon. Our flour mill in Ghana is now at full steam and we also have wheat mills in Cameroon and Senegal underway. We are really contributing to Africa’s growth.”