-
Chief Executive Officer
This opinion piece was first published in Thomson Reuters Foundation News.
Inefficient markets and limited access to finance and services often lead to waste and loss – but support for small businesses can build local supply chains
As the knock-on effects of the Russian invasion of Ukraine spread across the world, food security has been high on the agenda at global gatherings, including the G7 summit, the High-level Political Forum on Sustainable Development and Africa Climate Week.
A recent pledge of $2.3 billion from the World Bank to help 11 countries in Africa respond to the food crisis is a positive sign, but we must press for a food system that can provide for long-term needs and help people adapt to the effects of climate change.
By 2030, it’s projected that the middle class on the African continent will grow by about 70% and the majority of the world’s people will live in cities. This population shift is fueling a need to reconsider food supply chains and increase investment in inclusive development.
The progress that has been made in reducing food insecurity and developing local economies in previous years is under threat. Higher food prices, combined with lower real incomes and production and less-predictable harvests, are jeopardizing local food systems.
To be successful, we need to bring resilience into our solutions: we need to design food systems that can withstand shocks, adapt to changing realities and take a farmer-centric approach. Policies and approaches need to reflect the local context and support the development and growth of local food systems that can integrate into global supply chains.
According to the African Development Bank, food imports across Africa are worth approximately $35 billion and are projected to grow to $110 billion by 2025 due to rapid population growth.
Ensuring a sustainable supply of food hinges on reducing this reliance on imports and increasing the efficiency of local markets in Africa. Small- to medium-sized enterprises (SMEs) are critical for this transformation.
SMEs account for 90% of all businesses in Africa, according to the International Finance Corporation, and create 80% of jobs on the continent. These businesses have laid the foundation for the growing middle class and increasing demand for new goods and services.
INEFFICIENT MARKETS
The next big opportunity for African SMEs is in building robust value chains with smallholder farmers, to supply local markets, leading brands and retailers in Africa. The Global Alliance for Improved Nutrition (GAIN) estimates that 75-90% of food crops are produced by small and medium-sized farmers, but inefficient markets and a lack of access to finance and services often lead to waste and loss.
Cassava, for example, is an important crop in West and East African diets, but as demand has grown, supply-demand constraints have limited industrialization. Unorganized and inefficient supply chains, low yields on farms and inadequate funds for production have led to an inadequate and untimely supply of cassava derivatives in Africa.
In partnership with The Rockefeller Foundation, my organization IDH, which supports sustainable trade, embarked on a wide-ranging value chain development program. Our goal was to work with local actors to develop a prototype for how market transformation and improvement in business practices could help industrial processing factories develop inclusive, sustainable supply chains, reduce on-farm waste, and meet growing market demand in Nigeria.
The cassava production volumes were adequate, but the biggest barrier to success was among processors who could not handle cassava in a timely, efficient manner. Our focus was on helping processing factories develop inclusive, green supply chains – for cassava-derived goods from toothpaste to food, pharmaceuticals and chewing gum – and linking them to finance opportunities and large food companies.
Farmers received guidance, coaching and training in good agronomic and environmentally sustainable practices. The program aggregated 34,000 farmers and 81,000 metric tonnes of cassava sourced and procured by factories. Over 8,000 jobs were created, and 2,672 farmers received input finance.
Upgrading supply chains and improving efficiency and service delivery represents a huge opportunity for SMEs across Africa, but collaboration is needed. SMEs and smallholder farmers need support to develop sustainable business models. This relies on close cooperation between food companies (African and multinationals), financial institutions and African governments.
The aim is to help meet the needs of Africans by improving resilience, independence and the ability to build and strengthen local food systems, increase intra-Africa trade and generate a large number of jobs. Efforts like these can help spur system change and foster a healthier and more prosperous world.