SMEs should be catalytic force in industrialization of agriculture

Private sector small and medium enterprises (SMEs) should be the catalytic force in the industrialization and modernization of agriculture, a paper delivered Monday at the 2016 African Economic Conference taking place in Abuja has proposed.

Chief Executive of Agrolay Ventures, Nigeria, Ada Osakwe, who spoke as a panelists at the “High Level Plenary Session 1: Reflections and Perspective on achieving an inclusive agro-allied industrialization in Africa”, spoke on how SMEs could provide linkages that are required for inclusive growth in the sector.

“When you think about the smallholder farmer, you think about inclusive growth,” she said.

Osakwe shared examples from her firm, which is looking to investing about US $5 million in the next five years in 50 young agriculture enterprises with a target on agro-processing and described it as an approach that could be adopted by African countries.

“It really matters to us that that the smallholder farmer is able to give us the tomato and carrot when we need it. If it was a big company, they will have choices. If the smallholder farmer is not giving them what they want, they could buy their own farm, they could walk away or whatever. For us, it is a win-win situation when we think about smallholder farmers. So, it is inclusive,” said Osakwe, whose firm employs 16 people.

She explained why her firm focuses on processing and stressed how small players could become the game changer.

“Everybody is talking about processing around the value chain. We think about countries like Rwanda and their tea sector. Seventy-five per cent of the people who focus on the tea sector are smallholder farmers, yet we capture only 25 per cent of the economic value. You compare that with the farmers in the tea sector in Kenya who are organized. These farmers capture 75 per cent of the final tea value that is exported. That is the difference,” said Osakwe.

“The difference is that the farmers in Kenya own their own processing. So they are able to look for the efficiencies in their farm and pull things up as well," she noted, stressing how African countries could use SMEs to tap into the global agro packaging industry.

“Africa spends US $3.5 billion annually importing rice. This is rice that we can actually produce locally. It is the paddy. When you ask those who eat foreign rice why they do so, they would say it doesn’t look quality, that it looks dirty and not packaged properly. Packaging is important. It is about moving beyond what we see when we talk about value addition. I see it as value growth. I don’t see it as making tomato into tomato paste. It is about putting it properly in the right packaging and selling it domestically and globally.”

Osakwe wants attention to shift from the big processors to those she described as the ‘missing middle’.

Her words: “The packaged food industry globally is a US $2.4 trillion industry. If Africa was to capture just even one per cent of that, which is US $24 billion. The AfDB [African Development Bank] estimates that US $21-30 billion is the financing gap for agriculture on a yearly basis. So imagine if we capture one percent of the global packaging industry where you start seeing Made in Africa teas, pastas, rice, tomato sources, sitting on the shelf of TESCOs and other big stores.”

With this, Osakwe was emphatic that the agro-processors would start earning foreign exchange that many people did not see as possible.

The annual African Economic Conference, taking place from Monday, December 5 to Wednesday, December 7, is co-organized by the African Development Bank (AfDB), the UN Economic Commission of Africa (ECA) and the United Nations Development Programme (UNDP). This year’s conference theme is "Feed Africa: Towards Agro-Allied Industrialization for Inclusive Growth".