THE past few years have seen many African countries increasing emphasis on entrepreneurship development through formal education systems like universities. This has triggered a huge appetite for young people like university graduates to create their own employment using natural resources such as land, water and solar energy. By placing the entrepreneurship burden on youth, policymakers forget that not everyone can be an entrepreneur. Again, if everyone becomes an entrepreneur, who will employ who? If all young people are encouraged to become farmers, who will buy from who? Everybody will have the same commodity. When everybody has tomatoes, no one will buy from anyone else.
The value of long-term planning
While short-term strategies are ideal for firefighting and dealing with emergencies, real impact can come from long-term planning at national level. That is how African countries can use natural resources and infrastructure to unlock the value of agricultural and food systems including generating viable employment. If a country has Vision 2030, that vision should have financial products that speak to it. What financial products can be developed and used in the next 10 years and what are the targets? Financing agricultural inputs is just like providing consumer loans because there is no growth. In the event of a drought, all those resources are wasted as farmers are not able to repay loans.
Food systems require long-term financing focusing on infrastructure and markets. In most African countries, more than 90% of commodities from smallholder farmers are sold through informal markets. Without systems for tracking the movement of food commodities from smallholder farmers, who are the majority, to diverse markets, it remains difficult to determine market infrastructure requirements. Market-related logistics should also receive adequate attention.
Market-related logistics should also receive financial support in the form of loan packages for distribution and transportation of commodities from production zones to markets and areas with less food diversity. Feeder roads should also receive more attention than highways because it is through feeder roads that the majority of farmers transport commodities to the market, enabling millions of urban consumers to get food. Inasmuch as financial institutions and government programmes can provides inputs to distant areas like Gokwe, Hurungwe, Muzarabani and Rusitu, poor road networks in these areas have negative implications on loan repayment as commodities will not be able to reach the market in a good state.
Financial institutions should invest in feeder roads including aggregation facilities in production zones. Building feeder roads and related infrastructure is another smart way of investing in smallholder farmers who cannot individually build roads but can use their passion and knowledge to produce what the market needs. With the right financial modelling, most smallholder farmers may not need big loans as individuals, but investment in good feeder roads and other forms of infrastructure can enable tracking of volumes as well as evidence of commodities in supply corridors and their performance. This is critical in revealing pathways for financing value chains.
Need for a strong foundation
Building a strong socio-economic foundation should start with assessing existing natural resources and knowledge within farming communities before prescribing what farmers should do. If banks invest in infrastructure like dams, irrigation schemes and solar energy, that becomes a pathway to weaning off farmers to be self-dependent and release pressure from dependence on loans or contract farming. Productivity is driven by infrastructure which enables farmers to utilise water, pastures and other resources. In most African countries, several high potential farmers are locked in loans and contract farming arrangements. If a farmer takes a $100 000 loan, makes a profit of $20 000 but repays $80 000 to the bank, his/her loan is eroded by production costs. That farmer has not grown and will need another loan in order to produce next season. Yet if banks invest in infrastructure like water, farmers can use irrigation systems.
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A strong production sector will anchor all other sectors. It does not make sense to finance an import initiative. Those who want to import should get finance at concessionary rates. Institutions of higher learning like universities should be part of agricultural transformation. There should be a financial package for universities so that they develop products that can be put on the market.
Tertiary institutions should spearhead technical manufacture and companies should be exchanging knowledge with universities. This way, loans can come through companies which then extend to universities as consultants for companies, with repayment starting once the projects are up and running.
On the other hand, parastatals can do so and enable ordinary people to access some of these services. They cannot just wait for processing companies to go and aggregate commodities as a national duty.
Institutions responsible for value addition and supporting value chains between production and markets are badly needed in all African countries. Given that government is not an investment guru, it should focus on creating an enabling environment and leave investment analyses and promotion to investment gurus who are good at hearing what is not being said. Where government departments are trying to be in the forefront in luring investments, investors are smart enough to hear what is not being said. For instance, they can see that if government is really good with business and entrepreneurship, parastatals and State-owned enterprises would be performing well. No amount of advertising and investment promotion conferences or brochures can dispel this perspective. People good at selling the country as an investment destination should be put in the driving seat and investors will start investing genuinely.
- Charles Dhewa is a proactive knowledge broker and management specialist