Business Opportunities in the

African Agribusiness Industry

2015 Gulf Coast Trade Alliance World Trade Conference

Yasmine UmutoniConsultant _ Agribusiness & Agriculture Development

African agribusiness could be worth $1 trillion by 2030

Growing Africa: Unlocking the Potential of Agribusiness– World Bank report, 2013

The big picture

1/3 of the economicallyactive population obtains itslivelihood from agriculture(FAO, 2014)

570 million farms in the world:- 90% are Family farms occupying

about 70–80/5 of farm land- produce more than 80 percent

of the world’s food in valueterms (FAO, 2014)

Africa comparative advantage: morethan half of the world’s agriculturallysuitable unused land (450 million ha) andimpressive water resources scarcelytapped (McKinsey 2014 and World Bank, 2013)

Agriculture employs 65percent of Africa’s labor forceand currently worth about$313 billion (World Bank, 2013)

Global Sub Saharan Africa (SSA)

- Agricultural production and agribusinessconstitute an average of around 45% of theeconomy of Sub-Saharan Africa (World Bank, 2013)

- Africa has the potential to increase the valueof its annual agricultural output from USD 280billion in 2010 to about USD 500 billion by 2020and USD 880 billion by 2030 (AfDB, 2014)

Food demand is growing while land and waterresources are more and more scarce anddegraded and climate change will hardenthese conditions. Challenge: how to feed over9.1 billion people with safe food by the year2050 (FAO, 2014)

African Market Potential to Supply the Demand

• Africa hosts a huge spectrum of Suitable agro-climatic conditions

• 5 of the top 12 world fastest growing economies are in Africa (among which Kenya,Nigeria and Rwanda – all three possessing important agribusiness sectors)

• There are noticeable and successful efforts in surmounting traditional shortcomingsto boosting agricultural output in Africa (including infrastructure improvements andtrade barriers removal among others)

Output expected to increase business opportunity in upstream products (fertilizers,seeds, pesticides and machinery) and expected to result in the growth of downstreamactivities (e.g: grain refining, food processing and biofuel production)

Demand The world’s population recently exceeded the 7 billion mark

and global agricultural production must rise to feed thesegrowing numbers.

African economies spend between $40 billion and $50 billionyearly on imported agricultural products. The rapidUrbanization (3.7%/year) and subsequent food shows anopportunity of increased demand for value added products.

Business Opportunity

For most products, large parts of production are simply not exploited. These gapspresent opportunities for Investment in product’s value chain and market-oriented valueaddition

Core areas of potential interest

- Purchased inputs; - Innovative models of production- Irrigation and precision technologies,- Storage facilities/cold storage systems- Services for machinery repair- Transportation and logistics

- Market information- Processing facilities- Financing- Packaging and distribution- Retail networks- Export

Volume of food estimated at USD 4 billion forgrains alone are lost after harvest every year inSSA (World Bank, 2013). Post-harvest losses indicatesopportunities to invest in post-harvesthandling equipment and systems, (harvesters,threshers, warehousing, cold storage, sorting& packing facilities)

Urban food markets will increase fourfold to exceed US$ 400 billion by 2030, (World Bank, 2013): A rising high-end urban consumer based seek more storable and easily prepared foods and show a distinct preference for food distributed in supermarkets

Areas of interests (Cont.)

• Rice• Cocoa• Vegetable oils• Rubber • Palm oil• Higher-value horticultural crops

With the growing share of middle class and requirement for diversified diet, coupled with global demands, the expected most dynamic sectors overall are likely to be:

• Dairy• Poultry• Feed grains• Fish

• Processed foods for import substitution • Biofuels for export

Market Accessibility

- Free trade areas at regional level is easing Market Access

- Reforms have spurred the introduction of Foreign investment incentives (like taxexemptions) and facilitation structures (like One stop centers).

- Bilateral investment treaties (BITs) which are low-cost options to encouragebusiness climate reform and signal investor commitment to host countries, haveglobally reached the number of 2,902 in 2013 (at least 300 of these treaties weresub-Saharan Africa-specific)

- A growing number of private equity funds are springing up to finance agriculturalproduction in Africa such as the Africa Agriculture Trade and Investment Fund (a

public-private partnership created by KfW Development Bank and Deutsche Bank)

Evidence- Foreign investment in sub-Saharan Africa (from theEU, China, Japan and the U.S.) grew by nearly fivetimes between 2001 and 2012, from $27.2 billion toabout $132.8 billion.

-In 2014, these investments reached a record ofapprox. $80 billion. The large share went into Mining,financial services, manufacturing and construction.

Limitations and Challenges

• Most of the labor force in rural areas are uneducated/unskilled

• Low Research and Development in the sector

• Poor rural public Infrastructure and trade logistics

• Data availability for market analysis and Forecast about prices,trends

• Adequate administrative systems(supporting agribusiness) inrural areas

• Land access and rights issues

• Weak food safety systems and regulations

Assante

(Thank You in Swahili)

Note: Swahili is the mostly widely spoken language ofAfrica (about 100Millions people)

Yasmine Umutoniuyasmine@gmail.com

+1 2024685446 (USA)+250 78 8350350 (Rwanda)

Annexes

0

10

20

30

40

50

60

70

Share of Agric in GDP in 2013

Algeria

Angola

Botswana

Burkina Faso

Burundi

Cabo Verde

Cameroon

Chad

Congo, Dem. Rep.

Congo, Rep.

Cote d'Ivoire

Djibouti

Egypt, Arab Rep.

Equatorial Guinea

Eritrea

Ethiopia

Gabon

Gambia, The

Ghana

Guinea

Guinea-Bissau

Source: UNCTAD

Top Agricultural Imports

FDIs trends

Developing economies saw their FDI reaching a new high ofmore than US$700 billion, 4% higher than 2013, with a globalshare of 56%. At the regional level, flows to developing Asia wereup, those to Africa remained flat, while FDI to Latin Americadeclined.

In 2014, FDI flows to developed countries dropped by 14% toan estimated US$511 billion, significantly affected by a largedivestment in the United States. FDI flows to the EuropeanUnion (EU) reached an estimated US$267 billion; thisrepresents a 13% increase on 2013, but is still only one-third ofthe 2007 peak.