The food web

FoodWebThe potential for growth in Africa’s agro-processing industry is an investor’s dream, says Anver Versi

In the last piece on  investment opportunities in Africa, we discussed the enormous potential of investing in agriculture in Africa and how productivity levels can be raised through ‘smart’ farming techniques.

This article will continue on the same theme but drill down to the potential that the food production sector holds. The global food industry has made seasons and even geographies redundant. Today, you can eat what were once seasonal fruits and vegetables the whole year round; you can buy fresh tropical king fish from a fishmonger in Copenhagen or Malaysian frozen tilapia from a supermarket in Accra. A study of the origins of ingredients contained in a bowl of noodle and seafood soup from a street hawker in Hong Kong revealed that the products had come from seventeen different countries around the world.

The supply lines of the vast global food industry form a bewildering web across the globe. This has become, probably, the largest industry in the history of the world. The World Bank estimates that the food and agriculture sector is worth around US$10 trillion per year today. Experts say that this is an underestimate as many dealings are done on a cash basis.

As populations and incomes rise and as freight rates become more competitive, the industry is set for yet another period of explosive growth. A good deal of this expansion is coming from developing nations, particularly from Asia. In China, the agro-processing industry lifted more people out of poverty faster than ever before in history. The industry also produces the raw material needed for rapid industrialisation and wealth creation.

Where does Africa fit into this scheme of things? “Africa is very much involved in the mix but at the moment the traffic is going the wrong way – the continent’s annual food import bill is around US$35bn,” writes Dr Edward Brown of the African Centre for Economic Transformation (ACET) in a recent issue of African Business magazine. But, he continues: “In less than a decade, most Africans will be living in cities – opening up an enormous internal market for food. And the clamour for more food worldwide will continue to increase.”

Given Africa’s huge diversity of climates, physical features and agricultural traditions, experts say there is no reason why virtually any food item cannot be produced in abundance on the continent. Ethiopia, for example, has set itself the astonishing target of becoming the continent’s largest wine producer by 2025 – and is working with the largest wine producing company in France to do so.

Africa also retains the largest stock of arable land still available for cultivation in the world so expansion for any produce can be almost infinite. And yet Africa’s agro-processing industry is tiny relative to the rest of the world. It is also largely antiquated and, with a few exceptions, has failed to keep pace with modern developments and innovations. Where it has taken root, the returns on investment have been spectacular.

This can only mean one thing – the potential for growth is almost unbelievable – an investor’s wildest dream come true.