SMEs control majority of food systems in Africa- new study shows

AFRICA – According to a recent report on 2019 Africa Agricultural Status by The Alliance for a Green Revolution in Africa, 64% of food consumed across the continent is controlled by small and medium-sized enterprises (SMEs).

The report indicates that the SMEs drive a “quiet revolution” across the continent’s agriculture sector by connecting smallholder farmers to markets.

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The businesses include food processors, wholesalers and retailers, service providers from transport and logistics to the sale of inputs which are often women-led.

The report indicates that only about 20% of the food consumed in Africa fits the notion of subsistence agriculture, meaning food is consumed directly by farming households growing it.

The other 80% comprises of food which flows through private sector value chains managed by SMEs.

The SMEs purchase commodities directly from smallholder farmers, process, package, transport and sell the food products to consumers.

This has been due to the mushrooming of urban developments leading to 80% of the total food basket of rural Africa to be purchased through supply chains.

 “This represents a shift from just decades ago. There has been a ‘quiet revolution’ in the agri-food private sector value chains, linking smallholder farmers to mushrooming urban markets.

“This has spurred farmers’ participation in food and farm input markets,” said Michigan State University’s Dr Thomas Reardon, a lead author of the report.

He further added that over the past 25 years, there’s been an 800% increase in the volume of food being moved from rural areas to African cities.

Describing how African farmers and SMEs are ready, waiting and willing to expand into new areas, Dr Agnes Kalibata, the president of Agra, noted that SMEs are the biggest investors in building markets for farmers today, and will likely remain so for the next 10-20 years

“They are not a ‘missing middle’, as is thought, but the ‘hidden middle’, ready for support and investment to thrive further.” She said.

The AASR 2019 signals a renewed effort to bring SMEs into the light through investment and support to help them become vibrant and visible.

For instance, only about 5% of rural farmers are directly linked to large companies through contract farming. But with proper support, large businesses, including supermarkets and large-scale processors, present a big opportunity as they are likely to play a role in how farmers access credit and markets.

“Governments and donors should therefore not reinvent the wheel by replicating the work of the private sector and setting up state-supported or subsidised corporations including in remote areas, as this would kill grass roots entrepreneurs.’’ Dr Kalibata said.

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