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Agriculture an enabler but Africa’s farmers face an uphill battle

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Small scale farmers in Africa continue to face an uphill battle. Funding projects remain a major hurdle across the continent. Image credit: Leon Louw for WhyAfrica

Agriculture an enabler but Africa’s farmers face an uphill battle 

Although there are significant investment opportunities in Africa’s agriculture sector, farmers on the continent still face an uphill battle despite new technology and digital solutions to solve the many challenges.

By Leon Louw, founder of WhyAfrica        

Climate change, extreme weather events, shortage of fertiliser, inadequate water management, water pollution, a lack of surface water, inadequate cold storage facilities, infrastructure constraints and insufficient electricity supply continue to hamper agriculture development in all regions of the continent.

However, the crisis in Eastern Europe has resulted in a worldwide shortage of fertiliser and food products. This has inadvertently opened up huge opportunities for African entrepreneurs. Financing of agricultural projects is a challenge though, and the private sector has a crucial role to play, especially in helping Africa to adapt to the increasing frequency and severity of natural disasters like floods and droughts.

According to a study by the International Finance Corporation, there are up to USD100-billion in total potential upfront adaptation investment opportunities, or USD- billion a year, in Africa between now and 2040.

“Some examples of these adaptation investments include solar-powered crop irrigation systems to prevent harvests from being destroyed by droughts, and crop insurance to guarantee farmers a liveable income if yields significantly drop due to a weather-related event. With African governments’ budgets stretched and little fiscal space, public investment will not be sufficient to meet the continent’s climate adaptation needs, making private sector investment essential,” states the report.

Transportation and cold storage (Agriculture an enabler but Africa’s farmers face an uphill battle)

Inadequate road, rail and port infrastructure, a massive backlog in terms of electricity, and insufficient cold storage facilities are critical challenges for Africa’s agriculture sector. At the same time, developing these enablers present huge opportunities.

There is increasing demand for cold storage and warehousing solutions in sub-Saharan Africa. The UN’s Food and Agricultural Organisation estimates that over 40% of food perishes before it reaches consumers. In response to this, African Infrastructure Investment Managers (AIIM) recently established Commercial Cold Holdings, which plans to grow into a pan-African cold chain logistics platform with a network of temperature-controlled warehouses in key demand hubs and food production regions.

Lack of access to fertilisers (Agriculture an enabler but Africa’s farmers face an uphill battle)

According to the African Fertiliser and Agribusiness Partnership (AFAP), the agricultural sector in Africa has faced numerous challenges, including low productivity and low yields, caused by a lack of access to inputs such as fertilisers.

Fertilisers increase yields and boost agricultural productivity, making fertiliser an important tool for smallholder farmers looking to improve their yields.

By using fertiliser, smallholder farmers can also increase the overall productivity of their land and reduce the amount of time required to produce crops. Another benefit of the use of fertilisers is that it can help to reduce the risk of crop failure due to weather-related factors such as drought or heavy rainfall (fertiliser helps to improve the water-holding capacity of the soil, making it easier for crops to survive in challenging conditions).

One of the main challenges facing smallholder farmers is a lack of access to financing, which can make it difficult for farmers to purchase fertiliser and other inputs. This is where organisations like the AFAP come in.

AFAP is a social enterprise that aims to increase access to fertiliser and other inputs for farmers in Africa, particularly smallholder farmers. The organisation works with a range of stakeholders, including governments, the private sector, and international organisations, to provide capacity development support, market entry and market access support, financing and other support to agri-SMES, including farmers.

While most of AFAP’s work in the value chain is with hub agro-dealers (input wholesalers), through the hub and spoke model of working with hub agro-dealers and their retail networks, AFAP works to help farmers better understand the benefits of, and to adopt, inputs, to gain better access to credit, and to help groups of farmers to negotiate better prices for inputs.

Through, community-based agents that AFAP employs when introducing new products, AFAP also provides extension services and provides basic technical assistance to help farmers increase their productivity.

Africa’s first large potash mine (Agriculture an enabler but Africa’s farmers face an uphill battle)

Although potash is an essential element in fertiliser and demand for the product is at an all-time high, London based Emmerson’s Khemisset mine in Morocco will be the first large producing potash mine in Africa. Emmerson announced its first offtake agreements recently.

Current farming methods in Africa continues to strip potassium out of the soil faster than it is replaced with fertiliser. Potash is the common name given to a group of minerals and chemicals that contain potassium (chemical symbol K), which is a basic nutrient for plants and an important ingredient in fertiliser. Most potash is produced as potassium chloride (KCl).

According to a study by the Newcastle University in the UK, African farmers are replacing just 10% of the potassium being removed with each harvest, creating “a recipe for disaster.”

The study states that potash is plentiful in the Northern Hemisphere, where producers in Canada, Belarus, and Russia dominate the world market.

“Three countries thus produce more than 70% world’s potash, with little or no production in Africa, South Asia, and Australasia. Potash shortages affect parts of the Southern Hemisphere from Africa, to Brazil, to India and China.”

Demand for potash is high because there is not enough potash going onto the land. According to some estimates the world’s production of potash would have to double to meet current demand.

Potash is one of three main fertilisers needed for farming. The others are nitrogen and phosphorus. About 95% of the worlds potash in used on farms to fertilise the soil. Potash is a critical ingredient that improves crop yield, increase resistance to plant disease and heighten water retention.

In addition, potash is a component of feed supplements used to grow livestock and enhance milk production.   

Emmerson’s signing of a Memorandum of Understanding (MOU) relating to the offtake of potash and salt, to be produced at its Khemisset mine in Morocco, is thus an important announcement in the African fertiliser fraternity.

The MOU was signed with Keytrade, a global fertiliser trading company, and the diversified commodity trader Hexagon Group. The agreement with Keytrade includes the sale of a minimum of 245,000 metric tonnes per year of Muriate of Potash (MOP) for a period of ten years, and with Hexagon for the sale of a minimum of 245,000 metric tonnes per year of MPO and a minimum of 500,000 metric tonnes per year of salt products (NaCI), both for a period of ten years.

According to Graham Clarke, CEO of Emmerson, the prices for MOP (minimum of 60% K2O) and NaCl are expected to be derived from the market or as quoted in independent expert reports, such as Argus Research, averaged to form a monthly price in the month prior to bill of lading, and after deducting a marketing fee.

Importantly, the MOUs contemplate “take or pay” provisions whereby the off-takers will market the product to end users and compensate the company for any quantities not taken by end users or otherwise sold by the off-takers.

The MOUs envisage that all MOP and salt products sold will be delivered Free On Board (currently Casablanca, Morocco), unless otherwise agreed by the parties.

“We continue our process of advancing towards construction readiness at Khemisset.  These MOUs are an important milestone in this process and will account for more than 65% of MOP production and 50% of salt production.

Underpinning a significant proportion of future potash and salt sales on a take or pay basis is a strong endorsement for the project, de-risking the development for debt and other financiers.

They are also a clear signal of the critical importance of potash in the context of international food security, and we look forward to advancing further negotiations as we continue to lay the foundations for establishing Africa’s first commercial potash mine,” says Clarke.

Agriculture an enabler but Africa’s farmers face an uphill battle

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Agriculture an enabler but Africa’s farmers face an uphill battle 

 

 

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