Africa’s agric sector offers massive benefits for bold investors

While the volume of foreign direct investment (FDI) in Africa has seen a spurt over the last decade, for example registering $91bn in 2024, the FDI flow to the continent remains low at around 4-5%. Most of the investment is into hydrocarbons and minerals but investment into the continent’s biggest potential, its agricultural products, remains largely disappointing. Almaz Alsenov, founder of Harvest Group SA, a Switzerland-based international trader and distributor of agricultural products, argues the investors willing to navigate the complexities and challenges of the African market stand to Reap significant rewards from this untapped potential.

Harvest Group SA is a management company based in Switzerland, encompassing a Swiss trading company with extensive experience in international commodity trading. Harvest is actively expanding its assets for commodity processing, storage, transportation, and transshipment.

The shifting patterns of foreign direct investment (FDI) offer a window into future opportunities in every region for global investors. When we talk about the future of FDI, particularly in the commodities and agriculture sectors, one region stands out: Africa.

With its rich natural resources, vast arable land, and young and growing population of 1.5bn, Africa is often heralded as the next big opportunity for global investors. However, while the potential is undeniable, both opportunities and challenges need to be addressed to realise this vision, requiring a nuanced understanding of current investment trends, macroeconomic influences, and strategic policy interventions.

Foreign direct investment in Africa has been steadily growing over the last decade, albeit from a relatively low base. In 2024, the continent attracted roughly $91bn in FDI, a significant increase from previous years, against the backdrop of an 8% global decline in FDI.

Egypt played a pivotal role, accounting for approximately one-third of the continent’s total FDI, with $35bn inflows, largely driven by the Ras El-Hekma Peninsula Development project. Yet, Africa still only accounts for a small fraction of global FDI, around 4-5%. When it comes to commodities and agriculture, the story is even more mixed.

On one hand, countries like Nigeria, South Africa, and Angola continue to attract substantial investment in their oil, gas, and mineral sectors. Foreign companies, particularly from China and India, but also from new and ambitious global players like the UAE and Saudi Arabia, have heavily invested in these industries to secure the raw materials needed to fuel their rapidly growing economies.

The UAE, for instance, has invested approximately $110bn over the past decade, surpassing traditional investors like the US, with investments into farmland, ports, and renewable energy. This highlights a strategic shift towards sustainable and diversified projects. Nevertheless, agriculture, despite its potential, has been relatively underfunded, receiving less than 5% of overall FDI into Africa.

This is a missed opportunity. The continent is home to about 60% of the world’s arable land and yet imports more than $35bn worth of food annually. With rising global food demand and increasing pressure on agricultural resources in other regions, Africa could emerge as the world’s next breadbasket. But to unlock this potential, much more investment is needed—not only in farming but also in infrastructure, technology, and supply chain logistics.

Several macroeconomic and geopolitical factors currently affect the flow of FDI into Africa’s commodities and agriculture sectors, which can either act as tailwinds or headwinds, depending on how they evolve.

Global commodity demand and the prices of oil, gas, metals, and agricultural products are critical drivers for investment in Africa. The recent surge in global demand for commodities, spurred by post-pandemic economic recovery and energy transition efforts, has put African resources in the spotlight. However, commodity prices are notoriously volatile, and this volatility creates uncertainty for investors.

While Africa has some of the world’s most fertile land, it is also one of the region’s most vulnerable to the impacts of climate change. Unpredictable weather patterns, droughts, and creeping desertification can severely disrupt agricultural production, deterring long-term investment.

The UN’s World Food Programme, for which my company, Harvest Group SA is a supplier, is a vital player in countering food insecurity across some of the most vulnerable countries.

At the same time, the growing global focus on sustainable agriculture and carbon credits could create new opportunities for FDI in Africa. The region has the potential to play a key role in offsetting carbon emissions through reforestation, regenerative agriculture, and renewable energy projects.

Political risk remains a major concern for investors looking at the continent. Countries like Ethiopia, Mozambique, and Libya have seen recent conflicts that have eroded investor confidence, while coups across the Sahel have highlighted the risks of regime change. Although traders are used to conducting business in difficult environments, deal-by-deal opportunities are different to longer-term investments. Corruption, inconsistent legal frameworks, and weak governance can make it difficult for investors to feel secure in their ventures, especially if there is a risk of being ‘tainted’ simply because of who was in government at the time the investment was made. Moreover, Africa’s fragmented regulatory environment, with each country having its own set of rules and procedures, adds complexity and uncertainty to cross-border investments.

The African Continental Free Trade Area (AfCFTA), which became operational in 2021, is a game-changer. By creating the largest free-trade area in the world, AfCFTA could remove barriers to intra-African trade, attract FDI, and boost regional economies. However, much work remains to be done to harmonise policies and ensure that the agreement delivers on its promises. Effective implementation will require continued and consistently strong political will, adequate infrastructure, and a skilled workforce.

China has been Africa’s largest trading partner for over a decade, and its influence on the continent is undeniable. While Chinese investment has largely focused on infrastructure, there has been a growing interest in African agriculture and commodities.

However, Western investors have for some time viewed China’s dominance with skepticism, raising concerns about debt-trap diplomacy and resource extraction practices that may not benefit local communities.

While the challenges are significant, there are several steps that African nations and the global investment community can take to improve levels of FDI in the region.

African governments must prioritise creating a stable and transparent regulatory environment. Reducing corruption, ensuring the rule of law, and protecting property rights will help reduce perceived risks for foreign investors. Multilateral organisations such as the World Bank can play a role by offering political risk insurance or supporting reform efforts that promote good governance.

At the same time, Africa’s agriculture sector needs to embrace modern technologies, including precision farming, genetically modified crops, and irrigation solutions, to improve yields. Foreign investors should be encouraged to partner with local farmers and governments to create sustainable farming practices that benefit both local communities and global markets.

In addition, African nations need to focus on building the necessary infrastructure, such as roads, ports, and storage facilities, to facilitate efficient transport of goods to global markets.

With certain Western financial institutions increasingly focusing on ESG criteria, African nations may see an opportunity to secure foreign funding to develop projects that meet these standards, particularly in renewable energy, sustainable farming, and reforestation.

The development of carbon markets and green bonds could also help attract foreign capital while addressing the region’s vulnerability to climate change.

AfCFTA offers an incredible opportunity for Africa to become more self-reliant and attract larger-scale investments. Governments should focus on harmonising trade regulations, improving cross-border infrastructure, and reducing trade barriers. By facilitating intra-African trade, the continent can offer foreign investors access to a more cohesive and attractive market of over 1.5bn consumers.

Beyond traditional FDI, there is a need to diversify the types of investment into Africa by attracting private equity and venture capital into the commodities and agriculture sectors. These forms of capital are often more nimble and risk-tolerant, making them ideal for innovative agricultural technologies or sustainable farming projects. African governments can stimulate this by creating tax incentives or matching funds for investors willing to take the plunge.

In conclusion, Africa’s commodities and agriculture sectors present a vast, yet underexplored opportunity for foreign direct investment. While macroeconomic and geopolitical challenges remain, the region’s potential for growth, all fueled by global demand for resources, fertile land, and an expanding population, cannot be overstated.

With the right policies, investments in sustainable agriculture, improved governance, and enhanced regional integration, Africa can emerge as a leading destination for FDI in commodities and agriculture, driving prosperity for both investors and local economies alike.

Investors willing to navigate the complexities and challenges of the African market stand to benefit greatly from the untapped potential this continent offers. The question is not whether Africa will attract more FDI, but how soon.

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