Rural investment powers Africa’s food market potential

In the heart of Africa’s bustling capital, Addis Ababa, discussions on transforming rural economies into thriving business hubs are taking center stage. Alvaro Lario, President of the United Nations International Fund for Agricultural Development (IFAD), recently shed light on the pressing need for strategic rural investment to drive food market potential on the continent.

Addressing the persistent economic challenges faced by smallholder farmers, Lario highlighted the underinvestment that has historically plagued rural areas. ‘For a number of years, we have seen an underinvestment in many of the rural areas and in food systems,’ Lario stated. The contrast between large agribusinesses and small-scale farmers underscores the need for tailored approaches that address specific challenges such as aggregation, economies of scale, and fair pricing.

Despite their critical role in producing up to 70% of the food in developing countries, small-scale farmers often grapple with a significant financing gap. Essential infrastructure like tertiary roads, storage facilities, and access to credit remain insufficient, preventing these farmers from turning their efforts into profitable ventures. Although governments are beginning to invest in infrastructure, these efforts ‘do not really trickle down to these rural areas,’ Lario explained.

The dire situation is exacerbated by rising hunger across Africa, with one in five individuals facing food insecurity. To combat this, Lario emphasizes the importance of patient capital and financial risk perception. He argues that many major financial institutions perceive a greater risk than what truly exists with agribusiness investments. Instead, advocating for strategic investments in infrastructure and regulatory frameworks that support small enterprises is crucial.

Boosting rural economies and improving food systems requires a multi-faceted approach, Lario suggests. Governments must prioritize infrastructure development to create an environment conducive to business growth. Furthermore, development finance institutions like IFAD play a crucial role in catalyzing and de-risking investments, connecting local SMEs to global value chains, and fostering an ecosystem that links medium and large enterprises with small-scale producers.

A successful example cited by Lario is Nigeria’s special agro-processing zones, which connect medium and large businesses with small-scale farmers. This initiative started with a $500 million program and, due to its proven success, is scaling across the country. Such models exemplify the potential for growth when favorable conditions and sustainable strategies align.

Finally, with agriculture accounting for approximately 60% of jobs in Africa, integrating subsistence farming into a business-oriented model presents an opportunity for economic revival. Lario calls for bold actions from African leaders to coalesce public and private sector partnerships that can propel development forward. ‘The business case is really there,’ he reassured, urging policymakers to pave the way for market-driven approaches that empower small-scale producers.

The conversation with Alvaro Lario reaffirms the critical role of rural investment in reshaping Africa’s food systems. Concrete actions and sustainable policies can transform challenges into opportunities, fostering a future where small-scale farmers not only survive but thrive.

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