23 Jul 2019 / Article

Economic integration: are regional markets the future of African agribusiness?

“Agriculture offers great opportunities for intra-African trade, but the results in this area are very poor”, says Agnes Kalibata, president of the Alliance for a Green Revolution in Africa (Agra). While some countries have made efforts in terms of the business environment to facilitate trade and investment in agriculture, a majority of countries are still lagging behind. Africa’s agricultural imports are massive (+500% between 1990 and 2015), which weighs heavily on trade balances and results in a massive loss of jobs on the continent, while at the same time 1.7 million young graduates enter the labour market each year. Reducing imports could lift hundreds of millions of people out of poverty through smarter intra-regional trade: “It’s not just about trade, it’s about smart trade,” the AGRA president said.

Participating in the same session of the AFRICA CEO FORUM in Kigali, Vimal Shah, President of Bidco Africa, is surprised that East Africa imports 2.5 million tonnes of wheat – and 4 million tonnes in the near future – without producing any.

According to him, we should figure out today which East-African countries could grow wheat, and how to facilitate its trade with neighbouring countries. With demographic pressure and rising living standards, the problem will only increase: demand for agricultural products is expected to increase by 129% between 2015 and 2025 according to figures released by Agra.

This work to harmonize standards must be carried out by governments in collaboration with the private sector

To boost intra-African agricultural trade, lowering tariff barriers is one of the main challenges. For Vimal Shah, if East Africa through the EAC (East African Community) is already positioning itself as a “role model” in the field, the subject is wider and affects Africa’s competitiveness compared to other major agricultural producers such as China, India or Vietnam which “are growing for us”.

Marc Roussel, Senior Vice President Africa of Bureau Veritas, recommends the implementation of shared standards, based on the European model. “African countries work with their own standards,” he says. “Most of the time, it is difficult to exchange products between countries, often because of minor details. This work to harmonize standards must be carried out by governments in collaboration with the private sector.”

Innovating in production and trade techniques seems essential to increase the competitiveness of African countries. Sylvain Gotta, general manager of Sipra, Ivorian leader in poultry farming, stresses the need for more large-scale companies in terms of production capacity and logistics. They are the only ones able to achieve economies of scale and therefore become more efficient than small operators facing significant costs: “We don’t have enough regional operators on the continent, and too many local operators, which strongly impairs competitiveness,” he explains.

Logistics plays a central role in the development of intra-African agricultural trade. Joshua Rugema, Country Director Rwanda and Head of East Africa at East Africa Exchange, insists: “we need to better connect farmers, producers and distributors in order to ensure the products’ quality and fair price to all stakeholders.”

Click here to view Agnes Kalibata’s presentation.

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