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Can grain be ‘the new oil’ in Africa?

In recent years, agribusiness analysts have predicted that agricultural commodities could become “the new oil” in Africa, a continent with a booming population, a growing economy with potential for even greater expansion, and 60% of the world’s uncultivated arable land. This all adds up to an incredible opportunity.

“Understand that by transforming Africa’s agriculture sector, it will become the engine that drives Africa’s economic transformation through increased income, better jobs higher on the value chain, improved nutrition, and so on,” said Jennifer Blanke, vice-president of Agriculture, Human and Social Development for the African Development Bank, at the African Investment Forum in November 2018 in South Africa.


This transformation will require a shift from subsistence farming, which currently accounts for about 65% of the continent’s agricultural production, to more advanced agribusiness endeavors such as high-tech commercial farm operations and ag processing industries capable of creating good-paying jobs that will grow Africa’s middle class. Facing critical issues such as water availability and poor infrastructure, it will require partnerships between governments and the private sector, African countries and their neighbors, and Africa and its development partners.

Accomplishing this goal won’t be easy, nor will it be inexpensive. No continent faces more demographic, economic, environmental, social, and political challenges. Some analysts estimate it may take up to $45 billion per year — current annual investment is around $7 billion — to harness the power of agriculture in Africa and grow the value chain to create jobs and wealth. If this goal is realized, it is even possible Africa could become a net exporter of agricultural commodities years from now, replacing $110 billion worth of imports, as well as doubling its share of market value for select processed commodities.

Some international companies such as U.S.-based Seaboard, which has operated flour mills in East Africa since the 1960s, understand the challenges and opportunities that are involved in running a successful business on that continent.

“You have to be patient, well capitalized and understand that any one year could be dramatically different from another year because of political events, market conditions, or currency issues,” Dave Dannov, president of Seaboard’s overseas trading group, told World Grain last year.

It would seem Africa’s milling industry is positioned to flourish in coming years. Over the last 10 years, while the population has grown by 32%, wheat imports have increased by 68% as eating habits shift from corn- to wheat-based foods. Among those responding to this trend is Switzerland-based Bühler, a manufacturer of milling equipment, which opened the African Milling School in 2015 in Nairobi, Kenya, to help provide milling companies with highly-skilled workers.

One way or another, Africa will need grain in the coming years — and lots of it. Not only is it the fastest growing continent, with demographic experts projecting Africa will account for more than half of global population growth in the next 30 years, it is also the second fastest growing economy behind South Asia.

The question is where will most of that grain be sourced? Will the E.U., Russia, the United States and others remain its largest suppliers, or will commercial farming and agricultural processing in Africa finally blossom and push the continent closer to having a zero balance in grain trading or even a trade surplus?


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