Masiziba Ruth Hadebe - Non-Technical Article- Third Runner up - 2022

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Agricultural Communicator Entry:

Agro-Processing Dreams vs Reality

Agro-processing is a “value adding” process which refers to the sub-sector that takes primary materials and intermediate goods from agricultural, fisheries and forestry-based sectors and processes them to make it usable as food, feed, fibre, fuel, or industrial raw material. This process has long existed with the presence of products like dried fruit, peanut butter, canned fruit, biofuels etc.  

The Agro-processing industry is thus a significant contributor to the manufacturing industry.  Furthermore, this industry allows for multidisciplinary collaboration between chemical engineers, chemists, food scientists, biotechnologists etc making the research and development within the sector a crucial contributor to the success of the industry.

Given the potential that the industry holds, the sector has been perceived as the sector to address nutrition and food security challenges in many countries while increasing the demand for the agricultural products and opportunities for rural employment with a particular focus on increasing the number of Agro-processing firms. But is that as feasible as it seems? Especially in the African Context?

Firstly, challenges around market access, technology adoption, skills development, adequate infrastructure, and some incentives to participate in the existing Agro-processing industries are prevalent.  This was exacerbated when the pandemic hit and many countries in Sub Saharan Africa accelerated Agro-processing to curb increasing food shortages that were associated with trade disruptions. However, this acceleration made challenges around market access, technology adoption, skill along with the infrastructure more prevalent.

Secondly, the food and Agro-processing sector in countries like South Africa is dominated by large commercial operations translating to the sector being characterised by extensive anticompetitive conduct as the few role players do not easily allow the transformation to take place because of uncertainty and risk aversion.

Thirdly, cost competitiveness is seen as a minimum requirement in Agro-processing which means that entrant Agro-processing units must be able to compete against imports and large local businesses.  Aspects such as transport and logistics capabilities can significantly shape the competitiveness of a firm, and these are perceived as significant challenges.

Lastly, access to financing. Many entrant Agro-processing firms face challenges in securing finance from both private and public (development finance) institutions due to the cost advantages that large commercial operations have over them. Indeed, over the years, work has been done to give rise to alternative finance, however, it seems there is a mismatch between the design of development funding and the needs of entrant firms.

So, what can be done to curb some of these challenges?

Well, there is a need, particularly for African countries, to initiate and implement conditions that will enable the Agro-processing industry to thrive.

Firstly, there is a necessity to attract investment to stimulate and grow the private sector. Besides Foreign Direct Investments, there is a need to encourage and finance value chain actors such as Agri-Tech businesses or start-ups who will purchase or innovate up to date technologies and modern inputs. In fact, entrepreneurs across Africa are using technology to create sustainable solutions to some of the biggest problems faced by the sector. Furthermore, according to reports, Agri Techs are seen as one of the stable and predictable markets making it appealing for long term investment.

The next condition to be set in place is the initiation, maintenance and improvement of post-harvest infrastructure. This is because poor infrastructure (or lack thereof) can prove detrimental to supply chains that could have played a crucial role in the sale or processing of commodities that had the potential to be used in the Agro-processing industry.

The last condition is the existence of a unified, flexible and inclusive process of funding Agro-processing entrant firms which will not be characterised by a mismatch between the design of funding and the needs of entrant Agro-processing firms.

Although these conditions are not set in stone and are part of an endless list, what remains clear is that a gap between Agro-processing dreams and the current reality exists. Additionally, for the mere fact that every entry firm will face their own unique set of challenges makes the gap even wider. Regardless, the sector remains crucial and has the potential to contribute to food security while lessening unemployment through agricultural, fisheries and forestry-based sectors. However, it will only thrive when certain conditions are initiated and implemented especially in the African context.

 Masiziba Ruth Hadebe

I am Masiziba Ruth Hadebe, a dedicated Master of Science Student in Agricultural Economics. I hold two Agricultural Economics degrees: A BSc and BSc Hons, all obtained from the University of the Free State (UFS).  I have also initiated and been part of several community projects that have impacted many people within my community. In addition, I am well experienced tutor and research assistant.