A Netherlands-based company is setting up an SA-based Investment Development Hub (IDH) that will use blended financing comprising of grants, seed financing facilities and technical support to assist a business-led alliance looking to invest in the transformation of Southern African food systems.
At a recent launch of the business-led alliance, called the Southern African Food Systems Transformation Alliance, IDH CEO Daan Wensing said the hub will use the funding to unlock and harness the enormous untapped potential of food systems to drive rural agro-industrial development and boost small-scale farmers’ productivity and incomes. It will also create additional employment in expanding segments of food supply and value chains.
“This is critical considering that the average cost of the household food basket in SA was close to R5,000 per month in 2022, [which is] R535, or 12.6%, more than in 2021,” Wensing said.
“The sector [also] represents approximately 7% of total formal employment in [SA] with a very high unemployment rate of 34.5% — and particularly high youth unemployment rates of 63.9% for the ages 15-24 and 42.1% for the ages 25-34 — agriculture is important for SA and regional development,” he said.
While SA is the centre of regional agribusiness, its commercial agricultural sector is also highly concentrated, with a highly capitalised and advanced large-scale commercial subsector alongside a struggling SME and smallholder farming subsector.
SA’s agriculture sector and related services generated total income of R351.4bn in 2019, which is roughly $24bn, or about 12% of GDP. The primary agriculture sector alone contributes about 3% to the GDP.
In the region, the Southern African Development Community’s (Sadc’s) Regional Vulnerability Assessment and Analysis Programme shows the number of food insecure people stood at about 55.7-million from April 1 2022 to March 31 this year.
This is a 34.9% increase on the five-year average. The research shows about 18.6-million children in the region are estimated to be stunted due to malnutrition.
Global Food Insecurity Driving Changes
Nala Fund chair Bongiwe Njobe said at the launch that the business-led alliance is centred on the ambition that 80% of total viable sourcing comes from the Sadc region by 2033.
The alliance includes companies such as Unilever, the Nala Fund — a private equity fund that specialises in sustainable agriculture — U Can Grow Africa and Freshmark Systems, which represents 24 fresh produce markets.
Njobe said even though SA is self-sufficient in most agricultural products, is a net exporter in monetary value and plays an important role in regional food security with the export of key staple crops within Southern Africa, there are also certain agricultural products for which SA is still heavily dependent on imports, for example, rice, sunflower oil, soya bean meal and spices.
“When looking at the regional perspective, food security in Southern Africa will become a critical risk with high population growth, a risk heightened by climate change and economic disparities in rural areas,” she said.
IDH programme manager David Black said the sustainable trade initiative and its partners recognise they should play a role in transforming Southern African food systems by increasing local sourcing to reduce the dependency on imports for key crops, increase processing and value addition in the SA economy, and developing an inclusive agricultural sector.
He said the alliance will also contribute to local and regional food security, as well as build climate resilience and regenerative farming practices, into Southern African agricultural value chains.
