Across many emerging economies, rapid industrialisation and urbanisation are placing strain on the world’s food resources. In China, for example, as people’s diets change to include more meat and calories, an area the size of the UK will need to be farmed just to cope with the demand.
Developed markets are unlikely to provide the solution. There are no significant under-farmed areas to develop in these markets. At the same time, yields have been maximised, so improvements will be marginal or take decades to make a material difference.
Africa, by contrast, has some 400 million hectares of arable land available in the Guinea Savannah zone, of which only 10% are currently cropped. This presents a once-in-a-lifetime opportunity for Africa to supply not only its own domestic needs, but become a major source of world food supply.
To achieve this, Africa will have to follow similar strategies to increase investment in agriculture and grow food production as Brazil did some decades ago. In the early 1960s, Brazil’s Cerrado region was an agricultural backwater, with low fertility, acidic soil, nearly non-existent infrastructure and no urban demand centres.
Today, it is a major agricultural hub, accounting for the bulk of Brazil’s annual production of soya beans, sorghum, coffee and beef, plus a large share of maize and rice output. Policies and reforms were introduced in the 1960s that implemented strategies to raise agricultural productivity.
Major initiatives included adding lime to neutralise soil acidity, developing high-yielding soya bean varieties suitable for the tropics, and implementing appropriate farming practices. A range of macro-economic factors reinforced these efforts.
In 1994, strategies were implemented to help stabilise the country’s economy and reduce inflation. In 1999, Brazil adopted a floating exchange rate and the currency suffered a significant devaluation; this made Brazilian exports competitive in the global market. Above all, the government enacted reforms that improved the investment climate and allowed the private sector to flourish.
Considering the impact of oil
The collapse of oil prices since the second half of 2014 has significant implications for the agriculture sector across many African nations. Much of the ‘Africa rising’ narrative can be attributed to a strong demand for natural resources and the corresponding capital flows that have swollen government coffers or flooded into the growing middle class, changing consumer spending patterns.
Thus 2015 might represent an inflection point for a number of African oil- and gas-producing nations such as Nigeria, Ghana, Angola and Mozambique. Nigerians over a certain age well remember how advanced the country’s agriculture sector was in the 1960s during the early flushes of independence. The discovery of oil in the Niger Delta – along with other political and economic factors – helped to weaken established industries such as palm oil, cocoa and rice production.
The collapse of oil prices and the concomitant effect on the exchange rates of these nations suggest a unique opportunity for agriculture to redress some of these imbalances. Africa has a US$35 billion (R506 billion) agriculture deficit and Nigeria alone may account for some 15% of that deficit.
Exchange rate devaluations push up the cost of food for domestic consumers but equally, they can boost the returns of domestic producers and create opportunities for exporters.
One of the factors that has driven Brazilian and Argentine agriculture exports has been the 1999 and 2001 exchange rate devaluations in both countries. Certainly, there will be some countries that understand and embrace the underlying shifts taking place within their economies and harness the dynamic benefits that they offer. These will emerge as winners while others will be left wondering what might have been.
African governments need to understand that the current situation is not permanent and with some delicate policy footwork and the embracing of radical private sector ideas, they can drive food security and development goals in tandem.
Utilising scarce resources
Resources such as land and water are finite and commentators often warn that we are running out of both. The concern is whether the finite quantity available for agriculture is sufficient for global food requirements. Looking at declining arable land per capita in isolation only proves that population growth is faster than arable land growth. Land is not the sole determinant of output – yields and cropping intensity must also be considered.
African yields are among the lowest in the world and have a large scope for improvement. To obtain higher yields requires large levels of investment coupled with changes in crop management practices. It follows that this would increase the cost of production, and be justifiable only in an environment of higher prices. If, for example, African grain yields improved to the level achievable with intermediate inputs, this would imply a large increase in agricultural output.
The focus needs to be on the land growth required for higher crop production – after accounting for yield growth and increases in cropping intensity – and on whether that growth is possible.
A study conducted by the World Bank explores the potential of the Guinea Savannah zone in sub-Saharan Africa – an agro-economic region encompassing approximately 600 million hectares of land with a warm tropical climate, annual precipitation of 800mm to 1 200mm and generally poor soil quality. Of this, nearly 400 million hectares of land are suitable for agriculture production, but less than 10% of this land is being utilised for cropping.
The other resource often highlighted as a constraint on food production is water. Population growth and urbanisation undoubtedly put pressure on water resources. However, this does not mean there are insufficient water resources for agriculture.
At a global level, irrigation water withdrawal accounted for only 6% of the total renewable water resources in 2005/2007. The Food and Agricultural Organisation of the UN expects this ratio to reach 7% in 2050, which hardly seems a cause for worry.
More importantly, the lowest levels of irrigation water withdrawal are seen in Latin America and Africa – precisely the regions where additional arable land resources are widely available.
To understand the importance of water for crops, it should be kept in mind that on a per-hectare basis, most crops require 5 000kl to 8 000kl of water in a single growing season. About 40% of the world’s food production comes from irrigated fields and for some crops, such as rice, the share is nearly 100%.
In sub-Saharan Africa, water availability for irrigation is scarcely an issue.
The current land area equipped for irrigation in sub-Saharan Africa is about six million hectares, out of a total arable land area of around 240 million hectares. To double irrigation capacity in Africa – that is, bring an additional six million hectares under irrigation, a modest goal – would require US$60 billion (R867 billion) in investment. – Gerhard Uys
This is an excerpt from the Food Security in Africa report published by PwC in December 2015. For a copy of the full report, contact Frans Weilbach: PwC Agribusiness Industry leader for Africa on 021 815 3204 or [email protected].