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Agribusiness in Africa: Investor reveals which areas hold the most potential

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Chris Isaac, chief investment officer of AgDevCo

by Betsy Henderson

Agribusiness in Africa: Investor reveals which areas hold the most potential
AgDevCo is an impact investment firm specialising in agribusiness in sub-Saharan Africa. It has a portfolio consisting of over 40 active investments throughout the continent. How we made it in Africa speaks to Chris Isaac, chief investment officer at AgDevCo, about the continent’s agribusiness opportunities and the investment lessons he has learnt.
Which agribusiness sub-sectors in Africa are you most enthusiastic about from an investment perspective?
We’ve been involved in many ventures over the past decade. We’ve learnt a lot of lessons from our investment mistakes and successes, which has led us to focus on a few areas where we see the greatest potential.
The first is tree crops, particularly avocados and macadamia. There is significant – and still growing – global demand for these crops, and if you can provide the right quality into the international supply chains, then it’s a good business. There are some risks, as there are major new plantings happening in Africa and around the world because prices are good at the moment. However, there are advantages to having export crops that bring in dollar revenue. Southern and East African countries have the possibility of being globally competitive because they can hit particular seasonal windows, they’ve got the right agro-ecological conditions, and you can build profitable new industries, as we’re seeing developing in Mozambique and Malawi.
Another area is livestock for supply to domestic markets, which plays into Africa’s demographics with an emerging middle class, increasing affluence, and a switch towards more protein-based diets. We’re doing quite a lot in poultry, including some innovative work that provides improved breeds to small-scale farmers. We also have investments in pig breeding.
The third sub-sector would be high-quality, competitively-priced basic foodstuffs. African consumers will buy good quality, locally-produced products if you can come in at the right price point. We’re currently involved in maize meal processing and groundnuts. You can find success in this area if you can assure the consumer the food is safe and if it’s well-packaged and well-branded.
Are there any areas you would be hesitant to invest in?
We’ve found you really need to know what you’re doing if you are going into large-scale production of commodity crops – like maize, soya or rice. These are relatively low-margin commodities where there is global competition and significant economies of scale (especially if you look to South America or Asia), so you really need to be sure that you can be an efficient producer and you’ve got the necessary scale. You are also sometimes dealing with unpredictable policy environments, where there may be intermittent export bans or changing tariff regimes, so primary production of low-value commodity crops is really difficult. It can make sense as part of a strategy where you’re vertically integrated and you’re also involved in the processing, but we’ve found it very challenging to make a success of doing straight primary production of those crops.
A similar challenge is if you move into, say, tomato processing or cassava starch – again, you’re taking on global suppliers who often benefit from subsidies, which makes it very difficult to get the cost of production below that of imports. It can be very tough to make those models work.
Explain the long-term impact of Covid-19 on Africa’s agribusiness industry.
We don’t know, is the honest answer. So far, the agriculture sector in Africa seems to have weathered the storm reasonably well. As one of our non-executive directors, Sir Paul Collier, has said, we are operating in a situation of “radical uncertainty”, and so all you can do is try and design strategies that will be more or less robust regardless of the pandemic’s outcome.
Initially, there was quite a lot of obstruction to logistics – borders closing, congestion at ports, supplies not going in or out – which seems to have eased. I would be surprised if we were to see further lockdowns. We were concerned earlier in the year that this was really going to hit our portfolio quite hard; we haven’t seen that yet, but I don’t think anyone knows what is going to happen over the next year or so. Hopefully, growth in the agriculture sector will be able to continue, as it has done remarkably well relative to other parts of the economy thus far.
In a sense, we are dealing with this type of uncertainty in agriculture all the time. You never know if a harvest is going to fail or if prices are going to collapse, so it’s one reason why you need an investment approach that is long-term, flexible, and that allows you to ride out the bumps that will inevitably come.
Covid-19 has focused attention on the fact that the continent is a net importer of food products, which needs to be reversed. It accelerates the trend toward orientating businesses to cater for growing demand in local and regional markets. That said, I don’t think it completely changes the game, and we’re not expecting a complete breakdown in international supply chains. You still have to focus on being internationally competitive and be able to deal with the fact that chicken can be imported from Brazil to southern Africa at very low cost and rice processing costs in Asia are a fraction of what they are in Africa.
Various stakeholders have highlighted the potential for African agribusinesses to tap into the global health and wellness trend by exporting organic products from Africa to Western markets. Do you agree that this is a good opportunity?
At one level, yes. There is value if you have full traceability back to the farmer who supplied the product, and can be sure that banned chemicals haven’t been used, coupled with sustainable and equitable trade relationships with farmers.
For example, we’re involved in sourcing organic cocoa from farmers in Sierra Leone. This achieves a premium in the market, allows us to share more value with the farmers, and it’s a good business. You could see this happening in coffee, tea, and some of the other traditional export crops, which are otherwise very low margin. If you can show consumers they’re getting a quality product and they know the farmers are getting a fair deal, I think there is a willingness to pay for that.
However, if you shift focus to niche crops – such as superfoods and that sort of thing – the challenge that you face is how big the market demand really is and to what extent you can supply that market and earn a reasonable margin without having to invest in a sophisticated marketing operation. Some people do this brilliantly, but they are really marketing businesses rather than farming businesses.
We’ve found that in order to be successful in these markets, you need a certain scale to be able to build a network of farmers and suppliers, and ensure that the company is going to be sustainable, profitable, and therefore able to maintain those relationships with farmers over time. There is a risk with new crops where the level of demand is not proven yet, and we’ve seen too many businesses spring up for a few years, but then don’t manage to achieve long-term sustainability, which risks farmers being left without a market.
What other agribusiness trends are you seeing in Africa?
Besides increasing domestic demand for better quality food and more protein-based diets, we’re seeing companies realising they need to think about vertical integration. The more successful players are becoming involved all along the supply chain in order to ensure end-to-end quality and consistency of supply. Currently, you can’t always rely on there being a steady supply of raw materials – for example, quality feed, if you are involved in the livestock sector. As markets mature, I think you’d see more specialisation again, but right now vertical integration – either through companies building it themselves or acquiring complementary firms – is a sensible strategy.
Which African country are you most optimistic about?
One country that is perhaps under the radar but where we’ve had great success is Malawi. It has a relatively small economy, but a history of commercial agriculture in tobacco, sugar, and to some extent tea, and an investment climate that is very good for agriculture. There’s also a strong overall supportive environment; Malawi has a solid legal system, it’s relatively painless dealing with the authorities, and you can get things done. We started investing there about eight years ago and have businesses in poultry, macadamia, sugar and peanuts that are all doing well.
Describe one of the investment lessons you have learnt over the years.
Perhaps the key lesson as an investor is getting the balance right between sensible caution and being decisive. In the early days of my career, there was perhaps a tendency to see every opportunity as exciting and I might have been tempted to give benefit of the doubt to a business plan. But then as you get more experience, you see more, and you become a little more sceptical. The thing is to not go too far in that direction – it’s too easy to start saying “no” to every opportunity. There are always risks and at some point you have to take the plunge and say “yes”.
One thing that is challenging in the African agriculture sector is that you have to make decisions without perfect information. We are often backing companies that are doing pioneering things and who are the first movers. So, you’ve got to do your due diligence and you can try to look at things from every angle, but at the end of the day, you do have to be decisive and trust your judgement. You won’t get it right all of the time. You are most likely to succeed if you build a team with experienced people who have seen what works and what doesn’t on the ground. We’ve also found that, as an entrepreneur, it’s important you have a business model that incorporates flexibility and allows you to course correct as you go along in order to manage uncertainty.
Original source: How we made it in Africa

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FARM NEWS

Agro-chemicals killing Ugandans

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A smallholder tomato farmer in the northwestern Uganda region of West Nile sprays his half-acre tomato garden without adequate protection. Many farmers around the country interact with hazardous agro-chemicals without using adequate PPEs. COURTESY PHOTO/SASAKAWA AFRICA ASSOCIATION.

 A consortium of civil society organisations (CSOs) has in a Jan.05 statement shown concern about the continued wrong use of dangerous pesticides in the country.

Members of the concerned CSOs mainly work to promote sustainable agricultural trade, food safety and sovereignty, climate justice, biodiversity restoration, and human and environmental rights.

The activists say there are growing concerns about pesticide misuse, including improper application and storage, counterfeit products, insufficient training in use, and use of poorly maintained or totally inadequate spraying equipment.

The activists insist the agriculture ministry should deregister at least 55 agro-chemicals that it registered in 2023 well-knowing that the same pesticides, herbicides and insecticides are banned by the European Union, a major market of Uganda’s agricultural produce.

Glyphosate-based herbicides, in particular, have raised significant alarm due to their potential environmental and health risks. Globally, they have been linked to contamination of water sources, soil degradation, and potential carcinogenic effects on humans.

In Uganda, glyphosate which appears in brands such as Rounduo and Weed Master, is widely used, especially among large-scale commercial farms and in weed control.

Betty Rose Aguti, the Policy and Advocacy Specialist at Caritas-Uganda who also doubles as the National Coordinator of Uganda Farmers Common Voice Platform says Uganda’s smallholder farmers need to be guided on the danger posed by some agro-chemicals.

“No one is guiding them on what to do with the agro-chemicals. Nobody is telling the farmers which agro-chemicals to use in what type of soils or on which type of crops and thereafter, what period of time they should take before they harvest.

“We have scenarios where some of these farmers apply these agro-chemicals bare-chested with no face masks and other protective gear; these farmers are using agro-chemicals as though they are using ordinary water.”

“They spray their gardens as they converse with their children and wives. In the course of doing this, they are inhaling the chemicals and after some time, they fall victim to the toxicity of these agro-chemicals and end up flooding the Uganda Cancer Institute,” she says.

What are pesticides?

Pesticides are defined by UN agencies; the Food and Agriculture Organization (FAO) and the World Health Organization (WHO), as substances or mixture of substances of chemicals or biological ingredients intended for repelling, destroying or controlling any pest, or regulating plant growth.

These often include ingredients that modify pest behaviour or their physiology (insect repellents) or affect crops during production or storage (herbicide safeners and synergists, germination inhibitors), as well as insecticides, fungicides and herbicides.

However, according to the activists, most of the chemicals on the Ugandan market are quite hazardous to both human health and the environment and yet they continue being used inappropriately by Ugandan smallholder farmers.

An agro-chemicals dealer displays a wide array of brands of pesticides, herbicides and insecticides that are available in his shop in Kampala. INDEPENDENT/ALFRED OCHWO.

“We call upon the government of Uganda to regulate and ban all hazardous pesticides especially glyphosate and chlorpyriphos on the market in Uganda,” said Jane Nalunga, the Executive Director of the Uganda chapter of the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI), a regional NGO that promotes pro-development trade, fiscal and investment-related poicies and processes.

Backbone of Uganda’s economy

The activists say Uganda’s agriculture sector is the mainstay of Uganda’s economy as it remains the main source of food, raw materials for industries, and employment of about 70% of Ugandans. The sector contributes about 24% to the country’s GDP.

“We cannot allow people with intellectual dishonesty to continue playing with the sector,” one of the activists said on Jan.5 during a press conference at the SEATINI-Uganda headquarters in Kampala. “We are aware that pesticides are significantly impacting health, biodiversity, socio-economic well-being, trade, and food security,” added Nalunga.

According to a 2020 World Health Organisation report, about 385 million cases of unintentional pesticide poisoning, including 11,000 deaths, mostly in low- and middle-income countries such as Uganda, are registered annually worldwide. According to UNICEF, pregnant and breastfeeding mothers, children under the age of five and the elderly are the most vulnerable to the effects of pesticides.

The activists say increased use of highly hazardous pesticides in Uganda is a threat to the right to adequate food, people’s livelihoods and farmers’ rights. They say pesticide runoff is reducing aquatic species diversity by 42% and threatening pollinators like bees. These insects are particularly critical for 75% of global crop production.

According to the European Environmental Agency, pesticides are intrinsically harmful to living organisms. When used outdoors, they can impact ecosystems even when they are intended to exclusively target a specific pest.

Herbert Kafeero, the Programme Manager at SEATINI-Uganda says the use of hazardous pesticides also has implications for trade. He says, in 2015, the government of Uganda imposed a self-ban on the export of agricultural produce to the EU because agro-chemical residues had been found in Uganda’s agricultural produce. “The self-ban was meant to address the challenges that were cited by the EU,” he says, “So we cannot ignore the fact that hazardous pesticides negatively impact the country’s trade and food security.”

He says, at the time, the government committed to retrain farmers and exporters to the EU regarding the EU’s sanitary and phytosanitary standards. Kafeero says the government must find solutions to the mushrooming agro-chemical dealers on the market.

“In every trading centre, you will not miss finding an agro-chemical shop and the person operating that agro-chemical shop presents himself as an expert when they actually are not.”

The activists want the Agricultural Chemicals Control Board under the Ministry of Agriculture, Animal Industry and Fisheries to quickly profile the various agrochemicals, acaricides and inputs and their various sources that are available on the market in Uganda and ban the highly hazardous ones.

They also want the Department of Crop Inspection and Certification at the agriculture ministry to strengthen the regulation, management, use, handling, storage and trade of agrochemicals in the country.

They also want the government and other stakeholders to purposively plan and budget for education and awareness on the management, use, handling, storage and trade of agrochemicals in Uganda.

Prof. Ogenga Latigo disagrees

The activists were infact responding to Morris Ogenga Latigo, a Ugandan professor of entomology (study of insects) who had written an opinion on December 31, 2024, downplaying civil society’s concerns about hazardous pesticide and insecticide use in Uganda.

Prof. Ogenga Latigo in his article said the issue of agro-chemical use on farm pests and weeds and households was being exaggerated by civil society. He said the targeted agro-chemical inputs (pesticides, insecticides and herbicides) were being used in other countries.

The acrimonious debate has since sucked in the agricuture ministry. Stephen Byantware, the Director in charge of Crop Protection at the agriculture ministry told the media in Kampala recently that Uganda has an Agriculture Police Force and a Department of Inspection and Certification of agriculture inputs that “ensure that only nationally and globally approved agro-chemicals enter the Ugandan market.”

“The chemicals allowed into the country are those that have been approved,” he said, “There are no banned products on sale in Uganda. You cannot find DDT or Endosulfan in Uganda.”

Agrochemicals spraying equipment on display at a dealership in Kampala. INDEPENDENT/ALFRED OCHWO.

But David Kabanda, the Executive Director of the Centre for Food and Adequate Living Rights, a Kampala-based non-profit, says Ugandans should know that hazardous pesticides have become one of the “loudest killers” and yet Ugandan smallholder farmers continue to associate with these chemicals on the farms, in the food stores, and in the homes.

“It’s only in Uganda where we don’t have a farmgate policy and yet we have scientific reports that have pointed out that the food we buy in markets in Kampala is contaminated.” “Don’t we see tomatoes and broccoli full of Mancozeb fungicide yet this chemical has been banned everywhere including the EU?”

“Pesticides are silent killers of humans, of nature, of our soils that are getting barren, of our water, of our agri-food system. I don’t imagine an agri-food system in Uganda without bees, without butterflies, and above all, without grasshoppers,” said Agnes Kirabo, the Executive Director of Food Rights Alliance (FRA).

Desperate smallholder farmers

According to the activists, Uganda’s agriculture system is by default largely organic but in recent years, pest and disease management has become one of the major production constraints for the country’s millions of subsistence farmers. And in recent years, farmers have turned to pesticides to control the pests.

According to the Food and Agricultural Organisation (FAO) of the United Nations, the number of agricultural pesticides used in Uganda doubled in 12 years (2010 – 2022) from 2,990.23 tonnes to 6,009.78 tonnes.

PESTICIDE TABLE 1 (CLICK TO READ FULL LIST)

Pesticide Table 1 

Similarly, the monetary value of pesticides imported to Uganda more than doubled from US$ 32.57 million to US$75.87 million in 2022 with a peak import value of US$108.57 million reported in 2020. The lucrative agro-chemical business has attracted more than 40 registered pesticide importing companies in the country.

The activists say the increased use of pesticides is attributed to their use for weeding and the increased use of hybrid seeds and livestock. According to the CSOs, equally alarming is that many of these pesticides are “synthetic pesticides” which are persistent organic chemicals.

A study published last year by the Food Safety Coalition Uganda (FoSCU) titled: ‘‘Food Safety-Crop Protection Nexus: Insights from the Uganda’s agriculture sector,’’ noted that of the legally registered active ingredients, 47.8% (of the active ingredients) and 68.6% of the brands in Uganda qualified as “Highly Hazardous Pesticides.”

Highly Hazardous Pesticides (HHPs) are classified as “reproductive toxicants” meaning they potentially can negatively affect the human reproductive system and have adverse effects on pregnancy outcomes and reduced fertility.

The same study noted that 15.6% of the registered active ingredients and 19.2% of the registered brands in Uganda qualified as highly hazardous pesticides in accordance with the FAO/WHO-Joint Meeting on Pesticide Management (JMPM) criteria.

According to the activists, by July 2023, over 65% of the 55 flagged active ingredients registered for use in Uganda and yet considered as highly hazardous pesticides according to the Pesticide Action Network (PAN) criteria, were not approved for use in the European Union economic bloc.

The majority (49%) of these pesticides are highly toxic to bees, 20% are carcinogenic and reproductive toxicants while 18% are probable carcinogens, and 9% are highly persistent in water and soil and are highly toxic to aquatic organisms.

They say that, based on the Uganda agrochemical register at the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) and the National Drug Authority (NDA), the country had at least 115 active ingredients and 669 brands of synthetic pesticides legally registered for use in Uganda by the end of 2023.

“These are presenting in 459 brands, but all these active ingredients in the 459 brands, according to the PAN, are classified as highly hazardous,” said Bernard Bwambale, the head of programmes at the Global Consumer Centre, or CONSENT, who also coordinates the activities on food safety at the Food Safety Coalition of Uganda.

Agrochemicals status ( CLICK TO READ FULL LIST)

Pesticide Table 2

If it is hazardous in EU, it is hazardous in Uganda

Bwambale says his organisation has found that of the 55 active ingredients registered in Uganda, 65.5% of them cannot be used in their countries of origin. “Now, if a chemical, a highly hazardous chemical, is produced in a particular country and that country cannot use it, who are we to start thinking that we can use it? This is where our concern is.”

“So, whatever is not used in the EU, it means it’s not fit for use for human beings. The human beings in Uganda and the human beings in Europe are all human beings. And we are all sharing the same human rights.” He says some of the highly hazardous pesticides are mutagenic, meaning they can alter one’s DNA or genetic make-up.

“Literally, it would mean that when you consume food consisting of this kind of product, you stand a risk of your DNA or your genetic makeup being altered. And that is why some research is pointing to some of these chemicals being responsible for birth defects.” He says other chemicals are carcinogenic, meaning the chemical has the potential to cause cancer.

But Prof. Ogenga Latigo says some chemicals like Mancozeb the civil society claim are carcinogenic are not. He describes others as ‘probable carcinogens.’ A probable carcinogen is a substance that has a strong but not conclusive amount of evidence that it can cause cancer in humans.

But Bwambale says, “They don’t want people to keep confusing us with science.” He says other chemicals have been considered fatal when inhaled. “Imagine a farmer who doesn’t know these things and is spraying but is carrying a baby. So both the mother and the baby are inhaling this chemical,” he says, “We need to regulate these chemicals as much as we can.”

He says recent studies have indicated that some of these chemicals were found in human bodies –in sweat, urine and blood, in food and in water. “When the Europeans send us, for instance, these chemicals and we buy them, they also have regulations on which kind of food we can sell to them. We all know that.”

He says when farmers use these chemicals in the name of commercialising agriculture, they may produce very big tomatoes that do not rot, for example, but they cannot sell them beyond Uganda.

“You cannot put them on the EU market because they don’t meet the standard of the EU market. So they (agriculture products still remain with us,” he says.

Source: The independent

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FARM NEWS

Coffee Leaf Rust disease hits Mbale region farmers

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Mbale, Uganda | Coffee farmers from Bulambuli and Sironko districts are counting their losses after being attacked by coffee leaf rust disease. The disease, caused by the rust fungus Hemileia vastatrix, can reduce coffee production by between 30% to 50%.

The most affected sub-counties in Sironko include Buhugu, Masaba, Busulani, Bumasifwa, Bumalimba, and others. In Bulambuli, the hardest-hit areas are Lusha, Bulugeni Town Council, Buginyanya, and Kamu, among others.

In an exclusive interview with our reporter, Francis Nabugodi, the Sironko District Agricultural Officer, spoke about the devastating effects on farmers. “This disease has negatively impacted farmers in terms of production, and since it’s coffee season, they are going to make losses,” Nabugodi said.

He added that he had instructed extension workers to start massive sensitization campaigns in the six affected sub-counties about preventive measures, such as spraying, to curb the spread of the disease.

Nabugodi also urged the Ministry of Agriculture, Fisheries, and Animal Husbandry to supply the district with chemicals so they can distribute them to farmers, as many cannot afford to buy them.

Julius Sagaiti, the LCIII Chairperson of Lusha Sub-County in Bulambuli District, stated that his sub-county is the worst affected, with over 100 farmers having all their gardens hit by the disease. He called for urgent action from Bulambuli district leaders, warning that the situation would have severe consequences for farmers.

Timothy Wegoye and Suzan Nanduga, both affected coffee farmers from Bukisa, the worst-affected sub-county, shared their concerns. “The majority of farmers are ignorant about preventive measures and do not know the chemicals for spraying,” they said, urging extension workers to use the media to sensitize them.

Original Source: URN Via The Independent

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FARM NEWS

Drought ruining Kasese farmers’ livelihoods

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Along Bwera-Mpondwe road, in Kasese district, farmers till the land, with every hoe raising more dust than dirt, a testament of how hard the sun has scorched the ground. Located at the slopes of the Rwenzori Mountains, the low altitude leads to high temperatures as the district also sits on the Equator. In January this year, the average temperatures were 25.1 °C

Gideon Bwambale walks through drying maize garden.

Today, the temperature is 28.6 °C. The most affected areas are low-lying sub-counties like Kahokya, Nyakatonzi and Muhokya.

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