Africa urgently needs to bolster investment in its agriculture sector as a strategic move to enhance its Gross Domestic Product (GDP), according to Deina Mayaki, co-founder of Agriarche and social entrepreneur. Mayaki recently emphasized the critical underfunding of the agriculture sector despite its pivotal role in employing over 60 percent of the continent’s population.
In the first quarter of 2024, the agriculture sector attracted a mere $50 million, which represents only 11% of total investments, starkly contrasted with the $151 million (32%) directed towards Transport/Logistics and $105 million (23%) towards FinTech. Mayaki highlighted this discrepancy, citing a PWC report that showed less than 3.8% of commercial bank funding went into agriculture. She stressed that access to finance remains a significant barrier, particularly for smallholder farmers.
“Agriculture claims to have about 60 to 70% of the African population employed by it. If we’re serious about feeding the nation and being self-sufficient in food, then we should invest in agriculture,” said Mayaki.
Mayaki underscored the importance of prioritizing funding for agriculture, arguing that the issue lies not in the availability of capital but in the structural and delivery mechanisms. She referenced past government initiatives, such as the 2015 subsidy programme and the 2020-2023 Anchor Borrow Programme, noting that while these programs were steps in the right direction, the effectiveness of capital delivery remains problematic.
“The agriculture sector in Africa is very informal, very vague, highly fragmented. This promotes a lack of feasibility across the ecosystem. Agriculture is beyond farming; it entails production, distribution, logistics, and last-mile delivery. Technology can play a pivotal role in enhancing visibility and addressing these challenges,” she added.
Mayaki pointed to the sector’s informality and fragmentation as major obstacles, which contribute to a lack of feasibility and confidence among potential financiers. She advocated for the integration of technology to improve the transparency and efficiency of the agriculture ecosystem.
Among the challenges hindering funding access, Mayaki cited insecurity in rural areas, the fragmented structure of agriculture in Africa, and the absence of a comprehensive credit system for farmers. She emphasized the importance of financial inclusion, which extends beyond mere access to credit to include digital and financial connectivity to global opportunities. The lack of financial inclusion, she argued, perpetuates a cycle that stifles financial inflow into the sector, impacting millions of farmers.
“Lack of access to finance, inadequate technology-know-how, and concerns around insecurity in major rural areas where agricultural activities take place are some of the factors affecting funding to the sector. Farmers are the major actors, but they are financially excluded. Financial exclusion means that they are digitally and financially excluded, so they have no way to connect to global opportunities,” Mayaki explained.
Mayaki also highlighted the decline in startup funding, attributing it to macroeconomic challenges such as currency devaluation and higher interest rates. She called for structured frameworks and the development of talent to attract more venture capital to the continent.
To address these issues, Mayaki urged a reevaluation of funding priorities and the implementation of more effective structural and delivery mechanisms to ensure that the agricultural sector receives the necessary support to thrive and contribute significantly to Africa’s GDP.