Introduction

Africa remains the only region yet to experience a “Green Revolution”, hence creates a big opportunity for Investment

Through the apparently good years of the commodity supercycle, most African economies grew rapidly, providing fuel for the popular “Africa Rising” narrative. However, since the mid-2014 oil price shock, GDP growth for Africa as a whole has dropped dramatically. The slump in oil prices had very negative implications for many African economies, as well as for many companies that had invested in them. But some regions have coped much better than others. The continent’s new normal is now a multi-speed Africa where some regions and economies are thriving while others are struggling.

Thanks to the relative success of some regions in Africa the continent has managed to outperform other commodity-dependent emerging markets recording average real GDP growth of 3.1% per annum. The economies that have actively promoted export diversification are now leading the way, with East Africa projected to continue showing strong growth in coming years.

The growth potential in the continent’s food sector, currently provides a considerable agricultural investment opportunities in some countries. Given the continent’s rising income levels and its large and rapidly growing population, food demand is expected to soar in the medium term, creating new growth opportunities for producers in the sector. By 2030, 20% of the world’s population is expected to be in Africa.

AGRICULTURE AS A GROWTH DRIVER IN AFRICA

Growing Disposable Income

Driven by strong GDP growth over 2000-16 period, Sun Saharan Africa’s (SSA) per capita GDP doubled from US$ 1,900 to US$ 3,800. This increase suggests rising disposable incomes for the continent’s growth population, with positive implications for food consumption.

Rapid Population Growth

Between 2006 and 2015 foreign direct investment inflows surged while agricultural value added doubled from US$135 bn to US$287 bn. FDI inflows were concentrated in primary agricultural activities and the sector has been contributing more strongly to GDP growth in parts of the continent as a result.

Global Food Consumption Growth

China currently feeds a fifth of the world’s population on a tenth of the world’s arable land and given expected rising food consumption levels, is likely soon to rely heavily on agricultural imports to meet its national food security needs. Future agricultural growth in Africa is therefore not only expected to be driven by favourable domestic demographics but also by external factors. African countries with sound agricultural policies and in particular those able to export to Asia, are set to benefit.