Smart regulation is the key to unlocking Africa’s agribusiness potential
Africa has a great potential to become a major source of world food supplies. The lack of suitable regulation however remains one of the main impediments to Africa’s growth. A recent World Bank study sheds light on which areas of regulation might be improved and gives practical examples of how policy can be transformed into effective regulation.
As PwC highlighted in its December publication (Food Security in Africa), the current oil price crisis has put agribusiness at the top of the political agenda across the continent. While Africa’s potential in the world of agriculture is immense – many compare it to that of Brazil - there are many challenges faced by African countries that will need to be overcome.
Aside from macroeconomic issues such as demographic changes, gender inequality and Africa’s own structural food deficit (estimated at US$35 billion), many policy changes are necessary. There is a requirement for strong environmental and social safeguards, well-resourced monitoring, security of tenure and more government and private sector support. In Brazil, the policy and regulatory changes took 40 years to turn the country from an agricultural backwater into the major player it is now. The same could be true for African countries. But what specifically can be done to help this process?
The Enabling the Business of Agriculture 2016 report published by World Bank in January this year provides helpful examples of practical regulation that helps the development of an agricultural sector. It covers 40 countries worldwide and measures the quality of regulation that directly impacts stakeholders in the agribusiness value chain.
The report evaluates regulation in six categories – seeds (variety, certification), fertilisers (affordability and access), machinery (availability, performance and safety standards), access to finance, market regulation (pest lists, efficient export requirements), and access to the transport sector. The indicators used in the report are refreshingly specific and range from issues such as the number and cost of licenses, through requirements for creating cooperative agreements among farmers and certificates necessary to export products, to availability of warehouse receipts as collateral for loans. The report also touches on broader issues, such as environmental protection, security of tenure and gender discrimination.
Perhaps unsurprisingly, Sub-Saharan Africa lags behind in most of the criteria evaluated by the report, perhaps with the exception of Tanzania and, to an extent, Kenya. While not all issues that African countries might face in promoting agribusiness can be addressed by giving examples from other regions, the report could at the very least provide a discussion platform for the policymakers working towards a more efficient and profitable agricultural sector in Africa.