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You Want to Set Up a Farm in Africa?

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Before I start, what do I know about farming, and why should you listen to me? Firstly, my grandparents were farmers, where I spend a lot of time as a child. I have, however brief, worked for the largest Danish agricultural lobby organisation, the Danish Agriculture and Food Council as a culture, market and security analyst on African countries, I have visited local farmers in Ghana, and I have read on the issue of agriculture in Africa among other issues at the University of Copenhagen in relation to my Master’s in African Studies and Human Rights.

That were the formalities, let’s get down to the hard facts; the population of Africa is on the rise, and so is the urbanisation. Currently, the population of Africa is estimated 1.2 billion people. By 2040, the African population is said to have doubled to two billion people.

On urbanisation, in 2030, it is expected that half of all Africans live in the cities. That leaves nearly 1 billion people completely reliant on buying foodstuff for personal consumption since few would be able to grow the food they need themselves. Meaning a huge and expanding market larger than that of the EU and the USA combined.

But, there is always a but, not everything is rainbows and unicorns. This piece will cover the cons and pros about farming in Africa, and end with some few piece of advice in how to prosper as a farmer in Africa. This piece predominantly targets foreigners contemplating trying to start an agricultural business in Africa. Though, I hope there might be some useful material for local farmers. It is a rather long piece so you might want to skip the parts that do not relate to your needs.

1) Cons

  • Poor Soil Quality
  • The Purchasing Power is Limited
  • An Expensive Investment
  • Corruption and Ports
  • Climate Change
  • Flawed Infrastructure
  • You Are at the Bottom of the Value Chain

2) Pros

  • Growing Population and Expanding Market Possibilities
  • Possibility to Harvest Twice a Year
  • Access to Educated Labour
  • Add Value to Your Products Domestically and Internationally
  • Tax Exceptions

3) General Knowledge in How to Succeed and CSR

4) The End

1) Let’s Talk about the Cons 

Poor Soil Quality
Africa is the second largest continent in the world. It covers 30,370,000 km2 (11,730,000 sq. mi), and as previously mentioned, consists of just above 1 billion people. Hence Africa is smaller than Asia, and having a population smaller than that of China or India. But Africa is so big, that you can fit China, India, the US, and the Western and Eastern Europe inside Africa, and still have room left. Meaning, on paper, there is a lot of land available for agriculture. The problem is the soil quality is poor in large parts of Africa. Not only places like the Sahara or the Kalahari Desert, but huge chunks of Africa are unsuitable for farming.

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Despite the fact, that the continent of Africa is huge, and the continent, compared to Asia or Europe, is extremely under-populated, it is very important to do extensive research on the soil quality at the location, you want to set up a farm. Also to add cost and what kind of fertiliser, you would need in order for you to produce enough to earn a surplus. You should also investigate how huge fields might create soil erosions, that forces you to have smaller plots and to grow more than one food crop.

In parts of Africa, the soil is fragile, and the nutrients are located in the top layer, making it impossible to apply the plough. If you plough too deep, the nutrients are gone, and the soil becomes barren. In several places, like Senegal and the Gambia, the extreme focus on just one crop, groundnuts, have degraded the soil removed most of the nutrients there once were.

So you would have to check the soil quality, and you would also not be able to apply the same means of farming in Africa as in Europe or America.

The Purchasing Power is Limited
Even the population of Africa is big and growing, the people are generally poor. In 2011, a report from the African Development Bank (AfDB) argued, that 34% of the African population or 326,664,000 people belonged to the African middle class. However, to reach this number, they included everyone having an income between $2 – $20 a day. Earning $2 a day does not make you a member of the middle class, which the AfDB acknowledges themselves in the report by referring to this group as the “floating class” and not the middle class. But they still included the floating class as part of the middle class, making the middle class significantly larger than it is.

In 2015, Credit Suisse released a report saying, that just below 19 million Africans were part of the middle class or 3.3% of the African population. The majority of the middle class live in South Africa, Nigeria, and Egypt. 0.2% of the African population belongs to the upper class, again according to Credit Suisse.

More significantly, the middle class of Africa was not growing. The double-digit economic growth benefitted a small group of people, but it did not benefit the vast majority of the African people, the main conclusion was.

But you have to bear in mind, that the data from several African countries are poor. And how does one measure the value of housework, landownership, and cattle? Often an African country does not even know how much food is produced by local farmers. That makes it hard to calculate how large or small a middle class really is. Several people are also floating middle class depending on harvest and the definition of what a middle class is.

My point is, that whatever size the middle class, your potential buyers, is said to be, it will always be an estimate based on real numbers, educated guesses, and at times just guesses. That regardless if the numbers come from Credit Suisse, AfDB, or the World Bank. Use the numbers, but also do not take these numbers at face value.

An Expensive Investment
You will likely need to import everything you need in order to run an effective and efficient farm. That being tractors, machines, the spare parts to each tractor and each machine, but also fertiliser and generators, because of frequent power outages. An option could be to invest in solar cells.

Furthermore, you would need to train your local staff to be able to operate this new equipment and to teach how to fix common problems that do occur handling the tractors and machines. That is why this shall be seen as an investment. It is like buying a stock. You need to spend money to make money. In this case, you would need to invest a lot of money.

Corruption and Ports
Another problem is to get your goods through the ports. Farmers report about months of waiting to get access to their imported equipment.

Even when farmers are invited to settle, it can take a long time to get even simple things through the various ports. In 2011, the government of the Republic of the Congo (not to be confused with the country the Democratic Republic of the Congo) invited farmers from South Africa to settle in order to revitalise the Congolese agricultural sector, where they were giving land in the fertile Niari valley. Not only did the farmers have to clear the land first, they also reported that it took months to get their equipment through the ports. In 2014, only 9 out of the 28 South African farmers were still trying, the rest were forced to give up due to debt and other difficulties.

The situation is much better in several other African countries, but it is a general problem.

Then we have not even dealt with everyday corruption, that varies a lot. But it can prolong the process when trying to get documents accepted for instance.

Climate Change
Climate change is real, and it is already affecting several areas in Africa. Once you could be sure when the rainy seasons and dry seasons began or ended. Today, these seasons are becoming increasingly unreliable. The dry seasons are longer, and the showers tend to be fewer but more intense. When we talk about this huge continent, sure the effects of climate change varies, but it is a fact, that Africa is the continent most vulnerable to climate change. That means the crops you were able to grow some few years ago, those same crops might no longer be suitable. The heavy rainfalls further risk to literally wash the crops of your field away, forcing you to replant. That is costly.

Also due to the prolonged dry seasons, we begin to experience, locating your farm near a major lake could be an option to have access to water during the dry seasons. Another risk is desertification due to soil degradation, deforestation, and dry weather.

Flawed Infrastructure
It is no secret, that the roads in most parts of Africa are in a detestable state. Even several African countries have begun to do some serious upgrading of their roads and railways,

Circle_night.jpgKwame Nkrumah Circle, Accra, Ghana, 2016

these upgrades are mostly occurring in or near the cities, or the new roads are constructed from the mining areas to the nearest port. Meaning not where your farm likely will be located. That also impacts how to get your equipment to the farm, for your workers to get to work, and for you to get your harvest crops from the farm to the destination, whether that been the port for export or to the local market.

These challenges have different solutions depending on the country, the distance to the nearest paved road, among other things.

As formerly mentioned, the water and power supply will as well be unreliable, where you need to take that into account.

You Are at the Bottom of the Value Chain
The more a product is processed, the higher value it gets. You earn more money selling chocolate than cocoa beans. You earn more selling butter than milk. You earn more selling juice than fruits.

As a farmer, you produce the raw, unprocessed material. You are at the bottom of the value chain. Every time someone processes your crop value is added to your product. That means you have to be able to produce larger quantities in order to make a profit due to the limited value your crops represent.

That happens at the same time, that you rely on the weather, and as aforementioned, due to climate change, that has become less and less reliable. That is a constraint since you rely on the ability to produce enough every year while doing so in an effective and efficient manner.

2) Let’s Talk about the Pros

Growing Population and Expanding Market Possibilities
Because of the growing population, there are enough people in the rural areas as well in order to run a successful agriculture business. Previously, the underpopulation meant, that it was economic unsound to start a green revolution. Today, it makes economic sense.

Furthermore, under the cons, I discussed the growing middle class perhaps was a mirage. Both AfDB and Credit Suisse measure poverty in economic terms.

But the African think tank, the Afrobarometer, uses a different method for measuring poverty, the Lived Poverty Index. Instead, to measure the perceived income of a person, they ask if the person has faced a shortage of basic necessities within the previous year.

In 2016, their latest conclusion was that not only is lived poverty declining but also that fewer people go to bed hungry. The divide is stunning, however. In Burundi, 72% of the people have gone to bed hungry at least once in the past year. In Ghana, it is only 28%. But if we only look at the total number of people, who often or alway go to bed hungry, then 86% of the total African population included in the survey go to bed with full stomachs. 54% of the population never go to bed hungry at all. Just 14% of the population are too poor to be able to purchase food. As just mentioned, the numbers vary a lot between countries.

That means, even the level of poverty is striking, the vast majority of the people can afford to buy foodstuff, meaning there are a growing market and local buyers for your products. Since the population is growing, it will double within the few decades, the market is ever expanding.

Possibility to Harvest Twice a Year
Due to the rainy seasons and the warm climate, you can harvest twice a year, which is a major upside compared to the situation in the cold North.

Access to Educated Labour
African countries spend a large sum of money on importing foodstuff, so they have begun to focus on improving their own agricultural sector and to improve the training of young people. This varies a lot from country to country, and several countries find it hard to motivate the young people to work on a farm when they prefer to live in the cities. Anyhow, education is improving, more people can read and write, also more complicated material. Some might as well be skilled in farming. Use the available skilled labour force.

Add Value to Your Products Domestically and Internationally
There are several ways in adding value to your product. One way is to become organic. Because of the soil, you will discover, that to be an organic farmer produces greater yields. If your farm is recognised as an organic farm, not only would you be able to have greater yields, you would also be able to demand a higher price for your crops.

You also have to decide, if you would like to produce for the local or the international market. The different markets have different demands, you have to take into account. Also the cost of exporting the harvest crops to e.g. Europe. It is also often the European markets, where people are willing to pay extra for organic foodstuff. Though, the African middle and upper class are also showing increasing interest in buying organic foodstuff.

You can also begin to process your harvest crops. Begin to produce biscuits, ice cream, soya milk, canned tomatoes, or chocolate. The possibilities are endless. People can buy the same products in stores, but these are often imported, therefore expensive, and only available for the rich elite. You would be able to produce the same products better and cheaper. You can then decide to lower the price notably to reach a greater segment of the population, or to lower the price some, so the people going to the big shopping malls favour your products.

If you choose the first option, your profit margin will be significantly less, but more people will be able to purchase your product. If you choose the second option, your profit margin can be big, but you will compete with other companies trying to reach the same small rich segment of society.

What is the best solution? That depends on the product, the country, and other factors.

Tax Exceptions
To attract farmers from other countries, several African countries offer favourable deals. At times these include you do not have to pay taxes for a certain period of time, you do not have to pay a tariff of imported equipment, and/or you will enjoy other benefits. Each country has different offers, so remember to make inquiries about what benefits you can enjoy.

3) General Knowledge in How to Succeed and CSR
Regardless if you enjoy tax exception or not, it is highly recommendable to support the local community, you will become a part of. It could be to donate money to the local school, the church/mosque, and to support local initiates.

Remember as well to respect the elderly and the chiefs. Become part of the community.

I cannot guarantee, that you will succeed when becoming a respectful member of the local society, but I can almost guarantee, that if you do not, you will fail.

You can also see the local farmers as possible trading partners. You do not use your machines 90% of the time anyway, so a possibility could be to rent some of your machines to the other farmers to earn some extra. When importing fertiliser, import extra and sell it to the other farmers for a reasonable price.

When you do so, it will not only benefit your own business, but it will benefit the entire community.

It is also a good idea to demand stricter rules of yourselves than what the legal requirements demand. The rules are changed constantly. By setting a higher bar for yourselves, not only can you produce a better product, you also become less vulnerable to sudden legislative changes.

Lastly, CSR, Corporate Social Responsibility, is a fancy word, but to make it short, treat your workers and the surrounding society with respect, and be a good employer.

The End
Why Africa? Since the time of Brazza and Stanley, European countries believed Africa was home to an El Dorado. Where a poor man could become rich easily. For most men, life became very different than what they had hoped upon their journey from Europe to Africa. The same is the case today. As every place else, you must work hard to succeed, and you shall think of the long term objective.

It takes a special personality to settle in an African country. You shall be able to think out of the box, learn to haggle, to see opportunities where other people see obstacles.

Despite the problems, unlike Europe, where it is hard to find a farm, to buy land is expensive, and the competition tough, Africa is still underpopulated, and the demand for foodstuff is just on the rise. The potential of Europe and the US for that matter have been exploited to the fullest. Africa is still waiting for the green revolution, and the time is ripe.

You like to set up a farm from scratch and to see it grow and feel the pride in turning a piece of land into a thriving business. You are willing to become part of a new community, and to be able to not only see yourself succeed but to assist in making your new employees and the society you become a part of succeeding as well.

Of course, there are several other things to be aware of, and I have not even touched the issue of aquaculture, or the various political, culture, market and security analyses needed. Why it would be a good idea to team up with a person with an intimate and in-depth knowledge on Africa (like me) before jumping into the farming business in Africa. But when you make the final decision, even it is hard work, with the right preparation and humbleness, you will not regret it!

For more info, back in 2016, I wrote this short piece (Danish): Vi ved for lidt om Afrika

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