Africa feeds itself and, makes money from it – Jean-Louis Ekra, Afrexim Bank
After two days of critical solution-oriented dialogue at the Fin4Ag Conference, a number of African social and demographic trends that call for a revolution have emerged in discussion. These include increasing urbanisation and growth of the African middle-class, and the consequential growth in diet diversification.
Urbanisation has been accelerating across Africa between 2010 and 2015. McKinsey Global Institute statistics assert that Africa’s middle class (US$1,000-5,000 per year) will surge from 39% of the population in 2005 to 55% in 2015. This has resulted in dietary diversification from staples towards meat, dairy, and fruit and vegetables, as well as fast foods and it is estimated that almost 60% of all marketed food in Africa is being consumed by the local urban market. African food producers and traders have significant challenges reaching the export markets, but can easily and rapidly reach local markets, proposed the Manager of Policies, Markets and ICTs Programme at the Technical Centre for Agricultural and Rural Cooperation (CTA), Lamon Rutten.
Making a case for intra-regional food trade
Gold sponsor of the Fin4Ag Conference, Africa Export Import Bank (Afrexim) shared their experience of working with smallholder farmers in high value export value chains such as cocoa in Ivory Coast and Ghana under the Africa People’s Initiative. Mr Jean-Louis Ekra of Afrexim Bank emphasised that it takes relatively more time to fully integrate Africa’s farmers into high value export markets than it would to penetrate the growing and lucrative local urban market for food products. While high value cash crops value chains are important, it is estimated that African urban food markets are set to quadruple as food and beverages may reach US$1trillion by 2030.
Blending innovations: An online corridor intraregional trade
The Fin4Ag Conference has showcased some striking value chain finance innovations, especially in the Plug and Play day. One of the most important lessons for me so far, is that no single innovation or strategy is sufficient in itself to sustainably finance agriculture in the ACP countries.
One of the presentations revealed that warehouse financing (alone) is least available at the beginning of the value chain, that is, primary production, where risk is greatest. Pre-production finance requires good records of production in past years, and these can be tracked through ICT linked innovations.
In between the Fin4Ag sessions, I managed to catch up with Mr George Magai of the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA) and he shared with me why policy makers and business people should embrace Pan African Food Exchange (PAFEXE) as a tool for financing intra-regional food trade while simultaneously growing subsistence agriculture to commercial.
PAFEXE is a intra-regional commercial commodities exchange with an online platform. It functions as a “business,” which distinguishes it from some donor or government reliant commodity exchanges that are.
How different is PAFEXE from other commodity exchange platforms?
The key features of PAFEXE that contribute to increased financing for intraregional trade include:
- Leveraging ICTs to attract more investment
The use of mobile money in PAFEXE reduces theft, embezzlement and transaction costs. Due to the huge potential of intra African food markets, as well as the innovative services offered by PAFEXE, the platform has attracted finance from a variety of market lenders. Each member has an online profile, featuring information such as name and contact details, business information, the list of products (buying and/or selling), applications, trading certifications and a supporting multimedia content (images or videos). Trade can be online or through smart or feature phones and farmers or farmer groups can buy and sell virtually a wide range of products.
- Guaranteed quality guarantees investment
PAFEXE is a product of the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA) of the Common Market for Eastern and Southern Africa (COMESA). This gives clients a sense of security because trading, quality and standards is guided by international regulations to COMESA is signatory.
- Inclusiveness and sustainability attracts investment
PAFEXE has attracted private sector investment because of the rich information and wide network that the platform offers for producers, processors and traders. PAFEXE also has a directory allowing users to connect with farmers, processors, manufacturers, traders, distributors, service providers and the public sector worldwide.
PAFEXE combines inclusive growth and financial sustainability. Each PAFEXE member pays for the services they get. Payment is also relative to value of trade, for instance, a 2.5% of commission. PAFEXE depends largely on market finance and less on social lenders such as donors.
This aims to grow smallholder farmers from subsistence to semi-commercial and eventually fully commercial at a gradual pace.
Share your perspective on PAFEXE by commenting on this blog!
Blogpost by Harrison Manyumwa, Social Reporter for the Fin4Ag Conference.