Unleashing African farmers, agro-processors’ economic potential through financial, technical support

By Zablon Oyugi

African farmers and agro-processors can unlock their economic potential through increased yields and value addition despite myriad challenges posed by climate change given financial and technical support.

According to Ayodeji Balogun, Chief Executive Officer at AFEX, a platform business that enables efficient trade for commodities in Africa operating in Nigeria, Kenya, Uganda and Cote d’Ivoire, the biggest challenges with reference to agriculture in the continent has always been how to boost farm production and create added value for a fragmented and largely subsistent sector.

In fact, the fragmentation cuts across multiple stakeholders from smallholder farming communities who form the bulk of food production, but lack access to storage and markets, to processors who face issues across inefficient agricultural practices and post-harvest losses.

“In Nigeria, for example, we face significant losses yearly due to poor storage facilities. At household level alone, post-harvest losses result is about 30-50% on grains, and 50% on fruits and vegetables,” said Balogun.

“Similarly, our exports, which remain largely dependent on raw materials, often do not meet export standards, which results in an overdependence on imports.”

Smallholders support

Balogun says inputs on credit is often the first of AFEX services that is adopted by farmers to help them improve their production.

The company does this by first accessing the growers looking into farm size, type of crops produced, farming history, farming output and connection to a farmer corporative followed by registration. In 2022, 34% of registered AFEX farmers in Nigeria received inputs.

“For our farmers, the assumed baseline yield is 0.6 MT/ha which is below the Food and Agriculture Organization (FAO) reported average yield of 1.5 MT/ha in Nigeria, considering we work with farmers that have less land and less education than average,” said Balogun.

“Through our input programs, which enable inputs to reach producers in a timely manner backed by extension support, yields have increased from 0.6 MT/ha to 2.5 MT/ha.”

As a result, the number of their farmers’ network has tripled from 160,000 in 2020 to over 450,000 currently across Nigeria alone.

According to Balogun, before AFEX came through for the smallholders, the growers struggled with accessing inputs in time to boost production, and in the case that they did receive inputs, they did not have access to the training to maximize these inputs.

Collaboration

Another core part of the firm’s lending program is collaboration with financial institutions and the use of agriculture extension officers who essentially engage farmers in adequate training necessary to maximize output and grow knowledge on best farming practices.

Recently, AFEX signed a memorandum of understanding (MoU) with the Ghana Commodities Exchange, geared at cross information sharing, cross training on best practices as well as cross border listing of commodities.

“We work with a range of retail and institutional investors to unlock capital for farmers. Through our capital raises with financial instruments such as the asset Backed Commercial Paper (ABCP), Capital Market Operators, PFAs, fixed income and FETC products, we have been able to raise upwards of $25 million in capital to create a lifeline for farmers and other parts of the agriculture value chain,” Balogun said.

Agro-processors support

In order to support agro-processors in Africa, AFEX is currently linking the processors  with trade platforms such as FMN, Olam, WACOT, ETG, Starlink, and foreign processors such as Cargill, JB Cocoa, and Valency to enable them trade in export commodities such as Soybean, cocoa, Sesame, Ginger, Cashew.

Warehouse for storing agricultural produce is another area the AFEX provides support for its stakeholders to reduce post-harvest losses.

“Currently, we have grown from 45 warehouses with a volume of 22,000mt in 2018 across 13 states, to over 200 today across Nigeria, Kenya and Uganda, with trading volumes of over 314,000mt,” said Balogun.

The firm’s operations cover the entire value chain end to end from input disbursement, planting and harvesting to processing and production as well as distribution and intra and inter Africa exports.

“Similarly, for the financial market, we also support the agricultural investment value chain through creating alternative investment assets class and providing adequate liquidity to investments.”

Future of agro-processing in Africa

One of the main discussions during the just concluded Africa Food Systems Forum summit in Tanzania was on financing agro processing and agro industrialization and how they pave the way for economic development at the Pan African level.

In this, Balogun says agro processing’s contribution to the agriculture sector lies in its ability to create added value products, reduce post-harvest losses by increasing shelf life of produce, improve quality and boost exports for the continent.

“Currently, Africa’s exports are mainly raw, unprocessed commodities, however, agro processing has the power to increase export quality and capacity, and also meet demands of growing urban population which mostly requires processed goods for consumption.”