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Africa’s agribusinesses need innovative financing to sustain operations

Africa’s agribusinesses need innovative financing to sustain operations
Africa’s agribusinesses need innovative financing to sustain operations

The latest outlook for Africa’s agribusiness sector shows that access to finance is the greatest priority for businesses to sustain and grow their operations in the midst of the Covid-19 pandemic.

Conducted by KPMG East Africa on behalf of AGRA, the survey sought to gain insights into top priorities of agribusiness chief executives understand how they are addressing challenges and what they see as opportunities in these Covid-19 times.

The report surveyed 182 executives in the agribusiness ecosystem in early to mid-2020 across 16 African countries in Africa, with Cote d’Ivoire, Ghana, Kenya, Nigeria, Mozambique, Rwanda, Tanzania and Zambia being its primary focus countries.

It pointed out that the funding need expressed by agribusiness CEOs is not just about access to finance, but also about the cost of finance and availability of financial instruments that are adapted for the agricultural sector.

Though the Covid-19 pandemic has led to the collapse of global markets for some sectors and disrupted agricultural supply chains, agribusiness CEOs in Africa remain determined to steer their organizations forward, according to the report.

About 41 per cent of CEOs interviewed for the survey indicated they would forge ahead with their pre-Covid-19 investment plans.

However, 43 per cent of the companies reviewed, the majority of them small and medium-sized enterprises, would be scaling back their operations due to COVID-19.

For these businesses, revenues fell 50-80 per cent as soon as lockdown procedures were implemented and identified managing cash-flow is critical to surviving COVID-19.

Speaking to The New Times, Laurent Demuynck, the Chief Executive Officer of Kigali Farms Ltd said that the Covid-19 has had an impact on the firm’s operations and revenues, pointing out that financial support is what is needed most to help agribusiness withstand the effects of circumstances such as this pandemic.

“The impact [of the Covid-19 pandemic] was very considerable. We lost our hospitality market in Rwanda – all the hotels and restaurants,” he said adding that the pandemic limited access to the export.

“On average, we will lose about 40 per cent of revenues for the whole year compared to 2019 [last year] due to Covid-19.”

The report noted that the future of African agribusiness must include the smallholder farmer.

The report found that agribusinesses are incorporating more smallholder farmers into their business models, something critical sustainability.

“We believe that there are opportunities for African agribusinesses during this period, which is unprecedented for many businesses. The collapse of global markets has led to the rise of the ‘buy local’ movement. There is a chance to optimise local value chains, thus helping mitigate the devastating effects of the pandemic on the economy,” said Agnes Kalibata, AGRA President, in a press release.

“But for this to happen, we need innovative financing solutions to support the agribusiness sector. Financing, specific to the agricultural sector, will help build resilience and enable them to seize the moment,” she added.

Anis Pringle, Partner at KPMG noted that “it is about making agriculture attractive, viable and profitable rather than being looked at as a risky endeavour.”

The importance of technology

Meanwhile, the report indicated that technology has enabled companies to respond and adapt their operating models after lockdown measures were imposed across the continent. Going forward, it added, technology will be the lever that will help Africa leapfrog into the future

About 52 per cent of the companies surveyed indicated that technology was crucial to achieving their business goals in this period.

Culled from Newtimes

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