OPINION: Covid-19 has Exposed Private Sector Investment Opportunities in Agribusiness
By Nathan Were
The Covid-19 pandemic has destroyed livelihoods and scattered millions of jobs around the world. The International Labor Organization estimates that nearly 1.6 billion people’s livelihoods are now threatened with the greatest impact being felt by those in the informal sector.
However, the pandemic has also brought to the fore numerous opportunities in agribusiness that the private sector – which has long argued that they’re no profitable opportunities in agriculture – can now harness.
Investment in cold chain solutions
The United Nations’ Food and Agriculture Organisation estimates that about 40pc of the food in the sub-Saharan Africa perishes before it reaches the consumer.
In Uganda, there’s a growing production of fruits and vegetables but most of it is going to waste due to the absence of storage facilities. Due to a lack of cold chain solutions in Uganda, most crops are only seasonally available with price variations between peak harvest and low season reaching up to 400pc.
Investment in cold storage will require temperature-controlled cold storage warehouses and transportation services for which affordable long-term debt financing and private equity will be critical for those without ready capital.
Investment in marketplace applications
The pandemic has eroded the traditional marketing systems and it may take years before we return to the practices, we have all been accustomed to.
However, farmers and buyers need to quickly connect for trading to happen. This is what is going to drive the popularity of marketplace applications. Market place platforms are going to slowly replace the traditional market systems and we could see many digitally literate young farmers adopting and using them.
A Consultative Group to Assist the Poor Survey in 2016, indicated that about 5pc of smallholder farmers in Uganda have a smart-phone and this number has been growing with young farmers that are tech-savvy joining the sector.
This could be a good place to start as we think about low hanging fruits that will drive adoption and use of these platforms.
Investment in distribution
During the lock-down, boda-boda and small cargo trucks have helped many people access supplies including foodstuffs.
Even though these have played a great role, they remain informal, disorganized, and less professional. There’s a great opportunity in building distribution leveraging the already existing infrastructure of boda bodas.
Although companies like safe boda and uber have invested heavily in this area, there’s still a huge opportunity especially outside of Kampala.
The lockdown disrupted movements and cut off supply chains for fresh vegetables and fruits among other products. Many people turned their backyards into gardens for leafy vegetables and fruits to meet the growing demand in the urban and peri-urban areas.
With cities expanding and population growing, urban gardens are going to become more popular.
Investment in this area will require customized greenhouses to fit in small urban garden spaces, bundled seeds, and crop protection products for small urban gardens and sophisticated technologies to help urban farmers optimize space and grow more foodstuffs including on the ground and in space.
Sorting and cleaning solutions
At the height of the lock-down, the government distributed food to urban families especially in Kampala. However, there was a lot of outcry from the public over ‘dirty’ and poorly sorted beans. This did not only start with the pandemic but for many years most foodstuffs such as beans, maize, rice have been poorly sorted.
In fact, in a Kilogram of beans, you buy in a retail shop, about 3-5% will be stones and sand partly due to poor post-harvest handling.
Investment in this area will require services that enable agri-business traders to clean produce, sort, and package. Even for smallholder farmers, these services can be offered at an aggregate level.
The Agricultural sector is full of opportunities throughout the value chain of various enterprises, private sector players need to be strategic is spotting and harnessing these opportunities.
Nathan Were is access to finance Specialist at the World Bank Group