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With food expected to become the “new oil” of the 21st century, Africa’s agricultural output is set for explosive growth as the continent’s largely untapped natural resources and potential gains elevated world attention, according to Mohit Arora, Standard Bank’s director of agricultural banking in Africa.
He was speaking at the Produce Marketing Association Conference in Pretoria, South Africa, where he delivered a paper titled “Brace for Agribusiness boom in Africa: Implications for fresh produce.”
Mr Arora said agriculture was expected to feature as one of the driving forces in Africa’s economic resurgence and was already among the key factors contributing towards a swelling interest in Africa’s natural resources.
“Regarding agriculture, the opportunity is immense. Though much is required, and a collective inertia still in large part remains, there are increasing signs of how Africa’s agricultural fortunes are changing. There could be a doubling in African agricultural output within the next decade alone. Demand for upstream products linked to the broader agri-business sector will also result, creating new economic opportunities for a range of African and international enterprises,” said Mr Arora.
He noted that following major increases in food prices in 2008-09, 463 projects covering 47-million hectares, mostly in sub-Saharan Africa, were acquired within a period of only eight months. Also, investors have bought nearly 60-million hectares since the 2009 economic crisis. He said there has also been a notable increase in private equity companies that are investing aggressively in African agricultural sector,with more than 45 private equity investors announcing plans to invest across Africa’s entire agricultural value-chain by 2015.
“With increasing demand for African land, we see investment banks, hedge funds, commodity traders, sovereign wealth funds and corporations competing to buy land in Africa. For example, more than 80 Indian companies have invested an estimated US$2.4-billion to buy or lease plantations in Ethiopia, Kenya, Madagascar, Senegal and Mozambique to grow food grains and other cash crops for the Indian market. The cost of agricultural production in Africa is almost half that of India,” he noted.
Mr Arora said that attention will continue to focus on Africa because it has these resources in abundance. With sub-Saharan Africa holding most of the world’s uncultivated arable land, this could support a projected three-fold increase in the continent’s agricultural productivity by 2030.
“In China, home to 20% of the world’s population and less than 8% of its arable land, total cropland is expected to decline from 135-million hectares today, to 129-million hectares in 2020. Almost half of China’s cities face water shortages. Other areas in the emerging world are even more pressed. In 2011, Bahrain, Qatar and Saudi Arabia were ranked as three of the four most water stressed nations in the world. Already, Gulf States import around 60% of their food, and natural water reserves are able to support only 30 more years of agricultural production,” he said.
He cautioned that while Africa’s agricultural allure is vast, central to the realisation of commensurate socio-economic benefits is an appreciation, on the part of African stakeholders, of how pivotal and intensely valuable this opportunity is and to position accordingly.
Normalised headline earnings for 2011 were $1.9 billion and total assets were over approximately $185 billion. Standard Bank’s market capitalisation at 31 December 2011 approximately $19 billion.
The group’s largest shareholder is Industrial and Commercial Bank of China (ICBC), the world’s largest bank, with a 20 % shareholding. In addition, Standard Bank Group andICBC share a strategic partnership that facilitates trade and deal flow between Africa, China and select emerging markets
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