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Study Reveals Potential of Farms in Africa

April 5, 2012
Business Report

Ayanda Mdluli


Products that could be grown with ease in some parts of Africa were being imported at “staggering costs” that often ranged in the billions, a new study showed last week.

The report commissioned by Basileus Capital, a private, unlisted investment firm that has interests in agricultural business opportunities across the continent, claimed that Africa currently imported about 90 million tons of agricultural commodities valued at $53 billion (R405bn) a year.

Naledi Mongoato, an analyst at the firm who compiled the report’s disturbing findings, revealed that the largest imported commodity was wheat, “at a staggering cost of $8.5bn for a commodity that could be grown with ease in Africa”.

Mongoato’s research suggested that most foreign agricultural investments’ into Africa “focused their production for export markets with minimal plans for the African market”.

Northern Africa was the largest wheat trading region, as it imported about 60 percent of the commodity, which amounted to $5bn worth. East and west Africa each account for 17 percent or $1.4bn, with southern and central Africa sharing the balance.

The research noted that the African populace could double by 2050 to approximately 2 billion people. What this meant was that if Africa did not start producing most of its staple foods, a greater strain could be placed on the buying power of governments and traders for agricultural products that could easily be grown in their respective countries.

“It is interesting to note that the north African countries (those in the Sahara desert) produce 16 million tons of wheat and import an additional 16 million tons.

“In most of these countries, wheat production occurs in the coastal northern tip of the country as the southern end is not conducive to farming.

“On the surface it appears there is clearly an opportunity to produce and trade wheat in Africa. The ideal country to grow wheat would be in Tanzania,” the research explained.

In addition, Tanzania had a stable political and business environment where infrastructure such as rail and road was well maintained, and it had impressive water resources of 500mm to 3 000mm of annual rainfall.

Also, wheat was grown entirely under rain-fed conditions in the country. However, where the country experienced a shortfall in production, it would import about 826 300 tons of wheat.

“Wheat is the preferred food grain in towns, while the rural population lives mainly on other cereals. As people move into the towns, consumption of wheat in the coming years is likely to grow faster than that of all other cereals.”

In addition, the report alleged that global hedge funds were purchasing large plots of land or had acquired it on long-term leases. These funds specifically targeted cheaper land in South America, Asia and Africa.

The Oakland Institute, a US-based research company, released a shocking report, after studying land deals in sub-Saharan African countries such as Ethiopia, Tanzania, South Sudan, Sierra Leone, Mali and Mozambique.

In 2009, speculators bought or leased 60 million hectares of land in these countries, an area the size of France. The Oakland Institute concluded that most of these deals were characterised by a lack of transparency and, more often than not, were based on false promises made to local chiefs.

“The competition for arable land has intensified with speculators often driving up farm land. Speculators are distorting the prices of prime agricultural land in Africa and increasing the cost of entering the commercial farming sector.”