Africa’s Agribusinesses Face $100bn Annual Financing Gap

Agriculture is considered one of the critical sectors in a country’s economy. According to a 2020 World Bank report, the sector in 2018 accounted for 4 per cent of global Gross Domestic Product (GDP) and can also account for more than 25% of GDP in some developing countries.

SME’s in the agricultural sector, however, face an estimated $100 billion annual financing gap in Sub-Saharan Africa. According to experts, this gap in getting the right funding greatly affects the sector’s output.

This was revealed during a virtual event to launch the fourth edition of the Agribusiness Deal Room, organized by the Alliance for a Green Revolution in Africa (AGRA). 

Speaking at the event, the Deputy President, AGRA, Dr. Fadel Ndiame noted that SMEs in the agricultural sector plays a central role in terms of production, processing, and distribution. He stated that the sector in Africa “struggle to have access to finance.”

Ndiame further observed that “the huge potential of the agricultural sector in the continent remains unmet, with agriculture being the engine of African economies.”

On why the Agribusiness Deal Room was established, Ndiame stated: “We designed the Deal Room to build the capacities of SMEs while at the same time connecting them with sources of financing. We are looking for investments and partnerships that will unlock the sector’s potential across the continent.”

Also speaking at the event, the Director, Agriculture Finance and Rural Infrastructure Development for the African Development Bank (AfDB), Atsuko Toda, noted that SMEs are the engine room of growth for the food supply chain in the agricultural sector and as well a vital means of creating jobs for many people, especially in Africa. He said this, amongst other reasons was why there’s a need for adequate financing.

The Agribusiness Deal Room was initiated three years ago in Kigali, Rwanda, by the Alliance for Green Revolution in Africa (AGRA) in conjunction with Alliance for Green Revolution Forum (AGRF), and with the support of the Rwandan government.

It is a matchmaking platform that convenes close to 4,000 stakeholders from the entire ecosystem to facilitate partnerships and investments in African agriculture. It specifically supports governments and companies with access to finance and partnership opportunities.

“Since its launch in 2018, the Deal Room has directly facilitated over 400 companies with targeted investor matchmaking and hosted more than 800 companies to explore networking opportunities”, a statement on the AGRF website indicated.

This year’s focus is on addressing the challenges in agricultural lending to SMEs and investments, with other objectives of contributing to continental and global frameworks including the 2021 UN Food Systems Summit, Africa’s Agenda 2063, the Malabo Declaration, the Sustainable Development Goals, and the UN Climate Change Conference (COP26).

AGRA is a partnership-driven organization set up in 2006 with the core aim of transforming African agriculture from the small-holder farming system, to a thriving business that translates the entire value chain into a sustainable venture.