US$1tn SSA food and beverage market largely untapped

The food and beverage market in sub-Sahara Africa (SSA) is projected to grow by US$1trillion in value by 2030, according to World Bank.

While this presents a huge growth potential, the industry in Ghana remains largely import dependent, with few big players along the production and processing value chain.

But for many the small players like the kenkey and hibiscus tea/drink (sobolo) dotted along the streets of Accra, there is very little support in terms of capacity building and finance to help them expand and employ more hands.

This, according to Dr. Edward K. Brown – Senior Director, Research and Policy Engagements at Africa Centre for Economic Transformation (ACET), needs to change if the country is to take advantage of this huge market potential.

“Urbanisation is creating a huge demand for the local food and beverage industry, and there are some big players which have been here for years; but there is also a tremendous role that can be played by small and medium enterprises.

“But at the moment, if you look at the urban centres like Accra, Kumasi and Takoradi, a huge chunk of the products is imported. So, in many ways we are not taking advantage of our comparative advantage in the production of local products that would feed into the food processing industry,” Dr. Brown told the B&FT.

Dr. Brown is the co-author of ‘High-Potential Pathways for Productive Jobs’, a research series based on the ACET paper – The Future of Work in Africa: Implications for Secondary Education and TVET Systems, which highlights economic opportunities that spur the economic growth of SSA economies

Part of the problem, to him, is due to lack of government support in terms of finance and infrastructure like roads to link farms with market centres, as well as poor organisation.
Among other things, the sector is also saddled with rising input costs. Many inputs such as glass and plastic for packaging still have to be imported; and duties, which are calculated in foreign currencies, drive production costs higher. Others include depreciation of the cedi, imports and illicit products.

He however said the burgeoning industry, coupled with the country’s comparative advantage in producing products – largely agric-related raw materials – that can feed into the market, makes it compelling for government and the private sector to find ways of helping smaller players to grow, expand and create jobs; and be enabled to tap into the growing market locally and in the SSA region, while providing market for the agriculture produce.

Agriculture-driven transformation
Increasing productivity and output in a modern agricultural sector, according to the study, is the way forward for Ghana and African countries if they are to stand any chance of benefitting fully from the growing food and beverage industry.

This is because it is the only way to sustain agro-processing and a host of services upstream and downstream from farms, creating jobs and boosting incomes: “For example, rising incomes, urbanisation, and growing food consumption in cities provide enormous opportunities for agribusiness,” the study said.

It further revealed the growing food and beverage market, if harnessed optimally, will bring about an expansion of employment in off-farm activities and agriculture-related manufacturing, and provide many productive jobs – including for workers leaving farms who are prone to end up unemployed or working informal jobs in cities or towns.
A more productive agriculture sector will also solve one of the greatest problems facing SSA countries today – unemployment – as it will attract more young people, “rejuvenating a sector dominated by aging farmers”.

“Attracting youth into agriculture is particularly important, given that rapid urbanisation is putting pressure on already stretched resources in cities and leaving rural areas with skills gaps. In addition, a modernised farm system can also attract young people to become service providers to the sector and spur a vibrant fabrication sector,” the study read.

The role of government
The success of any attempt to become a key participant in the food and beverage space will depend largely on the policies put in place by African governments, Dr. Brown said.

“Policies and regulations must also create an enabling environment for the business of farming – and agribusiness in general – to be profitable; in particular, strengthening market linkages for smallholder former to access markets at lower cost,” he added.

More importantly, he said, both the private sector and government must interact on how to build capacity, provide logistics and supporting infrastructure – like roads from the farm to market, as well as storage facilities.

Without government support in the form of finance and infrastructure like roads to link farms to market centres, as well as an enabling environment, he said, no SSA country will be able to make the most of the projected US$1trillion market.

Meanwhile, to create jobs and raise productivity in African agriculture, Dr. Brown noted that considerable attention needs to be focused on land access, too.