Forum pushes for funds to bolster food security

Financing agriculture in Africa has been dismally low because of the risk factors banks see in the sector.

For example, banks find it difficult to predict the lending risks to agriculture because production may be affected by a myriad of issues yet penetration of agriculture insurance that can offset that risk is low.

The situation has not been helped by governments’ failure to increase their funding for agriculture.

In Africa, only Mali, among few other countries, has increased its agriculture budget to over 10 per cent of the national allocation.

This low lending is despite the fact that agriculture contributes an average of 25 per cent of the countries’ annual wealth every year in most of the sub-Saharan Africa.

The bank announced that it will also be helping African countries to set up commodity exchanges that will help farmers get good prices for their produce.

An agriculture finance expert said setting commodity exchanges in Africa will help to cushion small- scale farmers from losses that happen when they compete to sell all their produce at once, oversupplying the market that reacts with rock-bottom prices, especially during the harvesting season.

“There is a definite and urgent need to have transparency around pricing commodities in Africa and commodities exchanges can help to achieve this,” said Jacques Taylor, head of agriculture financing at Standard Bank in Africa.

Commodities exchanges in Africa will help end the farm-to-market type of agriculture business practised by small scale farmers where they assume that as long as they take the produce to the market, it will find buyers.

“Instead, farmers should be guided on managing how they supply the market,” said Mr Taylor.

Farmers for example should be able to supply their produce when the demand is high and this will mean they fetch higher prices.

But farmers must have proper storage facilities and skills to identify when the demand is low and high.

Farmers must also be provided with good infrastructure to enable them deliver on time as per the sale contracts.