Slow implementation of farming policies fuels hunger in Africa

Clive Tasker, the CEO of Standard Bank, has taken the road less travelled in Africa’s banking sector. He is betting big on financing small-scale farmers.

With a presence in 19 countries in the continent including Kenya (through CFC Stanbic), the bank is seeking to balance the equation of helping Africa to exploit its virgin expansive land seen as one of its most valued assets.

“Our interest in agriculture is because we believe sub-Saharan Africa can provide a solution to food security in the world. Africa should be a global food supplier,” said Mr Tasker in an interview in Accra, Ghana.

According to figures by the International Fund for Agriculture Development (Ifad), Africa has about 12 per cent of the world’s arable land but 80 per cent of that is uncultivated.

Only seven per cent, Ifad says, is irrigated compared to 40 per cent in Asia, indicating the huge opportunity for investments in agriculture in the continent.

Africa’s food production per hectare is 1.7 tonnes compared to Europe’s at five tonnes per hectare as shown in recent studies by Alliance for a Green Revolution in Africa (Agra), World Bank, and Food and Agriculture Organisation (Fao).

Standard Bank announced in September that it will commit Sh800 million for lending to groups of small-scale farmers in four African countries, building on its previous commitments.

The bank is banking on the fact that the private sector in Africa is increasingly playing a larger role in agriculture unlike before when governments were key players in financing.

Private sector participation is increasing in food processing, supply management, linking farmers to formal markets.

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

Banks find it difficult, for example, to predict the lending risks to agriculture because production may be affected by many factors while penetration of farm insurance is low.

Lending is also affected by severe change of pricing especially when there is oversupply immediately after harvest where prices can change by up to 200 per cent.

The low lending disregards the fact that agriculture contributes an average 25 per cent of annual wealth in most of sub-Saharan Africa.

In Ghana, where the contribution is as high as 30 per cent, lending to agriculture is only five per cent of total bank loans, according to the Bank of Ghana.

Financing agriculture, however, is just one of the challenges facing Africa in the quest for sustainable food supply in the continent.