The livestock sector remains a crucial driver of economic growth and development across Africa. In Kenya, it supports 25 million livelihoods while contributing 42 percent to the national agricultural GDP with a value of over $10 billion. The demand for livestock products is poised to grow by 50 percent by 2030.
But despite its pivotal role, the sector is fraught with numerous challenges chief among them financing. Even as private sector-led investment in the overall agriculture sector continues on a meteoric rise, livestock-focused investment has been negligible. Only 10 percent of the $500 million investment in agriculture since 2015 has gone into livestock-related ventures.
What is holding back investments in the livestock sector?
A new study by Gatsby Africa, the International Livestock Research Institute (ILRI) and AgThrive on the Kenya livestock investor landscape shines the spotlight on the issues that are slamming the brakes on investment in the sector. Three key factors were identified: informality of businesses, production-level risks and the absence of ‘investor-ready’ businesses.
So what should businesses in the sector do to attract impactful investment and turbocharge the sector to its pride of place?
In evaluating investments in livestock businesses, impact investors, who seek to generate a measurable, beneficial social or environmental impact alongside a financial return, weigh various risks such as market volatility, unprofessionalism in agribusiness, supply chain inefficiencies, lack of environmental sustainability and regulatory compliance.
How then can businesses improve visibility of livestock investment opportunities for investors and align themselves with the requirements of impact investors?
For starters, businesses should put in place tools for transparent tracking of the supply chain. Transparency builds confidence and encourages investment.
Developing a clear, sustainable business plan is crucial. It helps articulate goals, financial projections, and risk management strategies. Investors appreciate well-structured plans.
Livestock businesses should also maintain accurate financial records, demonstrate financial stability, and manage cash flow effectively.
At the same time, impact investors prioritise businesses that align with their values for long-term sustainability. Businesses should therefore conduct assessments to measure social and environmental impacts such as efficient water usage, waste and carbon footprint reduction and eco-friendly livestock management.
Establishing robust governance structures, transparent reporting mechanisms, and ethical practices should also be priorities for livestock-related businesses seeking impact investment.
Additionally, business should market their ventures and move the livestock sector towards professionalism. Highlighting and circulating achievements through impact studies, annual reports, industry reports, news media, and social media are good starting points. These stories demonstrate the positive impact of livestock investments.
Business owners should then actively engage with impact investors, attend relevant conferences, and participate in impact-focused networks in order to build networks.
Investing in technology
Innovations and technological practices equally play a pivotal role in winning over investors.
Businesses should leverage technology to optimize resource utilization. Efficient feed management, disease detection, and breeding practices for example, reduce costs and increase productivity.
Investors appreciate evidence-based strategies. Utilising data analytics enables better decision-making for businesses. Insights from data can lead to higher yields, improved animal health and streamlined operations.
Technologies like blockchain and Radio Frequency Identification, RFID, ensure traceability throughout the supply chain. Transparent tracking builds trust with consumers and investors. Knowing the origin and quality of livestock products is essential.
Alive to the challenges businesses in the sector face, investors offer various options to support them.
Flexible financing through a mix of financing options such as equity, debt, and grants. Equity investments provide ownership stakes, debt offers working capital, and grants can support specific projects. This flexibility accommodates different business stages and risk profiles.
Beyond funding, impact investors provide technical assistance through business training, mentorship, and market access support which enhance business resilience and growth potential. Well-prepared businesses are more attractive to investors.
Investors also engage with local banks, and microfinance institutions to better understand local contexts and needs. These partnerships allow tailored financial products suited to small-scale farmers.
Establishing funds specifically for the livestock sector streamlines investment processes. These funds can focus on sector-specific growth opportunities, fostering targeted impact.
Improving productivity for the triple bottom line (profitability, adaptation and sustainability)
The Livestock sector is unique in that improving livestock production will improve productivity and achieve triple benefits: increasing profits, ensuring farmers can adapt to climate change and mitigating livestock emissions. Improvements in breeding, feed management and animal health and welfare can increase productivity whilst mitigating emissions by more than 20%.
Sustainability and alternatives to the reduction of methane production often associated with livestock rearing are key considerations in the present day.
The writer is Impact Finance Manager at Rabo Foundation.
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