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Lowering Barriers for Agribusiness in the Sahel

March 15, 2022
Watering a field of vegetables
Members of the Cooperative Agriculture Maraicher for Boulbi, nurture their fields of vegetables, as they water and hoe the fields on November 8, 2013 in Kieryaghin village, Burkina Faso. Photo © Dominic Chavez/World Bank

 

Photo ID: World_Bank_Burkina_Faso_EDIT_013

By Olivier Monnier and Abdoul Maiga

From a distance, West Africa’s expansive Sahel region might seem an unlikely investment destination.

Spanning some of the world’s least developed countries — Burkina Faso, Chad, Mali, Mauritania — the region is a mystery to most outsiders, written about mainly for its coups, jihadist attacks, and struggles with climate change.

These are all very real and pressing problems. The Sahel also faces a lack of access to basic infrastructure, including roads and power, and the COVID-19 pandemic has deepened poverty.

But driving through Bamako’s busy streets, wandering the bustling markets of Ouagadougou, or strolling along the majestic and peaceful Niger river in Niamey, a different picture emerges — one of resilience, hope, and investment opportunities.

Despite the challenges, Sahelian nations — which have a combined GDP of only $70 billion, about the size of Luxembourg’s GDP — are alive with entrepreneurship and are more urbanized and more connected to Africa and the world than ever before. The transformation of cities is especially striking: the population of N’Djamena, the capital of Chad, has more than doubled between 1993 and 2018, while in Mali, Bamako welcomes more than 100,000 new residents each year and is expected to exceed 13 million people by 2050.

The region offers opportunities in a range of sectors, especially mining, renewable energy, and agribusiness. With the right support, and with increased and targeted investment, agribusiness in particular could be transformative for the subregion.

“Sahelian countries have the agro-climatic conditions to grow many crops, but the potential of the agribusiness sector remains underexploited,” said Fanja Ravoavy, regional agribusiness advisory lead for West and North Africa at IFC. “The agricultural production side needs to be strengthened and the processing segment is almost in virgin territory.”

A growing food economy

The agri-food industry is easily the Sahel’s largest economic sector, accounting for a third of its GDP and 75 percent of its employment. The subregion is a major producer of cotton, cereals, and livestock, and holds significant potential in horticultural products, oilseed crops, and nuts.

Adiaratou Sanogo, founder of Agro Business Badouha.
Agro Business Badouha, founded by Adiaratou Sanogo in Burkina Faso, trains farmers and those from displaced communities. Photo courtesy: Agro Business Badouha

Over the past 10 years, the Sahel’s farmers have worked their fields hard to serve fast-growing, rapidly urbanizing local populations and to meet growing global demand for their harvests.

According to estimates from the OECD Sahel and West Africa Club, the value of the food economy in the Sahel has more than doubled since 2010, and nearly 90 percent of the jobs expected to be created in the subregion by 2030 will be in this sector.

Digging deeper, however, exposes underlying weaknesses, including low productivity, limited access to markets for farmers, and precious little local processing or value addition. Much of the Sahel’s agriculture sector is built on small, family-run farms that lack access to inputs or training and whose ambitions are limited to feeding their families and earning a small income.

This is starting to change. Together, the private sector, governments, and global development organizations are working to remove barriers that are holding back agriculture in the Sahel, while helping introduce modern approaches to get the most out of the region’s fertile ground.

For instance, the establishment of agribusiness Special Economic Zones — currently being planned in Burkina Faso, Mali, or Chad — is seen as an opportunity to attract investment, boost industrialization and create jobs in high-potential areas. With the right legal, regulatory, and institutional framework, these initiatives could be transformative for the region’s agribusiness sector.

Innovative financing tools, such as warehouse receipt systems — which involve using securely stored goods as loan collateral — could also help improve access to finance.

Emerging entrepreneurship

Entrepreneurs as well as investors are betting that agribusiness in the Sahel can yield dividends.

In 2016, Abdoul Aziz Mahamadou left his stable job at an international telecommunications company to develop an irrigated organic farm 80 kilometers south of Niamey, Niger’s capital.

“Agriculture in Niger is still mostly practiced with traditional methods, and it’s not productive enough. I wanted to do something innovative to show that a different model is possible in Niger,” he said. “There are more and more innovative private sector initiatives and people are realizing that we need to take a value chain approach, from the fields to the end-consumer.”

Abdoul Aziz Mahamadou sows moringa on a new plot.
Abdoul Aziz Mahamadou sows moringa on a new plot. Photo courtesy: Entreprise Agricole Goroubi

Today, Mahamadou‘s farm, La Ferme Goroubi, spans 30 hectares, its fields flush at harvest time with citrus fruits, mangoes, tomatoes, peppers, and moringa. Mahamadou, who employs about 15 people full-time, has also built a processing unit that produces herbal teas, juices, and a range of therapeutic products that he sells in more than 60 pharmacies in the country.

Mahamadou isn’t alone in showcasing new approaches to agribusiness in the Sahel. Small but dynamic firms are emerging across the region’s food value chain, tapping modern technology to succeed or expanding into processing, marketing, and retailing.

In Niger, Tech-Innov has brought Silicon Valley thinking to the Sahel, helping farmers increase their productivity through nano-sensors and data. In Burkina Faso, Agro Business Badouha is training farmers and those from displaced communities on how to greenhouse farm without soil. In Mali, Mali Shi is working with 120,000 shea farmers, mostly women, to process and export shea butter, while Laham Industrie sources meat from 700 herdsmen, distributing 80 tons of beef every month to its own meat shops across the country.

Larger firms have also been active in the region for decades, especially in the cotton sector, one of the region’s main export crops. A number of them are seeking to expand and build their value chains.

In Chad, Singapore-based Olam International Ltd. is helping to revive the country’s cotton sector. The company took a large stake in CotonTchad SN, the country’s monopoly ginning company, and met its debt obligations. This helped instill confidence in farmers, leading to a sharp increase in production.

Meanwhile, French cotton company Advens-Geocoton Group, active in Burkina Faso and Mali, is also convinced that the Sahel’s agribusiness sector will play a more prominent role creating jobs, boosting growth, and strengthening stability in the region.

“The true potential of agriculture in the Sahel has been overlooked for too long,” said Karim Ait Talb, the company’s deputy general manager. “Agriculture has traditionally been seen as a subsistence activity, when in fact it is a tremendous economic driver that can contribute to the emergence of the region in a sustainable manner.”

Seizing opportunities

The Sahel’s challenges are clear and well documented. Yet there are also strong incentives supporting growth and investment in agribusiness in the region.

Sahelian farmers are enjoying rising demand for foods once deemed exotic but that are now commonplace in supermarkets around the world, including mangoes, sesame seeds, and cashew nuts.

For example, Mali has tripled its mango exports over the last decade. In neighboring Burkina Faso, sesame acreage more than doubled between 2010 and 2015, driven primarily by demand from Asia, the Middle East, and Europe.

The Sahel’s population is expected to more than double by 2050. This, combined with rapid urbanization, is fueling and transforming local demand for agriculture, according to Léopold Ghins, an economist at the OECD’s Sahel and West Africa Club.

Farmers harvesting moringa leaves in Niger.
Harvesting fresh moringa leaves in Niger. Photo courtesy: Entreprise Agricole Goroubi

“Urban consumers tend to have higher incomes and are looking for a greater variety of foods, including in the form of processed and packaged products. Demand for fruits, vegetables, meat, fish, and dairy products is also increasing,” Ghins said.

Growing demand for foods the Sahel has long produced is proving a boon for the region. Processing them at home or adding value in other ways, including through organic farming, will create even more jobs and higher incomes, especially for women, who dominate employment in processing and retailing.

But with 1.2 million young Sahelians entering the labor market each year, the agribusiness sector urgently needs support to reach its full — or at least a much fuller — potential. This is where investors, including development finance institutions and other partners, can make a meaningful difference.

Constraints, threats

A major challenge to farming in the Sahel is limited access to finance. Many banks in the region lack the knowledge needed to assess the risks involved, dulling their desire to provide financing. In Burkina Faso, for example, agriculture accounts for 27 percent of the country’s GDP, but less than 4 percent of the loans provided by banks, according to official data.

Meanwhile, entrepreneurs, despite their dedication, often fail to grow their businesses because they can’t produce the collateral necessary to obtain a loan.

“This is unfortunately the reality faced by most entrepreneurs in the region,” said Rosemonde Touré, the founder of Rose Eclat, a company in Burkina Faso specializing in the production of dried mangoes. “Banks ask for impossible guarantees and don’t believe enough in agribusiness. We need more support and financing.”

Aware of these barriers, governments are taking initiatives to expand access to finance, but more reforms are needed, especially to leverage opportunities offered by digital financial services and increase the presence of financial services providers in rural areas.

With four of the five Sahel countries landlocked, infrastructure is another serious challenge. Poor road networks and longstanding issues accessing electricity menace food production and transport across the Sahel, driving up costs and reducing competitiveness.

Development partners, such as the World Bank Group and the African Development Bank, are working with governments to improve the business environment, increase power generation and grid access, modernize transport, and strengthen digital infrastructure and trade.

IFC, for instance, aims to deliver up to $1.2 billion in investments (including mobilization) in the Sahel in the next four years, including in infrastructure, green energy, agribusiness, value chain development, and financial inclusion.

Finally, with temperatures rising 1.5 times faster than the global average and an alarming spiral of severe droughts and devastating floods, the Sahel faces serious threats from climate change.

This already has adverse impacts on food security, conflict, and migration, and poses significant risks to food systems’ performance and resilience, underscoring the need for improved governance of natural resources in the region. Expanding access to irrigation could also build farmers’ resilience to climate-related disasters.

Despite the many obstacles, Ait Talb says he firmly believes in the promising future of agribusiness in the Sahel — provided certain psychological barriers are also removed.

“The perception of risk in the Sahel is higher than it really is. We need to change that by showing models that work and by changing the narrative about the Sahel,” he said. “For sure, there are a lot of difficulties and there’s insecurity. But there is also great potential and therefore, there is hope.”

First Published in March 2022
Updated in June 2022