The hidden middle: Bringing Africa’s SMEs into the light
The private sector has a major role to play in the transformation of African agriculture. In particular, SMEs will be vital to the continent’s long-awaited green revolution.
But small-to-medium sized agribusinesses often lack the collateral, resources and support they need to realize their potential. As such, they make up what is referred to as the ‘hidden middle’; an overlooked cohort of essential but unrecognized workers and enterprises.
The ‘hidden middle’ is the focus of this year’s Africa Agriculture Status Report (AASR). Coordinated and published each year by AGRA, the AASR addresses the tough questions that accompany the challenge of delivering inclusive growth and enhancing government capacity. It serves as a handbook for governments and their supporting partners to deliver agricultural and economic transformation.
Launched at AGRF 2019, this year’s edition of the report was welcomed by Dr Agnes Kalibata, President of AGRA and AGRF Secretariat, as an important study on a crucial segment of the private sector.
Not the “missing” middle but the “hidden” middle – a crucial distinction made by Dr Kalibata as she described how African farmers and SMEs are ready, waiting and willing to expand into new areas. Through commitments and insights, the AASR 2019 signals a renewed effort to bring SMEs into the light and, through investment and support, help them become “vibrant and visible”.
“The SME landscape needs to work,” said Dr Kalibata as she warned that African agriculture, like an engine in idle mode, cannot presently go forward. With the threat of climate change, it could even start to go backwards – unless we act now to engage and empower the continent’s SME population.
Before presenting the key findings from AASR 2019, Dr Tom Reardon, Professor of Agricultural, Food and Resource Economics at MSU, set about busting a few popular myths.
According to Dr Reardon, conventional wisdom has it that the African food system is broken. “But the food system in Africa feeds 880 million consumers,” he said. “So, if indeed it is broken, we’re in big trouble.”
What’s more, the research that shaped the AASR 2019 contradicts this conventional wisdom. “Yes,” said Dr Reardon, “the African food system is constrained…but we’ve found a quiet revolution at the grassroots level in African supply chains.” That is, in the segments that are closest to the famer, made up of agro-dealers, truckers, processors, wholesalers and street vendors, among others. And it’s here, in the hidden middle, that rapid advancements are being made, with huge potential for growth.
Dr Reardon then set out some of the key findings of the AASR 2019.
First, the African food system is growing extremely quickly. “From 1970 until now,” he explained, “the total volume of food in Africa has grown by a factor of 350%.” This is on a par with Asia, which is widely perceived as the food system success story.
And over 25 years, there’s been an 800% increase in the volume of food being moved from rural areas to African cities. “Is that a broken value chain?” asked Dr Reardon.
The report also found a very rapid transformation of the nature of the food system. Two-and-a-half decades ago, the urban share of the food economy in Africa was very minor. Today, cities account for 60% of all food consumed in Africa, triggering the jump in urban-rural supply chains.
There has also been a shift away from a subsistence farm economy. “Today,” said Dr Reardon, “80% of the total food basket of rural Africa is purchased, which means it’s also coming through supply chains. So, private supply chains are feeding 80% of Africa. I think that’s really important.”
Next, panellists responded to these findings and insights.
Dr Abebe HaileGabriel from FAO said that government, rather than stepping aside, should become an important partner for business. He also urged for a broad and integrated approach to the private sector that incorporated the smallholder farmer.
Ms Ndidi Nwuneli, Co-Founder of Sahel Capital, said innovative investment “at the mezzanine level” was urgently required, alongside agri-business education to secure a pipeline of future talent.
Meanwhile Lucy Muchoki, from Kenya National Chamber of Commerce and Industry, said businesses in the hidden middle are often women-led, so efforts in this area will also help to address gender inequality.
AASR 2019 is also about future commitments, and the session concluded with the launch of the Farm Fit Fund. A unique coalition to improve farmer livelihoods, Farm Fit has strong financial backing from USAID and other key international partners. Through its targeted support for the hidden middle, the Fund represents an exciting new mechanism for engaging the private sector in Africa.