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, and Niger, a
group known as the “G5 Sahel” – 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 urbanised 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% 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.
According to estimates from the OECD Sahel and West Africa
Club, the value of G5 Sahel’s food economy has more than doubled since 2010,
and nearly 90% 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 organisations 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 and Chad – is
seen as an opportunity to attract investment, boost industrialisation 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
realising that we need to take a value chain approach, from the fields to the
end-consumer.”
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
to process and export shea butter, while Laham Industrie sources meat
from 700 herdsmen, distributing 80 tonnes 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 neighbouring 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 urbanisation, is fueling and transforming local
demand for agriculture, according to Léopold Ghins, an economist at the OECD’s
Sahel and West Africa Club.
“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.
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% of the country’s GDP, but less than
4% 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 specialising 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 G5 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.
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.”