Distributed by APO Group on behalf of AGRA

AGRA (formerly known as the Alliance for Green Revolution in Africa) has released the third edition of the ‘African Agribusiness Outlook Report’ which sheds light on the impact of the so-called “triple crisis” (COVID-19 pandemic, climate change, and the Russia-Ukraine conflict) on small and medium-sized agribusinesses in Nigeria, Zambia, and Tanzania.

The report, which is jointly produced by AGRA and IPSOS (a market research company), surveyed 1 623 small and agribusinesses in the rice, maize, and tomato value chains in Nigeria, Zambia and Tanzania, and the soya bean, maize, and tomato value chains in Zambia. The study examined the impact of various measures taken to support Small and Medium Enterprises’ (SMEs’) performance during the triple crisis, revealing that a substantial proportion of agribusinesses have experienced severe declines in revenue during this period, with only some managing to recover.

The report states: “Agribusinesses in agricultural value chains in Nigeria, Tanzania, and Zambia, have been hard hit by the “triple crisis” of COVID-19, climate change, and the Russia-Ukraine conflict. Although the larger businesses were hardest hit in Nigeria and Zambia in 2020, these businesses appear to have been better able to recover towards 2023. While supply demand, and operational costs were significant challenges during the peak of the COVID-19 pandemic, the report reveals that businesses continue to grapple with soaring operational expenses in the wake of climate-related impacts and the ongoing conflict in Ukraine.

The report discloses that 58% of SMEs surveyed have experienced substantial revenue declines of 20% or more throughout the “triple crisis” period. Furthermore, the report reveals some of the strategies employed by businesses to stay afloat during these challenging times including injecting additional capital, cost reduction measures, and streamlining their product lines. Dr Agnes Kalibata, President of AGRA, noted that agribusinesses have exhibited remarkable adaptability, innovation, and determination, on the one hand, but continue to struggle amidst business disruptions through lockdowns, supply chain disruptions, productivity decreases, and reduced consumer demand.

Dr Kalibata remarked: “We are all aware of the challenges they are facing, however not much has been done to look at the cumulative impact of the triple crisis and the specifics of severity that the agribusinesses are grappling with. As we reflect on the impact of the triple crisis on agribusinesses in Africa, we must also recognise the incredible potential these enterprises possess.”

She noted that as drivers of farmer resilience, job creation, economic development, and poverty alleviation, African agribusinesses hold the promise of fostering greater social inclusion and reducing inequality across the continent.

“There is an urgent need for measures to effectively address and alleviate the impacts of these crises on the sector that serves as the primary employer, engaging over 70 percent of Africa’s population in economic activities and contributing more than 30 percent to the continent’s economies,” she emphasised. The report calls for more collaboration between policymakers, financial institutions, and development organisations to provide supportive ecosystems that empower the agribusinesses and respond to their three top tasks: access to affordable finance, fostering a business-enabling environment particularly with stable and predictable policies, and supporting an effective regional trade system.

The report recommends more focused, tailored, and concerted investment and support to improve quality and quantity of produce at the farmer level. It recommends the adoption of policies that encourage the development of financial products specifically tailored to the agricultural sector and improving financial policies to enhance access to affordable credit. To optimise the efficiency of SMEs and reduce transaction costs, there is a call for improved market information. Enhancing information services related to supply and demand is vital, as it can facilitate better decision-making for agribusinesses. It notes that a well informed market will lead to improved supply efficiency. The report calls upon governments to reduce fuel costs, mitigate currency fluctuations, ensure timely fertiliser subsidies, streamline business registration processes, and efficiently manage storage facilities.

A view of dry grass in a valley under a cloudy sky.

Summary of key findings Extent of revenue drops:

  • In Nigeria, 51% of SMEs reported a decline in revenue since the 2019 COVID-19 outbreak.
  • In Tanzania, 44% of SMEs experienced a drop in revenue.
  • In Zambia, 21% of SMEs reported a decline in their revenue.

Impact of the crisis on different sectors and business sizes:

  • In Nigeria, maize was the hardest hit crop in 2020. Medium-sized businesses were affected the most but recovered faster than smaller businesses.
  • In Tanzania, maize was also the hardest-hit crop and struggled to recover compared to other value chains.
  • In Zambia, tomatoes and soya beans were significantly impacted. Tomatoes recovered faster, and medium-sized businesses were hit hardest by Covid-19 but also recovered more quickly.

Impact of climate change:

  • Unreliable rainfall is perceived as a very big problem in Zambia (54%) and Tanzania (62%) but a lower concern in Nigeria (32%).

Causes of revenue decline:

  • In Nigeria, the high cost of transport was identified as a leading cause, accounting for 85% of the challenges faced.
  • In Tanzania, low profit margins were a significant issue, with 83% of SMEs affected.
  • In Zambia, low profit margins also posed a challenge, impacting 77% of businesses.
  • Strategies to mitigate the revenue decline and financial challenges:
  • Capital injection: SMEs in Nigeria injected more capital into their businesses (42%), followed by Zambia (32%) and Tanzania (24%).
  • Reduced staff costs: To cut expenses, SMEs in Zambia reduced staff costs (24%), followed by Tanzania (33%) and Nigeria (36%).
  • Loan uptake: While loan uptake grew over the past few years, only a minority of SMEs took out loans to cope with the crisis, citing perceived affordability as a barrier. Currently, the highest loan uptake by businesses is Zambia (15%) followed by Nigeria (12%) and Tanzania (10%).