How can African economies benefit from improved regional food trade?

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Do you know which policies prevent private agribusiness from contributing to regional food trade? IDH and AGRA surveyed private agribusiness to get insights that can strengthen the African policy making processes. 

Read the latest IDH Farmfit summary to learn more.  

The food and agriculture sectors in African economies can benefit greatly from improved regional food trade integration, and achieving this requires action at both the public and private sector levels.

Currently, many African countries’ food trade – the trade in food-related products – is more closely integrated with the rest of the world than it is with other African countries. While the demand for food products is growing – due to factors like population growth, urbanization and increasing prosperity – domestic production has not grown as fast, increasing many countries’ import dependency.

This contributes to foreign exchange outflows, depressed domestic currencies, heightened food inflation, and ultimately greater food insecurity. Increasing the volume and value of regional trade can yield many improvements, including access to better, more affordable, and more nutritious food; more and higher paying jobs; improved opportunities for small and medium enterprises; and a more vibrant localized economy.

The efforts needed from the public sector are quite well-understood and include strengthening of the policy and regulatory environment at the national and regional levels, build the capacity and resilience of value chain actors, and strengthening national and regional production. Efforts such as the African Continental Free Trade Area (AfCFTA) are promising step. Insights from the private sector confirm that while there is an eagerness to participate in and benefit from greater regional food trade, companies are hampered by inefficient, unpredictable and in some cases insufficient policies and implementation.

The benefits of improved regional food trade are numerous and broadly recognized. Regional food trade can improve access to better and more nutritious foods, create more and higher-paying jobs, offer improved opportunities for small and medium enterprises, and generally speaking lead to a more vibrant, localized economy.

Shorter supply chains can also ensure that greater value goes to the farmer and reduces farmers’ dependence on and vulnerability to volatility and disruptions of international markets. Supply chains can be shortened both by encouraging and increasing processing and consumption within countries where agricultural commodities are produced, as well as increasing trade with neighboring and regional countries.

In both cases, more value-adding steps – such aggregation, processing, marketing and retail – take place within the region, with a host of benefits described above.

Regional, country and household climate impacts

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Despite the emergence of several Regional Economic Communities (RECs), regional food trade integration in Africa is inhibited by a range of challenges, many of which are systemic in nature. At the same time, a number of extraneous factors have greatly exacerbated these challenges, as well as slowing down and even reversing strategies and policies meant to increase regional food trade integration. Specifically, the longer term challenges related to climate change and the more immediate challenges of the desert locust outbreak of 2019-20, and the COVID-19 pandemic have negatively impacted regional food trade, from on-farm production through to the financing and transporting of produce across borders.

All of these factors, directly or indirectly, relate to regional food trade integration. Regional food trade integration can help make African economies more resilient to shocks by allowing the movement of food from surplus areas to deficit areas in times of need

Policy and political economy factors affect regional food trade outcomes such as private sector investment, smallholder farmers’ participation in structured food trade, and food trade financing across sub-Saharan Africa. Regulatory and policy action (and inaction) are behind many of the key challenges to intra-African food trade; factors include protectionist trade policies, non-tariff measures, information and data gaps, slow (or non-) implementation of regional commitments at the national level, and more. Such actions are usually inefficient, often generate negative returns and in many cases disincentivize private sector investment in food trade markets.

A predictable and transparent food policy environment is critical for promoting regional food trade across the continent. Such a food policy environment creates incentives for increased private sector investments as well as increased smallholder participation in structured regional food value chains. In supporting more predictable and transparent food policy, AGRA is implementing a number of activities aimed at addressing underlying policy issues and ultimately enhancing regional food trade.

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Much of the research and policy briefs on the topic of regional food trade have focused on the policy angle; relatively less has been written on the role of the private sector. However, an engaged private sector is key to realizing closer regional food trade integration, and much of the government interventions are aimed at enabling and facilitating market-based interactions.

Directly, the private sector drives much of the activities in food value chains, from operating and supporting (pre-)production, aggregation, processing, trading and retail of food products.

IDH Farmfit and AGRA believe that the perspective of the private sector is important to include when looking at the topic of regional food trade. Hence, they surveyed a number of private sector partners involved in the sourcing, trading, and/or processing of agricultural products from farmers, and get their perspective on how they view regional food trade integration, what they see as the main opportunities and challenges, and their ambitions when it comes to regional food trade.

It is clear that African countries and economies individually and collectively can benefit from closer regional food trade integration. The benefits, as well as the actions needed from policymakers and regulators, are quite well-understood.

Insights from the private sector confirm an eagerness to participate in greater regional food trade. In order to achieve this goal, additional efforts to improve the policy environment and support the private sector are needed. IDH will continue to provide insight into the policy and regulatory matters that impede the competitiveness of agribusinesses. Furthermore, there will likely be three more policy briefs produced in the next couple of years.

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More information

Kafui Adjogatse – IDH Farmfit

Data Analyst

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