How MSMEs are transforming food systems in Africa
Africa’s agricultural industry, which accounts for between 35 percent of the continent’s GDP, is going through a notable transformation with the rise and rise of the Micro, Small, and Medium Enterprises (MSMEs). Increasingly, MSMEs are playing a pivotal role in shaping agrifood systems, plugging gaps in food security needs and powering economic growth.
The latest report by the Alliance for a Green Revolution in Africa (AGRA) highlights how MSMEs are revolutionising the continent’s food value chain. From production methods, processing, and distribution to the end consumers, MSMEs are making food systems more resilient and sustainable in the face of adverse effects of climate change.
The AGRA report shows that the private sector businesses now account for roughly 80 percent of Africa’s food economy, with MSMEs managing about 85 percent of the agrifood value chains.
In particular, these enterprises are primarily responsible in connecting farmers to markets, and processing raw materials into finished products. What’s more, MSMEs are ensuring that food reaches urban and rural consumers, AGRA study shows. Increasingly, MSMEs are now the unsung heroes that keep Africa’s food system moving.
As rural-urban migration keeps to soar, and and dietary patterns shift, AGRA established that there is an increasing demand for diverse and nutritious food products.
Urban areas present significant market opportunities, with cities accounting for more than 50 percent of food purchases in Kenya and many African countries. MSMEs are positioning themselves to meet this demand by offering a wide variety of food products, often tailored to local tastes and preferences.
Dr. Agnes Kalibata, President of AGRA, cited the critical role MSMEs play in feeding Africa’s ballooning population: “The Africa Agriculture Status Report 2024 highlights the transformative role of MSMEs in shaping Africa’s agrifood landscape. By harnessing the power of the private sector, we can drive meaningful food systems transformation and achieve sustainable growth.”
Opportunities and challenges for MSMEs
Despite their critical role, MSMEs are facing numerous challenges, threatening their growth and productivity. These hurdles include inadequate infrastructure, limited access to finance, and regulatory barriers.
For instance, poor road networks hinder the efficient transport of goods from rural areas to urban markets, while unreliable electricity disrupts food processing operations. Additionally, many MSMEs struggle to access affordable credit, which limits their ability to invest in technology and scale their businesses.
The AGRA report calls for targeted investments to address these challenges. Specifically, it recommends improving infrastructure, enhancing access to finance, and streamlining regulatory processes to create a more enabling environment for MSMEs.
Dr. Kalibata noted: “Our goal is to illustrate how these enterprises are vital drivers of growth and innovation. We urge increased support and collaboration between governments and the private sector to address challenges and unlock new opportunities for sustainable development.”
Driving food security through digital technology
One of the most exciting trends highlighted in the report is the growing use of digital technology to transform agricultural value chains. Digital platforms are revolutionizing everything from farm management to market access, enabling MSMEs to operate more efficiently and connect with new markets.
For example, mobile platforms such as M-Kulima in Kenya are providing farmers with real-time market information, access to credit, and improved distribution of inputs. This way, these platforms are helping farmers to optimize their operations and increase yields.
In East Africa, financial services platform M-PESA, is revolutionizing transactions in the agricultural sector, making it easier for MSMEs to pay for goods and services and receive payments from customers. Meanwhile, digital tractor leasing services startup Hello Tractor is increasing mechanization accessibility for smallholder farmers, boosting productivity and reducing costs.
These innovations are driving a more inclusive agricultural economy, with smallholder farmers—who make up the majority of Africa’s agricultural workforce—benefiting from improved access to resources and markets. MSMEs, in turn, are better equipped to process and distribute food, contributing to overall food security and economic growth.
Another key recommendation of the AGRA report is the development of agro-industrial parks and clusters to address infrastructure deficits and provide support services to MSMEs. These parks, which offer essential infrastructure such as storage facilities, processing plants, and transportation links, are helping to integrate smallholder farmers into larger value chains.
Tanzania, for example, has made great strides in advancing food processing and value addition through its agro-industrial parks. These parks not only provide farmers with access to markets, but also create jobs and foster local economic development. By connecting smallholders to larger value chains, these parks are playing a crucial role in enhancing food security and reducing post-harvest losses.
Zambia’s livestock sector offers another compelling case of how investments in infrastructure and support services can drive growth. By improving veterinary services, feed production, and market access, AGRA says Zambia has boosted meat and dairy production, improving both animal health and export opportunities. These developments are contributing to the southern Africa country’s economic development while enhancing food security.
Read also: Agriculture, tourism power Kenya’s economic growth in 2023
MSMEs paving the way in agribusiness innovation
The AGRA report showcases several case studies from Africa showing how MSMEs are driving innovation and growth in the agrifood business. In Malawi, for instance, substantial investments in groundnut production, supported by new seed varieties and enhanced processing capabilities, have not only bolstered local agriculture, but also expanded the country’s export markets.
In Nigeria, strategic investments in modern farming techniques and processing infrastructure have revitalized the cocoa industry, positioning the country as a leading cocoa exporter.
Similarly, Ghana’s AgroCenta, a digital platform, is revolutionizing agriculture by providing farmers with access to market information, credit, and improved input distribution.
Kenya’s increasing investment in macadamia nuts, coupled with the adoption of digital platforms for farm management and market access, is positioning the country as a major exporter of the crop, AGRA found out. Despite regulatory and market challenges, Kenyan MSMEs have demonstrated resilience and adaptability, driving growth in the macadamia sector.
Read also: AGRA champions sustainable business models at Davos
Building sustainable agrifood systems
As Africa’s population continues to grow and urbanize, the role of MSMEs in transforming food systems will only become more critical, AGRA established. By investing in infrastructure, supporting MSMEs, and rolling out effective policies, African governments, development partners, and private sector stakeholders can advance the continent’s agrifood systems and power it toward greater sustainability and resilience.
As Dr. Kalibata notes, “This report marks a significant milestone in understanding the private sector’s influence on Africa’s agrifood systems. It showcases the crucial impact of MSMEs in driving agricultural productivity and economic development. By supporting these enterprises, we can create a more inclusive, resilient, and sustainable food system for all.”
