Categories: Articles, Resource managementPublished On: 12th April 2023

African agribusiness companies can still grow Part 5: How to establish an agribusiness

By 5 min read

agribusiness 2

by Tapuwa Mashangwa

Agriculturally Africa still has much potential for growth. A vast amount of land is still underutilised. Its use depends on the climate, the nature of the soil, land topography, availability of capital, availability of farm inputs, an agile labour force, availability and demand of market, and government interventions, support, and programmes.

If these elements are in place, it will spur growth of agribusiness. Kalu, (2019) states that according to the World Bank, Africa is set to create an entirely new development path harnessing the potential of its resources and people. Being home to the world’s largest free trade area and a 1,2 billion-person market certainly comes with quite some perks. Perks like increased opportunities of entrepreneurship, economic growth, and a potential decrease of poverty on the continent as well. Establishing a sustainable agribusiness is possible as others have done it before. It is a process that requires establishing SMART (specific, measurable, achievable, relevant, and timebound) goals, adhering to the plan of execution and making corresponding adjustments where and when required.

Some steps required in building an agribusiness include research, application of innovation, diversifying activities, seeking new distribution channels, specialising, committing to organic products, taking into account the weather, practicing crop rotation and integrated farming, approaching the final consumer, obtaining local support and links, and seeking institutional support. According to Valizadeh and Bijani (2020) research can be broadly defined as any research activity aimed at improving productivity and quality of crops by their genetic improvement, better plant protection, irrigation, storage methods, farm mechanisation, efficient marketing, and a better management of resources. This robust and rigorous research process is paramount for the success of an agribusiness.

It helps lower costs, ensure efficient and sustainable production and service delivery systems, promotes the hiring of qualified personnel and heightens understanding of the interactions and interdependence between production systems, farming communities and the final users of agriproducts and services. Research ensures that one is familiar with the legal, economic, trade policy, and health protocols in the country or industry of operation. Moreover, the research phase involves the gathering of specific market information which will result in customer oriented products and services. These will not only earn the agribusiness a valuable market share, it builds consumer loyalty as well.

The 21st century has exposed agribusinesses to various new technologies that aid their functionality on a small and large scale, thus it is imperative for agribusinesses to make use of the benefits of innovation. Innovative technologies and approaches can increase productivity and profitability, improve consumption of nutritious food, empower youth and women’s access to information, technology and markets, and ensure that agricultural practices are environmentally sustainable for future generations. Foldable solar panels, drone technology, mobile applications, robots, artificial intelligence (AI), highly accurate hyperlocal weather forecasting, 3D printing, and augmented reality are some of the examples of new technology that can be exploited by agribusinesses.

Not only does innovation keep an agribusiness abreast in its area of operation and better satisfy consumer needs, it also helps to ensure longterm viability and reduce the negative environmental impacts of production, such as pollutants and waste. Most agribusinesses in Africa have diversified products and services. Diversification is a risk-reduction strategy that involves adding product, services, location, customers and markets to a business’s portfolio. Not only is it an important consideration for small and medium-sized enterprises (SMEs) for expanding business internationally, having a diversification strategy will benefit the business’s long-term stability and growth.

Diversification can be done through existing product/service adjustments, product line extension, brand extension, and adjacent market expansion. Benefits of these strategies are improved accessibility to necessary resources, seamless expansion to similar markets, increased consumer reach and potential customer-base, establishment of a competitive edge, enhancement of brand visibility and consumer interest, offerings of variety which attracts new customers, and it promotes a deeper understanding of core competencies and how to adapt them.

The African business arena is unique. What works in one town, city, country, or region may not work in another. This inconsistency comes with the possibility of creating new products and services to satisfy consumers. The creation of these would need some specialisation. Incubating creative ideas, studying its viability, and reception in the market during specialisation increases the chances of achieving agribusiness objectives.

Establishing a successful agribusiness is not an event, it is long-term process requiring risk taking, tenacity, a customer-centric approach, good marketing, a strong vision, passionate leaders and empowered employees. These internal factors and external influences such as a stable economy, a trustworthy and reputable banking system and legal, economic, and trade policies that promote business growth aid in spurring the success of agribusinesses

References

Valizadeh, N., Bijani, M. (2020) Agricultural Research: Applications and Future Orientations. Available at: https://link.springer.com/referenceworkentry/10.1007/978- 3-319-95675-6_5#:~:text=Agricultural%20research%20can%20be%20broadly,resources%20(Loebenstein%20and%20Thottappilly%20 2007)  

Kali, I. (2019) 10 Tips to Build a Sustainable Agribusiness in Africa. Available at: https://www.ignitia.se/post/10-tips-to-build-asustainable-agribusiness-in-africa    

The high 5 for transforming Africa. (2016) Feed Africa. Strategy for agricultural transformation in Africa 2016-2025. Available at: https://www.afdb.org/fileadmin/uploads/afdb/Documents/PolicyDocumentsgy-En.pdf

Agribusiness for Africa’s Prosperity. (2011) United Nations Industrial Development Organisation Available at: https://www.unido.org/sites/default/files/2011-05/Agribusiness_for_Africas_Prosperity_e-book_NEW_0.pdf   

FAO’s work on agricultural innovation. (2018) Sowing the seeds of transformation to achieve the SDGs. Food and Agriculture Organisation (FAO). Available at: https://www.fao.org/3/CA2460EN/ca2460en.pdf 

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