Africa’s urban market, which currently accounts for more than 40 per cent of food produced on the continent, is growing and is mostly supplied by Micro, Small and Medium-sized Enterprises (MSMEs), a new report has shown, recommending support to these entities for growth purposes.

The 2024 Africa Agriculture Status Report, titled "Harnessing the Private Sector for Food Systems Transformation in Africa," provides an in-depth analysis of the significant role MSMEs play in transforming food systems across Africa.

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The AGRA report, developed through extensive collaboration with a diverse group of stakeholders, was launched on September 3, during the 2024 Africa Food Systems Forum (AFS Forum 2024), which is taking place in Kigali, Rwanda through September 6.

The report showed that apart from the overall food demand pulled from population and income growth, the private sector of agrifood value chains (AVCs) in Africa has grown quickly because of two other reasons.

First, it indicated, rapid urbanisation has driven the development of rural-urban supply chains, pointing out that longer and bigger supply chains have driven the proliferation of wholesale and logistics MSMEs in both rural and urban areas.

This is pulled by the powerful motor of the rise of Africa’s cities which will be a major factor in AVC development for at least the next decade or two, it projected.

Today, the report said, by far the largest food market facing the African private sector and farmers is the African urban market, which is far larger than the export market.

The report indicated that from 1990 to 2023, the continent’s urban population more than tripled (3.5 times rise) from 145 million in 1990 to 508 million in 2023.

It added that the urban market food consumption share of food output in Africa grew from 28 per cent in 1990 to 43 per cent in 2023 (in terms of tonnes) compared with exports which grew from 3.5 per cent in 1990 to 5 per cent in 2023.

Thus, the African urban market was eight times larger than the export market in 1990 and nine times larger in 2023, it concluded.

Secondly, the report observed, a huge rise in consumption of processed foods and non-grain products (fruits, vegetables, and animal products) in Africa in the past several decades has been another important factor propelling the growth of MSMEs and MLEs in food processing, wholesale and logistics, and crop inputs and animal feed (with derived demand for MLE services in soy crushing, peanut cake processing, and others as recounted in this report).

While presenting the report, one of its authors, Thomas Reardon, a professor at Michigan State University, said the private sector is selling to a gigantic urban African market, and that urban market is growing extremely fast. It was 145 million people in 1990, it's half a billion people today.”

He pointed out that African food consumption is 1.3 billion tonnes per year, of which 1.1 billion tonnes moves through agri-food value chains operated by the private sector to consumers – thus the private sector handles 300 million tonnes each day.

Domestic supply, MSMEs dominate Africa’s food market

Reardon added that 85 per cent of the African food market is from domestic supply – and only 15 per cent from imports.

Also, he said, 95 per cent of African farm output is sold to Africans, while only 5 per cent is exported.

The report showed that the private sector drives approximately 80 per cent of Africa’s food economy, with MSMEs playing a dominant role in managing around 85 per cent of the agrifood value chains, which underscores the critical importance of supporting these enterprises to enhance food security and stimulate economic growth.

Agnes Kalibata, President of AGRA, stated, "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.”

Challenges faced by MSMEs and recommendations at a glance

The report highlights several challenges confronting MSMEs, including inadequate infrastructure, limited access to finance, and regulatory barriers. Specific issues include poor road networks, insufficient wholesale markets, and unreliable electricity. These constraints hinder MSME growth and productivity.

To address those challenges, the report recommends targeted investments in infrastructure, enhanced financial access, and streamlined regulatory processes. It emphasises the need for a coordinated agro-industrial policy strategy to support MSMEs and improve their operational environment.

"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,” Kalibata said.