Value chain finance: Innovations for intra-regional food trade

Innovations to stimulate Africa’s intra-regional food trade can reduce dependency on imports and help tackle rural poverty. If Africa’s horticultural potential is realised, production value is estimated to more than double by 2030.

If Africa’s potential for increased food production is to be realised, farmers must be able to sell to its rapidly-growing cities. But this depends on achieving huge improvements in intra-regional trade. Trade between African countries is often constrained by high costs (e.g. transport) and lack of finance for short-distance value chains (e.g. farm-to-city). Yet most bankers are unfamiliar with value chain funding mechanisms, have negative perceptions of the risks of agricultural funding and appear blind to the commercial opportunities offered by farm-to-city value chains.

To put those opportunities into perspective, by 2030 it is estimated that African horticultural production will be worth €430 billion per year, compared with €165 billion for traditional cash crops. Further encouragement for bankers lies in existing value chain improvements (e.g. through supermarket expansion) and increasing formality, even in informal trade, in response to consumer demand for better quality produce. Innovations such as mobile money transfer and new trade corridors, combined with strengthening of regional trade-supporting institutions and promotion of credit-risk management facilities (e.g. insurance) can stimulate a boom in Africa’s intra-regional trade, reducing its dependence on imported foods and tackling rural poverty.

The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.