Opinion

Youth and finance: What is needed to help start-ups access investment?

Wole Odetayo

Channelling investment into agribusiness

Africa is a continent that is so rich and yet so poor. For too long, this has been blamed on bad leadership, corruption and political instability. Yet, history suggests that African countries have had bright pasts, notably in Nigeria where revenue generated from agriculture has single-handedly funded the construction of the foremost tertiary institutions and industries. Agriculture’s contribution to the past, the present, and the future of the African economy can never be overemphasised.

An agribusiness revolution in the agricultural sector, cutting across the entire value chain has, to an extent, reduced the rate of unemployment and redeemed our hope of achieving food security in Africa. There's been a shift from other sectors of the global economy to agribusiness because venture firms now see great potential in the agricultural sector. African venture firms need to capitalise on this revolution in the agribusiness sector, and support value chain development by investing in smallholders with viable business innovations.

In sub-Saharan Africa, smallholder farmers manage 80% of farmland, but financial constraints often prevent them from expanding activities from subsistence farming to commercial production. The risk of investment in such entrepreneurs and innovations is, today, generally considered high, however, there is growing awareness that investment in African agriculture has the potential to rapidly generate returns, making the risk worthwhile. Nowadays, innovative entrepreneurs can leverage the power of the internet, improved farm inputs and innovative machines to close the food demand gap. But, in spite of their growing success, funders still require assurance from agribusiness entrepreneurs that their investment will generate good value for money. Hence, the need for programmes that support agricultural entrepreneurs to become investor-ready.

Strengthening collaborative networks

African venture firms need to start building strong partnerships with organisations or institutions that provide capacity building and access to mentorship for young entrepreneurs. It is also important that agripreneurs gain some field experience prior to setting out on their own entrepreneurial journey. Such experience can help them to understand the challenges involved in sustaining a successful agribusiness, validate their assumptions and perform better as leaders of their own business.

An investment-ready agripreneur should also have links to an entrepreneurship centre like Wennovation Hub, where they are easily connected to research institutes to access improved seedlings, and government bodies for land tenure and other subsidies (e.g. inputs). Entrepreneurship centres should guide these agripreneurs through market entry and business formalisation processes as a way to prepare them for attracting investment. Meanwhile, venture firms need to understand that not all businesses along the agricultural value chain have the same timeline in generating profit, and therefore, there is a need to provide patient capital and favourable terms for young agribusinesses.

Agribusiness success stories also need to be told and celebrated. Venture firms are envied throughout the world as engines of economic growth. African venture firms need to replicate the same success in African agriculture for us to experience the same economic growth as elsewhere.

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.