Africa is not a breadbasket, but it could be. Better yields require investment

Africa is not realising its massive potential for agricultural production.

This despite the positive knock-on effect agriculture has on a huge number of other industries.

Agricultural yields in Southern Africa are currently only 4.2 tons per hectare, compared to the global average of 6.1.

To substantially increase these yields will require greater investments in quality inputs and better farming practices.

Farming in Africa has long been seen as coming from an individual sustainable basis, but to be successful… we have to industrialise the greater agriculture industry which rests on the pillars of infrastructure, education and mechanisation.

Chris Potgieter, Old Mutual Wealth Private Client Securities

Investments in infrastructure and education, while not direct investment into agriculture, are two enablers for improving the industry.

The average age of farmers in Africa is 60.

Early education and inclusion of young skilled people into the value chain are needed, considering 60% of Africans are younger than 24.

Infrastructure investment is crucial for effective irrigation, mechanised production processes and reliable transport routes, but education goes hand-in-hand with job creation within these evolving industries.

Chris Potgieter, Old Mutual Wealth Private Client Securities

Technology is the catalyst for evolution in the agricultural industry.

Innovations in science cannot just focus on one aspect of farming; the entire value chain needs to be mechanised. The drought in the Western Cape has highlighted the importance of having climate-resilient crops, but we also need to employ smart irrigation techniques and ensure we have proper storage facilities for times like these.

Chris Potgieter, Old Mutual Wealth Private Client Securities

Geo-mapping, a technology that helps farmers gather essential data using satellite technology combined with soil condition sensors, will help farmers make better decisions and increase farming efficiency.

Chris Potgieter, Old Mutual Wealth Private Client Securities

While a lack of infrastructure remains one of Africa’s largest obstacles, improvements are taking shape in this regard.

This is evident in the number of listed companies – both local and international – who are at the forefront of exciting innovations that address water scarcity, climate change and its unintentional consequences.

John Deere and Company comes to mind in this respect, as they are so much more than just a tractor company. They invest heavily in smart farming for future growth along with the GPS technologies that increase efficiency and targeted biological research which contributes to global sustainable farming practices.

Chris Potgieter, Old Mutual Wealth Private Client Securities

An interesting agriculture holding is Alphabet, Google’s investment arm which encompasses the Farmers Business Network – a service that connects farmers with each other, giving them the opportunity to share data on their farms’ inputs and practices, thus empowering farmers to make better decisions. Farmers can source and sell collectively and smartly, by capitalising on big data in a smart and practical way.

Chris Potgieter, Old Mutual Wealth Private Client Securities

South Africa has also seen a rise in technology companies that are exploring large-scale data collecting systems that could potentially change the farming landscape in South Africa.

The Internet of Things (IoT) has changed how we live. And through large-scale data collection specific to farmers, Smart Farming in South Africa will be the norm. Through the use of data sensors, farmers will be better equipped to deal with unpredictable climate patterns, exposure to new pests, diseases and alien vegetation.

Chris Potgieter, Old Mutual Wealth Private Client Securities

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