When engaging with youth agripreneurs in Africa on the challenges they face, access to finance emerges as a key concern. Closer scrutiny of their business models generally reveals that young entrepreneurs are often not deemed creditworthy, or suitable for investment, primarily because they lack consistent and deep access to their perceived target markets. In short, their order books are lean and their access to markets is limited.
The value chain concept is based on the idea that at the top there is a principal off-taker, and cascading down from there are various suppliers, providing components of the end product. In agriculture, this value chain moves from ‘farm to fork’, and from primary production (produce grown on farms) to finished, packaged, products sold in supermarkets.
Agricultural development support institutions, including the Food and Agriculture Organization of the United Nations, have also noted that there is a related flow of finance through the value chain, which is triggered by the off-take contract of the lead firm/end buyer at the top of the value chain. Thus, the suppliers in the value chain leverage their contract with a strong end-buyer to convince lenders and investors that these will have a certain level of security, and be sure of realising a return or repayment on their loan or investment.
Encouraging youth participation in Africa’s food value chains
While it may seem like a chicken and egg scenario – if you have more money you can secure greater market share – broader analysis of food sector market dynamics shows that having a ready market and a creditworthy buyer is a greater indicator of sustainability and long-term success than simply having access to capital. If you do not have a market to sell to, you will not have cash flow, and your continuing operating expenses will ultimately force you to close your business.
Some countries, such as Kenya and Rwanda, have recently passed public procurement laws that seek to allot a percentage of government spending to purchase goods and services produced by enterprises owned by youth (and women). Some large corporates have also started to solicit input supply from young farmers and aggregators. But despite this positive move, far more can and should be done to support and encourage youth participation in Africa’s food value chains. This can be done by ring-fencing market opportunities for youth to supply component and end products to public and private buyers willing to allocate a portion of their spending specifically to youth-owned farming and agribusiness companies.
Government and development partners keen to address youth unemployment and promote youth entrepreneurship should recognise that the negative perception among youth regarding agriculture and agribusiness as a potential career path is partly driven by the difficulty they encounter in penetrating markets with their products. Compounding the problem is the fact that young agribusiness suppliers often lack the requisite quality and volume to compete with other rival producers.
For this reason, technical support from buyers – or one that is aligned with the needs of buyers – is needed through supplier-development programmes. These could be provided through agri-sector incubation and acceleration programmes, or directly by the lead firms. The aim would be to analyse the value chain, segment the tiers of products that roll up to create the finished product, and then work with youth-owned enterprises to help them improve their capacity to produce quality and adequate volumes of output to supply the targeted market.
Even with market access, not all youths will find agriculture, agribusiness, or the value added food sector attractive. If we are to encourage greater participation in the sector – which will be critical for food security in Africa – we will need to provide incentives. That means ensuring a degree of guaranteed market access, coupled with supplier development related technical assistance and debt and equity capital. The aim is to provide certain minimum levels of profitability and sustainability for youth-led enterprises. Such a scenario is likely to change the way that youths in Africa think of agriculture. From being a dead-end prospect with few opportunities, it could well emerge as the career path of choice for a large sector of the continent’s young people.
This article was created through a CTA-led process to document and share actionable knowledge on 'what works' for ACP agriculture. It capitalises on the insights, lessons and experiences of practitioners to inform and guide the implementation of agriculture for development projects.