By Jean-François van Boxmeer
A version of this post originally appeared on the World Economic Forum blog.
Sustainable commercial agricultural production is vital to the health and well-being of Africa’s economy and people. Smallholder farming accounts for the majority of African agricultural production, and subsistence agriculture–where farmers focus on producing what is needed to feed their families–is still widespread. In Uganda, for example, 86 percent of the population live in rural areas and rely on subsistence agriculture. Low inputs and low productivity result in stagnation, and stagnation in the developing world is equivalent to poverty, hunger and malnutrition.
As leader of a company that has been involved in Africa for more than 100 years, I see enormous potential to more rapidly develop this area together with regional partners. There is a need for more partnerships between farmers, government, NGOs, local business and multinational corporations to accelerate Africa’s commercial agricultural growth. This will not only help thousands of farmers escape the subsistence trap but also offer benefits to all partners.
According to the Food and Agriculture Organization of the United Nations, the global demand for food is expected to increase by 60 percent by 2050. Smallholder farmers will need to play a key role in meeting the growing need. Africa’s food and beverage markets are to reach a threefold increase by 2030, the World Bank estimated in 2013, bringing more jobs, greater prosperity, less hunger and significantly more opportunity for farmers to compete globally.
There are, however, numerous challenges that subsistence farmers are faced with and that inhibit potential growth. These include limited access to infrastructure, to productivity-enhancing technologies and to education–issues that require substantial investment and long-term partnership of local business, farmers, corporations, governments and NGOs.
Two critical challenges are the inability to compete with low-priced international products–it is virtually impossible to compete with imported rice from Vietnam, for example–and the lack of access to a strong commercial market. These cause farmers to maintain production at levels merely enough to provide for their family, providing little or no incentive to invest in improved crops and fertilizers, or access to these products. As with cash crops such as cotton, coffee and tobacco, markets are most likely to be built on demand for the product and accelerated by large multinational corporations. Multinational companies such as Heineken can play a significant role in creating this demand, partnering with farmers, government and NGOs to help African agriculture gain a larger share of the world’s commercial market. Local sourcing creates shared value.
Heineken currently produces from 56 plants in 23 African countries and has made a Clinton Global Initiative commitment in 2011 to source 60 percent of its agricultural raw materials used in Africa within the continent by 2020. This is also part of the commitments we made under our Brewing a Better Future program, Heineken’s approach to sustainability and one of our key business priorities. Together with the European Cooperative for Rural Development (EUCORD) and the Dutch Ministry of Foreign Affairs, we recently invested in three Public Private Partnership projects in Ethiopia, Rwanda and Sierra Leone and we appointed a local sourcing director to increase the focus on and coordination of these projects.
In the Democratic Republic of Congo, our commitment to train farmers to produce consistent volumes of high-quality rice has seen their average annual production increase by 62 percent between 2009 and 2012. We have committed to invest more than $4 million by 2017 to accelerate our sourcing initiatives in the region, which will reduce the number of crops imported from other countries, educate local farmers through support and training, and improve income for thousands of farmers and their families.
Through partnerships with government and international NGOs such as EUCORD, Heineken seeks to use its commitment to actively improve agricultural productivity in the countries in which we operate. Working together with NGOs, Heineken is using its agricultural experience and capacity to train and organize smallholder farmers to integrate as many rural families in their supply chain as possible. Our objective is to make the agricultural sector more competitive in order to lower the costs of local grains – both as a source for the agro-processing industry as well as for local food consumption.
For farmers, the benefits include improved agricultural knowledge, increased productivity and profitability, better food security and an improved overall livelihood. Governments will see improved employment, economic development and a growing international trading position. And for commercial corporations–whether local businesses or multinationals – the long-term benefits are significant as well. For Heineken, these include securing a long-term sustainable source of raw materials, reduced exposure to unavailability or potential volatile prices, reduced transport costs; and a smaller carbon footprint.
We believe in Africa and can see the immense opportunity it offers. We also realize it is our obligation to partner with the continent to stimulate sustained and sustainable growth. We are encouraged by the results of our partnerships and want to engage in dialogue with other multinationals, local business, farmers, NGOs and governments about successful partnering for shared supply chain value. Together, we will be able to stimulate the growth of a sustainable and commercial agricultural sector for Africa and take an important next step to increase the global food supply.
Jean-François van Boxmeer is Chairman of the Executive Board & CEO, Heineken. He is a co-chair of the World Economic Forum on Africa 2014.