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Thursday, September 17, 2015 - 11:18
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Partnerships between Italian and South African businesses key to making agri-business a wealth driver

18 August 2015 With its population boom and growing need for food, Sub-Saharan Africa’s agricultural sector not only needs to become more efficient, but attract investment to improve output if it is to meet a major increase in demand for food over the coming decades.
But how can South Africa overcome the current challenges it faces in the sector? This will be on the agenda when over a hundred Italian and South African business and political leaders meet at the South Africa-Italy Summit from 1-2 October in Cape Town.
The Summit, hosted by The European House: Ambrosetti, will explore ways Italian and South African businesses can collaborate to boost growth in the agribusiness sector.
  “Sub-Saharan Africa has undergone radical change in a short period of time and is one of the fastest-growing regions in the world,” says Dr. John Purchase, CEO Agbiz. “Establishing local, commercially-based output for consumption and export is not only a cornerstone to guarantee food security, reduce poverty and direct growth, but for transforming a development challenge into an economic opportunity.”
Owner and Chairman of Texere Spa Gian Luca Bagnara says Italian agrifood companies can offer much experience in this regard. After focusing on creating trust in its agricultural products, Italy used both small and big farming businesses to revolutionise its supply chain.
“Small farmers tend to be good producers, but are not always good managers,” he explains. “On the other hand, large businesses are well managed, but the spin-offs for the social economy can be limited.
He says Italy excels in offering not only technology for large farms and factories: “The Italian experience is based on integrating small farmers into the supply chain to enable them to compete in larger markets.”
According to a position paper by The European House: Ambrosetti, changes in the consumer market in Africa make for a positive growth story for agricultural products. Sub-Saharan Africa’s middle class will grow by 80% by 2020, with aggregate spending rising to US$1 trillion by 2020. Average per capita GDP will increase by 30% by 2030 and 80% between 2030 and 2050.
Dr. Purchase says this is one reason the continent is now attracting the attention of investors looking for ways to partner with local producers to grow output, create jobs and improve wealth, but South Africa needs to put in place a number of changes to take advantage of this.
“Combined with the population trends, Sub-Saharan Africa has over 200 million hectares of uncultivated land, equal to 50% of that available worldwide,” says Dr. Purchase. “About 45% of this land is less than six hours away from local consumer markets.”
South Africa’s rich natural resources, developed infrastructural and financial system, political-economic stability and seasons that are counter to Europe’s, make it an attractive investment destination for agribusinesses. The World Bank says, after Rwanda, South Africa offers the best environment for the development of economic activities. Yet South Africa is 32nd in the world in the production of agricultural products (although it is the leading exporter in Sub-Saharan Africa).
Trade minister Rob Davies, who will speak at the Summit, has highlighted how Agri-Parks are key to growing the agricultural sector. These aim to establish agricultural cultivation; packing; processing; storage; and marketing of agricultural commodities in a central location.
“Agri-Parks are a great way for South African and Italian businesses to work together, since Italy has grown its agricultural sector on the back of highly successful co-operatives,” says Bagnara. “South Africa and Italy possess potential that is complementary in terms of strategic needs.”
He adds that Italy and South Africa are not competitors but complementary partners, for example farming counter-cyclical fruit and exporting agricultural products to Asia.
While South Africa is the economic centre of the Sub-Saharan region, with a developed agribusiness sector, Italy is one of the major exporters of agro-industrial products, with areas of excellence in agricultural equipment and technologies. It is the third largest world producer of agricultural machinery and has leading competencies and technologies for cold chains, seed, fertilisers, water management and irrigation.
“The two countries could integrate their competencies to better, and more rapidly, take advantage of the emerging opportunities in African markets,” adds Bagnara. “Agribusiness is one of the priority sectors for collaboration.”
But the sector needs investment in various areas such as production and processing; cultivation and technology and infrastructure such as energy, water, transport and communication.
“This will require forward-thinking public policy, supportive investments and partnerships with the private sector,” says Dr. Purchase.
Bagnara says a sustainable development strategy requires switching to a new supply chain model and transforming the nature of partnerships from transactional ones to creating value through closer cooperation.
Delegates at the Summit will look at how to devise strategic partnerships between South Africa and Italy in terms of research and industry, with the aim of creating successful joint agro-industrial projects.
The think tank says agribusiness is a useful tool to reduce poverty and can be up to four times more efficient than industry in reducing poverty. Adds Bagnara: “Agri-business can have a multiplier effect on economic growth, help create new jobs and diversify the economy.”
Healthy growth in this sector could act as a multiplier for economic growth overall. Estimates by the World Bank set the triggering factor between 1.5 and 2: 1% growth in the agribusiness sector could translate into an overall economic growth rate of 2%.
 

Copyright © Insurance Times and Investments® Vol:28.9 1st September, 2015
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