Governments across Africa have put in place policies to stop the spread of COVID-19 with the first lockdowns resulting in significant restrictions on the movement of people and goods. But the disruption of intermediary businesses in agricultural value chains could have the most consequential impact on food security and livelihoods.
This includes reduced supplies of caloric staples and other nutritious foods to consumers (many of whom already spend up to 50% of their income on food), loss of jobs in food processing, and – for those who are farmer-allied – lower incomes and support to smallholder farmers who contribute to more than 80 percent of agricultural production in Africa.
Intermediary businesses can include producer cooperatives, aggregators, processors and vertically integrated brands. These linchpin firms are now struggling with COVID-19 related challenges that imperil their continued operation, according to a coalition of international practitioners who support these businesses with capital and technical assistance comprising Bain & Company, TechnoServe, Partners in Food Solutions, Land O'Lakes Venture37, Acumen and Root Capital.
A TechnoServe survey of over 100 food processors spanning sub-Saharan Africa, shows that over 60% of these enterprises do not feel adequately prepared, including having limited liquidity, for meeting the challenges presented by COVID-19:
As a result, some food processing businesses are shutting down and, according to TechnoServe, only 31% of companies are retaining their full workforce, with the majority putting workers on leave and 17% already making layoffs.
"Some companies are trying to pivot," says Jeff Dykstra, CEO of Partners in Food Solutions, "but the expected slowdown in business is limiting investment at a time when innovating for this new operating environment is critical. Also, without sufficient liquidity and working capital, these businesses will not be able to continue making payments to suppliers and investing in farmers by maintaining extension services or providing farmers with credit."
Food processing businesses advance socio-economic development by providing nourishment, jobs and incomes in Africa, while building more resilient local food systems. They help smallholder farmers withstand global fluctuations in the markets and, where appropriate, reduce reliance on imports.
"Supporting these firms and smallholder farmers – which our research shows many of whom are in the 'missing middle' where affordable commercial financing is not readily available and have already struggled with a capital gap pre-COVID-19 – is also necessary to strengthen the longer term ability of Africa to feed itself, build more resilient food systems and harness the economic potential of African agriculture and food. All of which are critical to Africa's economic development," says Christopher Mitchell, a partner at Bain & Company and leader of the firm's work in African Food Systems.
The international donor community and African governments have an opportunity to act now to mitigate against a food security crisis arising from the pandemic and to set a path toward food system transformation that would yield greater nutritional, economic, societal and environmental benefits for decades to come:
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