One of the greatest unresolved challenges facing Africa’s agribusiness sector is the lack of value addition. Sub-Saharan Africa-focused consultant Dr Edward George looks at how this affects two of Africa’s most important soft commodity value chains – cocoa and cotton – and explores how the fostering of local demand for crops could transform the balance of power for Africa’s agricultural producers.

Of all the challenges facing Africa’s agribusiness sector, the failure to add value to crops before they are exported has proved the most intractable. Most African softs are exported raw to global markets, and the processing industries that do exist locally struggle to add value. They may bring national prestige but they require costly subsidies to survive and create little employment. This situation is acute for three of Sub-Saharan Africa’s most important cash crops – cocoa, cotton and cashew nuts – which provide a livelihood for millions of Africans (Figure 1).

West Africa is the world’s largest producer of cocoa, with Côte d’Ivoire, Ghana, Cameroon and Nigeria producing over 70% of global output. But around 75% of the crop is exported as raw beans to Europe and Asia, with only a quarter staying in the region for processing into cocoa butter, powder and (a little) chocolate. This leaves the lion’s share of value addition to be captured by the confectioners and retailers at the end of the chain.

Cotton is another mainstay of West Africa’s agricultural sector, yet 70% of the crop is exported raw to Asia where it is processed into yarn and fabric and re-exported back to Africa. This means there may be West African cotton farmers wearing Asian-manufactured shirts made of the cotton they grew themselves. And, in the case of cashews, barely 5% of the crop is processed prior to export, with 95% of nuts going raw to India and Vietnam for processing and consumption.
It is not that there is no processing of cash crops in Africa. The problem is that most processing is basic. The majority of cash crops go through the bare minimum required for export or sale to the next part of the value chain. Although this can bring in immediate cash for farmers and processors, it means that they put in all the work to make a fungible commodity that is easy to trade and then let all of the value add go to those further down the chain (see fact box, page 29). ....

Why is value addition so low?
So why is value addition so low in Africa, when the continent’s agricultural sector has so many inbuilt advantages? These include abundant agricultural land, a rapidly growing population, the lower cost of capex for industrial plants, lower labour costs, plus less onerous know your customer and regulation. But many factors work against these advantages.
A key constraint is the lack of an efficient marketing infrastructure. This prevents farmers and processors from getting full value from their crop, even in its raw form. The problems start with the lack of farmer credit and inputs, and progress through the value chain with inadequate storage facilities, poor roads, overloaded ports and lack of access to buyers. This results in high crop losses – typically 30-40% of African crops rot before they reach market – and poor co-ordination between farmers which creates market gluts – as often happens in Nigeria’s tomato sector – and results in farmers getting little or nothing for their crop.

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