AGRICULTURE INSIGHTS | 30 JUNE 2020

Absa extends plans to grow its lending book in African markets

Roux Widernboer Author

Roux Wildenboer

Head: Agriculture

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Agricultural markets across the continent present opportunities for growth.

Absa Corporate and Investment Banking (CIB) says there are good business opportunities in some markets in sub-Sahara Africa outside South Africa where the bank has appetite to increase its agricultural lending book.

Potential exists in countries such as Kenya, Ghana, Mozambique, Tanzania and Zambia where gradual improvement in both the regulatory environment and investment climate is good for the agricultural sector.

Despite bottlenecks in accessing markets due to poor road and rail infrastructure, the agricultural sector is nevertheless key to economic development and job creation in these countries.

We are particularly excited about the agricultural potential in markets such as Kenya and Tanzania. Kenya is famous for its tea and horticultural products, while Tanzania is a major producer of cashew nuts.

Ghana is already the world’s top producer of cocoa, while Ivory Coast – where Absa does not have a presence – is a leading producer of cocoa and nuts.

Development spinoffs from agriculture are significant

We want to have emphasis on larger presence countries where we already have operations, and this includes countries like Kenya, Ghana and Tanzania.

But there is also potential in other markets such as Mozambique and Mauritius, even though the latter sugarcane industry has been suffering, particularly with increasing health awareness where the soft drinks industry and consumers are substituting sugar with other sweeteners which impacts on the sugar industry.

Uganda is another market we want to grow, as it is a country with opportunities we can capitalise on.

Because agriculture still remains a predominantly labour-intensive industry in many African countries where mechanisation is yet to be developed, it can provide employment opportunities for young people.

Agriculture in Africa is by its nature labour intensive. Wherever we engage and assist with finance, the developmental spin offs are significant in terms of employment creation.

For example, a viable poultry production business that has a medium size abattoir delivering a million chickens a week, can create between 300 and 400 jobs.

There is a counter that farmers will over time use technology in order to be competitive, but even then, agriculture still has a large potential to create employment, as well as in all downstream businesses such as transporters, retail, parts suppliers and agents.

But there is also a multiplier effect we see in agriculture and Absa wants to be at the forefront of this positive impact.

Governments can play a role by ensuring market and regulatory certainty as well as further investments in infrastructure. The freer the market is the better, as free markets stimulate competition, technology and efficiencies

For small and medium scale producers, governments can assist by implementing sound policies to ensure the growth of sustainable businesses.

This article was originally published here

Roux Widernboer Author
Roux Wildenboer

Head: Agriculture

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