The Need for Increased Finance for SMEs, Start-ups

The Need for Increased Finance for SMEs, Start-ups
The Need for Increased Finance for SMEs, Start-ups

By our Correspondent

In the recent times, there have been calls for increased finance to support modern agricultural start-ups and small and medium enterprises and strengthen food security.

In this wise, Aftica’s startup sector has been heating up, with small businesses and start-ups innovating. Efforts are being made to modernise agriculture, help farmers boost yields and overcome threats from climate change.

But despite this, small and medium-sized agriculture businesses in developing nations are facing a $106 billion funding gap, according to ISF Advisors, a sector-specific strategy group.

Reliably, ISF estimates that about 220,000 “agri-SMEs” in sub-Saharan Africa and Southeast Asia need a total of $160 billion in financing; but only $54 billion of that amount is being met through formal channels.

Going by the Africa Agribusiness Outlook 2022 report by AGRA and KPMG East Africa, SMEs are keen on increasing investments in affordable smart technologies for small farms as part of a measure to transform agriculture on the continent.Improving local agricultural production through the promotion of the adoption of modern agriculture is a priority for governments in Nigeria and the other parts of Africa. This is in line with their strategies to enhance food security.

And in support of this, many development and strategic partners have joined forces with the Federal Government to explore opportunities that drive agricultural production, and launch appropriate financing schemes to attract agro entrepreneurs. This ranges from support of agritech startups in grants and incentives assist support for SMEs in the agriculture and food landscapes to rebuild and strengthen their businesses.

Only last year, MasterCard Foundation launched a $200million fund for African SMEs. The MasterCard Foundation Africa Growth Fund (MFAGF), supports early-stage, growth-oriented SMEs on the continent. The goal of the MasterCard Foundation Africa Growth Fund is to enable dignified and fulfilling work for youths, particularly young women. The fund of funds is bold and catalytic, helping to crowd in capital for African entrepreneurs by strengthening and de-risking African investment vehicles that are committed to advancing gender equity in entrepreneurship. As concerns increase over the ageing farming population, MasterCard Foundation and the International Institute of Tropical Agriculture (IITA) have announced plans to increase youth participation in the agricultural sector through building creative and digital skills.

Now, the Country Head, Nigeria, MasterCard Foundation, Chidinma Lawanson, at the Agribusiness investors’ network organised by the Innovative Youth in Agriculture (I-Youth), said the foundation has identified agriculture, creative and digital sectors to achieve the feat.

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In her view, the challenge of agriculture for the youth is that they only think in terms of drudgery, saying that they are automatically attracted to the creative sector and not to agriculture. She, however, stated that the foundation plans to create at least 30 million work opportunities for young Africans by 2030.

Meanwhile, USAID grants are awarded based on the capacity and promise to implement impactful agriculture investments that can drive long-term growth in the sector. Microsoft, in partnership with Pangea Trust, with the support of Seed Builders inaugurated a startup accelerator programme to foster a culture of innovation among African startups. The Acceleration programme enables and empowers agri-food tech entrepreneurs with the skills and resources needed to build successful and thriving agri-food tech businesses across Nigeria.

Then, apart from this, the African Development Bank (AfDB) has established Creating Sustainable Youth MSMEs Through Urban Farming (SYMUF) initiative, to support young farmers in Nigeria, the Democratic Republic of the Congo (DRC) and Uganda, attracted to urban farming.The bank is partnering a consortium of incubation centres in participating countries to implement the project. They are the Africa Projects Development Centre (APDC) in Nigeria, the International Institute of Tropical Agriculture (IITA-Bukavu) in the DRC, and the African Agribusiness Incubation Network in Uganda.

Also, the SYMUF project has received $937,000 in grant from the Fund for African Private Sector Assistance, a multi-donor trust fund managed by the AfDB. While in different regions of the continent, the three countries grapple with high youth unemployment and limited economic opportunities.

Notably, SYMUF, which is under the bank’s Empowering Novel Agri-Business Led Employment (ENABLE) Youth Programme, will use business incubators and financial products to help transform start-up micro, small and medium enterprises into bankable ventures. It will provide youths with agribusiness and technical skills, including climate-smart agriculture practices, technologies, market networks, and professional mentorship.

Significantly, the Chief Executive, African Agribusiness Incubation Network in Uganda, Alex Ariho, said the SYMUF project would help young African ‘agripreneurs’ overcome start-up incubation and management challenges.

“Working together with all the partners, we are committed to making the SYMUF Project one of the best projects sponsored by the African Development Bank,” he added. The bank has invested over $400 million in 15 African countries under the programme,” he said.

It’s worthy of mention that the bank has committed to investing in financial services and products designed to strengthen the agricultural business sector in poor communities. Also, Germany’s Ministry for Economic Development and Cooperation’s (BMZ) is working with International Fund for Agricultural Development to provide SMEs with better access to finance through IFAD’s Private Sector Financing Programme (PSFP), particularly in nie African countries (Benin, Burkina Faso, Cameroon, Côte d’Ivoire, Malawi, Mali, Nigeria, Togo, and Zambia).

IFAD President, Alvaro Lario said, ”Agricultural SMEs along the food value chain are essential to small-scale farmers. They provide services, input, and link to a multitude of market opportunities, increased incomes and employment in rural areas.”

Reletively speaking, as Nigeria and other parts of Africa are developing, the agricultural sector faces enormous challenges to growth, with systemic problems of water scarcity, the energy transition among others. Deputy Managing Director, Project Incubation West Africa, OCP Africa, Caleb Usoh, believes the startup sector provides a testing ground for new ideas and technology aimed at solving the problems of tomorrow.

In this regard, he said the company is working on supporting agritech startups to embrace diversification and support agric SMES in enabling long-term growth.The incubation programme, according to him, will be designed to inspire the country’s future generation of AgriTech entrepreneurs. He is convinced Nigeria has the potential to position itself as a major innovation hub in the agro-industrial sector in Africa. Still in the work, the programme, according to him, is dedicated to innovative solutions in agro-industrial value chain and other sectors.

Interestingly, Heifer’s Country Director, Rufus Idris, believes that initiating and equipping the sector’s stakeholders with the latest technologies available is fundamental. For this reason, the organisation is empowering more tech entrepreneurs provide solutions to allow farmers to make the best decision at the right time.

Additionally, Heifer International’s AYuTe Africa Challenge launched a new national competition to boost agriculture across Africa. The contest offered young entrepreneurs in Nigeria the opportunity to pitch for investment in their agritech solutions to boost the incomes and productivity of Africa’s smallholder farmers with a $20,000 for winners.

He stated that, “The National competition in Nigeria has been initiated as an enterprise development programme to further identify, nurture and support innovative, relevant and technology-driven agriccentric enterprises to grow, scale and thrive. Idris said the programme was initiated to support innovative, relevant and technology driven agriccentric enterprises. Three agritech innovators won the Heifer International ‘AYuTe Africa Challenge Nigeria’$20,000 grant to shape the narrative of agriculture in Nigeria using technology, as well as to reimagine farming and food production across the continent.”

The recorded five finalists reached the grand finale out of over 600 entries, which was held in Lagos, with Soupah Farm-en-Market Limited emerging first to get $10, 000, Simkay Foods Limited emerged second to get $6, 000, while Evet Technology got $4, 000 for third place. Idris said the country’s agriculture is one of the most underperforming in yields and productivity, as well as under-mechanised where families have no choice but to engage in manual labour that sometimes could be more expensive. He said there are smallholder farmers that are operating in regions vulnerable to farming chain impacts, such as flood, drought, pest and diseases.

Further he said, ”We are also operating a sector where small holder farmers are struggling and living in poverty because they cannot access essential services, care market, improved input and seeds, as well as finance and technology that can help them to increase and improve their productivity.

“Nigeria and Africa’s small rural farmers’population are aging. We have an average of 60 years old and the younger ones are not interested in replacing those that have retired,” he maintained.

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And then he said to address these issues, Heifer International invests more than $1.5 million to accelerate digital agriculture entrepreneurship in Africa through the AYuTe Africa Challenge grants to support promising young agritech innovators across Africa who are using technology to reimagine farming and food production across the continent. There is, undeniably, a huge scope for bringing in innovations in agriculture sector, according to Lagos State Commissioner for Agriculture, Ms. Abiola Olusanya, who observed that the turbulent times of climate change and other challenges require action from tech entrepreneurs to ensure growth and sustainability for agri-preneurs.

Accordingly, with farmers being on the top of the priority list of the government, she reiterated that every effort is made to ensure innovative agriculture contribute immensely to make Lagos self-sufficient in food production. She reiterated the need to build capacities to promote agriculture as agri-SMEs are a vital piece in the puzzle to address the food crisis. In 2021, investments into agritech startups in Africa hit $ 482.3 million.

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