This document discusses the role of small and medium enterprises (SMEs) in promoting science, technology, and innovation for food security and sustainable agriculture in Africa. It outlines that SMEs face many constraints, including lack of political support, low productivity, cheap imports, an unfavorable policy environment, lack of infrastructure, and limited access to finance. However, SMEs can play a key role if governments provide a supportive policy environment, promote collaboration between SMEs and research institutions, support partnerships between SMEs and large firms, and increase financial and technical assistance to SMEs.
Expense Management Maximizing Efficiency for Business Success
The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture
1. The Role of SMEs in promoting
Science, Technology and Innovation
in Food Security and Sustainable
Agriculture
By:
Ambassador Wendell McIntosh
(President / Chairman of ADA
COMMERCIAL INC., Monrovia, Liberia)
At the occasion of the 5th EABF and 4th EU-Africa Summit on
31st March 2014 in Brussels, Belgium
2. Outline of Presentation
1. Challenges in African Agriculture
2. Contributions of SMEs
3. Constraints faced by Agribusiness SMEs
4. Way forward (Roles of SMEs in innovations for
food security)
5. Conclusions
6. Recommendations
7. Research needs
3. 1. Challenges for agricultural SMEs
• SMEs in Africa have failed to be a major force in
advancing Science and Technology Innovations,
especially in our agricultural productive systems
• Agricultural productivity remains low.
• There is heavy reliance on food aid and food
imports in Africa.
• Problem mainly attributed to business and policy
environments not conducive for SMEs to operate
and compete in domestic and international
markets.
4. Challenges for agricultural SMEs
• Some of the unfavourable situations hindering SME
growth and development in Africa include:
– Unstable political climate;
– Lack of business and investor confidence in the economy;
– Unstable and unpredictable macroeconomic environment;
– The difficulty in doing business, and
– The perceived corruption of governments in most African
countries.
5. Challenges for agricultural SMEs
• Africa’s ability to break the relative food
insecurity and poverty challenges would largely
depend on:
– Public sector/government leadership to harnesses
the entrepreneurial and/or innovative potentials of
agribusinesses in the private sector,
– Technical and financial support to the efforts of
especially infant and distressed agribusinesses.
6. 2. Contributions of SMEs
• SMEs have been defined variously depending on the
context.
• The Ministry of Commerce and Industry of Liberia
defines Micro, Small, and Medium-Scale Enterprises
(MSMEs) in terms of full-time, non-family employment:
– Microenterprises (0-3)
– Small Enterprises (4-20)
– Medium Enterprises (21-50), and
– Large Enterprises (> 50)
• Irrespective of the definition, SMEs create employment
and contribute substantially to the GDP of their
respective countries
7. Contributions of SMEs
• Contribution of SMEs in Liberia:
– Serve as a source of family income for over 80% of Liberians
– Contribute about 20-30% of the value of manufacturing output
– SME manufacturing firms contribute a maximum of about 2% to
GDP.
– SMEs engaged in trade and services in Liberia account for about 2-
3% of GDP.
• In Ghana:
– SMEs provides about 85% of manufacturing employment
– Contributes about 70% to GDP, and
– Account for about 92% of businesses.
• In Republic of South Africa:
– About 91% of the formal business entities
– Contributes between 52 to 57% to GDP, and
– Provide about 61% to employment in that county.
8. Contributions of SMEs
• Compare to China (2012):
– SMEs in China comprise 99 % of all firms
– Account for 60% of GDP and fiscal revenues, and
– Employ nearly 80% of the country's population
(Ministry of Industry and Information Technology)
– Accounted for 65% of the country's all invention patents,
– 75% of corporate innovations, and
– 80% of new product developments.
9. 3. Constraints faced by Agribusiness SMEs
• Several constraints hinder innovative potential of SMEs
to break through the food insecurity and poverty cycles.
CONSTRAINTS
1. Lack of political will on the part of government
– Claim by governments to put agriculture first in its
development and food security agenda not credible.
– CAADP targets not fulfilled by almost all African
governments
• Increase agricultural production by 6% per year
• Increasing public spending in agriculture by devoting at least
10% of their annual budget to agriculture.
10. Constraints faced by Agribusiness SMEs
• Empirical evidence: most African governments
have not been committed to these target.
2. Low productivity
• Farms in Africa characterized by low productivity.
• Appropriate technological innovations with external
inputs is a key challenge for most African peasant
farmers.
• Some research findings have contributed to
productivity improvements.
• Some technologies are difficult to adopt based on
socio-economic and socio-cultural factors.
11. 3. Cheaper imports into domestic markets
• SMEs in Liberia, for example, have not fully exploited the
benefits of globalization.
• Developing countries under pressure from the influx of
cheaper (and sometimes inferior) foreign imports onto
the domestic market.
• This unfair competition is a major challenge for SMEs in
Liberia and African in general.
• Evidence:
• Liberia currently challenged with cheap rice imports of low
quality
• Yet potential and capacity exists, through ADA COMMERCIAL’s
proven experience, to produce, supply, and saturate the
domestic market with quality milled rice at competitive prices.
Constraints faced by Agribusiness SMEs
12. 4. The policy and regulatory environment
• A conducive policy and regulatory environment
necessary for SMEs to operate efficiently.
• Available evidence:
– General policy environment in Africa is weak and
sometimes non-existent .
– Farmers and agribusinesses unable to efficiently compete
and prosper.
– The policy environment does not provide safety nets for
start-ups and distressed businesses to manage risks from
foreign competition.
– Local agribusiness entrepreneurs either neglected or
discriminated against by their own national governments
in favour of foreign companies.
Constraints faced by Agribusiness SMEs
13. 5. Infrastructure Policy
• Good infrastructure facilities provide a conducive
environment for productive SME activities growth.
• Lack or inadequate infrastructure, such as roads
(trunk, feeder, and first class roads), electricity,
water, telecommunication, research facilities, etc.
• The enabling environment upon which private sector
(SMEs) can depend on to spur growth and
development is mainly absent
Constraints faced by Agribusiness SMEs
14. 6. Lack of Access to Finance
• Access to finance remains a major challenge to most SMEs in
Liberia and Africa.
• Agribusiness is a profitable venture and perceived as very risky
– Therefore discriminated against by financial institutions and national
governments for support.
• SMEs (from production to distribution to value addition) have
been crippled by the lack of financial support.
• Very little done by African governments to adequately support
SMEs access loans at low interest rates.
• For example, interest rates charged to SMEs in Liberia, Ghana
and South Africa on average are above 29%.
Constraints faced by Agribusiness SMEs
15. 4. Way forward
• Agriculture is a big business and Africa
considered as last agricultural frontier to feed the
world.
• African SMEs in the agribusiness sector need
innovative pro-poor sustained strategies that will
guarantee food security using appropriate
technologies.
16. 1. Workable science and technological
innovations policy
• Research institutions in Africa need to re-examine the
kinds of research output they produce and how it has
benefitted the agricultural sector.
• A forum should be created where SMEs (including
farmers) could regularly meet with Ministry of
Agriculture and other relevant Ministries, Research and
financial institutions to understand the needs and
concerns of agribusinesses.
Way forward
17. • SMEs could lead the direction of technological
innovations from the research institutions
• SMEs can directly engage other essential stakeholders,
including researchers for appropriate and improved
seed varieties that will improve on the food security
situation.
• For example, ADA Commercial is linking up with Africa
Rice Centre to ensure the right rice varieties suited for
the Liberian climate are produced:
• In commercial quantities for massive mechanized
rice production in Lofa and Nimba Counties in
Liberia.
Way forward
18. 2. Innovation for competitiveness
• Strategic linkages and collaborations between
agricultural research institutions across Africa
and individual SMEs need to identified and
mapped out for specific demand-driven
innovations.
Way forward
19. 3. Collaboration with big firms
• Cooperation with big firms will enable SMEs
withstand various levels of risk which will put them
in a better position to be resilient to unfavourable
economic difficulties.
• Off take agreements need to be signed with key
institutions to guarantee ready markets for
agribusiness SMEs.
• For example, ADA Commercial has signed an off take
agreement with ECOWAS to:
– Produce and supply rice
– To feed the Food Banks of all ECOWAS Member States
Way forward
20. 4. Financial and technical support
• Agriculture and related agribusinesses require both financial
and technical support from governments and private sector.
• Promising and strategic agribusinesses need to be deliberately
identified by governments and key stakeholders
• Special attention devoted to them in terms of technical and
financial support.
• An example: ADA Commercial has land and machinery and
equipment to commercially produce and supply grains to the
ECOWAS sub-region.
• Capital injection with appropriate partnerships is required to
succeed in such agribusiness ventures.
Way forward
21. • Agribusiness SMEs can lead the quest for
appropriate technological innovations for
increased food security for sustained agriculture.
• ADA Commercial in Liberia has the experience
and capable of spearheading the agricultural
technological drive in the rice sector.
5. Conclusions
22. 6. Recommendations
• Serious brainstorming sessions required on the
part of Government, Ministry of Agriculture, and
financial institutions to define modalities for
supporting Agribusiness SMEs.
• There is the need to deliberately identify and
support SMEs with the capacity to go into large
scale production.
• Agribusiness SMEs must partner with research
institutions to produce appropriate innovations.
23. 7. Research needs
Small and suitable field production machinery
• Pre-harvest mechanization: Precision planting,
nursery industry and efficient use of water
• Improvement of agricultural technology and
system management
• Post harvest mechanization for processing of
agricultural product
Renewable energy technology
• furnaces for bio char
• Bio gas digesters