Agriculture enterprise development in rural Africa is complex and dynamic. Two thirds of Africans depend on agriculture for their livelihoods but there are huge sector inefficiencies and widespread 'supply chain disorganisation'. Common challenges are:
- 90% of smallholder farmers work in unorganised staple food markets, which currently have little or no points of aggregation. Less than 30% of Africa's agricultural production undergoes industrial processing.
- Many farmers produce small and unreliable volumes. Without coming together it is hard to find markets and engage external service providers. However, farmer organisation is limited in scope and capacity and farmer organisations often lack the support they need to be effective.
- There is nowhere for farmer organisations and aspiring entrepreneurs to go to find and access support relevant to their local context or to identify opportunities to access markets or supply chains.
- There is a lack of support to small-scale farmer enterprises at a pre-competitive stage. Many 'impact' investors have limited impact on poverty as their requirements (e.g. for legal structures and management capacity) make barriers to entry very high.
- There is a lack of trust because of perceptions of smallholder behaviour and of corporate exploitation. Smallholders can break long-term contracts when it is in short term advantage to do so by, for example, side-selling. Sometimes commercial companies default on deals.
There are also many opportunities:
- There are rapidly expanding domestic markets from increasing urbanisation and a growing number of people able to afford to eat better. Regional markets in Africa are opening and there is increasing interest in sourcing from smallholders in export markets.
- There is an increasingly positive policy environment. Private sector investment for sustainable growth in African agriculture is being encouraged and public private partnerships increasing. Globally there is recognition of the "impact economy"—one that promotes social, environmental, as well as economic value creation.
- Pluralism and demand orientation are guiding principles for rural advisory services . There are interesting innovations in services for rural entrepreneurs and in commercialisation of advisory and capacity building services . AAA can help make these accessible to small-scale producers and processors, building on the recognition of the importance of an enabling and facilitative approach to agricultural enterprise development – that process is more important than any specific form or model.
- Drivers of change in making links from small farms to markets in Africa are often private and internal, based on local agency . There is huge potential for further growth by broadening the opportunities for linkages.