The agriculture sector, comprising of crops, livestock, forests and fish, is an important sector for the country, contributing 7.5% in 2020 to Zambia’s Gross Domestic Product (GDP. Further, agriculture employs almost a quarter of Zambia’s labour force at about 23.3%, as per the 2019 Labour Force Survey. With the agriculture sector offering a huge stream of employment, it remains an important contributor to the socio-economic development of the country. The question then becomes, what steps can be taken to effectively undertake value addition in the sector?
Though agriculture is historically and culturally an important sector in Zambia, harvests from the sector continue to be afflicted with little or no value addition. ZamStats shows that on average the contribution of agro-processing to GDP from 2010 to 2020 has been in the region of about 2.5%, showing that more value needs to be added to the numerous agricultural output produced. To remedy the stagnation, the National Industrial Policy was introduced in 2018, which made processed foods a priority sector; with support to agriculture ramped up to ensure that raw materials were available for food processing as well as support to development of infrastructure in areas with agricultural raw materials and markets. Despite this, agro-processing continued to stagnate at 2.5% of GDP each year from 2018 to 2020.
One of the ways in which the lack of value addition manifests itself is in the continuous export of agricultural raw produce from Zambia. Perusal of the International Trade Centre statistics shows that, the export of raw agriculture produce accounted for about 9% of total exports in 2020. Looking at the maize value chain in Zambia, raw maize exports for instance, were worth US$36 million dollars in 2019 even though local consumption of value-added maize products, such as cornflakes has been on the rise. In the same year of reference, Zambia imported about US$2 million worth of cornflakes and maize cereals, despite producing over 2 million tonnes of maize, as was shown by the Food and Agriculture Organisation.
The underutilization of agricultural outputs is imminent as illustrated in Zambia’s maize value chain. Value addition continued to be at the basic level, mainly focused on producing maize meal, which is the staple food. Other basic maize products such as maize bran and groats were also produces and their exports were to the tune of US$16 million in 2020, exemplifying that Zambia continues to be an agrarian economy, exporting grains and other basic agricultural products in their raw form.
Transitioning from agriculture to agro-processing is a necessary condition needed to enhance social development in the country and increase exports of value-added goods. Increased value addition to agricultural products not only has the potential to increase GDP, but it additionally creates job opportunities in the manufacturing sector and agricultural sector, due to its forward and backward linkages. Some of the simple agro-processing opportunities in the country include: the production of peanut butter, cashew nut processing, production of animal feed, cassava processing, honey processing, production of edible oil and many others.
Driving the lack of growth in agro-processing is the mismatch between the available raw materials, as well as the market and processing opportunities. As was aptly identified in the National Industrial Policy, for the agro-processing sector to thrive, the agricultural sector needs to grow along with agriculture because of the symbiotic relationship. Therefore, Government policy supporting agro processing e.g. the capital allowances in cassava, mango and pineapple should be closely aligned to priorities in the agriculture sector and extended to these products. For instance, the farmer input support programme should extend funding to promote cassava, mango and pineapple because they become the primary source of inputs for processing.
By virtue of being one of the largest manufacturing subsectors in Zambia, agro-processing is comprised of many small and medium enterprises (SME’s), who lack access to finance to scale up their production and utilise export markets. Finance constraints have hindered the growth of this subsector, which is a low hanging fruit, given the numerous opportunities that lie in agro-processing. High demand of valued added agricultural products within the Zambian market as well as the commencement of the Africa Continental Free Trade (AfCFTA), provide a larger market away from our borders which can be utilised as an export destination. Empowerment opportunities in institutions such as Citizens Economic Empowerment Commission are also skewed towards farming and not processing.
In order to spur value addition in the agro-processing sector, the Government will need to create funding opportunities targeted at SMEs for processing machinery, equipment and technology. This will facilitate value chain development from crop production and output to the different stages in the value chain required to produce a final product. The creation of the Ministry of Small and Medium Enterprises in Zambia a step towards the value creation strategy as it will aid SME’s in agro-processing in undertaking business.
The mandate of this new ministry should also extend from business incubation and development to easing access to finance and providing preferential procurement for SMEs in government entities, particularly for those SME’s in the agro-processing sector. Ultimately, this will enhance the drive to ensure success in the agro-processing sector and allow for increased value addition to outputs from the agriculture sector.
