New opportunities in the soft commodity sphere could become the driving force for Africa’s growth, writes GTR Deputy Editor, Shannon Manders.

Adding value in Africa

The growth of the global population – which reached 7 billion last week – is putting huge pressures on commodity supply chains.

The increase in demand for commodities is already being felt across the globe and, with the world’s population set to grow to 8.8 billion in 2050, will likely escalate in the coming years.

Many industries will be looking to take advantage of this growing consumer market, and food-related businesses in particular are set to cash in on the world’s baby boom.

The African continent, which has long been popular for its vast natural resources, is home to some of the world’s biggest soft commodity producers.

But for now, it seems that Africa may be missing a trick when it comes to obtaining the maximum benefit from its soft commodity exports. The continent has little to no infrastructure needed to process its abundance of raw commodities, such as cocoa, which is stunting its ability to generate added value and reap even more financial rewards.

How exactly it will achieve its goals of becoming a processing hub is a challenge that has yet to be solved. At Exporta’s West Africa trade & commodity finance conference, held in London last week, panellists were keen to debate the continent’s future of soft commodity processing.

Without the necessary infrastructure, it’s an unlikely prospect, said one Nigerian banker who believes that even if European processing units were to be relocated to Africa, it would not help Africa’s plight, as such plants would simply be European entities based in Africa.

But the capacity for processing soft commodities is increasing in both Nigeria and Côte d'Ivoire. According to an African development bank representative, there is a greater demand for financing to support processing activities, but a lack of interest from other banks to get involved in the mounting deals.

Another African banker at the conference identified the need for more development funds going into Africa and called for governments to work with agencies around the world in order to make this objective a reality.

His colleague at an international bank noted that “international commercial banks are not involved in the business of development, but rather in the business of shareholder returns”.

One might ask how Africa might ever come to prosper if international financiers think that they do not have a role to play in the continent’s growth.

Do you think banks should be more concerned about African development?