Scaling up Africa's food systems: Innovative finance & investment for SMEs

Africa's small and medium-sized enterprises (SMEs) play a crucial role in ensuring food security, driving economic growth, and enhancing livelihoods across the continent. However, these enterprises often face significant challenges in accessing the necessary financing to scale up their operations and expand into new markets. In a recent interview with Lawrence Haddad, Executive Director at Global Alliance for Improved Nutrition (GAIN), CNBC Africa shed light on innovative finance and investment solutions aimed at bridging this gap and driving transformation within Africa's food systems. Haddad highlighted the unique position of African food systems, emphasizing the opportunity to learn from the mistakes of other global food systems. Unlike European, North American, and Asian counterparts that have focused on environmentally taxing, unhealthy, and expensive food choices, Africa has the chance to invest in sustainable, nutritious, and affordable food options. This strategic approach not only benefits consumer health but also contributes to environmental sustainability. The conversation delved into the critical role of the private sector, particularly small and medium enterprises, in shaping Africa's food landscape. While these enterprises predominantly cater to domestic markets, their impact on the food system is profound. Haddad emphasized the need to empower these SMEs with technical assistance, access to finance, and avenues for engaging with the government. He noted that SMEs are often overlooked by policymakers, labeling them as the 'hidden middle' rather than the 'missing middle'. Recognizing their significance, efforts are underway to provide support to SMEs through initiatives like the Nutritious Food Finance Facility (N3F). One of the key challenges faced by SMEs is the lack of access to affordable finance. While interest rates on loans provided by the N3F are slightly below market rates, the focus remains on offering flexibility in repayment terms and extensive technical assistance to ensure the success of SMEs. Haddad underscored the importance of striking a balance between affordable financing and fostering financial independence among businesses. Moreover, the conversation turned towards the role of government policies in influencing the success of SMEs. Haddad stressed the importance of collaboration between government agencies and private sector stakeholders to create an enabling environment for SME growth. By working closely with enterprise support organizations and advocating for market infrastructure development, GAIN aims to strengthen the linkages between SMEs and formal finance mechanisms over the long term. In light of the COVID-19 pandemic, the significance of market infrastructure has come to the forefront. By investing in modernizing food markets and enhancing food safety protocols, organizations like GAIN are not only supporting SMEs but also bolstering resilience within the food system. From cold storage facilities to improved hygiene standards, these initiatives are instrumental in safeguarding the livelihoods of SMEs and ensuring the continued availability of nutritious food options for consumers. As Africa navigates its food security landscape, the key lies in empowering SMEs through targeted financial support, technical assistance, and policy advocacy. By bridging the financing gap and strengthening the ecosystem for small and medium enterprises, the continent can pave the way for a more sustainable, inclusive, and prosperous food future. The journey towards transforming Africa's food systems is underway, with innovation and collaboration at its core.