How a return to Agriculture will drive economies | KPMG | SG

The Phoenix Rises – How a return to Agriculture will drive economies

How a return to Agriculture will drive economies

This article first appeared on WEFLIVE 2017.

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While not often considered a “sexy” sector, Agriculture is drawing increasing investments and propelling rampant economic growth. Employment in Agriculture still represents about 20% of the global workforce and is critical in many developing nations. Indeed, with the drop in crude oil prices and minerals, many developing nations are rethinking their future sustainability, food security issues, and employment creation. The opportunity is there, but there are considerable challenges too.

The northern hemisphere has largely mechanized its crop business as it has large swathes of flat land, crops that lend themselves to this, and abundant access to water, electricity, fuel, technologies and funds. 

This is not the case in the tropics and southern hemisphere. Access to seeds, fertilizers, and technology is not so easy, funds are often not readily available, and infrastructure not in place to import and export goods.

 

So, what needs to be done?

To address the first part of the question, a combination of forces is needed -- support and expertise of development assistance and investment from the private sector. Several factors can facilitate this.

First, there has to be a shift in mindset by corporates towards smallholders. At some point in time, if the supplier-buyer model does not shift to one of partnership with full awareness that smallholder farmers need to be treated fairly and provided the proper incentives to grow their crops, then they will gradually abandon their business or their children will not want to take over in time.

Second, governments, private enterprise, and financial institutions will need to work hand in hand to ensure that agricultural projects receive the investments they require.

And third, the real challenge, particularly in developing nations will be to learn new skills, gain access to new technology and increase productivity. For governments, this will entail diversifying their crop base and looking at how to create downstream value addition to the crops produced.

Herein lies the opportunity for change. Technology has shown that it can unlock the potential of many industries, and Agriculture is no different. VC’s are now pouring money into companies that can transform agriculture, be it in biotech, precision agriculture, or digital such as IoT solutions or Blockchain.

With increasing population that is becoming wealthier at one end of the spectrum, and millions still to achieve food security on the other end, there may never have been a better time to turn our attention to Agriculture.

Chris de Lavigne is Principal, Strategy at KPMG in Singapore. Chris specializes in agricultural commodities.

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