By: Igwe Chinonso
Starvation and hunger in many places in Africa is seen as one of the economic and humanitarian challenges that the world faces. Though Africa has the potential of being the Agricultural hub of the world, millions of its people still find it hard to access nutritious foods. To securely tackle this issue, there is a need for the existence of food security. Food security does not only refer to the availability of food, but also the sustained access and its utilisation by people (IDH, n.d.). Making provision for food security demands that the agricultural sector of Africa will have to develop a value chain resilience. Value chain resilience is the ability of agricultural systems to absorb shocks such as pandemic, climate change or drought and keep food flowing from farms to plates (Vroegindewey & Hodbod, 2018). To be able to undertake and strengthen these systems, there is a need for strategic investment. Private equity can serve as one such strategic investment. It is a form of long-term capital investment that has its focus on growth and returns. If implemented, it can help in unlocking the large financing that is required to modernize Agriculture and the food system resilience of Africa. However, it does not come without its challenges, which must be addressed in order to achieve inclusive impact.
Why Private Equity Matters for Africa’s Food Systems
Though the majority of Africa’s workforce is employed by the Agricultural sector, traditional financing from commercial banks and financial institutions is still not sufficient enough to meet the needs of the sector. It is reported that on an annual basis, sub-Saharan Africa has an Agriculture funding gap of over $180 billion (AVPA, 2024). This is mainly because lenders see Agricultural lending as high risk and costly due to variables like limited infrastructure, climate variability and price volatility (Chikore et al., 2025).
This is where private equity (PE) comes in. Private equity matters because it fills the financial gaps. Private equity provides long term investments unlike banks loans that are short term. This system is able to absorb the risks and delayed return that is well-known in any agricultural venture. PE helps in unlocking agriculture investments would otherwise be risky or capital intensive for lenders (Silici & Locke, 2013).
The potential of Agricultural growth in Africa is enormous. This is as a result of its teaming population and growing demands for food. There are available opportunities in scaling production lines and processing across the value chain. With the help of the flexible capital that private equity provides, Agribusiness SMEs can expand, adopt the use of modern technologies and improve the quantity and quality of yields in order to meet growing food demands (Schoneveld, 2022).
In the face of climate change and global shocks, the need for value chain resilience is paramount for the Agricultural sector in Africa. This resilience can come in the way of diversifying facilities used for processing, improvement of infrastructures and better logistics. All these are capital intensive. Private equity can help by supporting investment models that are climate-smart and risk-adjusted, thereby providing a sustainable and robust food system in the long term.
Key Ways Private Equity Can Improve Food Security
In the food system of Africa, one of the most impactful roles of private equity is financing critical infrastructures that markets and smallholders cannot finance on their own. When investments are made on storage, processing facilities or cold chain logistics, it directly addresses one of the biggest problems of food security. For example, in Kenya, private equity investments through funds such as ARCH Cold Chain Solutions fund are building cold temperature-controlled facilities in order to reduce the amount of foods that spoil and also improve the quality of foods from the farm by way of distribution (European Investment Bank, 2023). This kind of investment can help in cutting down the amount of food that wastes due to inadequate storage and transport.
Additionally, private equity helps in transforming the value chain by way of investing in companies that link farmers to the market. Doing so helps in improving market competitiveness and streamlining logistics (Harant, 2025). Private equity also facilitates a faster and more reliable movement of goods from farmers to consumers by investing capital into processing plants, value-added enterprises and transport networks. This leads to strengthening of the supply chains while creating more jobs and stabilizing the food system of Africa.
Lastly, private equity inspires innovations such as agritech platforms and digital financial services, which eventually reaches smallholders. Equity investors are increasingly attracted to start-ups such as finance platforms and digital marketplaces which bridges the supply chain gaps between farmers and consumers. The resultant effect is the improved access to markets, reduce transaction costs and promote resilience within value chains. In Ghana, platforms that are funded by private equity such as Farmerline give out data-driven advice and inputs, which invariably raises productivity by 20% - 30% (Farmerline, 2024). This goes to show how much impact PE has made in the food security system of Africa.
Risks and Limits of Private Equity
There are significant risks and limits that surround private equity in the African food system irrespective of the roles it plays. One of such limitations is the risk-averse nature of PE, where many funds pay more attention to larger and commercially attractive enterprises over small and remote regions (Mncube, 2025). This tends to leave the majority of smallholder producers underserved and excluded from the value chain. This trend shows on a broader level how investments concentrate capital flows in countries or businesses that have lower risk, leaving the rural markets behind.
There are also concerns in regards to social inclusion in the sphere of private equity. Private investments are more likely to focus their gains on larger Agribusiness or elite actors in the sector (Silici & Locke, 2013). This results in a situation where there is no meaningful integration of local smallholders and women into investment strategies. It breeds inequalities in the system, not giving those at the lower end a chance to grow and access market opportunities.
Furthermore, the impact that private equity has on agribusinesses are limited by the absence of strong supportive policies and regulatory frameworks. Private capitals will not be able to tackle the problems of food security if there are no targeted interventions from the government in terms of risk-sharing schemes, protection of land rights, incentives for inclusive business models etc (Ikuemonisan, 2024). These and many more are some of the limitations and risks that surround the role of private equity in food security in Africa.
Conclusion
From all indications, private equity has the potential to be the catalyst behind food security and value chain resilience in Africa. It has the ability to unlock the long-term capital that is needed for innovation, market linkages and infrastructure. This can inadvertently transform rural economies, reduce the deficiencies in the food system and lead to enhanced productivity. However, to do so requires inclusive investment strategies and government policies that are supportive so as to guide capitals towards smallholders and underserved communities in Africa. There is a need for collaboration among governments, investors and local actors in order to achieve a resilient and sustainable food system for the future of Africa.
References
AVPA. (2024, March 20). The state of agricultural financing in Africa. https://www.avpa.africa/the-state-of-agricultural-financing-in-africa/
Chikore, T., Mtema, K. N., Chirwa, P. B., Mkochi, C. R., & Nyabadza, F. (2025). A non-linear analysis of risk and agricultural financing decisions in Malawi. Scientific African, 29, e02824. https://doi.org/10.1016/j.sciaf.2025.e02824
European Investment Bank. (2023, November 29). Kenya: EIB supports cutting-edge cold storage facility.
https://www.eib.org/en/press/all/2023-479-eib-supports-africa-s-first-of-a-kind-cold-storage-facility-launch-in-kenya
Farmerline. (2024, July 15). Empowering agribusinesses in Ghana and Ivory Coast with Farmerline’s GROW program. Farmerline. https://farmerline.co/empowering-agribusinesses-in-ghana-and-ivory-coast-with-farmerlines-grow-program/
Harant, F. (2025, February 28). Private equity in agriculture: Evolving investment strategies and emerging trends. AgriBoom Ventures. https://agriboom.com/blog/private-equity-in-agriculture-evolving-investment-strategies-and-emerging-trends
IDH – The Sustainable Trade Initiative. (n.d.). Transforming food systems and value chains in Africa. https://www.idh.org/focus-areas/food-systems-transformation?utm_source=chatgpt.com
Ikuemonisan, E. S. (2024). Challenges and strategies in Nigerian agribusiness entrepreneurship for sustainable development. CABI Agriculture and Bioscience, 5, Article 115. https://doi.org/10.1186/s43170-024-00303-5
Mncube, V. S. (2025). Overcoming the funding dilemma for Small and Medium‑Sized Enterprises (SMEs) in Africa to unlock their unrealized potential. International Journal of Scientific Research and Management, 12(05), 61–83. https://doi.org/10.18535/ijsrm/v12i05.eps01
Schoneveld, G. C. (2022). Transforming food systems through inclusive agribusiness. World Development, 158, 105970. https://doi.org/10.1016/j.worlddev.2022.105970
Silici, L., & Locke, A. (2013). Private equity investments and agricultural development in Africa: Opportunities and challenges (Working Paper No. 62). Future Agricultures Consortium. https://www.rfilc.org/library/private-equity-investments-and-agricultural-development-in-africa-opportunities-and-challenges/
Vroegindewey, R., & Hodbod, J. (2018). Resilience of agricultural value chains in developing country contexts: A framework and assessment approach. Sustainability, 10(4), 916. https://doi.org/10.3390/su10040916
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