Ayodeji Balogun, Group CEO, AFEX
Tackling hunger in Africa is one of Ayodeji Balogun’s life’s passions. He wants to see food security improved across the continent, and through AFEX, an agricultural, finance, and technology-based exchange, he has been working to promote Africa’s “agriculture-led development. Since its inception in 2014, AFEX has supported and improved the lives of more than 500,000 smallholder farmers and processed more than 500,000 metric tons of grain, with a turnover of over $300 million. During this time, AFEX secured more than $400 million in funding for the continent’s agriculture industry, including a recent $26.5 million pledge from UK development finance institution British International Investment.
AFEX’s ‘all-inclusive’ approach has since supported ancillary infrastructure essential for the growth of agriculture in general, while increasing the value of the commodity produced as capital through tradable eWarehouse receipts by increasing the market power of farmers and connecting them to agronomic training, inputs, and credit.
Currently, AFEX is active in 3 African countries and plans to expand to 10 countries over a 10-year period. These countries’ strategic positioning as trade hubs and the unique opportunities that AFEX identified in the eastern agricultural market drove this expansion. AFEX’s mission is to be a key enabler for intra-African trade coordination and to make it truly seamless for Africa to trade across borders and, ultimately, for the rest of the world to trade with Africa.
In this interview with Africa Executive, Ayodeji Balogun discusses the ways forward for food systems transformation and AFEX’s strategic objectives to accelerate growth in key areas including infrastructure, agricultural credit and financing, market access for the agricultural value chain, and strengthening supply chains through coordination between farmers, processors, and possibly consumers.
Can you give us an overview of AFEX?
We started AFEX in 2014 with a resounding vision from our founding investors: to unlock capital for the smallest unit of business in Africa—smallholder farmers. Enmeshed in that vision was a quest to contribute to food security in Africa and to explore the commodity exchange model as a path to efficient and inclusive trade.
As a business, we have recorded a number of wins over the years. We especially hold dear our impact towards producers, and we have reached over 500,000 farmers over our operational locations since we started up. We have also unlocked over $400 million in financing for the agriculture sector on the continent during that period.
Today we are in 3 African countries, with a timeline to hit 10 total countries over a 10-year timeline. Our goal is to be a fundamental engine for intra-Africa trade coordination and make it truly seamless for Africa to trade across borders and ultimately for the rest of the world to trade with Africa.
What is food insecurity?
Food insecurity deals with questions of access and affordability. It’s a complex mix of challenges that make it impossible to get sufficient, safe, and nutritious food to meet dietary needs and live healthy, and it most definitely is a problem that requires a complex web of players to collaborate to solve.
What are the common misconceptions about food insecurity?
For us, it would be that any singular intervention can solve food insecurity. First, because the food value chain is a long and intricate one with a number of players contributing to it. This makes the food systems incredibly diverse, and it becomes necessary to incentivize players to play their parts to get things moving. Ideally, in Africa today, we have to simultaneously solve problems of knowledge, capital, and efficient market systems to deliver gains in our food security mission.
A second misconception is that we can tech our way out of a food deficit, even just on the level of unlocking capital. Africa needs incredible investment in infrastructure to truly move the needle on food insecurity.
What’s the difference between eating on a budget and experiencing food insecurity?
Access/Choice. Eating on a budget suggests that there is access to food. However, there is also a conscious effort to manage and limit one’s food expenses while still having access to an adequate and nutritionally balanced diet. On the other hand, food insecurity presents a complex and challenging scenario in which reliable access to adequate and nutritious food is compromised. It entails uncertainties and limitations that extend beyond simple budgeting, potentially significantly impacting an individual’s health and overall well-being.
What makes Africa especially vulnerable to food insecurity?
Africa Development Bank’s [AFDB] President, Akinwumi Adesina, always says that agriculture is business and not development. For so long, we have taken agriculture as a means of poverty eradication, and the result of that approach to agriculture has been creating fewer poor farmers.
The underlying thing is still that they are poor farmers. We have not created wealthy farmers as a continent over the last 3/4 decades. The last time we made wealthy farmers was in the early eighties, when we started seeing the continent’s entire market infrastructure collapse. Three decades after that, all farmers have remained poor. If you look at our production of food per capita, it has declined significantly. We have produced more people than the food we will use to feed them. Our value creation in agriculture has declined because we processed more food in decades past than we do today. This is a multiplier effect that has made the sector almost a poverty center. It is nearly an ill fate to be born by a smallholder farmer on the continent because immediately opportunities are not available for you.
Beyond hunger, how does food insecurity affect lives?
You will see around the food systems, particularly in Africa, that it is a sad truth that an average African family lives to eat. When we have 80 million poor people in a country of 200 million people, it just means that they are eating the least that they can, and 80% of their cash goes to just buying food. They almost exist to eat, unfortunately. When the economy does well and then they earn twice, a larger part of that incremental income still goes to feeding because now they can have protein with a meal or have an extra variety of meals on the weekend. We have a situation where both accessibility and affordability of food are undermined, keeping most people on the lower rungs of the hierarchy of needs. The effect is immense, affecting everything from physical health to mental well-being and educational opportunities to economic stability and social relationships.
What resources would you suggest for countries currently struggling with food insecurity?
As I mentioned before, three things are critical to turning this around and creating an efficient and sustainable food system on the continent. First is talent. We need to close the knowledge gap. Second, we need capital. We need to attract capital for the sector and not at the high-end, sort of large, macro-level, or big conglomerate level. We need to ensure that every smallholder farmer has access to credit to buy the input he needs, improving his productivity. The third part is that we need efficient market systems that ensure the farmer is not exposed to price volatility or the risk of not selling the commodities produced. The approach to solving these problems has been taking one, two, or any of these three things and creating solutions in isolation, and that approach does not create a systemic change. The continent needs systemic changes that simultaneously address the three things, bringing prosperity to players in this sector.
Another thought I have is the need to move away from a complete focus on smallholder farmers as a continent. We also need what I call mid-sized commercial farming. Farms between 30 and 50 hectares that are effectively cultivated and connected in an ecosystem that supports them These are the kinds of farms that will grow into African gazelles, fast-growing SMEs, and then national champions in a decade.
To what extent do food production and distribution systems in Africa reflect local needs, culture, and conditions?
We have families who are into their third generation of farming, handing down knowledge from generation to generation, but also increasingly extension support programs are coming in to teach more modern and adaptable techniques. So it really is a mix, just as it should be. The big change that needs to happen across most African societies is the departure from the idea of agriculture as a core subsistence activity. More farmers treating agriculture as a business and plugging in to the networks that support that are vital for us.
Why is international cooperation important for food security in Africa?
Food systems are interconnected. This can especially be seen with the crises of the past few years. Both COVID-19, the Russia-Ukraine conflict, and even climate change challenges have further underlined the need for cooperation across borders. This cooperation, though, should still see Africans leading the charge to feed Africa because we understand our food systems in depth and hold quite a lot of answers for their transformation.
Does Africa have to rely on international support for its food security?
Africa needs to unlock capital from a variety of sources to fund the non-negotiable food system transformation that it requires over the next couple of years. By 2050, Africa would have almost doubled its population in three decades. With this population currently growing faster than our food production output (volume), Africa is set on an unsustainable path. In light of this, the sector needs longer-term capital, with the understanding that investments in large-scale infrastructure, production, and value addition through processing will require patient capital. We could therefore think of this less as support and more as financing requirements that can be satisfied through a variety of local and international partners that understand the needs of the sector and industry, that have access to data and information to guide their decision-making, and that are connected to other players in a symbiotic and legitimate way.
How are food systems influencing and being impacted by climate change?
Agriculture has the potential to accelerate climate action, so how do we shape a food system that nourishes people, restores our environment, and adapts to changing weather? Specifically, how can climate technology transform our food systems to be climate-smart, ensuring we mitigate and adapt to the impact of climate change?
In Nigeria, for example, smallholder farmers are experiencing climate disasters, including increased flooding as well as drought across some states, which is made worse by a lack of access to seasonal climate and weather information services. The implication of this is a significantly lower production volume across the agricultural value chain. Additionally, one-third of the world’s droughts occur in sub-Saharan Africa, with Ethiopia and Kenya currently enduring the worst droughts in at least four decades. Torrential rains and floods are severely impacting countries such as Chad.
The time to innovate around Africa’s agriculture in the face of a climate crisis is now; however, it will require significant investment. Beyond the investment in the tools that allow farmers to adapt to climate change, there needs to be mitigation of further emissions and deforestation to prevent further disruptions to climate and the environment. Appropriate use of agricultural inputs is key to reducing emissions, and knowledge transfer can be supported by agritech as well. Furthermore, the traceability of traded commodities to farmers can identify and mitigate deforestation risks, as is also required by upcoming EU due diligence. Traceability will likely become a requirement for access to markets.
What are African policymakers and citizens doing to transform food systems?
Through a range of initiatives, policymakers are implementing reforms to create an enabling environment for agriculture, focusing on sustainable practices and increased investment. A number of initiatives are being spearheaded from every corner, and we will continue to advocate for solutions that are scalable and that ensure that we can increase production, but we also continue to see the potential for increasing intra-Africa trade to plug demand and supply shortfalls across African countries. We were recently part of the founding members of the AfCFTA Association of Commodities Exchanges (A-ACX) after signing an MoU at the Intra-Africa Trade Fair in Cairo to promote intra-African trade in commodities, foster collaboration, and collectively address challenges and opportunities in the commodities exchange industry.
Are there any examples of cities or regions that could act as role models for transforming food systems?
To begin with, we should acknowledge and appreciate the progress and transformation that countries like Ethiopia and Cote d’Ivoire have made in their commodities sectors, enhancing value chains, attracting investment, and increasing production and processing capacities. Cote d’Ivoire has doubled cocoa output and processing in the past decade, while Tanzania has excelled in cashew production and trade.
How much work is being done to strengthen African food security and improve their resilience to such shocks?
When you are thinking about food security and agriculture, you are essentially thinking about a value chain. So many players have to play their part to ensure that food is available and accessible to everyone. At the heart of the AFEX model is incentivizing these players to collaborate and work together to achieve our food security goals as a continent. So there is definitely a lot of work being done both in the public and private sectors. Most African governments practice a very active policy environment for the agriculture sector in their countries, and a number of innovative agribusinesses have emerged over the years.
For over 9 years now, we have innovated around deploying infrastructure and driving access to capital and markets for stakeholders. With our ancillary infrastructure, we provide storage services for farmers and aggregate grains to enable farmers to access larger markets. The clear implication of solving for infrastructure first is that it helps drastically reduce post-harvest losses, which today is one of Africa’s largest problems.
Additionally, by connecting farmers to formal markets, we have been able to reduce bottlenecks along supply and demand chains. Through our digital trading platform, we have created a marketplace for buyers and sellers to trade and invest in commodity-backed investment contracts. Our solutions enable price transparency and standardization, boost export confidence, promote quality, provide better access to markets, and reduce the exploitation of farmers.
By connecting the financial markets to the commodities market through our platform, we are also able to unlock finance for the agriculture sector and improve productivity and yield. Our input financing program, for instance, allows us to provide essential productivity drivers such as quality seedlings and fertilizers for smallholder farmers, and through this program, we are able to deliver increased productivity for farmers.
Why is there such a large range of food insecurity prevalence estimates in Africa?
Like other continents, Africa faces a yearly increase in population, economic disparities, climate variability, political instability, infrastructure challenges, and discrepancies in data. These contribute extensively to food insecurity. Addressing these challenges requires nuanced interventions tailored to the conditions across the continent.
How are secondary impacts from the war in Ukraine affecting food security in Africa?
The Russian-Ukraine war exacerbated supply chain challenges, resulting in a global increase in food prices, particularly for grain commodities. The conflict has disrupted logistics for commodity-related activities in the Black Sea region. Specifically, fertilizer scarcity directly impacts the costs and productivity of primary agricultural production. Additionally, the import substitution quota for commodity production has been caught short.
AFEX recently received a US$26.5 million commitment from the BII. Tell us more about that.
The commitment aims to drive structural improvements in Africa’s agricultural industry, primarily focusing on supporting smallholder farmers and enhancing food security in the form of the construction of strategic smart warehouses across Nigeria, Kenya, and Uganda.
We believe that storage remains key to fixing some of the gaps in the commodities trading ecosystem in Africa. Storage infrastructure is essential for reducing post-harvest losses, upholding quality requirements, and enabling farmers to access more structured markets, which increases their earning potential. The prospects for innovative solutions around price discovery for farmers, traceability and transparency for buyers and final consumers, as well as data gathering on production levels for the country or continent, are also greatly improved by the deployment of adequate storage infrastructure.
What’s next for AFEX?
At AFEX, our mission is to help Africa feed itself, and this is represented in our strategic goals to drive growth in key areas such as infrastructure, agriculture credit and financing, improved market access for the agriculture value chain, and stronger supply chains by coordinating across farmers, processors, and potentially consumers.
We believe in our ability to continue to unlock capital for the sector and run programs that are both impactful and commercially sustainable. Our commodities exchange model facilitates access to crucial resources such as financing, storage facilities, and other essential services, which ultimately enhance productivity and competitiveness. It is a model that is a core aspect of the food system transformation that Africa requires and that we are happy to deploy alongside other innovative players.
We also remain bullish that the solutions that we have developed are scalable across other African countries, and we will continue to expand across the continent in a way that allows us enhance intra-Africa trade in key commodities, working alongside governments across Africa and other private sector players.
