Impact of COVID-19 on agribusiness and the food industry in African and Asian markets
As the COVID-19 pandemic has unfolded, concerns over ensuring food security have been voiced in many countries around the world. While the crisis has immediate effects on food and agricultural supply chains, the negative impact of the COVID-19 pandemic is not limited to short-term disruptions in supply and demand.
Considering that the food and agricultural sector accounts for ten per cent of global GDP and employs an estimated 1.5 billion people worldwide, the outbreak of COVID-19 will likely have far-reaching and noticeable social and economic consequences for the sector.
In order to evaluate those effects, the UNIDO Investment and Technology Promotion Office (ITPO) Germany, in cooperation with the German Agricultural Society (DLG e.V.), and SmartHectar Innovation, initiated an online survey among 800 companies from the European and especially German food and agricultural sector with business activities in African and Southeast-Asian markets.
The survey was conducted by dimap, the German Institute for Market and Political Research, between June and July 2020. The majority of participants were small and medium-sized enterprises (SMEs) headquartered in Europe, while a third of the participants represent larger corporations. Two-thirds of the respondents generate more than half of their annual turnover on foreign markets.
The survey confirmed that the coronavirus pandemic indeed represents a huge challenge to companies operating in the food and agribusiness sectors. While the immediate effects on business operations in African and Southeast-Asian markets are still limited, they are already more pronounced in Europe in the form of reduced production and cancelled orders. However, despite the looming crisis, the long-term outlook of most companies remains rather positive, with only about ten per cent of respondents pondering layoffs or closing down part of their business in foreign markets.
More diversified product, supplier and customer base as long-term strategy
The survey further revealed that many companies see diversifying their product, supplier and customer base as the suitable medium- to long-term strategy to cope with the effects of the crisis. Moreover, one-third of respondents consider expanding their research and development activities as a response to the pandemic.
A majority of SMEs see the opening of new markets and continued international expansion as the right way to adapt to the crisis. Keeping markets open is seen as crucial to ensure global food supplies and to maintain social and economic stability.
The respondents are convinced that trade liberalization has to be accompanied by active measures to strengthen local supply chains and to facilitate industrial upgrading of agricultural and food-processing industries.
The results of the survey validate the approach of ITPO Germany and its partners in their continued efforts to support technology providers and investors in the food-processing and agricultural sectors in developing countries and emerging markets, particularly in Africa and Southeast Asia.