Meaning of Agribusiness
According to Wills (2009), agribusiness is the off-farm link in agro-food value chains. It provides inputs to the farm sector and it links the farm sector to consumers through the handling, processing, transportation, marketing and distribution of food and other agricultural products. Thus, there are strong synergies between agribusiness and the performance of agriculture for development dynamic and efficient agribusiness spurs agricultural growth.
And a strong link between agribusiness and small holders can reduce rural poverty.
According to Ezike, et al (2009) define agribusiness as the process by which agricultural inputs are supplied or purchased and processed for eventual distribution to the target market as one fully in targeted business concern, which is simultaneously adjusting to changes that are constantly occurring in the global business environment.
Therefore, agribusiness is a sector that includes the sum total of all operation involved in the manufacturing and distribution of farm supplies, production operations on the farm, and storage processing and distribution of farm commodities and items made from them (Davis and Goldberg, 1957).
Concept of Agribusiness
The role of agribusiness in economic growth, development, employment and innovation has been a subject of interest to academic and policy makers alike. Agricultural related business activity, called agribusiness, can be defined as the sum of all operations in the economy involved in the farm supply, farm production, marketing distribution of agricultural products (Ezike et al, (2009). It cannots all organization whose basic raw materials or final outputs are agricultural or are for agriculture. Agribusiness defined in this way accounted for 4.8% of GDP in 2002-2003 of the Australian economy (Onyido, 2006) and one – fifth of Nigeria GNP in 2002. Agribusiness in Nigeria spans the entire agricultural production, processing, distribution and consumption spectrum from farm input supplies through firms themselves. Included also are wood producers, furniture manufactures, food producers, food packers, food transporters and food marketing companies. If agribusiness is stretched to the farthest limits, more than 75% of all business operation in Nigeria may be classified as agribusiness in form and or typology (Onyido, 2006) it provides a broad range of investment opportunities for both institutional and private investors.
Agribusiness enterprises in Nigeria can be classified into four major groups, farm input supply companies, producing farm firms, food processing agribusiness firms, and food marketing and distribution agribusiness organization.
Investment into agribusiness is widely propagated, within the agribusiness industry, particularly by the mangers of SMEs projects, and is sometimes believed that because agribusiness returns have a low correlation to other, they have potential to improve returns and reduces risk in a diversified portfolio (Hawkins and Hastive, 1990).
Agribusiness play an important role in the development of a countries, agricultural sector as suppliers of farming requisites, marketers of agricultural commodities and providing services such as storage and transport (Ortmann and king, 2007: 62).
Agribusiness refers to the back ward and forward business linkage associated with agricultural production, the provision of finance, machinery, fertilizer, seeds etc. at the input end and the processing and marketing of food/ food stuff at the output end. It is a modern form of agricultural business ventures operated strictly for profit (Olayide and Heady, 1982; Downey and Erickson, 1987).
The agribusiness sector is structured into small, medium and large-scale enterprises. Small-scale agribusiness is the one privately owned and operated. Agribusiness enterprise constitutes a vital engine for the growth and development of Nigeria economy. Omeresan (2004) observed that if this sector is to survive and grow in the present volatile business environment, appropriate strategies must be developed and adopted by entrepreneurs.
Factors Influencing Investment in Agribusiness
In most African countries, most of the participants in the agribusiness sector are small and medium scale entrepreneurs who find compliance to the standards very costly (Nomathemba, 2010). In the of Nomathemba (2010), lack of organization of small holders activities leads to high production and distribution costs mainly because individually they will be unable to take advantage of economic of scale. Producer organization make it easier for small holder producer to inputs and markets.
Additionally, cope and Walts (200) deduced that they can enhance the access of small holder farmers to agricultural credit, by reducing client analysis and selection cost for lenders, thus making them more attractive as borrowers.
Access to finance and technology is a critical factor in inverting into agribusiness. According to Nomathemba (2010), financial constraints in agriculture remain pervasive in many African due to an array of the sector and are severally limiting for small holders. For small holders farmers, financial constraints originate in the lack of asset ownership to serve as collateral and lack of access to affordable finance (World bank, 2007).
Again, Nomathemba (2010) observed corruption and bureaucratic customs processes add costs to doing business and there by reduce profitability of investments. For the agribusiness sector, given the perishability of most agricultural products, efficiency in moving produce is of great essence.
The level of infrastructure development in an economy influence the cost and efficiency of business operations. The limited availability and poor quality of roads and bridges in Nigeria and other African countries have been a major handicap to effective transportation of produce from the rural areas to various markets, resulting in high post- harvest losses and rendering agribusiness investment less profitable (World bank, 2007).
Similarly, access to other basic infrastructure, such as electricity and telephone lines in rural areas is limited.Dependability of infrastructure is also important, particularly for key utilities, notably electricity and water. In the light of it was observed that lack of adequate infrastructure in the united republic of Tanzania was blamed for high energy and transportation costs, which have caused the country’s commodities to be less competitive (Msuya, 2007).