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).