Leveraging East Africa’s Soybean Opportunity: A Path to Economic and Agricultural Transformation

Kilimokwanza.org Team

According to a report by Gatsby Africa, the soybean value chain in East Africa holds immense potential for economic growth and agricultural resilience. Despite natural solid growing conditions, regional production remains low, with Uganda dominating at 90% of East Africa’s soybean production. However, the region is still heavily dependent on imports, with Kenya, Tanzania, and Uganda collectively importing USD 84 million worth of soybean and related products in 2022. This dependency underscores the untapped potential for local production to meet domestic and export demands.

• USD 84 million – The value of soybean and related products imported by Kenya, Tanzania, and Uganda in 2022.
• 90% – The percentage of East Africa’s soybean production dominated by Uganda.
• USD 23.5 million – Potential increase in farmer incomes per season if target yield of 2.2 MT per ha is achieved.
• 372 million MT – Global soybean production in 2021.USD 193 billion – Expected value of global trade in soybeans by 2028.
• 647-741 kg/ha – Average yield range for soybeans in Kenya, Tanzania, and Uganda.
• 41% – Labor’s share of production costs for a typical soybean grower in Kenya.
• 50,000 MT – Estimated soybean production needed in Tanzania to attract large-scale processing investments.
• 85% – Percentage of soybean produce used for animal feed production globally.500,000 direct jobs – Expected number of direct jobs generated by the soybean production strategy by 2027 in Tanzania.
• One million indirect jobs – Expected number of indirect jobs generated by the soybean production strategy by 2027 in Tanzania.
• USD 10 million – Expected annual savings in foreign exchange for Tanzania from 2023 due to soybean production.
• KES 100 billion – Expected contribution to GDP by soybean production by 2027 in Tanzania.
• USD 69 per MT – Premiums paid for non-GMO soybeans in 2022.
• 140,000 MT – Total volume of soybean and soybean product imports into East Africa from outside East and Southern Africa in 2020.
• USD 64.1 million – Value of soybean and soybean product imports into East Africa from outside East and Southern Africa in 2020.
• USD 11 million – Value of soybean imports into East Africa in 2020.
• USD 1.7 billion – Value of oilseed trade flows into East Africa in 2020.72% – Share of edible oil imports to the EAC accounted for by palm oil.
• USD 310.5 million – Value of Kenya’s edible oil exports, mainly to the EAC region, in 2022.
• 86% – Proportion of soybean product imports into East Africa constituted by oilcake in 2022.
• USD 39 million – Value of regional trade in soybean oilcake within East Africa.

Market Dynamics and Challenges

The demand for soybeans in East Africa is driven by rapid population growth and the rising need for soybean-based food and animal feed. Soybeans contribute significantly to food and nutritional security and the livestock and aquaculture sectors, enhancing soil health through nitrogen fixation. However, several factors constrained East African productivity and profitability.

Firstly, weak value chain linkages hinder the ability of farmers to access both input and output markets. Inadequate aggregation, storage, transport, and off-take arrangements result in unpredictable markets and limited access to secure output markets. This instability leaves farmers dependent on inconsistent traders, undermining their bargaining power.

Secondly, limited access to quality inputs like certified seed and inoculants is a significant barrier. Due to unpredictable demand, companies produce limited amounts of these inputs, making them scarce and expensive for farmers. The short shelf-life and sensitivity of soybean seeds and inoculants further complicate distribution and availability.

Thirdly, poor agronomic practices are widespread, with only 3% of farmers in East Africa adopting key good agricultural practices for soybean production. This low adoption rate leads to suboptimal yields, ranging from 647-741 kg/ha on average across Kenya, Tanzania, and Uganda. Of these, Kenya has the lowest yields.

Fourthly, high labor costs and limited mechanization drive up production costs. Soybean farming is labor-intensive, and in regions like Kenya, labor accounts for 41% of production costs. This high cost reduces the overall profitability for farmers.

Lastly, cost competitiveness and price volatility are ongoing challenges. Soybean meal and cake are optimal animal feed inputs, but alternative proteins like sunflower, cottonseed, and insect meal are often cheaper. Additionally, global commodity price volatility, over which the region has little influence, exacerbates the unpredictability of soybean prices.

Opportunities for Growth

Addressing these constraints requires strengthening value chain linkages and market pull to ensure farmers have assured markets for their produce. Key strategies include improving market access and establishing secure output markets, incentivizing investment in competitive processing operations, and scaling regional production to attract world-class processing investments.

Improving market access involves providing farmers with guaranteed off-take arrangements, which can create demand for specialized inputs like inoculants and improved seed varieties. These arrangements assure farmers of a market for their produce, encouraging them to invest in productivity-enhancing practices and inputs.

Incentivizing investment in competitive processing operations and downstream product development is crucial. The market pull for increased productivity and production can be strengthened by developing human foodstuffs and animal products from soybeans. This approach can drive the growth of local and regional markets, creating jobs and enhancing food security.

Scaling regional production to create sufficient volumes is essential for attracting large-scale processing investments. Drawing on the successes seen in Malawi and Zambia, Gatsby Africa estimates that in Tanzania, this tipping point is approximately 50,000 MT of soybean production. Achieving this production level could play a critical role in overcoming existing challenges and unlocking the potential of the soybean value chain.

The Role of Government and Development Partners

Governments and development partners can play a critical role in enabling the jump to 50,000 MT or more through several targeted actions. Facilitating market access, providing targeted incentives for businesses delivering specific sector services, and ensuring a stable policy environment are key areas where their support can be transformative.

Facilitating market access involves providing grants or tax breaks to firms developing soybean-based products and substantial incentives for investors in intensive and semi-intensive livestock farming. These measures can stimulate demand for soybeans and encourage investment in the value chain.

Providing targeted incentives for businesses that produce and distribute inoculants or improved seed and those offering services like mechanized land preparation, harvesting, and threshing is crucial. Incentivizing these businesses can help farmers optimize their investments, raise yields, and maximize returns, boosting regional competitiveness and attracting further investment.

Ensuring a stable policy environment is essential for reassuring businesses operating in the soybean sub-sector. This includes demonstrating a credible commitment to open soybean and soybean product trade policies, maintaining targeted investment promotion incentives, and securing effective sector regulation in licensing and market oversight. Stability in government decision-making can build investor confidence and support long-term growth in the soybean industry.

Lessons from Successful Case Studies

Examining successful soybean industry case studies can provide valuable insights for East Africa. In countries like Malawi and Zambia, coordinated efforts to address value chain constraints have led to significant increases in soybean production and processing capacity. These successes highlight the importance of a comprehensive approach that includes investment in processing facilities, farmer training, and strong market linkages.

The development of a robust soybean processing industry has been key to the sector’s growth in Malawi. By investing in processing facilities and ensuring reliable market access for farmers, Malawi has increased its soybean production and created jobs in processing and related industries. This approach has also improved food security and nutritional outcomes, demonstrating the multifaceted benefits of a strong soybean value chain.

In Zambia, a focus on farmer training and access to quality inputs has driven productivity gains. Programs that provide farmers with the knowledge and resources to adopt good agricultural practices have led to higher yields and increased profitability. These initiatives have also strengthened value chain linkages, ensuring that farmers can access both input and output markets.

Leveraging East Africa’s soybean opportunity requires coordinated efforts to overcome productivity constraints and build a robust value chain. By enhancing market access, incentivizing investments, and ensuring stable policies, East Africa can capitalize on its natural growing conditions to boost farmer incomes, create jobs, and enhance food and nutritional security.

According to Gatsby Africa, realizing the soybean value chain’s full potential will reduce import dependency and position East Africa as a significant player in the global soybean market, driving economic and agricultural transformation in the region. With strategic investments and supportive policies, East Africa can unlock the promise of soybeans, fostering a more resilient and prosperous agricultural sector.