The Africa Agricultural Machinery Market is expected to register a CAGR of 9.6% during the forecast period.
As per the research survey conducted by Agri evolution Alliance, Africa holds a great market potential for agricultural tractors. The increasing support by governments to develop the agricultural sector is expected to drive this sector. For instance, the government in Ghana provides tractors at subsidized rates to entrepreneurs who run 89 centers that rent out, and service tractors. In major parts of Africa, tractor sales were affected due to uncertainty regarding crop yields and exchange rates. Additionally, issues with respect to land restitution and farmworkers’ shares in farms, added to the uncertain conditions of the farmers. According to the South Africa Agricultural Machinery Association, the sales of tractors in 2018 increased by 10.4%, as compared to 2017. The sales of tractors were 3,930 units by July in 2018, as compared to 3,557 units by July in 2017.
Key Market Trends
Increasing Focus on Sustainable Agricultural Mechanization
Agriculture plays a crucial role in the economic development of Africa, but the sector is performing below its potential. Currently, around 60% of Africa’s population depends on agriculture for livelihood, yet the sectorial contribution to the gross domestic product was paltry 21% in the year 2016. While Africa has the highest area of uncultivated arable land in the world, amounting to nearly 202 million hectares in 2016, hence its productivity lags far behind other developing regions. Moreover, crop yields are only reaching to 56% of the international average. So, there is a dire need to increase the crop yields in the coming decades to keep pace with food demand driven by population growth and rapid urbanization in Africa. Therefore, the mechanization through tractors can, directly and indirectly, bridge the yield gap. According to the Food and Agriculture Organization of the United Nations (FAO), agricultural mechanization in Africa is still at its initial stages. The studies were undertaken by FAO also revealed that the level of mechanization in the country is slowly moving from hand-driven technology to power sources. For instance, as of 2016, Central Africa has 15% of its land entirely under power sources, followed by West, Southern, and Eastern Africa with 30%, 46%, and 50% respectively. As a result, the availability of tractors per hectare in the Southern African Development Community(SADC) has risen by 12% from 2010 to 2016. However, as stated in the sustainable development goals, indicated in agenda 2063, the African Union Commission(AUC), and the Food and Agriculture Organization of the United Nations (FAO) view agricultural mechanization as an immediate indispensable action for attaining the Zero Hunger vision by 2025. Such initiatives towards sustainable agricultural mechanization are likely to boost the market for agricultural tractors in the near future.
South Africa Dominates the Market
The South African market for agricultural tractors was valued at USD 461.3 million in 2018, witnessing a CAGR of 8.8% during the forecast period. The South African agricultural economy has witnessed a paradigm shift from food aid to domestic production in the form of the green revolution, which was first started by the World Food Program of the United Nations. South Africa now has major potential for the growth of the agriculture and agriculture machinery market, including tractors. The tractors market in South Africa has been reinvigorating from the standstill brought to the market due to extremely dry weather conditions since 2014. Major players in the global tractor industry, like Deere and Company, Mahindra and Mahindra, and others, are planning to make South Africa the hub for manufacturing and exports, given the high potential that the farm equipment market holds in South Africa. The South African Crop Estimate Committee reported that farmers intend to increase the area plantings for summer grains and oilseeds in the next cropping season, thereby giving a boost to the tractor market during the forecast period.
The market is consolidated with international players accounting for higher market share. Deere & Company, Kempston Agri, and Kubota SA are the few key players in the Africa agricultural tractor market. Companies are not only competing based on equipment quality and promotion but are also focused on strategic moves, in order to hold larger market shares.
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