Tap into Africa’s potential

Chiji Ojukwu, Director of Agriculture Division at African Development Bank.

Agriculture is a major source of income in Africa, however untapped agricultural potential has contributed to persistent poverty and deteriorating food security, resulting in a projected increase in the number of undernourished people from 240m in 2015 to 320m by 2025.

Taking steps to optimise this as an opportunity is the Feed Africa Strategy and the Grow Africa Partnership.

Feed Africa: Strategy for Agricultural Transformation in Africa 2016 – 2025

An extract taken from ‘Feed Africa: Strategy for Agricultural Transformation in Africa 2016 – 2025’ states that falling commodity prices for a broad range of natural resources are creating an increasing imperative for African nations to diversify their exports and reduce current account deficits. At the same time, increased food demand and changing consumption habits driven by demographic factors such as population growth and urbanisation are leading to rapidly rising net food imports, which are expected to grow from USD35bn in 2015 to over USD110bn by 2025. These rising imports are indicative of a broader opportunity to transform agriculture construed as a business. The scale of imports demonstrate that demand exists, if a vibrant private agribusiness sector in Africa can be stimulated to service it. These food imports represent a diverse set of markets, both in key commodities as well as processed goods and associated or ‘agro-allied’ industries worth more than USD100bn in revenue per annum, while delivering food security and broad-based income growth. Capturing these opportunities on the scale required in Africa has occurred elsewhere in the world before, such as in Brazil, Malaysia and Vietnam, and often over a shorter time period. The conditions for transformation are beginning to materialize in a number of African countries. Smaller-scale transformations are happening, such as in the horticulture and floriculture sectors in Kenya and Ethiopia respectively, Rwanda’s rapid and material reductions in the level of malnutrition, Nigeria’s large scale registration of farmers onto an electronic-wallet system to facilitate fertilizer subsidy payments, and transformation of the rice sector in Senegal. These instances show that localised transformation in Africa is possible, and point the way for larger-scale shifts in African agriculture. The lessons learned from these experiences help frame ‘Feed Africa: Strategy for Agricultural Transformation in Africa 2016 – 2025’.

Chiji Ojukwu, Director of Agriculture Division at African Development Bank says, “Primarily, the Feed Africa Strategy aims at helping the Regional Member Countries (RMCs) tap on the potentials of their various agro ecologies, in prioritising some specific commodities that would help them contribute to the achievement of the four key goals of the Strategy namely: a) Contribute to eliminating extreme poverty in Africa by 2025; b) End hunger and malnutrition in Africa by 2025; c) Make Africa a net food exporter; and, d) Move Africa to the top of export-orientated global value chains where it has comparative advantage. Whilst not being prescriptive and based on specific criteria including: the future demand of a given commodity, potentials to nourish Africa, competitive advantage, scope for transformational uplift and existing focus; the Strategy came up with 18 commodities that would be prioritised for its projects and programs implementation in the RMCs. This is why we are focusing for instance, on commodities like wheat in North Africa, horticulture in East Africa and rice in West Africa to mention a few.”

In connection with the ‘Feed Africa – a strategy for agricultural transformation in Africa 2016 – 2025’, a high-level ministerial conference: ‘Feeding Africa – An Action Plan for African Agricultural Transformation’, was held in Dakar, Senegal, in October 2015, to deliberate on modernising Africa’s agriculture sector. The conference was co-convened by the African Development Bank (AfDB), the African Union Commission (AUC), The United Nations Economic Commission for Africa (UNECA) and several development partners. The principal purpose of the conference was to draw up an action plan towards ending food insecurity, extreme poverty and malnutrition in Africa and placing Africa high on the value chain.

Success stories of agricultural transformation across Africa presented at the event provide clear evidence of the massive potential for increasing food production and creating employment that exists in the agriculture sector. Research results reveal burgeoning African food markets for such high-value perishable food products as poultry, dairy, meat, fruit and vegetables, with value chains expected to triple in cash volume by 2030.

Following three days of ministerial dialogues and work stream sessions on 26 themes related to agricultural transformation, the President of the AfDB presented the Action Plan in his closing speech. This was endorsed by over 600 participants, including 155 high level Government representatives, including Ministers of Agriculture and Finance, Trade and Industries, and Central Bank Governors. Others are Representatives from AUC, UNECA, NEPAD, Alliance for a Green Revolution in Africa (AGRA), International Fund for Agricultural Development (IFAD), United Nations Food and Agriculture Organization (FAO), United Nations Industrial Development Organization (UNIDO), the World Bank, US Agency for International Development (USAID), World Food Programme (WFP), the Consultative Group on International Agricultural Research (CGIAR), the Civil Society, the Private sector, including commercial and agricultural banks, Farmers Associations, amongst several partners.

Action Plans

  1. Deploy innovative approaches to address malnutrition. The AfDB will establish a strategic partnership with President Obama’s Feed the Future Initiative, Grow Africa of the World Economic Forum, the Big Win Philanthropy, the FAO, Scaling Up Nutrition, World Food Programme, Bill and Melinda Gates Foundation, the Global Panel on Agriculture and Food Systems for Nutrition, and the private sector to initiate innovative approaches towards addressing malnutrition.
  2. Execute a bold plan to achieve rapid agricultural transformation across Africa through raising agricultural productivity. This will be led with the Forum for African Agricultural Research, the Consultative Group on International Agricultural Research and national agricultural research systems and the Alliance for A Green Revolution in Africa. The CGIAR team has committed to coming up with a plan by 7th November, 2015 that will spell out how they will collectively respond to Africa’s agricultural transformation.
  3. Operationalise the Affirmative Finance Action for Women in Africa by first quarter of 2016. The AfDB will establish a USD300m financing facility to de-risk financing to women owned-businesses by commercial banks and microfinance institutions. The German Development Bank (KfW, the German acronym) has pledged its support to the preparatory work towards its establishment.
  4. Establish an African Agricultural Risk Sharing Facility to de-risk the financial value chain and de-risk the agricultural value chains across the continent. This will allow commercial banks and financial institutions to lend at scale to agricultural value chains.
  5. Develop agro-allied industrial zones and agricultural corridors. The goal is to accelerate investments in integrated infrastructure to improve the competitiveness of Africa in processing and value addition to agricultural products.
  6. Increase access to climate financing – The AfDB will support African countries in accessing climate financing to enable them to finance their adaptation to climate change. The African Development Bank will triple its climate financing to USD5bn annually by 2020.
  7. Central Banks in Africa to set aside special funds to allow farmers to access credit at reduced interest rates, as well as agricultural loans with longer term maturity.

Ojukwu says, “The cost of pursing Agricultural Transformation in Africa has been estimated to be between USD31.5bn – 400bn over the next 10 years. With this quantum of finance required for the transformation agenda, there are obviously investment opportunities which are driven by new broader market horizons in the sector. The mere fact that Africa imports as of today over USD35bn market presupposes that there is a huge market opportunity. The investment areas would largely be driven by the need to satisfy the opportunities presented by the enablers of the transformation agenda, which includes among others: orchestrating the design of programs and projects that would help boost productivity; scaling up and replicating value addition along the various prioritised commodity value chains, and more importantly opportunities provided to invest in hard and soft infrastructure. In other words, the Strategy provides investment leeway for Africa to turn around the real value of agriculture relative to the importance to its economies. The processing gaps presented by commodities like cocoa coffee, and other tree crops and grains like the soybean ultimately make investments in the sector very evident. These gaps present opportunities along the value chain for investors to meet the increasing demand. And what more, the scale of capital required is larger than the public sector alone can manage, and so, crowding-in private investment is key.”

Ojukwu says the development of the Feed Africa Strategy was a collective effort with many other relevant development and partner institutions, with the Bank providing the leadership. It is therefore safe to say that the Agricultural Transformation in Africa agenda is an African Strategy with partnership playing a key role in its implementation and indeed it is one of the key enablers. Therefore, the Strategy is being implemented with the cooperation of the various stakeholders (public sector, private sector, civil society, development actors, etc.) across the continent but primarily by the RMCs. To better coordinate multi stakeholders’ implementation of the Strategy, the Bank is establishing the Partnership for Agricultural Transformation in Africa (PATA) and the Leadership for Agricultural (L4Ag) initiative.

These mechanisms will facilitate a variety of activities including:

  • Bringing coherence and clear plans of action and securing commitments;
  • Holding participating actors accountable to their commitments;
  • Selecting priority focus areas both for decision-making and resource allocation;
  • Sequencing efforts across the same value chain and within the same country or region;
  • Leveraging shared capabilities and footprints to enhance programs and expand reach;
  • Sharing previous experience and learnings as they pertain to new projects; and
  • Engaging and understanding the needs of value chain actors and larger private sector players.”

“In 2016, the Bank approved 29 operations in the agriculture public sector for a total commitment value of over (Units of Aid) UA615.69m equivalent to USD827.69m. The 29 projects approved will impact positively on the life of millions of people in the move than 25 countries covered and regional institutions. Notable amongst the high ticket projects approved are Nigeria Enable Youth (USD280m) Zambia Aquaculture Enterprise Development Project (USD45m).”

Funding an ambitious but nonetheless realistic Strategy like this is no doubt a challenge and Ojukwu says mutual commitments and understanding amongst partners in the leveraging funds to meet the transformational need is highly desirable. “Obviously, the cost of transformation cannot be met from the public sector so private investments are key. Daunting as the challenge is, the Strategy has provided likely avenues by which the quantum of funds required for transform the African Agriculture sector can be realised. These include tapping and leveraging funds from capital markets, sovereign funds, and pension funds as well as the private sector who play a significant role within the feed Africa strategy. The Bank sees greater opportunities even the face of this challenge.”

“The implementation of the Strategy calls for devoted partnership and commitments across stakeholders. The expectation is that the Bank and its partners will pursue an agenda to transform key agricultural commodities and agro-ecological zones. This commitment must prioritise the need to create an enabling environment to create opportunities for new and diverse interest and investors especially youth and women to be involved across the value chain, Ojukwu concludes.

Grow Africa Partnership

Grow Africa is an African-owned, country-led, market-based and inclusive platform for cross-sector collaboration. It aims to increase inclusive and responsible investment into African agriculture thereby generating agriculture-driven economic growth that contributes to reducing poverty and hunger. Grow Africa consists of a partnership platform, network and secretariat.

The Grow Africa Partnership was founded jointly by AU/NEPAD and the World Economic Forum in 2011. Grow Africa works to increase private sector investment in agriculture, and accelerate the execution and impact of investment commitments. The aim is to enable countries to realize the potential of the agriculture sector for economic growth and job creation, particularly among women farmers. Grow Africa brokers collaboration between governments, international and domestic agricultural companies and smallholder farmers in order to lower the risk and cost of investing in agriculture and improve the speed of return to all stakeholders.

The Grow Africa Partnership comprises over 200 companies and governments in 12 countries. These companies have made formal commitments with the government in the respective country to invest in agriculture. Ten of these countries are part of the New Alliance for Food Security and Nutrition, a partnership in which stakeholders – public and private sectors, and donors – commit to specific policy reforms and investments outlined in Cooperation Frameworks that accelerate implementation of African country food security strategies.

Some African government-driven investment opportunities outlined by the Grow Africa Partnership include:

Nigeria

  1. Rice production and milling
  • USD45m will be required to cultivate 15,000 Ha of rice with the intention of expanding to 60,000 Ha to enable self-sufficiency (output increase to 120,000 tons/year through the use of husk as a source of energy)
  • Kwara and Niger states ideal locations
  1. Warehousing/Storage
  • Sorghum, Maize, Cassava, Soybeans
  • Food security
  • Job creation
  • Economic diversification
  • Import substitution
  • Properly managed and maintained warehousing that allows for storage and aggregation of commodities
  1. Cocoa Production and Processing
  • South West region (Oyo, Ekiti, Osun, Ondo)
  • Investment of USD25m required
  1. Livestock Value Chain – Cattle & Dairy
  • National production of milk is estimated at 469,000 MT/year while demand is 1.1 million MT/year
  • Low milk producing indigenous breeds
  1. Soybean & Maize Production and Storage
  • Nigeria is the largest producer of soybean in Africa at 550,000 tons as at 2010
  • Around North Central zone – Kaduna & Niger states
  • Nigeria produces 8m tons of maize annually
  • However, poultry consumption necessitates import of 100,000 MT maize annually
  • Hoping to increase production to 20 million MT/year

Ghana

  1. Provision of agricultural inputs
  • Improved seeds
  • Agrochemicals
  • Fertilizers
  • Pesticides
  • Veterinary drugs, vaccines & chemicals
  • Animal feed
  • Feed ingredients
  1. Opportunities in processing of agricultural products
  • Cereals – maize, rice, millet, starch crops – yam, cassava, sweet potato, plantain
  • Vegetables – carrots, cabbage, garden eggs, tomato
  • Fruits – pineapple, pawpaw, banana, mango
  • Industrial crops – rubber, sugar cane, cotton, oil palm, coconut, cocoa, coffee
  • Livestock – cattle, pigs, poultry, sheep
  • Fisheries – tuna, tilapia, catfish
  • Rearing of silk worms for production of raw silk
  1. Dairy products – processing as well as supply of machinery to establish hatcheries for day old chicks
  2. Floriculture – for cultivation of a number of exotic flowers for the European market
  3. Agro-processing industry to add value, reduce post-harvest losses, promote price stability & expand demand for local agriculture produce – e.g. processing of cocoa beans into cocoa products and fruits into juices
  4. Developing irrigable land through irrigation in the key area – Ghana has potential irrigable land of 346,000 Ha but only 10,000 Ha have been developed
  5. Technological & support services – supply and installation of cold chain equipment, packaging & factory building technology
  6. Distribution – companies required to provide post-production services e.g. transport, packaging & cold vans
  7. Agricultural inputs – fertilizers, pesticides & fungicides
  8. Technology & services – irrigation, heavy equipment (e.g. hiring tractors, ploughs, harrows & combine harvesters) to provide investment opportunities
  9. Storage industry – storage facilities
  10. Horticulture
  • Production companies to produce horticultural produce for the local and international markets
  • Raw materials
  • To produce horticultural seeds
  • provide sustainable irrigation services in the industry
  • Organise smallholders into Outgrower systems for production
  • Supply fertilizers, pesticides & other agricultural chemicals to the industry
  • Marketing & Distribution
  • Packaging materials
  • Buy the horticultural products for export
  • Supply and install cold chain equipment
  • Organise smallholder firms into out-grower systems for marketing
  • Provide post-production services (transport, cold vans) Joint Ventures
  • Package and ship floral products to international markets
  • Technological & Supporting Services
  • Technological & consulting services
  • Financial services & products to the industry
  • Research and Development services
  • Inspection and grading
  • Capacity building

Ethiopia

  1. Investment in cattle fattening and abattoir business for the domestic market & export to regional/Middle Eastern export markets – USD1.5m
  2. Investment in Ultra-High Temperature (UTH) milk processing plant for Ethiopian domestic & neighboring countries export markets – USD11m
  3. Poultry processing plant to sell chicken meat and eggs to the Ethiopian mass markets USD20m
  4. Investment in soybean meal processing for processing consumer products & soybean meal to serve USD1.2m
  5. Tomato processing business for domestic & export markets USD4m

Tanzania

Ihemi Cluster – A case study in the Southern Agricultural Growth Corridor of Tanzania:

  • Covering Iringa & some parts of Njombe region Soybean value chain through working with Outgrowers in production technologies, procurement, storage and value addition solutions
  • Potato value chain through working with smallholder farmers in mechanisation, storage and value chain solutions
  • Aims to mobilise USD3.5bn in agriculture by 2030
  • Develop 350,000 Ha
  • Superior infrastructure & connectivity to local and global markets
  • SAGCOT partners work together in clusters that aggregate different value chains and nucleus farms in a supportive eco-system
  • Six main clusters
  • 50,000 farmers
  • Inputs, production, storage, processing, research services
  • Value chains – tomato, potato, soya, dairy, tea
  • 26 irrigation schemes across 46,438 Ha
  • Partnership approach
  • Compact signatories
  • Unmet demand services by imports
  • Potato value chain
  • Net exporter of potato

Malawi

  1. Livestock production
  • Improved breeds of cattle, AI, medications & extension services
  • Feed growing nd feed production, hay production through growing of Rhodes grass
  • Manufacturing of cooling tanks & collection equipment (i.e. milk churns)
  • Service provision including AI, operation of dipping tanks & administration of drugs
  1. Soybean
  • Products are used by bakeries, meat industry & animal feed manufacturers
  • Processing of soya into yoghurt, cheese, tofu, miso, candles, cattle feed, bio-diesel, cooking oil, meat substitute & margarine for local & international markets
  1. Fruits & Vegetables
  • Wide variety of fruits & vegetables including oranges, tangerines, pawpaw, pineapples, bananas, tomatoes and onions
  • Opportunities for cold rooms & relevant transport infrastructure, processing factories for value addition to make puree, spices & juices, storage, cleaning and grading facilities, large scale commercial farming, market development and contract farming
  1. Cassava production
  • Staple food in the Lake shores and other areas
  • Security crop
  • Drought-resistant
  • Minimum labour requirements
  • Large scale commercial farming along Lake Malawi
  • Starch & flour processing for domestic and international use
  • Manufacturing of certified clones and pest and disease control
  1. Support to dairy development & AI services USD283m
  2. Shire Valley Green Belt project USD156m
  3. Fisheries & Aquaculture Development project USD40m
  4. All Year Irrigation Farming along Lake Malawi, Shire River USD20m
  5. 35 Ha of land ideal for irrigation to cultivate vegetables, fruits & flowers USD15m

Kristy Jooste