Feed Africa

The Road to Agricultural

Transformation in Africa
24 May 2016

DR. CHIJI OJUKWU

Director, Agriculture and Agro-Industries
Department
African Development Bank
Presentation Outline
I. Why do we need Africa-wide Agricultural Transformation?

II. AFDB’s Strategic Response

III. Implementation Costs and Financing

IV. Flagship Initiatives

V. Going Forward

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FEED Africa: Agricultural Transformation in Africa

I. Why do we need Africa-wide

Agricultural Transformation?
Agriculture remains a major source of income in Africa; however, untapped
potential has resulted in persistent poverty and deteriorating food security
Instability in commodity prices is creating an imperative for African
countries to diversify sources of foreign exchange earnings
There is a need to diversify sources of economic growth; food commodities are one of the least volatile groups

Commodity price indices; 2005=100, 2005-2015

Food
260
Metals
240 Fuel (Energy)

220

200

180

160

140

120

100

80
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: IMF Primary Commodity Price System

Urbanization is driving increased demand for food products that
are not currently being supplied by African producers
Increasing urbanization across Africa Shifting consumption preferences to ‘premium’ rice
African urbanization rates; millions of people, 2000-2025 Per capita rice consumption by grade – Nigeria Example
Kg per capita per year

635 35.0

532 30.5
+4% 10.9
(31%)
446

372
21.4
311 Standard
(70%)
263

24.1
(69%)

9.1
Premium
(30%)

2000 2005 2010 2015 2020 2025 Rural Urban

% of pop.: 34% 35% 37% 39% 41% 44%

Source: IFPRI, Policy options for accelerated growth and competitiveness of the domestic rice economy in Nigeria; World Bank; CGIAR, Technologies for African
Agricultural Transformation; Africa Rice Center, The New Rice for Africa – a Compendium; World Bank Data; Dalberg analysis
 Barriers Crippling Africa’s Agriculture Sector
Poorly Poorly
Limited Insufficient Limited reach Inconsistent
Under- organized post- developed
coordination of utilization of of extension to capacity for
performing harvest market
research and inputs and boost on-farm effective value
value chains aggregation linkages and
development mechanization production addition
and transport trade corridors

Insufficient transport, energy, water, waste and Undeveloped soft infrastructure including aging
Insufficient
other hard infrastructure, leading to smallholder farmers and a lack of skills for
infrastructure
uncompetitive cost structures commercial agriculture and agro-allied industries

High service cost due to small Limited market attractiveness

Limited access
Real and perceived risk limiting deal sizes, lack of credit data, relative to perceived higher
to agricultural
private sector investment and low capacity in agricultural returns outside of the
finance
lending agricultural sector

Unfavorable market access and Ineffective sector regulation Unsupportive business enabling
Adverse agri-
incentives limiting trade and creating long lead times for new environment restricting land
business
capacity to produce high-quality technologies and inconsistent tenure and general ease of doing
environment
products trade policies business

Limited
Insufficient inclusivity of women Limited incentives to ensure Limited access and affordability
inclusivity,
and youth in agricultural sustainability and climate- of commodities with high
sustainability
development resilient practices nutrition levels
and nutrition
FEED Africa: Agricultural Transformation in Africa

II. AfDB’s Strategic Response

 5
AfDB’s “High ” Priorities

1. Power and Light Up Africa

2. Feed Africa

3. Industrialize Africa

4. Integrate Africa

5. Improve Quality of Life of Africans

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FEED Africa: Co-Convening and Co-Developing for
Transformation

The Dakar High level Conference on African Agricultural Transformation Agenda

HELD in October 2015

ATTENDED by over 600 Ministers of
Agriculture and Finance, Central Bank
Governors, Development Partners, RECS,
Academia and Private Sector
RESULTED in 4 Goals and 18 Dakar Action
Points adopted to transform African
Agriculture within the CAADP framework

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The imperative for agricultural transformation:
Where we are, Goals and Targets
Become a net exporter Move to the top of
Contribute to the end Eliminate hunger and
of agricultural key agricultural value
of extreme poverty malnutrition
2 3 commodities chains
1 4
Goals

49% of Africans or 420 Staggering food net Low value addition to

million live under the 33% of African children food import bill of USD agricultural commodities
poverty line of $1.25 35.4 billion per annum and predominantly
Status Today

live in chronic hunger;

per day (2014); (2015); primary production;
40 million stunted
Those living in poverty Net Imports projected Africa’s share in global
children under the age of
will rise to 550 million to increase to USD production of cocoa beans
by 2025 5 years as at today 111.0 billion by 2025 is 73 % vs. 16% share in
if we do nothing if we do nothing ground cocoa

Contribute to alleviating Eliminate large scale

Food security for all imports of commodities Africa share of market
poverty though job
Target by 2025

Africans that are that can be produced in value for processed

creation and providing
‘undernourished’; Africa, and selectively commodities ~40%
sustainable livelihoods;
begin to export (Example for cocoa
Zero hunger and grinding)
~130m lifted out of
malnutrition Africa´s net trade balance
extreme poverty
– $0 billion
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 Feed Africa is anchored on the commitments made under the Comprehensive
African Agricultural Development Program (CAADP)

Feed Africa CAADP- Malabo Commitments

• Recommitment to the principles and values of the CAADP
• End extreme poverty by 2025 process
• Eliminate hunger and malnutrition by • Recommitment to enhance investment finance in agriculture
2025 • Commitment to ending hunger by 2025
• Make Africa a net exporter of • Commitment to halving poverty, by 2025, through inclusive
agricultural commodities by 2025 agricultural growth and transformation
• Move to the top of key agricultural • Commitment to boosting intra-African trade in agricultural
value chains by 2025 commodities and services
• Commitment to enhancing resilience in livelihoods and
production systems to climate variability and
• Commitment to mutual accountability to actions and results

Source: Commitments and Goals by African Heads of States and Government in 2014 Malabo-Equatorial Guinea
Country-level Transformation is already underway across
Africa
Becoming a major exporting Becoming a major exporting Improving yields through
player within 10 years player within 10 years modernized input distribution

Kenya Ethiopia Nigeria

Exporting horticulture out of Exporting floriculture out of Scale farmer registration and
Africa Africa input distribution

Total horticulture exports, billion KSH Total floriculture exports, million USD Total farmers registered, million users

GESS was introduced 10.3

97 to farmers in April
+11% +41% 550 2012

346 4.2
21 178
0.66 13

2000 2005 2010 2014 2001 2005 2010 2013 2016p 2012 2013 2014

• Strong foreign investor and partner • Ethiopian Horticulture Producers and • Strong political will and government
support developing and driving the Exporters (EHPEA) actively managing support to transform the input supply
industry the sector system
• Contract farming model used to assure • Strong Government support in (1) • Use of public funds to leverage private-
consistent supply infrastructure and logistics, (2) access sector investment (i.e. agro-dealers
• Political will to support smallholder to land, (3) provision of long-term networks)
farmer development credit and (4) attracting domestic and • Leverage mobile technology to achieve
foreign investors scale and provide nationwide access
A Focused Approach on Integrated Commodity Value Chains
The Bank and its partners will pursue an agenda to transform a selection of key agricultural
commodities and agro-ecological zones

In particular, Feed
Wheat in North Africa Maize, soybean,
livestock, and poultry
Africa will take a
across the Guinea commodity-
Sorghum, millet, Savannah focused integrated
cowpea, and livestock approach –
across the Sahel
simultaneously
addressing multiple
Rice in West Africa
bottlenecks across
entire prioritized
Cassava in humid and sub-humid zones
Tree crops (inc. agricultural
cocoa, coffee, commodity value
cashew, and oil
palm), horticulture chains and within
and fish farming related agro-
across all of Africa ecological zones

Agricultural commodity value chains and agro-ecological zones targeted by the Feed Africa
The AFDB - in collaboration with partners - will contribute to Orchestrate,
Architect, Scale and Replicate Transformation through 7 Enablers
Feed Africa Enablers AfDB Role
1 Orchestrate/ TAAT: increase investment into agriculture research and technology dissemination
Design
Inputs finance and agro-dealer network development: expand input finance and connect farmers to buyers

Mechanization Program: establish facility for on-farm mechanization leasing

Increased Productivity
Scale/ Develop agro-dealer supply systems
Replicate
Support wide-scale deployment of innovative farmer extension models

2 Orchestrate/ Post-Harvest Loss Prevention Facility: invest in infrastructure and training to reduce on-farm and post-harvest loss
Design
Warehouse receipts systems (WRS): scale WRS as 1st step for commodity exchanges

Realized Value of Agro-processing zones and corridors: increase and link production and processing capacity along key corridors
Increased Production Scale/ Scale-up and replicate innovative models to organize and aggregate farmers
Replicate
Establish agricultural commodity exchanges

3 Orchestrate/ Infrastructure Coordination: accelerate and coordinate development of enabling hard infrastructure (energy,
Increased Investment Design water, logistics)
in Hard & Soft Market infrastructure: build market centers and associated service infrastructure
Infrastructure Farmer e-registration: launch large scale farmer e-registration systems
The AFDB - in collaboration with partners - will contribute to Orchestrate,
Architect, Scale and Replicate Transformation through 7 Enablers (Cont’d)
4 Orchestrate/ Risk-sharing Facility: catalyze bank lending to the ag sector through risk-sharing facility
Design Non-Bank SME Finance and Capacity-Building Fund: provide funding and capacity-building to SME funds as well
as surrounding ecosystem (e.g. credit bureaus)
Project Finance Facility: Increase long-term funding to ag SMEs
Trade Finance Facility: scale up existing Soft Commodity Facility
Finance Expanded
Sovereign Risk Support: Scale up Africa Risk Capacity (ARC) initiative (sovereign insurance solution to agro-
Agricultural ecological shocks)
Diaspora Bonds: create lending products to attract diaspora and institutional capital
Scale/ Facilitate lower lending rates to agricultural players through Central Bank funds
Replicate Deepen and broaden agricultural insurance markets

5 Orchestrate/ Policy reform matrix: coordinate establishment of an Africa-wide policy matrix detailing the five groups of key
Design policy changes required to enable transformation; key policy areas would be: (i) Land tenure, (ii) Input subsidies,
(iii) incentives for local production and processing, (iv) financial sector deepening, (v) Regional integration and
trade

Improved Global Program for Improving Agricultural Statistics and Rural Development: improve statistical systems across
Agribusiness African countries by building capacity in ministries and offering technical assistance

Environment Scale/ Facilitate land tenure reform through the Africa Land Policy Center
Replicate
Provide technical advisory to governments to support agriculture development bank set-up / reform
Strengthen capacity of private-sector actors’ (e.g. Chambers of Commerce) to advocate for favorable policies
Support development of Agribusiness Environment indices
The AFDB - in collaboration with partners - will contribute to Orchestrate,
Architect, Scale and Replicate Transformation through 7 Enablers (Cont’d)

6 Orchestrate/ AFAWA Facility: establish a facility to promote women-owned MSMEs

Design

Scale/ Replicate Increase representation of women in agricultural research, and enhance gender-responsive research,
monitoring, and evaluation

Increased Inclusivity, Orchestrate/ Youth Jobs for Africa Agricultural Flagship Programs: establish facilities to increase youth employment and
Sustainability, Design enhance skills in agribusiness (e.g. ENABLE Youth)
Nutrition
Orchestrate/ Climate Resilience Funding: provide funds to support climate adaptation and climate smart agriculture
Design practices

Scale/ Replicate Encourage scale-up and replication of nutrition programs (through the Nutrition Trust Fund and other
mechanisms)

7 Orchestrate/ Partnership among key actors from the public sector, private sector and development institutions
Design
Coordination
Scale/ Replicate Support pan-African agriculture leadership initiatives (e.g. Leadership 4 Agriculture)
FEED Africa: Agricultural Transformation in Africa

III. Implementation Costs and

Financing
Achieving Feed Africa Goals requires Substantial Investment
and results in Substantial Revenues
Investment required to transform Africa agriculture; USD billion, 2016-2025 Indicative Estimate
Enablers

Partnership for
Infrastructure6

Sustainability,
Environment8

opportunity
Ag. Finance7
Hard & Soft

Inclusivity,
Value Chain Development

Nutrition

revenue
Enabling

by 2025
Annual
Africa

Total
ATA
Value
Production4 Total
Addition5

Rice ~18-22 ~3-4 ~21-26 ~5

Commodities / Agro-Ecological Zones

Cassava ~2-2 ~2-3 ~4-5 ~1

Wheat ~22-27 ~16-20 ~38-47 ~13

Cotton ~0.4-0.5 ~1-1.2 ~1-2 ~0.3

Horticulture ~5-6 ~4-5 ~9-11 ~65-80 ~265-330 ~20-30 ~30-40 <5 ~315-400 ~16

Aquaculture ~1-1 ~19-23 ~20-24 ~8

Tree crops1 ~14-17 ~9-11 ~23-28 ~11

Sahel Region2 ~6-7 ~9-11 ~15-18 ~6

G. Savannah3 ~42-52 ~26-32 ~68-84 ~23

Total ~110-135 ~90-110 ~200-250 ~65-80 ~265-330 ~20-30 ~30-40 <5 ~315-400 ~85

USD 315-400 billion over the next decade, or an average of $32-40bn annually
could unlock USD 85 billion of revenue annually from 2025
Mobilizing Funding to Address the Financing Gap
Current Funding for Agriculture Development in Africa
AfDB and public sector partners will crowd in
vs. Requirements for Transformation, $bn / year private and institutional funding by:
• Establishing enabling environments for
private investment
~$25-33bn ~$32-40bn
• Employing innovative de-risking tools and
Total govt spending is blended financing
~$12bn, although 70-80% is • Proving the potential for risk-adjusted
on current expenditure returns in agriculture projects and
commitments leaving only agribusinesses
$2-3bn for investments
Sources for filling the gap include:
<$1bn $7bn
$2-3bn • AfDB: Increase annual lending to USD
2.4bn/year
• Governments: co-investment in increased
$3bn AfDB lending (@10%) and raising budget
allocation from average 3% to 5%
• Commercial banks: currently lending $660m
<$1bn annually (4.8% of ~$14bn); room to catalyze
more
• Sovereign wealth funds: AUM of ~$160bn
AfDB Other Govt Commercial Total Gap Total • Pension funds: AUM of $380bn
ODA and Spending Lending Investment Required • Africa-weighted PE funds: AUM of $25-35bn
Donors

Currently, total investment finance is ~$7bn annually

Leaving a funding gap of ~$25-33bn
FEED Africa: Agricultural Transformation in Africa

IV. Flagship Initiatives

 Agropoles, Agro-Industrial Processing Zones and Corridors
Components Concept Cases

1 Burkina Faso
Modern
Open farms farm
Support zones in developing Terminal
clusters,
markets
business case analysis and marketing green
logistics
plans to attract investors houses,
Commercia livestock Collection
l trade area centres Democratic Republic of Congo
Cold stores,
2 Packaging
ripening
and
chambers,
Provide public sector financing and support Integrated warehousin
services
crowd in private sector g Tunisia
Agropoles and
investment for infrastructure Other agro
development within zones Agro-Processing Primary
and food
processing Zones processing
hubs
zones
(AAPZ)
3 R&D,
Integrated
incubation
agro
centers,
Provide funding to support local industrial
quality
agripreneurs and agribusiness park Agribusinescontrol
companies engaged in expanding and s Ethiopia
Utilities &
strengthening supply networks manageme
services IT support
Common nt
/library, institutes
infrastructu
training
re
center
 ENABLE YOUTH: Agribusiness as a Solution to Empower and Employ
Africa’s Youth
Target Intervention
USD12.5 billion to support enterprise
and job creation for youths and women
CAPACITY AND
SKILL BUILDING
ENTERPRISE AND
Investing in 25 African 18-month training BUSINESS FINANCING
countries* incubation of young DEVELOPMENT
graduates as business Crowd in private
men and women in Transformation into investment and
1.25 million agribusiness creditworthy commercial lending
agribusiness jobs in agripreneurs
Deploy risk sharing
the next 5 years mechanisms

250 000 agribusiness

* Benin, Burkina Faso, Burundi, Cameroon, enterprises to be created
Cote d’Ivoire, DRC, Ghana, Guinea Bissau, in Africa
Kenya, Liberia, Madagascar, Malawi, Mali,
Mauritania, Morocco, Mozambique, Nigeria,
Rwanda, Senegal, Sierra Leone, Sudan, 10,000 unemployed graduates Need to leverage
Tanzania, Tunisia, Uganda and Zambia (50% women) USD 0.5 billion
trained and financially per country
empowered in each country
Technologies for African Agricultural Transformation (TAAT)
Commodity and Agricultural
Risk Sharing Financing
Mechanism forValue ChainsAgriculture Finance
Increased
Public Goods support:
Roads, Irrigation, R&D, Storage, Price Stabilization etc.
• AFDB to mobilize
~USD 1 billion for
Improve the Agricultural Value Chain risk sharing
Commodity Products
• RSF to leverage up
to 10x
Farmers Agro Seed Fertilizer Agro Industrial Trade
Dealers companies companies processors manufacturers and exports
• Systemic change in
bank financing for
agriculture
Appropriate Risk Sharing Instruments along the Agricultural Value Chain
• Finance for growth
Interest Technical of Agribusiness
Guarantees Insurance
rebates Assistance
• Financing
Seasonal • De-risk the financial value chain Term agriculture as a
Financing • Unlock commercial financing for agriculture Financing business/ENABLE
Youth
 Achieving agricultural transformation in Africa will
require strong partnership and collaboration
Key Potential Actors and Partners to Deliver on Feed Africa
Enabling Inclusivity,
Increased Realized Hard and Soft
Agri Finance Agribusiness Sustainability,
Productivity Productivity Infrastructure
Environment Nutrition

Co-development

Non-Exhaustive
Co-financing + Partnership
Regional Member Countries
Multilateral, Bilateral Donors, Foundations, Small and Large Scale Agribusiness; Farmers
Government Organizations Organizations; Food Companies
FEED Africa: Agricultural Transformation in Africa

V. Going Forward
Next Steps

• Approval of the Strategy

• Pipeline development
• Knowledge and Advocacy
• Partnerships and Collaboration
• Events : Risk-sharing Financing Mechanism
• Programme Implementation
AFRICAN DEVELOPMENT BANK GROUP

CONTACT:
Dr. Chiji Ojukwu
Email: [email protected]

THANK YOU / MERCI

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