Agri09 day iii - session v - part i - brian baldwin - gdprd


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Agri09 day iii - session v - part i - brian baldwin - gdprd

  1. 1. Meeting Investment Capital Needs: The role of International Financial Institutions and donor organisations. Brian C Baldwin (IFAD) - Chair of the Steering Committee - Global Donor Platform for Rural Development “Empowering the private sector to boost productivity and growth in Africa” Cape Town 14-17 June 2009 1
  2. 2. Global Donor Platform for RuralDevelopment• A network of 30 donors, international finance institutions and development agencies, formed in 2003;• Common vision that agricultural and rural development (ARD) plays important role in poverty reduction;• Members are committed to achieve increased and more effective aid for agriculture and rural development (ARD) centered at smallholder agriculture;• Platform outputs:  Coherent and evidence-based advocacy in support of increased and more effective aid in ARD;  Enhanced capacity of member agencies to deliver more effective support for ARD. 2
  3. 3. Aid & Investment to agriculture• Aid allocation in ARD International ODA to agriculture, forestry, fishing 1983 - 2007 (constant prices 2006) declined; 25000 35% 30%• Aid fragmentation 20000 25% increased; ODA million US$ 15000 20% % total ODA 10000 15%• Government 5000 10% investment:6.4% in 5% 0 0% 1980 to 4.5% in 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 2002 (World Bank, World Development Average number of donors per recipient county, region and decade Report 2007) 40 Latin America and• Aid architecture and 35 30 Caribbean Middle East and North modalities are 25 20 Africa increasingly complex other Asia and 15 Oceania 10 South and Sentral Asia 5 0 Sub-Saharan Africa 1960- 1970- 1980- 1990- 2000- 2006 1969 1979 1989 1999 2006 3
  4. 4. Paris and Accra commitmentsby donors and partner countries• Partner countries exercise leadership over their development policies and plans (ownership);• Donors base their support on countries’ development strategies and systems (alignment);• Donors co-ordinate their activities and minimise the cost of delivering aid (harmonisation);• Partner countries and donors orient their activities to achieve the desired results (managing for results);• Donors and partner countries are accountable to each other for progress in managing aid better and in achieving development results (mutual accountability); 4
  5. 5. Major contemporary agriculturesector issues• Food, fuel, fertilizer price volatility and economic crisis increasing rural poverty;• Climate change and environmental degradation increasingly serious and donor response inadequate;• Agriculture services, processing, input supply and farming itself are increasingly private sector led;• IFI instruments are inadequate to deal with the private sector;• Agricultural sector includes a wide range of stakeholders (civil society, rural organisations, private sector);• Limited role of the state, cross-Ministerial and institutionally complex; and,• The challenges and needs are country/region-specific. 5
  6. 6. Agricultural supply and volatilityproblems due to: • Lack of agriculture investment and consequent reduction in productivity growth 18% of development assistance went to agriculture in 1979, falling to less than 3% last year • Transport, marketing and farm input price increases expanding as oil prices increase; • Substitution of bio-fuels for food (for maize); • Government policy deficiencies, panic in food markets 48 countries have imposed price controls, consumer subsidies, export restrictions (World Bank) • Climate change and environmental degradation exacerbating the slow food production response By 2020 yields from rain-fed agriculture could be reduced from 10-20% in much of Sub-Saharan Africa (IFPRI) 6
  7. 7. Changes in aid to agriculture• New donor priorities (social protection, health and education, AIDs, development policy lending, anti- corruption, public administration);• Big agriculture projects fell out of favour (large scale irrigation, integrated rural development, agriculture credit, parastatal enterprises);• New style agriculture projects require less money: irrigation rehabilitation, micro-credit, agriculture research and knowledge, soil rehabilitation, land management, land titling;• Quality problems with agriculture projects, combined with high cost of preparation; and,• Urban poverty highly visible. 7
  8. 8. Agriculture has high economicpay-off• A 1% p.a. increase in agriculture growth, on average leads to a 2.7% increase in income of the lowest 3 income deciles in developing countries (World Development Report, 2007)• Agriculture is 2.5 to 3 times more effective in increasing income of the poor than is non- agriculture investment (World Development Report, 2007) 8
  9. 9. Donor support to private sector• Canada (CIDA): Canada fund for Africa ($500M) to spur economic growth in Africa by providing risk capital for commercially successful private sector businesses. $25.1 million disbursed in 2005-06.• UK (DFID): African Enterprise Challenge Fund. to stimulate private sector led support to innovations in agricultural and financial markets where the private sector’s engagement has traditionally been weak. administered by AGRA Over the next seven years the AECF is expected to stimulate over US$200 million in private sector investment. + Food Retail Challenge Fund to link UK retailers and African farmers together.• EC: support to private sector development to create enabling business environment, business development services (training, advice); information services (technical and managerial skills).• Switzerland (SDC): promotes the private sector and market dynamics in rural regions by strengthening public administration capacities, improving the range of vocational training opportunities and developing an inclusive dialogue between the private and public sector. 9
  10. 10. Donor support to private sector(cont.)World Bank: IFC is providing $75 million, its largest equity investment in agribusiness, to help set up a fund that will support farming and food production in emerging markets to increase the global food supply.US: USAID Agricultural Markets and Trade-USAID assists governments and regional organizations and helps build the capacity of private sector organizations to create a supportive environment for the marketing and trade of agricultural products through programs that, among other things, develop agricultural markets for crops, seeds, and fertilizers, and build physical infrastructure, such as rural roads, necessary for market access. All efforts are aligned with and directly support the AU/NEPAD Comprehensive African Agriculture Development Program.Denmark: DANIDA finances business and private sector development interventions in agriculture, fisheries, water and infrastructure. E.G. Tanzania Private Agricultural Sector Support (2003-2008);Uganda Agri- business development (2004-09)Sweden: Sida supports developing specific business organisations in as agriculture and livestock husbandry and provides technical assistance to private sector enterprises. 10
  11. 11. Donor support to private sector:African Agriculture Fund• IFAD, AGRA, AfDB and Agence Française de Développement (AFD) support the investment Fund to modernize Africa’s agriculture;• The Fund has an initial target size of €200M to become operational and expects to raise additional commitments up to an aggregate capital amount of €500M• Targets:  Operate in industries with sustainable economic and financial objectives  Have designed business plans which focus on developing and/or diversifying their products and/or sectoral integration  Empower value chains and reduce transaction costs of the producer-processor / marketing interface• Investment sectors: cereals; roots & tubers; livestock; dairy; fruit; seeds; fats & oils; fertilisers.• Investment financing:  Equity and quasi equity product;  Technical Assistance Facility 11
  12. 12. Donors Challenges • IFIs and donors work mostly through governments; • Private sector agriculture often shares neither donor nor government objectives; and, • The market and the private sector are increasingly driving agriculture. 12
  13. 13. Donor Responses• Be more flexible in objectives and instruments in order to partner with other donors, private sector partners and with sub-sovereign governments;• Strengthened and more inclusive ownership (farmers & farmers’ organisations, rural CSOs, private sector) of policies/strategies & implementation/monitoring; – Capacity Development for all stakeholders; – Coherent and policies and strategies at national, sectoral and decentralised levels; – South-south learning networks, communities of practice.• Development of results management methodology and indicators of progress in results monitoring for agriculture. 13
  14. 14. Thank you! 14