INNOVATIVE FINANCING AND
INVESTMENT IN
AGRICULTURE: AFRICA’S
EXPERIENCE
Okoruwa V.O. (Ph.D)
Professor of Agricultural Econ...
Outline of the Presentation
The place of Agriculture in Africa’s
Development
Innovative Financing in Agriculture: A
Glob...
Place of Agriculture in Africa’s
Development
Contributes to the
continent’s GDP
(between 30% and
40%),
Makes up about 60...
Place in Agriculture in Development
cont’d
Most farming operations
still at subsistence level
and small scale (less than
...
Agriculture Driver of Growth &
Poverty Reduction
Agriculture has
potential to serve as a
strong driver of growth
and pove...
Poor Access to Finance for
Agriculture
 Seasonal nature of
agriculture which causes
price fluctuations of inputs
and prod...
Poor Access to Finance for
Agriculture cont’d
Allocation to agriculture
by African governments
is only about 5%
(Despite ...
Innovative Financing in Agriculture:
A Global Perspective
 New ways of raising funds,
often from extra-official
sources, ...
Innovative Financing in
Agriculture Cont’d
Figures from International
Expert Report (2012)
reveals
 Global food supply ne...
 Region is facing severe
threats in the maintenance
of soil fertility, because of a
fragile environment,
increasing land ...
Innovative Financing in
Agriculture Cont’d
Meeting these challenges
will require a
considerable scaling-up
of investment ...
Innovative Financing in
Agriculture Cont’d
Private investment key to
agricultural development
Although severely
constrai...
A for Agriculture/Forestry/Fisheries 200-2010 (millions of constant dolla
Recent Innovative Financing Around the World
 Mexico and Pakistan - rural
leasing a form of credit that
provides farmers ...
Experiences of Success
Stories in Africa
Concerted efforts put in
place not only by the
governments but also
the private ...
Experiences of Success Stories in
Africa cont’d
Government’s role in
the innovative financing
and investment in the
conti...
Success Stories in Africa cont’d
Strong indication that
the rest of the world is
appreciating current
efforts and
achieve...
Success Stories in Africa cont’d
 Farmers’ now pull
resources together through
cooperatives to assist one
another and gre...
Public Financing and
Investment
 Nigeria: The YouWin! is a
new youth empowerment
government initiative in
Nigeria.
 Ethi...
Public-Private Financing and
Investment
In the last ten
years, the ICT-
based applications
have gained a lot of
popularit...
Public-Private Financing and
Investment cont’d
Malawi Agricultural
Commodity Exchange
(MACE) in Malawi;
Manobi in Senega...
Private Financing and
Investment
 Maendeleo
Agricultural
Enterprise Fund
(MAEF) in East
Africa- Kenya,
Uganda and Tanzani...
Private Financing and Investment cont’d
 ESOP in Togo, Burkina Faso and
Benin
 Promoted by two NGO’s (CICR and
ETD) link...
Private Financing and Investment
cont’d
 Savannah Integrated
Export Processing Farms
(SIEPF) and OLAM
 SIEPF, a tomato p...
Private Financing and Investment
cont’d
 Weinco Maize Project
and Blue Skies- Ghana
 ‘Weinco’ an input supply
company, a...
Private Financing and
Investment cont’d
 Gatsby
Gatsby (African Agricultural Capital) provides access
to markets for sma...
The Way forward for Africa
Promote and
encourage voluntary
contribution from
consumers, firms and
employees and/or by
foo...
The Way forward for
Africa
Enhance private
investment in
agriculture, by building
up a favourable
environment and
develop...
Thank you for listening
Innovative financing and investment in agriculture
Upcoming SlideShare
Loading in …5
×

Innovative financing and investment in agriculture

740 views

Published on

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
740
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
40
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Innovative financing and investment in agriculture

  1. 1. INNOVATIVE FINANCING AND INVESTMENT IN AGRICULTURE: AFRICA’S EXPERIENCE Okoruwa V.O. (Ph.D) Professor of Agricultural Economics, University of Ibadan, Ibadan, Nigeria.
  2. 2. Outline of the Presentation The place of Agriculture in Africa’s Development Innovative Financing in Agriculture: A Global Perspective Recent Innovation Around the World Experiences of Success Stories in Africa The Way forward for Africa
  3. 3. Place of Agriculture in Africa’s Development Contributes to the continent’s GDP (between 30% and 40%), Makes up about 60% total export earnings, Employs over 65% the population Growing at about 3.3% each year since 2000 Over 60% of Africa's agricultural population live in rural areas Rural agricultural workers are among the poorest in Africa with poverty rate of about 50% in the continent Agriculture major factor of development in most economies
  4. 4. Place in Agriculture in Development cont’d Most farming operations still at subsistence level and small scale (less than 2ha of land), Low level of technology, Weather-dependent production, Poor market access, Weak infrastructure Low farmers’ incomes, and limited ability to influence government policy Over 600 million are youths under 30 years of age. Rural agricultural workers among poorest in Africa with poverty rate of about 50% in the continent Sector remains largely under- developed
  5. 5. Agriculture Driver of Growth & Poverty Reduction Agriculture has potential to serve as a strong driver of growth and poverty reduction in the continent. Investing in agriculture most important and effective strategy for reducing poverty and hunger in both rural and urban areas through multiple pathways Farmers’ productivity and incomes are enhanced, Food availability is enhanced, Demand for other rural goods and services are stimulated, Employment is created Incomes for the landless rural poor enhanced
  6. 6. Poor Access to Finance for Agriculture  Seasonal nature of agriculture which causes price fluctuations of inputs and products  lowers farmers’ incomes and risk bearing ability,  Under-investment and inability to break out of poverty  The vulnerable groups (Women and youths) - the larger proportion of the agricultural labour force, are more disadvantaged by insufficient finance due to access to fewer assets and younger age respectively  Implications for agricultural development and strategies for increased agricultural finance is pertinent for eradication of hunger and poverty. A key impediment to improving the efficiency of African farmers and adopting better technologies.
  7. 7. Poor Access to Finance for Agriculture cont’d Allocation to agriculture by African governments is only about 5% (Despite Maputo declaration of 10% government allocation to the sector in 2003). Public funding generally restricted and unpredictable even in times of crisis, Need for new ways of financing the sector for development Public Allocation to Agriculture
  8. 8. Innovative Financing in Agriculture: A Global Perspective  New ways of raising funds, often from extra-official sources, to foster development in the sector.  Catalyst for private sources (far below their potential in developing countries), to contribute to development through public, public-private and private innovations.  Rely on new partnerships between wide ranges of stakeholders (i.e. countries of diverse levels of development, local authorities and private sectors).  Sustainable and based on a supportive policy environment.  Innovative in source but also innovative in use (investment)
  9. 9. Innovative Financing in Agriculture Cont’d Figures from International Expert Report (2012) reveals  Global food supply needs to increase dramatically in order to meet the world demand.  By 2050 the world’s population will reach 9.1 billion, 34 percent higher than today, in particular in developing countries.  Combination of this growth and increasing per capita meat consumption, will require a 60 percent increase in global food and feed production.  Africa among developing nations is the region where the challenge will require most efforts. -- Africa lags behind in productivity of gains on major crops and food dependency. Rational for Innovative Financing and Investment in Agriculture
  10. 10.  Region is facing severe threats in the maintenance of soil fertility, because of a fragile environment, increasing land pressure and very low adoption of effective soil conservation practices.  Fertilizer consumption is only 9 kg/ha/year (in nutrient content), against 140 kg in average in developed countries.  SSA where population growth will be highest, hunger index is alarming and most likely the most affected by climate change.  Challenges from climate change represent major risks for long-term food security and nutrition for the continent where agricultural output up to 2080-2100 could be between 15 and 30 percent if required efforts to adapt agriculture to climate change are not made in due time. Rational for Innovative Financing and Investment in Agriculture
  11. 11. Innovative Financing in Agriculture Cont’d Meeting these challenges will require a considerable scaling-up of investment in Africa’s agriculture. Estimates from the FAO’s report (How to feed the world by 2050) suggests Developing countries will need to invest USD 83 billion per year (net of the renewal cost of existing equipment) or USD 209 billion including this cost, Compared to a current level of investment of USD 142 billion in order to cope with the challenge. Considering the enormousity of the challenge and the existing budget constraints, Need to find innovative ways of sourcing funds to help meet the challenge confronting the continent
  12. 12. Innovative Financing in Agriculture Cont’d Private investment key to agricultural development Although severely constrained, public investment is necessary to build up a favorable environment and required infrastructure, to ensure such investment to occur Traditional ODA through public driven projects is limited in their capacity to foster private investments, Their implementation is often too rigid, and because they are insufficiently market- driven and result-based. Private investment key to agricultural development
  13. 13. A for Agriculture/Forestry/Fisheries 200-2010 (millions of constant dolla
  14. 14. Recent Innovative Financing Around the World  Mexico and Pakistan - rural leasing a form of credit that provides farmers with a means to acquire productive assets  China, Brazil, Paraguay - financial education for farmers on loan products and debt capacity has led to positive changes in savings behaviors  India - non-financial services such as soil testing and health monitoring of livestock, along with credit, to farmers in a way that maximizes returns to credit services  India and Mexico- risk management such as index base issuance which is an innovative measure to share climate risk among members of an issued population
  15. 15. Experiences of Success Stories in Africa Concerted efforts put in place not only by the governments but also the private individuals in agriculture, Contribution of some governments in the provision of basic infrastructure and ensuring security of life and property is highly commendable Many of the regional governments are also adopting market- friendly policies and committing more resources to the sector.
  16. 16. Experiences of Success Stories in Africa cont’d Government’s role in the innovative financing and investment in the continent has however, been dual Direct government financing with examples in Nigeria, Kenya, Ghana and Uganda, Ethiopia etc Government partnership with private investor. In either case (public or public-private partnership), the aim of the governments remain the same: creation of employment opportunity, enhance revenue and ensuring food security.
  17. 17. Success Stories in Africa cont’d Strong indication that the rest of the world is appreciating current efforts and achievement is investors’ is revealed by Figures from Info agra and McKinsey (2010) 45 private equity firms plan to invest $2 billion in the region’s agriculture in the next three to five years. Consequently the continent’s agricultural output could treble from the current $280 billion a year to $880 billion by 2030.
  18. 18. Success Stories in Africa cont’d  Farmers’ now pull resources together through cooperatives to assist one another and great achievements have been recorded in terms of number of beneficiaries and loan repayment. Kenya, Ghana, Togo, Benin, Tanzania and Uganda etc.  Local and foreign investors in the continent are involved in production, processing, marketing and provision of improved farm inputs to farms.
  19. 19. Public Financing and Investment  Nigeria: The YouWin! is a new youth empowerment government initiative in Nigeria.  Ethiopia: The Ethiopian Commodity Exchange (ECX) regulates trade of major agricultural commodities.  Ghana: Cocobod Monopolist marketer of cocoa in Ghana, extends seasonal credit and provide a significant degree of organisation to the value chain.  Kenya: The Kenya Tea Development Authority (KTDA) provides farmers with extension services and inputs and also receive assistance in collection, processing and marketing of the green leaf tea.
  20. 20. Public-Private Financing and Investment In the last ten years, the ICT- based applications have gained a lot of popularity in SSA Busoga Rural Open Source and Development Initiative and FoodNet in Uganda; MPESA (literal meaning: mobile money), Kenya Agricultural Commodity Exchange (KACE) and Drum-Net in Kenya;
  21. 21. Public-Private Financing and Investment cont’d Malawi Agricultural Commodity Exchange (MACE) in Malawi; Manobi in Senegal; TradeNet/E-Soko in Ghana; Kilosa Rural Services and Electronic Communication in Tanzania And the most recent e- Wallet under the Growth Enhancement Scheme (GES) of the Nigerian government.
  22. 22. Private Financing and Investment  Maendeleo Agricultural Enterprise Fund (MAEF) in East Africa- Kenya, Uganda and Tanzania  A grant-making fund that aims to sustainably improve the livelihoods of smallholder farmers  Investment in innovative agri- business enterprises that seek to either create or adapt technologies for improving agricultural productivity, increasing profitability and linking smallholder farmers to viable, profitable and sustainable markets.  Helpful to women farmers in the region trying new ways of working, setting up businesses and finding profitable new markets. Since 2002 more than 150,000 households across
  23. 23. Private Financing and Investment cont’d  ESOP in Togo, Burkina Faso and Benin  Promoted by two NGO’s (CICR and ETD) linking processing agribusiness for urban supply (mainly for rice, and at time soya beans) to farmers’ organizations.  The enterprises are run as joint ventures between private individual operators and farmers groups through a contract, which provides them with improved seeds and other inputs on credit financed by local banks under specific credit lines.  Farmers are paid upon delivery of the produce to the agribusiness warehouse through a system of warehouse receipts at a selling price set in advance.  Repayment of the input supply loan takes place upon delivery of the produce to the warehouse.
  24. 24. Private Financing and Investment cont’d  Savannah Integrated Export Processing Farms (SIEPF) and OLAM  SIEPF, a tomato processing plant, and OLAM, a rice processing mill, provides inputs such as seeds, fertilizers, extension services and even land to farmers in northern Nigeria on loan in return for procurement of high quality produce from the farmers. It provides a guarantee to farmers to buy the products of a certain quality at a fixed price thereby increasing output for the companies.
  25. 25. Private Financing and Investment cont’d  Weinco Maize Project and Blue Skies- Ghana  ‘Weinco’ an input supply company, and ‘Blue Skies’, a major processor and exporter of fresh cut fruit supply small farmer-groups in Ghana with quality seeds which guarantee increased yield, fertilizer and technical support.  After harvest, the companies buy the products from the farmers at a minimum price set in the contract, thus reducing postharvest loss of farmers due to lack of storage facilities.  The repayment of the input credit is done by reduction on the proceeds of the sales paid on the farmers’ bank account.
  26. 26. Private Financing and Investment cont’d  Gatsby Gatsby (African Agricultural Capital) provides access to markets for smallholder farmers by stimulating new value chains, adding value to agricultural products and connecting smallholders with buyers and customers. About 1.4m smallholder farmers have benefitted across Kenya, Tanzania and Uganda.  The major challenge of Gatsby is low return to capital invested.
  27. 27. The Way forward for Africa Promote and encourage voluntary contribution from consumers, firms and employees and/or by food and nutrition correlated industries. Lotteries can also be considered Promote the use of migrant remittance which can be considered both as new and renewable sources of financing as well as existing private capital that may be channeled into agriculture. Seek ways of accessing funds generated by carbon emission allowances auctions in the European Union Emission Trading Systems (EU ETS)
  28. 28. The Way forward for Africa Enhance private investment in agriculture, by building up a favourable environment and developing catalytic tools providing incentives and alleviating the constraints to investment. Encourage private participation on insurance programmes which are specifically tailored to suit the peculiarities of African farmers particularly the vagaries of weather.
  29. 29. Thank you for listening

×