Hans Balyamujura

1. Financing African Agriculture: Perspective from the
Private Sector
Hans Balyamujura
African Continental Briefing, Yaoundé
3rd to 5th December 2013

2. Agricultural Finance Challenges …
• Limited small scale/smallholder finance.
• Limited long term and development finance.
• Limited ability to manage agricultural market risk.
• Poor appetite for entrepreneurial risk.
• Poor integration of value chains.
• Some policy environments not strong enough for value chain finance. Regulatory
environment too flexible thus poor stability of value.
• Value chain finance not compensating for the perceived primary agricultural risk.
• The producer still carries the bulk of the risk.
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3. Typical Trend with African Imports …
One Ship load
of razor blades
Trucks loads
Pick up loads
Bicycles
loads
Rural consumer
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4. Missing Piece for Effective Trade …
Truck
loads
Pick up
loads
Bicycle
loads
Smallholder
farmers
3
Ship load
of maize

5. Limited Access to Agricultural Finance ...
Figure 1: The Small Scale Farmers and the Agricultural Value Chains
Transport
Store
Process
Food &
Energy
Input Supplies
Commercial Banks
Consumer
Plant
Harvest
Produce
Growing Crop
Store
Transport
Harvested Produce
Commercial Banks
Manufacture
Agricultural Entrepreneurs
Small Scale Farmers
(Majority of the African Farmers)
Characteristics (Left)
• Less risk
• Access to multiple financial institutions
• Growth among actors is too slow
 Limited repeat business (Most are new farmers)
Characteristics of the Missing Middle
• Activities led by the NGO sector
• Individual scale very small
• Poor profitability of the smallholder farmers
• Lack of adequate security/collateral
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Characteristics (Right)
• Less risk
• Access to multiple financial institutions
• Limited local supply (size of operations)
• Limited local demand (purchasing power) and scale is
too small for profitable international export.

6. Value and Risk along the Value Chain …
Figure 2: Perception of Risk in a Non-Integrated Value Chain
Financial Solutions
Flow of Money
Manufacture Transport
Store Plant
Input Supplies
Banking Relationship
Produce
Harvest
Growing Crop
Store
Transport
Harvested Produce
VALU
RISK
5
E
International/
Process Local market
Food &
Energy

7. Reliable Value in the Chain ...
• Movement of signals along the chain to the front and back
Source:www.ebay.co.uk
• Storage capacity.
Source:www.northerntool.com
• Markets (local and international).
• Good and effective Logistics.
• Strong and effective demand.
• Income per capita - Affordability.
• Multiple uses of the produce (animal feed, beer, human food, breakfast cereal, etc.).
• Is production in line with growing demands of the ‘middle class’
• Well defined policy environment.
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8. Value Chain of Financial Services …
Figure 3: Small Scale Farmers and the Agricultural Value Chain
Hardwood trees
Commercial Banks
Softwood trees
Shrubs
Micro Finance Institutions
Perennial plants and grasses
Farmer/Peer Groups
Social Services
Annual plants
Lichens
Farmers
Inputs
Farmers
Logistics/Processor
Farmer Group
Farmers
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Market

9. Value Chain of Financial Services and Farmer Organisations …
Figure 4: Farmer Organisations and Financial Services
National
Hardwood trees
Provincial
Softwood tress
Shrubs
Regional
Perennial plants and grasses
Farmer/Peer Groups
Social Services
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Annual plants
Lichens

10. Addressing Access for the Missing Middle …
Focus of activities/Start point
Figure 4: Farmer Organisations
Lichens
Social Services
Annual plants
Farmer/Peer Groups
Regional
Provincial
National
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Perennial plants and grasses
Shrubs
Softwood tress
Hardwood trees

11. Investments to Integrate Value Chain Operations …
Figure 5: Aggregation of Activities within the Value Chain
Primary
Farming
Farmer
Organisations
Inputs
Food processing
Advisory
Manufacture
Transport
Store
Plant
Harvest
Produce
Store
Transport
Farmer Organisation Investments
• Strategic investments (Interests).
• No control: Leverage private sector skills (Avoid ownership of technical skills).
• Access income across the value chain.
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Consumers

12. Thank You
Email:
Phone:
hans@zedgroupza.com
+27 83 346 1655
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