Awakening Africa’s Sleeping Giant Prospects for Advancing Inclusive and Sustainable Agricultural Mechanization in Africa

Awakening Africa’s Sleeping Giant
Prospects for Advancing Inclusive and Sustainable
Agricultural Mechanization in Africa
by:
Simeon K. Ehui & Chakib Jenane
Agriculture Global Practice, World Bank Group
Fifth World Summit on Agriculture Machinery
January 21, 2016 ~ Istanbul, Turkey
1

Presentation
outline
Importance, challenges and opportunities for
agriculture in SSA
What are we doing to respond and scale-up?
Overview of agriculture mechanization in SSA
Future prospects – Industry perspective
Concluding remarks
2

Importance, challenges and opportunities
for agriculture in Africa1

Importance of agriculture in Africa
• A key contributor of overall growth, accounts for about 20 % of
GDP.
• Ranging from 3% (in mineral/oil rich countries) to more than
50% of GDP.
Growth
• Higher poverty impacts from agricultural growth relative to other
sectors.
• About 300 million rural poor, 90 million could migrate by 2030.
• 210 million poor people remaining in rural areas to be lifted out
of poverty by 2030.
Poverty
• Half a billion more people to feed by 2030, 45% more than
today.
• Africa currently imports about 30 percent of cereal
consumption.
Food

Challenges and Opportunities for Agriculture in Africa:
Broaden growth and jobs …
5
11
13
7
4
3
2
NumberofSSAcountries
Cereal Yield Range (kgs/hectare)
Recent growth, scope for further gains
Need to capture market opportunities
Food demand ~60% higher by 2030, more
than any other region.
Opportunities to expand agribusiness, jobs
and mechanization across value chains as
food demand increases.
Annual growth rates (%) 2000-13
Agricultural value added +5.1
Cereal yield growth +2.1
Cereal area expansion +1.8
Relatively strong recent growth ...
… scope for further gains.
4x irrigated area
200m ha uncultivated land
potentially available
Change in food demand in SSA by 2030 %
Cereals, food 56
Roots and tubers 47
Sugar and sugar crops (raw sugar eq.) 62
Pulses, dry 60
Vegetable oils, oilseeds & products (oil eq.) 64
Meat (carcass weight) 63
Milk and dairy, excl. butter (fresh milk eq.) 50
Other foods (kcal) 48
Total foods (kcal) 55

Challenges & Opportunities for Agriculture in Africa:
Scale smallholder success…..New models for larger farms
Scale smallholder success New models for larger farms
• Countries with significant cereal yield
growth & significant poverty reduction
through smallholder production e.g.
• Has not happened everywhere. E.g.
Zambia & Malawi had annual cereal yield
growth of 5.9% & 8.5% from early
2000s, but more limited poverty reduction.
Lesson learning.
• Significant interest from private
investors.
• 31 agribusiness investment funds with
target capitalization ranging from $8m
to $2.7bn have sights on Africa.
• ~200 million hectares of uncultivated
land potentially available.
Countries
[time period based
on poverty survey
years, over about 10
yr period]
Cereal
yield
annual
growth
(%)
% change in
poverty
headcount
rate (%)
Rwanda [2000-2010] +7.2 -21
Ethiopia [1999-2010] +4.9 -33 Mechanization
will be
required for
both farming
models

• Significant negative impacts
for Sub-Saharan Africa
• +1.5oC warming by 2030
could lead to about 40% of
current maize area no longer
suitable for current cultivars.
Climate
change
• Increasing pressures on land
and water use
• Land degradation is
increasing
Natural
resource use
• Avian influenza – not gone.
• Wheat rust spread across
Africa (susceptible varieties
still in use).
• Periodic desert locust
Disease risk
7
Challenges & Opportunities for Agriculture in Africa:
….Ensure sustainability and appropriate mechanization

Jobs and growth
in the food system
to meet poverty
reduction targets
Able to feed every
person, every day, in
every country with a
safe, nutritious and
affordable diet
Improved health
outcomes
• Meet ending hunger
targets
• Reduced child stunting
• Reduced food related
NCDs
• No net increase in
obesity
Improved
sustainability
• Climate
resilience/mitigation
• Improved land & water
management
• Protected local
communities &
biodiversity
World Bank 2030 Vision for
Agriculture in Africa - Looking at
the Broader Food System
SDG Goal 2 End Hunger, achieve food security and
improved nutrition, and promote
sustainable agriculture
Malabo Declaration Accelerate agricultural growth and
transformation for shared prosperity and
improved livelihoods

What are we doing to respond
and scale-up?2

Increasing the level of our support and growing the
set of regional programs
700
1.010
1.509
-
200
400
600
800
1.000
1.200
1.400
1.600
FY06-08 FY10-12 FY13-15
IDA/IBRD Support for Agriculture and Related
Sectors in SSA ($ millions, annual average)
Regional Approach - Focusing on
transformational projects
Technology
• Southern Africa ($90m)
• Eastern Africa ($120m)
• West Africa ($400m)
Pastoralism
• East Africa ($197m)
• Sahel ($248m)
Irrigation
• Sahel ($125m)
Growth corridors
• Kivu-Tanganyka Growth
Poles ($120m)

Engaging on the broader policy agenda (examples)
Policy area
Developing analytical underpinnings &
Policy reform support instruments
Land • Land Governance Assessment.
• Land administration projects.
Agricultural public
spending efficiency
• Public expenditure reviews as key entry points for policy
dialogue and investment plans.
Business
environment
• Enabling the Business of Agriculture.
• Business climate assessments.
Input (seeds &
fertilizers)
• Subsidies.
• Seed production, trade, quality control, certification.
• Fertilizer distribution, private sector participation.
Finance and risk
management
• Agriculture Sector Risk Assessments .
• Risk sharing and Insurance.
Markets and trade • Groundnut value chain reform in Senegal.
• Trade policy review in Nigeria.

Micro-grants for investments to
help diversify income generating
activities, and development and
maintenance of socio-economic
infrastructure and facilities.
Training and skills development
for on-farm and post harvest
processing.
Territorial and spatial development
to bundle
infrastructure, services, and
institutions
Rural livelihoods and jobs
Increasing assets, skills, and opportunities

Overview of the current state of agriculture
mechanization in Africa3

Compared with other world regions, agricultural mechanization
has either stagnated or retrogressed
• The greatest source of power for agriculture in SSA
remains human muscle power:
 Less than 20% of mechanization services are
provided by engine power
 In Central Africa an estimated 80 percent of
cultivated land is worked manually.
• In 1960, Kenya, Uganda and Tanzania each had more
tractors in use than India. However, by 2005, India had
100 times more tractors in use than all three countries
combined.
• Large disparity of tractor use per country: more than
50% of tractors in South Africa and Nigeria.
0
10
20
30
40
Tractor use per 1000
ha arable land in 1985
and 2003
1985 2003
 SSA is the only region where the number of agricultural
workers per hectare is very low compared to other
regions (Asia).
 Not only does SSA has an acute lack of human resources
available for agricultural production, it also has very few
tractors available as an alternative source of power.
Source: FAOSTAT/AGS (2005).
Source: FAOS, (2013).
Opportunity
for
Mechanization

Optimism on agriculture in SSA
Current changes in policy towards agriculture are leading to
significant investments in the sector.
Investments in irrigation, rural infrastructure have increased
significantly in recent years.
Demand for agric. commodities and high-value products across SSA
to increase from US$ 50 billion in 2000 to US$150 billion in 2030.
Potential income to farmers due to increased trade in domestic
and regional markets is expected to increase to US$30bn by 2030.
The policy-makers recognize the need for a pro-growth
environment for agriculture mechanization.
SSA is leapfrogging in other sectors – Cell-
phones, transportation, financial services and education sectors
Market opportunities for agriculture machinery !
15

While still limited, there is clear signs for new investments in
agricultural mechanization….
• Formulation of
national
mechanization
strategies:
Sudan, Cameron, Burkina-
Faso, etc.
• Provision of soft
loans to purchase
tractors and
implements:
Tanzania, Senegal, Ghana, etc.
• Promotion of
tractor custom-
hire services:
Ghana, Kenya, Nigeria, etc.
• Joint ventures for
the assembly of
tractors:
Mali
• New suppliers:
China, India, Brazil and
Turkey.

But, there is a clear need to establish an
integrated supply chain
Mistakes of the 1960s
and 70s are still
possible due to a lack
of a supply chain
approach to
mechanization

Future prospects – Industry perspective4

How important is Africa
for your company?
How do you see the
future potential of
the agricultural
machinery market in
Africa?
How do you see the
role of public-private
partnerships in
developing
sustainable
mechanization in
Africa?
Survey on the importance and future potential of the
agricultural machinery market in Africa (lead by CEMA)

Data sources
162 companies responded
15 countries representing the main suppliers of
tractors and other agricultural machinery
• Austria
• Brazil
• Canada
• China
• France
• Germany
• Hungary
• India
• Italy
• Japan
• Korea
• South-Africa
• Ukraine
• United Kingdom
• USA
20
0 10 20 30 40 50
Basil
France
Germany
India
Italy
Japan
USA
China
Number of
responses per
country

21
0
5
10
15
20
25
30
35
Not important Of little importance Of average importance Very important Absolutely Essential
How important is Africa for your company, % ?
CURRENT IMPORTANCE GROWTH IN IMPORTANCE OVER THE PAST 5 YEARS
45%
42%

What has improved/worsened in your business
dealings with Africa in the past 5 years?
Worsened
• Political stability
• Currency exchange
• Import regulations
• Financing potential
• Growing competition locally
and from China and India
• Subsidies
• High volatility of commodity
prices
• Difficulties to find a strong
partner
Improved
• Demand for farm mechanization
• Technical knowledge
• Better understanding of the
farmers for quality products
• Understanding of the markets
• Communication and response
• Less corruption
• Distribution network
• More knowledge of how to trade
in Africa (north and south)
• Commercial farms
22

23
0
5
10
15
20
25
30
35
40
45
No potential Little potential Avergae potential Great potential Very strong potential
How do you see the future potential of the
agricultural machinery market in Africa, % ?
EXPECTED MARKET POTENTIAL IN THE NEXT 5 YEARS
EXPECTED MARKET POTENTIAL IN THE NEXTS 5-15 YEARS
72.6%
49.6%

What needs to improve in Africa for your company to
get more involved/invest more?
Government
•Policies and
regulations
•Business environment
•Political and
economical stability
•Development
mechanization strategy
•Reduced custom tariffs
•Less corruption
•Develop basic
infrastructure
Finance and Market
•Credit availability
•Reliable banking
system
•More stable currencies
•Payment issues and
line of credits
•Market dynamics
knowledge
Industry
•Develop dealership
network
•Companies needs to
know better each
other
•Exhibitions, trade fairs
and B2B meetings
•Local production
•Field testing of
equipment
Farmers and skills
•Technical know-how –
education
•Change in the
Agricultural methods
•Focus on quality rather
than price
•More commercial
farmers
•Awareness on
technology
24

25
0
5
10
15
20
25
30
35
Not important Of little importance Of average importance Very important Absolutely Essential
How do you see the role of public-private partnerships in
developing sustainable mechanization in Africa, % ?
CURRENT IMPORTANCE EXPECTED GROWTH IN IMPORTANCE IN THE NEXT 5 YEARS

Which best practice features come to mind when thinking
about successful PPPs on ag mechanization in Africa?
• Exhibitions
• Knowledge
sharing
• Clusters
• Assembly
lines
• Technology
centers
• Demo farms
• Access to
credit lines
• Risk sharing
Finance
Education/
skills
Communication
Local
manufacturing
26

Concluding remarks5

Doing nothing is terms of promoting agricultural
mechanization in SSA is not an option
Support is critical given the
range of different
challenges on the ground
A new approach is needed:
•Reinforce institutional support
for agricultural mechanization in
a new form
•Strengthen cooperation with the
private sector

Main Pillars: A tailored, inclusive and integrated
approach for agricultural mechanization in Africa
Tailored
• To local/regional
conditions and needs.
This means that different
aspects are considered
such as the local farming
system and farm
practices, existing farm
infrastructure, as well as
the broader socio-
economic situation of
farmers.
Inclusive
• Benefits must reach farm
holdings of different types
and sizes and the overall
rural community.
Integrated
• Broader approach which
foresees public-private
partnerships and the
active participation and
support of farmers and
other key agri-business
stakeholders (food
processors, industry
producers, and financial
institutions such as the
World Bank).
Capitalizes on renewed
impetus for growth and
development through
increased agricultural
investment
Make agricultural
development and food
security policies,
strategies and programs
as well as national
African
agricultural policies
“mechanization smart”
Promote greater
inclusion of the private
sector in
public/institutional
activities by enhancing
PPPs
Source: Based on CEMA, 2014

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