Whether for profit or social motives - and often both - an increasing number of investors are targeting opportunities in African agriculture. At the same time innovative approaches for deploying aid to support farming businesses linked to smallholders are emerging. This blog provides a snapshot of who is doing what, where and how.

28 October 2010

Private Sector Interest Grows in African Farming

Mounting concern over security of food supplies is spurring a wave of private-sector investment in Africa that many hope will put it at the center of a green revolution. Already investors are waking up to Africa's potential. Forty-five private equity firms plan to invest $2 billion in the region's agriculture in the next three to five years, according to figures from Informa Agra, and consultancy McKinsey estimates the continent's agricultural output could treble from $280 billion a year today to $880 billion by 2030.

"People are realizing the potential of agriculture," says Lucy Muchoki, head of African business coalition PanAAC, which encourages investment in the continent's agricultural sector.
To meet growing global food demand the United Nation's Food and Agriculture Organization estimates an extra six million hectares need to be brought under cultivation every year for the next 30 years. With sub-Saharan Africa estimated to hold up to 60% of the world's remaining uncultivated land suitable for farming, the region's agriculture is starting to look an interesting investment.

Read the full Wall Street Journal article

27 October 2010

Africa can achieve food and nutrition security through agricultural development

As fears increase about the impact of another global food crisis on poverty in Africa, a ten-member panel of development experts from Europe and Africa have launched a new report. The report, Africa and Europe: Partnerships for Agricultural Development, The Montpellier Panel, provides an overview of the state of European investment in African agriculture, highlights African priorities in agriculture and nutrition, and makes recommendations for ensuring global food price stability and strengthening partnerships between Europe and Africa.

 
The report comes at a time when Brazil, China and India are scaling up their investments and partnerships in various sectors across Africa, and Africa is taking the lead in boosting its own agricultural development. Europe risks being left behind as a key partner to tap the huge potential of the farm sector in Africa. GDP is now rising in 27 of Africa's 30 largest economies-both in countries with significant resource exports and in those without. That growth is coming from a variety of sources, not just oil and other natural resources, but also agriculture, finance, retail, and telecommunications.
 
The report portrays an Africa vulnerable to spikes in food prices, yet also lays the groundwork for unprecedented progress in food production. Meanwhile, Europe has made big promises for a massive increase in agriculture aid, but has yet to bridge the gap between rhetoric and action. The current murky state of European assistance obscures its record as historically Africa's most reliable partner.
  • Average wheat and coarse grain prices are projected to be 15-40% higher over the net decade in real terms relative to 1997-2006 (OECD, FAO)  
  • By 2030, the population of Sub-Saharan Africa is still projected to be about 52% rural based. In Sub-Saharan Africa, the agricultural sector accounts for over 80% of the labour force and 50% of the GDP  
  • If Africa could raise yields on key crops it could increase the value of its agricultural production by $235 billion over the next two decades.  
  • Coupled to this, if Africa could shift a proportion of cultivation to higher value crops such as fruit and vegetables, the continent would benefit from a further $140 billion annually by 2030

23 October 2010

"We cannot solve the problem of poverty without sustainable increases in agricultural productivity"

An internal review of World Bank projects shows that its activities in Africa have not performed very well in terms of boosting agricultural productivity or improving rural livelihoods. The Independent Evaluation Group (IEG) assessment presents a sobering picture of how little the World Bank Group has done over the past decade or so in that task and the need to do more and do it better.

Enhanced agricultural growth and productivity are essential if we are to meet the worldwide demand for food and reduce poverty, particularly in the poorest developing countries. The World Bank Group has a unique opportunity to match the increases in financing for agriculture with a sharper focus on improving agricultural growth and productivity in agriculture-based economies, notably in Sub-Saharan Africa.
Read the full Independent Evaluation Group (IEG) report

14 October 2010

Investing in start-up agriculture in Mozambique

AgDevCo today agreed to provide a first round of loans to several start-up agriculture businesses in the Beira corridor region of Mozambique. The aim is to help create profitable companies which can provide jobs, link smallholder farmers to markets and address food security issues. The beneficiaries are involved in farming and marketing of a range of grains, livestock and tropical fruits – maize, wheat, cowpeas, soya, sesame, potatoes, goats, bananas and mangoes. All of the projects include active participation by smallholder farmers.

The loans ranging from $50,000 to $200,000 are provided as part of the Beira Agricultural Growth Corridor (BAGC) initiative. BAGC is a partnership between the Government of Mozambique, international donor agencies and private companies, launched in early 2010. The aim of the BAGC is to promote a competitive agriculture sector in central Mozambique, creating over 350,000 jobs and providing opportunities for large numbers of smallholder farmers to boost their farming incomes.

Pascoal Alves, a farmer in the Dombe region who grows mangoes and sesame, said:
“Support from AgDevCo will help kick-start a profitable mango industry in the Dombe region, creating jobs and income earning opportunities for large numbers of people. What’s more, we are supporting smallholder farmers to grow sesame and food crops among the mango trees, helping boost incomes and address hunger”

Roberto Albino, director of the Mozambique government's Centre for Agricultural Promotion (Cepagri), said:
“The first round of investments under the Beira Agricultural Growth Corridor initiative will kick-start a revival of the agriculture sector in the central provinces of Manica, Sofala and Tete. We call on development partners to help scale-up the programme so that it can provide income generation opportunities for hundreds of thousands of farmers and their families”

Chris Isaac, Director of AgDevCo, said:
“Mozambique has huge untapped agricultural potential. The BAGC initiative can help tackle rural poverty and increase food production through a public-private partnership. The government and donor partners should increase support for rural farming infrastructure, especially electricity connections and irrigation. Local and international investors can provide the capital to scale-up successful business”.

Despite huge potential, there is today virtually no competitive agriculture in the Beira corridor region of Mozambique. Of the 10 million hectares of arable land, less than 20,000 hectares (0.2%) is farmed commercially under irrigation, mostly sugarcane. 800,000 smallholder farmers operate at the subsistence level with almost no access to modern farming inputs, finance or markets.

The BAGC Investment Blueprint demonstrates how to transform opportunities for smallholder farmers by linking them to markets and giving them access to improved inputs, infrastructure and know-how. It calls for almost US$2 billion of investment by the public and private sectors over a twenty year period.

Investing to Achieve Food security

Investing in irrigation and other measures to improve land quality will accelerate productivity growth. Rich countries should help to finance such investments.

The spectre of a global food crisis has reared its head again. Soaring corn prices, which on Monday recorded their biggest one-day rise since 1973, have triggered fears of a return to the turmoil of 2007-2008. Far-reaching measures are needed to prevent a recurrence.

Full article from Financial Times (registration needed)

1 October 2010

Is Zambia Africa's next breadbasket?

Mail & Guardian - Jody Clark

The evening sun is setting on Francis Grogan's Zambian farm and the combine harvesters are finishing their work for the day. Francolins scuttle in their wake and herons pick at the ground where wheat has been growing.
But instead of letting the farmland lie fallow until next season, Grogan will soon be planting again.
"The land is so good here that there's no need for it," says the Irishman and managing director of Zambeef, one of sub-Saharan Africa's largest food producers.
"The sun shines all day and there is plenty of water for irrigation, which means we can double-crop. Once the wheat is harvested, we'll plant the maize and sorghum."

Long regarded as the poorer cousin of its Zimbabwean neighbour, Zambia is fast gaining attention as a desirable destination for agricultural investors.
International investors from Britain to South Africa have begun putting money into infrastructure development and transport, and about 200 exiled Zimbabwean farmers have taken leases from the Zambian government to develop farmland in the country.
Meanwhile, companies such as Zambeef have risen on the back of a growing Zambian middle class, whose incomes and expectations are rising.
From humble beginnings in 1991 in Lusaka, where the business started as an abattoir and two butcher shops, Zambeef is now a $200-million-a-year company. It is the largest meat producer in Zambia, slaughtering more than 60 000 head of cattle and 3,5-million chickens a year.
"We have a lot more water than Brazil, there is plenty of rainfall and solid support from the government. This is an excellent country to invest in," Grogan said.
The question now on many people's lips is: Could Zambia become the next breadbasket of Africa? It certainly has the potential.

Of a total land area of 752 000km2, 420 000km2 is classed as having medium to high agricultural potential. But, only 15% of arable land is cultivated, according to the World Bank.

Despite this, last season's maize harvest satisfied domestic consumption more than twice over, according to the International Trade Centre in Geneva.

Of a total harvest of 2,7-million tonnes, only one million tonnes of maize was absorbed by the home market. The surplus will be exported, and the country is looking for buyers.

Although economic growth has averaged 5% over the past decade thanks to a roaring demand for the country's copper, the agricultural industry has floundered. Agricultural growth has averaged less than 1% annually.

Only 1% of small farmers have access to electricity and just 28% have access to a public water supply, making irrigation all but a dream for many.

Despite the country's potential, between 80% and 90% of its farmers still work on small-scale or subsistence operations.

Access to finance and capital is also a problem. The Zambian National Farmers' Union has said that "Zambia's market for agricultural finance is fundamentally dysfunctional".

Credit is scarce and expensive for the majority of farmers and heavily skewed towards the larger corporate sector.

In addition, the union says, loan terms are often too short to accommodate the long-term nature of agriculture, and the processing of loan applications by banks frequently takes too long.

These problems make an already risky sector even more hazardous, with non-performing loans in the 0agricultural sector now exceeding 37%, against 13% across all other sectors of the economy.

Large sums of money are needed to kick-start agricultural businesses. According to Grogan, it costs $10 000 a hectare to turn bush into farmland, but even for large-scale businesses such as Zambeef, bank lending rates are about 20%.

For that reason the company has turned to international organisations, such as the European Investment Bank, which offers loans for farming operations at about 5% interest. This is not an option for most farmers in Zambia.

Despite this, the tremendous possibilities have continued to attract investors, with a delegation of Indian commercial farmers expected in December.  That could benefit both them and Zambia.

The United Nations Food and Agriculture Organisation says that if Zambia could equal agricultural activity in Kenya, a country where two-thirds of the land is semi-arid, output would amount to $1,5-billion a year --10% of Zambia's GDP.

The sector's current contribution is about 1%.

"The Zambian government is very supportive -- and they aren't looking for backhanders," said Grogan. "Of course there's a lot of red tape and bureaucracy, but that's the same everywhere in the world.

"We came up from very humble beginnings, delivering beef to the shops in the morning in Land Rovers. Now we have a turnover of £200-million a year and we're listed on the local exchange."