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 January 2011

USAID commits to Tanzania Catalytic Fund for agriculture

As the world faces up to another food crisis, Tanzania is leading the fight back with a strategy to triple agricultural production and lift millions out of poverty.

A report launched in Davos on Friday by Tanzanian President Jakaya Kikwete shows how to achieve a green revolution in East Africa, by promoting “clusters” of profitable agribusinesses which incorporate small-scale farmers.

At the launch Rajiv Shah Administrator of USAID announced a $2 million investment into the Corridor’s $50 million catalytic fund. USAID is considering additional annual investments up to $10 million.

The Southern Agricultural Growth Corridor of Tanzania (SAGCOT) is an area the size of Italy with rich farmland and good “backbone” infrastructure - roads, rail, power and an international port at Dar es Salaam. It could feed the East Africa region and become a major agricultural exporter, to rival the likes of Brazil.

SAGCOT is supported by a public-private partnership of global agriculture businesses, international development agencies, farmers’ groups and the Government of Tanzania. It promises a transformation in the fortunes of hundreds of thousands of Tanzanian farmers.

Small-scale farmers in Tanzania, as in many other parts of Africa, lack access to modern inputs, are at risk from climate change and remain locked out of international markets. SAGCOT will link farmers to modern supply chains and make agriculture a profitable activity, in a country where over 75% of the population is engaged in the sector.

The 63-page Investment Blueprint report was developed with support from AgDevCo, a social impact investor, and Prorustica, a consultancy. Global corporate partners are Unilever, Yara International, Dupont, Stanbic Bank, Monsanto, SAB Miller, Diageo, Syngenta and General Mills. Tanzanian businesses and farmer groups are also involved.

The main findings and recommendations are:
• $3.4 billion of public and private sector investment could triple agricultural output over a 20-year period, achieving food security for the region, creating 420,000 jobs and lifting two million people out of poverty
• Tens of thousands of subsistence farmers would have opportunities to become profitable, commercial farmers in their own right, with access to modern inputs, irrigation and international markets.
• To achieve these results, new financing facilities will be established, including a $50 million Catalytic Fund – backed by the Tanzanian government and international donors – to provide low-cost capital for start-up agriculture businesses.
• The report lists a number of “early wins” in the corridor – agricultural investments which could achieve rapid results in terms of increased output and benefits for small-scale farmers and local communities.
• A SAGCOT partnership organisation, with a professional Secretariat, will help coordinate and monitor public and private sector investments along the corridor.

Global fertilizer company Yara International announced one of the first major investment in the corridor in January 2011 with a USD 20 million investment into a new fertilizer terminal by the port in Dar es Salaam.

President Jakaya Kikwete said:
“Tanzania has immense opportunities for agricultural development . . . SAGCOT is an initiative which I believe personally is the best model to fast track the green revolution in Tanzania".

Prime Minister Mizengo Pinda said:
"SAGCOT will show the way by demonstrating that smallholder agriculture pays and can be a business. The Tanzanian government will commit resources to the Catalytic Fund".

Dr. Keith Palmer, Chairman of AgDevCo, a social impact investor, said:
“Profitable agriculture with strong links to markets is the best route out of poverty for the majority of Africa’s rural poor. SAGCOT can deliver transformational change within a generation”.