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.

11 February 2011

Concessional Funding Key to Unlock Africa’s Agriculture

At least three major demands: “catalytic funding”, some form of “patient capital” and the setting up of “agricultural growth corridors” – need to be met in order to boost the productivity of Africa’s farm sector, creating jobs, improving livelihoods and alleviating poverty.

This is one of the conclusions reached last week by experts meeting at the World Bank in Washington, DC, to discuss how best to assist African smallholder farmers to transition from subsistence to commercial farming.

An essential first step, the experts agreed, must consist of helping smallholder farmers gain access to credit, farm inputs and protection for their land rights. A similar step is needed for African commercial farmers, who need access to grants, subsidized or long-term funding.

“About 60 percent of the world’s uncultivated farmland is in Africa, yet the continent receives only five percent of global investments in agriculture, ” noted World Bank Managing Director Ngozi Okonjo-Iweala, pointing to the tremendous window of opportunity agriculture represents for Africa.

The representatives of African commercial farmers told the meeting that every dollar in “catalytic funding” (subsidized loans) devoted to Africa leverages up to $20 in private capital.

World Bank President Robert Zoellick, who hosted the talks, pledged Bank support in helping establish a “catalytic fund” and mobilize “patient capital” (resources from foundations and Trust Funds) to help nurse Africa’s “baby agricultural industry” to the maturity needed for it to satisfy demand from global retail giants like Walmart and Shoprite.

“Only one percent of commercial lending in Africa went to agriculture in 2010, not enough to ensure that the sector expands by at least 5 percent a year, ” commercial bank executives and some of the region’s biggest agri-business representatives acknowledged.

A mere third of the $3bn devoted to agriculture by private investors worldwide goes to Africa, where 60 percent of all arable land continues to lie fallow.

These problems are compounded by limited use of science – agronomic research, genetically modified seeds, fertilizers and other inputs. In addition, about 40 to 50 percent of Africa’s total farm yield is believed to be destroyed or lost between the harvest, warehousing, conservation, post-harvest marketing and transport to the final consumer.

More from the World Bank here.