Presentation by Dr. Chiji OJUKWU, Director of Agriculture and Agro-Industry Department 1 Presentation Outline:

I. Why we need Africa-wide Agricultural Transformation

II. AfDB’s Strategic Response

III. Costs and Financing

IV. Key Flagship Initiatives

V. Collaborations and partnerships.

2 I. Why we need Africa-wide Agricultural Transformation?

3 The imperative for agricultural transformation: Where we are, Goals and Targets

Become a net exporter Move to the top of Contribute to the end Eliminate hunger and of agricultural key agricultural value of extreme poverty malnutrition commodities chains

1 2 3 4 Goals

49% of Africans or 420 Staggering food net Low value addition to million live under the 33% of African children food import bill of USD agricultural commodities poverty line of $1.25 live in chronic hunger; 35.4 billion per annum and predominantly per day (2014); (2015); primary production; 58 million children in Those living in poverty Net Imports projected Africa’s share in global Africa are stunted Status Today Status will rise to 550 million to increase to USD production of cocoa beans (under 5 years) by 2025 111.0 billion by 2025 is 73 % vs. 16% share in if we do nothing if we do nothing ground cocoa

Contribute to alleviating Eliminate large scale Food security for all poverty though job imports of commodities Africa share of market Africans that are creation and providing that can be produced in value for processed ‘undernourished’; sustainable livelihoods; Africa, and selectively commodities ~40% begin to export (Example for cocoa Zero hunger and ~130m lifted out of grinding)

Target by 2025 by Target malnutrition extreme poverty Africa´s net trade balance – $0 billion 4 Agriculture remains a major source of income in Africa; however, untapped potential has resulted in persistent poverty and deteriorating food security Urbanization is driving increased demand for food products that are not currently being supplied by African producers

Increasing urbanization across Africa Shifting consumption preferences to ‘premium’ rice

African urbanization rates; millions of people, 2000-2025 Per capita rice consumption by grade – Nigeria Example Kg per capita per year 635 35.0 30.5 +4% 532 10.9 (31%) 446 21.4 372 Standard (70%) 311 263 24.1 (69%)

Premium 9.1 (30%)

2000 2005 2010 2015 2020 2025 Rural Urban % of pop.: 34% 35% 37% 39% 41% 44%

Source: IFPRI, Policy options for accelerated growth and competitiveness of the domestic rice economy in Nigeria; World Bank; CGIAR, Technologies for African Agricultural Transformation; Africa Rice Center, The New Rice for Africa – a Compendium; World Bank Data; Dalberg analysis Barriers crippling Africa’s agriculture sector

Poorly Poorly Limited Insufficient Limited reach Inconsistent Under- organized post- developed coordination of utilization of of extension to capacity for performing harvest market research and inputs and boost on-farm effective value value chains aggregation linkages and development mechanization production addition and transport trade corridors

Insufficient transport, energy, water, waste Undeveloped soft infrastructure including aging Insufficient management and other hard infrastructure, smallholder farmers and a lack of skills for infrastructure leading to uncompetitive cost structures commercial agriculture and agro-allied industries

High service cost due to small Limited market attractiveness Limited access Real and perceived risk limiting deal sizes, lack of credit data, relative to perceived higher to agricultural private sector investment and low capacity in agricultural returns outside of the finance lending agriculture sector

Unfavorable market access and Ineffective sector regulation Unsupportive business enabling Adverse agri- incentives limiting trade and creating long lead times for new environment restricting land business capacity to produce high-quality technologies and inconsistent tenure and general ease of doing environment products trade policies business

Limited Insufficient inclusivity of women Limited incentives to ensure Limited access and affordability inclusivity, and youth in agricultural sustainability and climate- of commodities with high sustainability development resilient practices nutrition levels and nutrition II. AfDB’s Strategic Response AfDB’s ‘’High 5” Priorities

1. Power and Light Up Africa

2. Feed Africa

3. Industrialize Africa

4. Integrate Africa

5. Improve Quality of Life of Africans

9 Country-level Transformation is already underway across Africa

Becoming a major exporting Becoming a major exporting Improving yields through player within 10 years player within 10 years modernized input distribution

Kenya Ethiopia Nigeria Exporting horticulture out of Exporting floriculture out of Scale farmer registration and Africa Africa input distribution

Total horticulture exports, billion KSH Total floriculture exports, million USD Total farmers registered, million users

GESS was introduced 10.3 to farmers in April +11% +41% 550 2012

346 4.2 178 0.66 13 2000 2005 2010 2014 2001 2005 2010 2013 2016p 2012 2013 2014

• Strong political will and • • Ethiopian Horticulture Producers Strong foreign investor and partner government support to transform and Exporters (EHPEA) actively support developing and driving the the input supply system managing the sector industry • Use of public funds to leverage • • Strong Government support in (1) Contract farming model used to private-sector investment (i.e. infrastructure and logistics, (2) assure consistent supply agro-dealers networks) • access to land, (3) provision of long- Political will to support smallholder • Leverage mobile technology to term credit and (4) attracting farmer development achieve scale and provide domestic and foreign investors nationwide access A focused approach on integrated commodity value chains

The Bank will pursue an agenda to transform key agricultural commodities and agro-ecological zones

In particular, Feed Wheat in North Africa Maize, soybean, Africa will take a livestock, and poultry commodity- across the Guinea Sorghum, millet, Savannah focused integrated cowpea, and livestock approach – across the Sahel simultaneously addressing multiple Rice in West Africa bottlenecks across entire prioritized Tree crops Cassava in humid and sub-humid zones (including cocoa, agricultural coffee, cashew, and commodity value oil palm), chains and within horticulture and related agro- fish farming across all of Africa ecological zones

Agricultural commodity value chains and agro-ecological zones targeted by the Feed Africa 12 The AFDB - in collaboration with partners - will contribute to Orchestrate, Architect, Scale and Replicate Transformation through 7 Enablers

Feed Africa Enablers AfDB Role Partners

1 Orchestrate TAAT: increase investment into agriculture research and technology dissemination AfDB/ CGIAR/ / Design Inputs finance and agro-dealer network development: expand input finance and FARA/ IITA/ IFPRI/ connect farmers to buyers World Bank/ AFAP/ Increased Productivity Mechanization Program: establish facility for on-farm mechanization leasing FAO/ WFP-PPP/ Scale/ Develop agro-dealer supply systems Microfinance actors Replicate (e.g. PAMIGA)/ Support wide-scale deployment of innovative farmer extension models. Equipment manufacturers 2 Orchestrate Post-Harvest Loss Prevention Facility: invest in infrastructure and training to reduce / Design on-farm and post-harvest loss AfDB/ Rockefeller Warehouse receipts systems (WRS): scale WRS as 1st step for commodity exchanges Foundation/ GAIN/ Realized Value of Agro-processing zones and corridors: increase and link production and processing FAO/ World Bank/ Increased Production capacity along key corridors UNIDO/ IFAD/ Scale/ Scale-up and replicate innovative models to organize and aggregate farmers BADEA/ AGRA Replicate Establish agricultural commodity exchanges

3 Orchestrate Infrastructure Coordination: accelerate and coordinate development of enabling hard Increased Investment / Design infrastructure (energy, water, logistics) AfDB/ IFC/ IFAD/ in Hard & Soft Market infrastructure: build market centers and associated service infrastructure GSMA/ BMGF Infrastructure Farmer e-registration: launch large scale farmer e-registration systems Orchestrate, design, scale and replicate transformation through 7 enablers (cont’d) Feed Africa Enablers AfDB Role 4 Orchestra Risk-sharing Facility: catalyze bank lending to the ag sector through risk-sharing facility te/ Non-Bank SME Finance and Capacity-Building Fund: provide funding and capacity-building Design to SME funds as well as surrounding ecosystem (e.g. credit bureaus) Project Finance Facility: Increase long-term funding to agriculture SMEs AfDB/ KfW/ IFC/ Expanded Trade Finance Facility: scale up existing Soft Commodity Financing Facility Commercial Banks/ Sovereign Risk Support: Scale up Africa Risk Capacity (ARC) initiative (sovereign insurance Central Banks Agricultural Finance solution to agro-ecological shocks) Diaspora Bonds: create lending products to attract diaspora and institutional capital Scale/ Facilitate lower lending rates to agricultural players through Central Bank funds Replicate Deepen and broaden agricultural insurance markets

5 Orchestra Policy reform matrix: coordinate establishment of an Africa-wide policy matrix detailing te/ the five groups of key policy changes required to enable transformation; key policy areas Design would be: (i) Land tenure, (ii) Input subsidies, (iii) incentives for local production and AfDB/ World Bank/ processing, (iv) financial sector deepening, (v) Regional integration and trade IFPRI/ Global Program for Improving Agricultural Statistics and Rural Development: improve CAADP/NEPAD/AUC Improved statistical systems across African countries by building capacity in ministries and offering / RF/ MMP/ Agribusiness technical assistance Rockefeller Environment Scale/ Facilitate land tenure reform through the Africa Land Policy Center Foundation/ Replicate Provide technical advisory to governments to support agriculture development bank set- Malabo Montpellier up / reform Panel Strengthen capacity of private-sector actors’ (e.g. Chambers of Commerce) to advocate for favorable policies Support development of Agribusiness Environment indices Orchestrate, design, scale and replicate transformation through 7 enablers (cont’d)

Feed Africa Enablers AfDB Role 6 Orchestrate/ AFAWA Facility: establish a facility to promote women-owned MSMEs Design AfDB/ CCIAT-CCFAS/ Scale/ Increase representation of women in agricultural research, and enhance gender- ONF International/ Replicate responsive research, monitoring, and evaluation Green Climate Fund/ GREAT/ Increased Inclusivity, Orchestrate/ Youth Jobs for Africa Agricultural Flagship Programs: establish facilities to increase AWARD/ Jobs for Sustainability, Design youth employment and enhance skills in agribusiness (e.g. ENABLE Youth) Youth Fund/ IITA/ Nutrition FARA/ Orchestrate/ Climate Resilience Funding: provide funds to support climate adaptation and climate Micronutrient Design smart agriculture practices Initiative/ BMGF/ FAO/ Dangote Scale/ Encourage scale-up and replication of nutrition programs (through the Nutrition Replicate Trust Fund and other mechanisms) Foundation

7 Orchestrate/ Partnership among key actors from the public sector, private sector and Design development institutions Coordination Scale/ Support pan-African agriculture leadership initiatives (e.g. Leadership 4 Agriculture) Replicate III. Costs and Financing Achieving Feed Africa Goals requires Substantial Investment and results in massive Revenues

Investment required to transform Africa agriculture; USD billion, 2016-2025 Indicative Estimate

Enablers

6

8 7

Value Chain Development

ATA ATA

Total Africa

Value Annual

by 2025 by revenue revenue 4 Enabling Total Nutrition Production Inclusivity,

5 Soft & Hard Ag. Finance Ag.

Addition opportunity

Environment

Sustainability, Sustainability,

Infrastructure Partnership for for Partnership Rice ~18-22 ~3-4 ~21-26 ~5

Cassava ~2-2 ~2-3 ~4-5 ~1

Wheat ~22-27 ~16-20 ~38-47 ~13

Cotton ~0.4-0.5 ~1-1.2 ~1-2 ~0.3 Ecological Zones Ecological - Horticulture ~5-6 ~4-5 ~9-11 ~65-80 ~265-330 ~20-30 ~30-40 <5 ~315-400 ~16 Aquaculture ~1-1 ~19-23 ~20-24 ~8

Tree crops1 ~14-17 ~9-11 ~23-28 ~11

Sahel Region2 ~6-7 ~9-11 ~15-18 ~6

Commodities / Agro / Commodities G. Savannah3 ~42-52 ~26-32 ~68-84 ~23 Total ~110-135 ~90-110 ~200-250 ~65-80 ~265-330 ~20-30 ~30-40 <5 ~315-400 ~85

USD 315-400 billion over the next decade, or an average of $32-40bn annually could unlock USD 85 billion of revenue annually from 2025 Mobilizing Funding to Address the Financing Gap

Current Funding for Agriculture Development in Africa AfDB and public sector partners will crowd in vs. Requirements for Transformation, $bn / year private and institutional funding by: • Establishing enabling environments for private investment ~$25-33bn ~$32-40bn • Employing innovative de-risking tools and Total govt spending is blended financing ~$12bn, although 70-80% is • Proving the potential for risk-adjusted on current expenditure returns in agriculture projects and commitments leaving only agribusinesses $2-3bn for investments Sources for filling the gap include: <$1bn $7bn $2-3bn • AfDB: Increase annual lending to USD 2.4bn/year • Governments: co-investment in increased $3bn AfDB lending (@10%) and raising budget allocation from average 3% to 5% • Commercial banks: currently lending $660m <$1bn annually (4.8% of ~$14bn); room to catalyze more • Sovereign wealth funds: AUM of ~$160bn AfDB Other Govt Commercial Total Gap Total • Pension funds: AUM of $380bn ODA and Spending Lending Investment Required • Africa-weighted PE funds: AUM of $25-35bn Donors

Currently, total investment finance is ~$7bn annually Leaving a funding gap of ~$25-33bn The Bank intends to increase agricultural lending to $2.4bn annually (Including public and private)

OSAN already has a robust pipeline of requests for the upcoming years (US$8,0 Billion) Others:. GEF, TSF, SRF, GAFSP Source: OSAN. IV. Key Flagship Initiatives Technologies for African Agricultural Transformation

OBJECTIVE: The CGIAR Technologies for African Agricultural Transformation (TAAT) Clearinghouse led by IITA will raise farmer productivity and incomes by creating a repository of proven agricultural transformation technologies that are tailored for the African context and can be scaled beyond pilots through CGIAR and partner delivery mechanisms

Key components Problems addressed Lessons learned from comparable examples

1 Delivery of technologies to end-beneficiaries varies • Brazil’s EMBRAPA (Brazilian Agricultural Provide funding and strategic support widely across projects and CG centers. Research Corporation) scales to CGIAR to mobilize and scale up CGIAR has developed many high-potential technological innovations and best proven agricultural development technologies for Africa’s agricultural transformation, practices through its Embrapa technologies in eight priority but many farmers have not adopted them Management System, via dozens of intervention areas and key commodity Transformation. partnerships with both public value chains institutions and private agribusiness • (TAAT) has been appraised and will be submitted to companies 2 Board approval early in 2017 subject to availability of • Thailand’s National Science and resources from the regional operation window. Technology Development Agency FARA collaborates with the TAAT • The Bank is working closely with about 13 CGIAR (NSTDA) has a dedicated Technology Clearinghouse to provide capacity centers, FARA, OCP, AGRA etc. to develop this Management Center (TMC) responsible building support USD800 million operation which is expected to for technology transfer and massively move improved technologies from the commercializing developed innovations; shelf to the farm where they are needed. it bridges the lab-to-market gap through • The Bank is also working with AFAP and AGRA on applied R&D, IP protection and licensing, SME financing of input supply systems. spin-offs and joint ventures, and • The Bank is supporting e-registration of farmers in contract and joint R&D with private Liberia, Benin and Togo. companies

Source: CGIAR TAAT proposal, February 2016; Independent Review of Integrated Delivery in the CGIAR, 2014; Walker et al. 2014; AfDB 2014; IRIBA 2014; NSTDA 2009. Agropoles, Agro-Industrial processing zones and corridors

OBJECTIVE: Agro-processing zones concentrate resources and create an enabling environment within high potential areas providing aggregation, processing, market information, market linkages and SME linkages for farmers and agri-businesses

Lessons learned from comparable Key components Problems addressed examples Infrastructure to support value addition is • Rigorous analysis is needed to establish 1 underdeveloped across the continent ideal zone location, profitable Support zones in developing • Africa imports a larger share of agricultural production mix and partners (e.g., analysis and business commodities than it exports, in terms of both primary Nigeria SCPZ and Lakaji Corridor /marketing plans to attract products and total merchandise trade studies) investors • Net trade deficit in agricultural products grew from • Attract private sector investors by USD35.4bn in 2014 to $42.6bn in 2015 ensuring right market incentives 2 • Agribusiness activities outside of farming account for • Professional and independent zone Provide funding for 38% of total value added across agricultural chains, management through a central infrastructure development compared to 78% globally demonstrating limited management center (e.g, SAGCOT’s within zones processing capacity on the continent . independent zone coordination center) • Government linkages to support policy • OSAN is supporting Angola, Senegal, DRC, Burkina Faso, and infrastructure development (e.g., 3 Cote d’Ivoire and Nigeria with design and financing of Hawassa Processing Zone in Ethiopia) Provide funding to support Agro-Industrial Zones or Agropoles. • African zones are relatively new to agribusiness engaged in • The DRC Bukango Lunzo (USD100 million) is being capture success, however Malaysian is expanding and strengthening prepared, as well as the Cote D’Ivoire Agropole an example of a country that has supply networks (USD120 million). intensified processing, transitioning to These are intended to scale up massively the production, the largest processed Palm Oil exporter processing and marketing of given agricultural commodity value chains. Others include Gabon (UA150 million) and Ethiopia (UA125 million).

Source: World Energy Outlook 2011, Why has Africa become a net food importer FAO 2011” The profile of agribusiness in Africa” Torben M. Roepstorff, Steve Wiggins $ Anthony M. Hawkins Agropoles, agro-industrial processing zones and corridors

Job Opportunities along the Agriculture Value Chain Cases

Burkina Faso

Democratic Republic of Congo

Tunisia

Ethiopia ENABLE Youth program

OBJECTIVE: The ENABLE Youth Program will increase youth participation in agriculture by providing business training, seed capital for youth- led agribusiness enterprises, mentorship, and placement in agribusiness companies. In partnership with IITA, Agribusiness Incubation Network, Unibrain, etc

Lessons learned from comparable Key components Problems addressed examples 1 Youth unemployment rates across Africa are as high • FARA-UniBRAIN learned that as 32%, with rural youth the hardest hit developing a large network of active Provide employer-driven agro- • 80% of rural youth are in vulnerable employment business mentors and strong processing training and • This is nearly 20% higher than in urban areas relationships between participants placement to urban youth There are large human capital needs to further and mentors is important for the (Agribusiness Support Program) develop the agricultural sector, but existing success of youth businesses after education systems do not provide sufficient or program graduation, as are advance appropriate programming to develop skilled commitments from employers to agribusiness leaders employ program cohorts after 2 • There is an apparent mismatch between graduation Support RMC provision of capital vocational training offered in tertiary institutions • TechnoServe’s STRYDE agribusiness and business training for and industry requirements project and MasterCard vulnerable rural youth to launch • Lack of technical skills as well as engineering skills Foundation's Youth Forward ag. microenterprises (Rural to efficiently operate processing equipment are initiative found that employer Micro-enterprise Program) cited as major challenges by CEOs of leading involvement in designing training African agro-processors programs ensures relevance and Even with the necessary training, youth often lack sustainability access to capital to grow businesses; only 20% have bank accounts

Source: Jobs for Youth in Africa strategy documents. ENABLE Youth: Agribusiness as a solution to empower and employ Africa’s youth

Target Intervention

USD 15 billion to support enterprise and job creation for youths and women CAPACITY AND SKILL BUILDING Investing in 30 African ENTERPRISE AND countries* 18-month training BUSINESS FINANCING incubation of young DEVELOPMENT graduates as business Crowd in private men and women in Transformation into investment and 1.50 million agribusiness creditworthy commercial lending agribusiness jobs in agripreneurs the next 5 years Deploy risk sharing * Algeria, Benin, Burkina Faso, Burundi, mechanisms Cameroon, Cote d’Ivoire, Democratic Republic of Congo, Eritrea, Ethiopia, Gabon, The Gambia, Ghana, Guinea Bissau, Kenya, Liberia, 300,000 agribusiness Madagascar, Malawi, Mali, Mauritania, enterprises to be created Morocco, Mozambique, Nigeria, Rwanda, in Africa Senegal, Sierra Leone, Sudan, Tanzania, Tunisia, Uganda and Zambia 10,000 unemployed graduates Need to leverage ** 37,000 for Nigeria (50% women) USD 0.5 billion trained and financially per country empowered in each country ** Agricultural Risks Sharing & Financing Mechanism

OBJECTIVE: The Agricultural Risks Sharing & Mechanism will achieve increased bank lending to SMEs through de-risking credit activities and attracting new capital to the sector.

Key components Problems addressed Lessons Learned

1 Previous risk-sharing initiatives in Reduce risks for Commercial Current risk-adjusted returns to capital are too Japan, the US, and India have Banks low to justify investment in the sector when other produced lessons about: 2 opportunities exist • Structuring of incentives to avoid Leverage excess liquidity into • Major commercial banks only loan 1-5% of their moral hazard risk by banks or Agriculture. portfolio to agriculture borrowers of originating excessive • Prohibitively expensive interest rates (15-25%) low-quality loans for agriculture reflect high transaction costs, 3 Build Agricultural Capacity of lack of sector expertise, risk exposure Successful initiatives such as NIRSAL Banks • The Bank will support countries with PPF or MIC in Nigeria and FIRA in Mexico grants to design and set up country instruments. illustrate the importance of: Requests have so far been received or expected • Partnerships with credible state 4 Increasing outreach of banks from Uganda, Rwanda, Liberia Sierra Leone, institutions into rural areas Rwanda, Kenya, DRC and Cameroon. • Stakeholder inclusion to align • A new Department of Agricultural Finance is credit guarantee offer with private being set up to create necessary instruments for sector needs 5 mobilizing resources for agricultural investment. and ensure a systematic • Instruments will be created for leveraging change in agricultural lending resources from Sovereign Wealth Funds, Pension Funds, and setting up Diaspora bonds.

Source: Dalberg interviews in Kenya, Senegal, Nigeria (2015); Omidyar Network, “Accelerating Entrepreneurship in Africa Report,” 2013; FAO, “Credit guarantee systems for agriculture and rural enterprise development,” 2012 Commodity and Agricultural Financing Value Chains Risk sharing mechanism for increased agriculture finance

Public Goods support: Roads, Irrigation, R&D, Storage, Price Stabilization, etc. • AFDB to support RMCs to setup RSF Improve the Agricultural Value Chain Commodity Products • RSF to leverage up to 10x

Farmers Agro Seed Fertilizer Agro Industrial Trade Dealers companies companies processors manufacturers and exports • Systemic change in bank financing for agriculture

Appropriate Risk Sharing Instruments along the Agricultural Value Chain • Finance for growth of Agribusiness Interest Technical Guarantees Insurance rebates Assistance • Financing agriculture as a Seasonal • De-risk the financial value chain Term business/ENABLE Financing • Unlock commercial financing for agriculture Financing Youth Agro-Inputs Network Development / Input Finance

OBJECTIVE: The Agro-Inputs Network Development Facility will raise farmer productivity by increasing financing to large-scale domestic inputs producers, expanding market access for smallholders, and supporting policy reform for greater inputs access.

Lessons learned from comparable Key components Problems addressed examples

1Provide project finance for large- Average yields in Africa are low compared to other • The FMO-IDH Smallholder Finance scale domestic input production regions of the world Facility (SFF) found that farmers are and irrigation equipment • Farmers lack access to high quality, appropriate more willing to use inputs if they manufacturing types, and sufficient quantities of seed, fertilizer, have market access, and that farmers and irrigation equipment need to see the benefits of improved 2 • African farmers could increase yields by 3-4X for inputs before buying On-lend to input distribution and most crops by using more improved inputs and • The difficulty in capitalizing AfDB retail SMEs through microfinance changing management practices African Fertilizer Financing institutions Africa spends heavily to import inputs it does use Mechanism (AFFM) shows that the • Net importer of fertilizers (excl. phosphate) and private sector should be targeted for 3 pesticides co-investment rather than RMC Procurement platform partners • Pays more than other regions on per-unit basis governments work with AfDB to facilitate • PAMIGA’s1 Water and Micro-finance expanded market access Difference in improved inputs Africa consumed in Africa versus other Initiative (WMI) offers micro- World average irrigation lending and training for regions 120 4 both farmers and loan officers, and 21% Partners (e.g. AFAP, FAO) work tailored, longer-tenor loans; PAMIGA with AfDB to support policy 18 6% recently created a facility with OPIC reform and usage data collection and Calvert to expand the program Fertilizer consumption Cultivated area (kg/ha) under irrigation (%)

Notes: (1) PAMIGA is the Participatory Microfinance Group for Africa, a consortium of microfinance institutions from across the continent.

Source: World Bank, 2013; Global Yield Gap Atlas; Williamson et al. 2008; FAOstat, 2013 data; PAMIGA WMI; OPIC press release, 2015. On-Farm Capex Hiring and Investment Support Mechanism

OBJECTIVE: The African Mechanization Program will raise farmer incomes by allowing farmers to lease mechanized equipment for more efficient production.

Lessons learned from comparable Key components Problems addressed examples 1 Africa is not reaping the potential efficiency benefits • Nigeria’s Agricultural Equipment Support select RMCs to create of mechanization Hiring Enterprises (AEHEs) Agricultural Equipment Hiring • Farmers often lack labor to plant larger fields in experimented with two models: Enterprises (AEHEs) time for rains, and thus have lower production distribution and leasing through the • African farmers have 10 times fewer mechanized ag. ministry, or through a 2 implements per farm area than farmers in other decentralized SME network; the Partners (e.g. FAO, UNIDO) work developing regions, and access has not grown as former requires high government to provide technical assistance to quickly as in other regions capacity AEHEs Many African farmers are unable to pay the upfront • BNDES FINAME Agricola’s longer- cost of mechanized equipment tenure and lower-interest loans are a 3 strong incentive for Brazilian farmers Provide concessional debt to be Value of agricultural machinery stock by to consider leasing equip. on-lent for equipment hiring and 400,000 region (2005 USD $M) • John Deere has distribution networks purchase via commercial banks East Asia in E, S, and W Africa; it is launching a 300,000 first loss guarantee to enable mech. 200,000 equip. adoption via lower monthly 4 FAO and other partners South farmer payments collaborate to create a robust 100,000 America • Farmers prefer to be able to knowledge base and collect data Africa eventually own their own assets, on mech. access 0 1987 1991 1995 1999 2003 2007 such as through Rent-to-Own

Source: FeedAfrica 2015; UNIDO and FAO, 2008; FAOstat, 1985-2007 data. On-Farm and Post-Harvest Waste and Loss

OBJECTIVE: The Post-Harvest Loss Prevention Facility will raise farmer incomes by making post-harvest loss (PHL) technologies more readily available through growth capital investments in suppliers, and on-lending for farmer leasing.

Lessons learned from comparable Key components Problems addressed examples 1 Post-harvest losses (PHL) in Africa are equivalent to • Many PHL solutions exist and can be the annual caloric requirement of 48M people, and locally manufactured, but are not Create a blended finance vehicle worth USD $4B in lost revenue yet reaching farmers at scale; to crowd in growth capital • Cereal losses are 21% of production, while fruit, Mahaseel Agricultural Investment investment for PHL technologies vegetable, root, and tuber losses are >50%, with Fund and Anterra Capital are venture the greatest losses at handling, storage, and private equity funds providing processing, and packaging stages growth capital to storage and 2 • PHL prevention technologies are typically too processing companies Partner with Rockefeller, GAIN, expensive for smallholders or are not marketed • Farmers need to have sufficient and others to provide technical and sold in remote rural areas incentives, such as market access, to assistance to investees in be able to benefit from and pay for conjunction with investments Agricultural production Share of total weight lost PHL technologies; AgResults found Postharvest handling & storage across commodities in sub- Saharan Africa that paying farmer aggregators Processing & packaging bonuses for higher-quality maize Distribution 3 66% improved uptake Consumption 54% Create an on-lending window to 38% 27% 30% 31% allow agricultural coops and 21% SMEs to lease PHL equipment

Cereals Milk Meat Oilseeds Fish & Roots & Fruits & & pulses seafood tubers vegetables

Source: APHLIS; CTA Policy Brief No.7, 2012; Rockefeller Foundation 2014; AgResults Nigeria Year 1 Verification. Warehouse Receipt Models Replication

OBJECTIVE: Warehouse receipt systems allow farmers who store their produce in licensed warehouses and issues them warehouse receipt which acts as an asset for sale or use as collateral for loans

Lessons learned from comparable Key components Problems addressed examples

In absence of adequate storage, farmers are • Adequate storage facilities with staff 1 losing profits from selling produce right after who are well trained to facilitate harvest consistent quality and quantity Provide funding for warehouse • Prices are usually lower during harvest season measuring (e.g., Ethiopia warehouse infrastructure development • Farmers can almost double the income from receipts financing initiative which feeds their produce in the off-season1 into the Ethiopian Commodity Non- transferability of harvest to commercial Exchange as well as with the Tanzania 2 uses and particularly security to access loan Warehouse Licensing Board) Provide technical advisory • Farmers can increase their margins by ~30%2 • Strong legal framework allowing for towards setting up and using inventory finance to meet annual enforcement of contracts e.g., Rwanda managing a warehouse receipt contractual requirements Warehouse Receipt System and systems Lack of warehouse receipt systems limit the Ethiopia Commodity Exchange potential success of budding African commodity • Reliable flow of market information to 3 exchanges facilitate price discovery, ensuring Provide funding • Commodity exchanges identify the lack the farmers get the full benefit of the to support the training of consistent supply3 of quality commodities as receipt system e.g., East Africa Grain warehouse staff to ensure the biggest challenge to scaling Council Warehouse receipts system quantity and quality standards

1. Tanzania – IFAD Agricultural Marketing Systems Development Programme. 2. Ghana - Onumah and Aning (2009) - Margins per tonne of maize sold increased from 5.1% to over 35.1% “Feasibility study towards establishment of commodity exchange in Ghana”. 3. EAX, ACE, ASCE

Source: Dalberg. Sovereign Insurance

OBJECTIVE: Africa Risk Insurance will improve country resilience to agro-climactic shocks by building a continent-wide sovereign insurance solution.

Lessons learned from comparable Key components Problems addressed examples

Agro-climactic shocks are a serious threat to Existing efforts by the World Bank to 1 smallholder farmers, economic productivity, build disaster resilience with a Provide re-insurance for and government budgets facility and insurance approach, Africa Risk Capacity’s risk • Rainfall fluctuations threaten agriculture, such as the Global Facility for pool particularly the 98% of farmers reliant on rain- Disaster Reduction and Recovery fed agriculture for food security and incomes and Pacific Catastrophe Risk Action is required in the near-term as rainfall Insurance Pilot focus on: 2 fluctuations from El Niño threatens 29 million • Development of government Convene actors and people with food insecurity in Southern Africa capacities to carry out governments to participate in and several tens of millions more in Eastern contingency plans and fund Africa Risk Capacity Africa • Accountable oversight of Rapid government response to drought via cash investments in public transfers and food mobilization saves lives and infrastructure and disbursements 3 money • Rapid transfer of cash and Offer technical assistance and • Investments in rapid response through the essential goods to affected areas linked infrastructure financing ARC yield a return of $4.40 to affected leveraging existing systems, to build RMC resilience households for every $1 invested actors, and relevant technologies • Estimated need of $14-17 billion per year for • International cooperation African countries to adapt to an between member governments approximately 2°C warmer climate forecast

Source: Intergovernmental Panel on Climate Change, “Fifth Assessment Report,” 2014; African Risk capacity, website, accessed 2016; Irin News, “Southern Africa’s Food Crisis in Numbers,” 2016; UNOCHA, “El Niño in East Africa,” 2015 Infrastructure Finance

OBJECTIVE: The Agricultural Project Finance Facility will catalyze financing for the build-out of agricultural infrastructure in support of the Agricultural Transformation Agenda by providing co-funding and project development assistance to value chain projects.

Lessons learned from comparable Key components Problems addressed examples

There is a $48B gap in overall infrastructure The Bank’s previous experience, 1 financing across continent including the Emerging Africa Provide project co-financing • Despite large infrastructure gap in Africa, Infrastructure Fund, highlights: facilities for large-ticket project finance in the continent only accounts • Collaboration with banks to agricultural infrastructure for 3% of the global figure develop robust partnerships for PPPs in line with the ATA • Moreover, 70% of current project finance co-financing and project support occurs in four countries (Nigeria, Ghana, South • Portfolio diversification by value 2 Africa, Angola), highlighting national chain and region Build a project development inequalities in access to finance • Need for window for project and technical assistance More specifically, agriculture-related development technical assistance facility that can support infrastructure is marginalized in Africa project nearly-bankable projects to finance relative to global proportions Other project finance initiatives, access finance from other FIs • Over 64% of project finance in Africa from including CIF’s Clean Technology 2003 to 2013 went into in extractive sectors, Fund, note the need for: far higher than global average of ~27% • Opportunistic collaboration with • While roads and transportation represented MNCs and governments to ~22% of global project finance, their allocation support nationally relevant PPPs in Africa was negligible and integrating projects with • PPPs represented only 1% of Africa project private sector needs finance Trade Finance

OBJECTIVE: The African Agriculture Trade Finance Facility will facilitate trade and improve global competitiveness of African agricultural exporters by providing access to finance for banks and export aggregators.

Lessons learned from comparable Key components Problems addressed examples

Trade finance is extremely difficult to access for The experience of actors including 1 interested actors AfDB as well as IFC and its trade Provide trade financing and • Interest rates on trade loans surpass 10% in a programs (Global Trade Finance guarantees for commodity third of all African countries Program; Global Trade Liquidity aggregators and exporters • Cash collateral requirements for loans Program; Global Trade Supplier frequently reach up to 50% Finance; Structured Trade • Business model needs to be proved to get Commodity Finance) show need for: 2 international financial institutions to expand • Engagement with commercial Provide dedicated credit and trade finance operations in Africa banks and other financial risk-sharing agreements for Unmet demand for bank-intermediated trade institutions in and outside of the banks providing trade finance finance is ~$115B continent • Unmet demand is higher in low-income • Leveraging bank name to draw in countries than in middle-income countries – outside finance and brand 3 the same countries that suffer the largest food beneficiaries Support technical assistance trade deficits • Balance between short-term and capacity-building for trade • Current supply of trade finance is $350B commercial viability and long- to exporters and banks • Major constraints to banks include limited term impact of projects dollar liquidity and insufficient limits with • Strategic and coordinated support confirming banks for value chain promotion

Source: African Development Bank, “Fostering Development Through Trade Finance,” 2014; African Development Bank, “Trade Finance in Africa,” 2014 Farmer E-Registration

OBJECTIVE: The African E-Payments Platform for Input Distribution will raise farmer productivity and incomes by helping countries create databases of their farmers and thereby directly distribute input vouchers and other vital services to farmers through mobile payments systems.

Lessons learned from comparable Key components Problems addressed examples 1 Most government support for farmer inputs does • Nigerian ag. ministry’s (FMARD) not reach smallholder farmers biometric e-registration system Support RMCs to create • In Nigeria, only 11% of government fertilizer has registered 15M farmers and electronic databases to register subsidies reached farmers before the partnered with Cellulant, an e- farmers government switched to an e-payments payments provider, to send platform farmers fertilizer subsidies directly Advances in value chain financing for inputs and • The World Food Programme 2 other services, such as warehouse receipt-linked (WFP) and Grow Africa’s Patient Support RMCs to channel input loans, have only reached 7% of smallholders, Procurement Program is piloting subsidies and other farmer continuing to leave farmers liquidity-constrained an e-payments system for staple support through e-payments Access to formal financial institutions remains low crop farmers in East Africa, which systems for farmers registered in Africa, but e-payments platforms are expanding evolved from WFP’s Cash for in RMC databases and often replacing formal accounts Assets pilot in Kenya • Virtually all African countries now have at least • One Acre Fund found that farmers 3 two mobile money services, with 17 countries are not well-served by traditional Provide concessional loans to hosting ag.-specific mobile money services MFI products; it’s now piloting e-payments providers to • 38% of Africans had a mobile account in 2014, more flexible input repayment acquire first wave of users in a with 23% of mobile connections linked to options in Kenya to improve market, to finance marketing mobile money; however, mobile connectivity repayment rates, in partnership and adoption incentives remains low in rural areas, limiting growth with Safaricom/M-PESA

Source: GSMA Mobile Money Deployment Tracker; GSMA mAgri Deployment Tracker; GSMA State of the Industry Report, 2014; CGAP Focus Note, 2014; FMARD 2015; Oxford Business Group; OAF white paper, 2015. Agricultural SME Finance Capacity-Building

OBJECTIVE: The Bank’s Agricultural SME Finance Capacity-Building initiative will build long-term sector capacity and support the development of innovative SME financing vehicles by funding a variety of non-bank financial institutions and ecosystem actors.

Lessons learned from comparable Key components Problems addressed examples

Gap in credit for smallholder finance in Africa of Lessons from existing SME funds 1 $50B (African Agricultural Capital Fund, Finance and advise private- • Banks have failed to fill gap, with only 16.6% Fund for Agricultural Finance in sector led PE, VC, and deposit institution penetration across the Nigeria, Africa Agriculture and Trade working capital facilities and continent, indicating that the majority of Investment Fund) include: funds for SMEs SMEs are failing to access formal finance • Professional and independent While there is a long-term opportunity for non- management of funds 2 banking financial institutions to address part of • Provision of pipeline Finance and advise this gap, many lack either the capacity to do so development support for NBFIs governments to administer or a proven track record • Diversification of funding away effective public SME funds • Agricultural private equity funds like FAFIN from public investors and agencies and other innovative finance models are still building out their track record and proving the Public ventures in SME support, 3 Finance and advise SME business model such as Nigeria’s CBN SME- • finance infrastructure actors Public institutions can provide near-term dedicated credit demonstrate: • such as credit registries, data capital infusion to SMEs Importance of addressing current systems providers, and Moreover, the ecosystem is not conducive to market failures and short-term financial intermediaries SME finance need for capital with public • Credit assessment and data service providers instruments and FI support are still at a nascent stage

Source: Dalberg, “Catalyzing Smallholder Finance,” 2012; African Development Bank, “Mobile Banking in Africa: Taking the Bank to the People,” 2010; Returns from 1/1/2015 to 2/1/2016 from EGX30ETF, NGSEINDX, JALSH, NSEASI, and GGSECI accessed on Bloomberg.com Affirmative Financing Action for Women in Africa (AFAWA)

OBJECTIVE: Affirmative Financing Action for Women (AFAWA) will raise women’s incomes by increasing their access to credit to grow agribusinesses.

Lessons learned from comparable Key components Problems addressed examples 1 Many of the problems faced by all farmers have a • The Women's Microfinance Create and manages a USD disproportional effect on women Initiative (WMI) offers business $300M de-risking facility to • African women farmers make up 60% of training and collateral-free loans leverage $3 billion catalyze agricultural labor but have 20-30% lower yields to women, recognizing that greater lending for women- and see lower incomes from farming women typically lack land tenure; owned agribusinesses • Women are disproportionately exposed to it also partners with local banks to climate change and other risks; 48% to 73% of graduate successful borrowers to African women farmers will be affected by formal banking after 24 months, climate impacts to their crops and continues to provide business More generally, women also face higher barriers support for a fee. It was able to to accessing finance increase the number of • 70% of African women are financially excluded, households with $60 in annual • Financing gap for African women is USD $20B savings by 600% in Uganda, and by 400% in Kenya Difference in access to financial Women • Root Capital’s Women in instruments by gender in Africa Men Agriculture Initiative (WAI) lends to ‘gender-inclusive businesses,’ 39% 30% providing financial, internal credit, 13% 18% 6% 7% and mobile advisory services; 29% of its clients are women-led Bank Account Formal Savings Formal Credit

Source: World Bank Findex, 2014; Open Society Initiative for Southern Africa, 2015; UNDP 2012; CCAFS-CIAT; WMI; Root Capital, 2015. Climate Resilience

OBJECTIVE: The Climate Resilience Fund for Agriculture will raise farmer productivity and incomes by investing in funds and projects that have already displayed success in improving farmer resilience to climate shocks and land degradation.

Lessons learned from comparable Key components Problems addressed examples 1 Effects of climate change on agriculture could cost • Livelihoods Fund for Family Create a blended finance African regions up to 7% of GDP by 2100 Farming (Livelihoods 3F) and the vehicle to scale successful • 67% of Africa’s land area has become or is Moringa Fund both focus on off- sustainable agriculture becoming highly degraded take and certification partnerships projects, as well as • Major African staple crops are expected to have to help ensure profitability and agroforestry, ecotourism, and 8%-22% lower yields by 2050 returns, while AfDB Congo Basin agri-tourism projects • African farmers are susceptible to increased Forest Fund (CBFF) saw market fluctuations in rainfall and temperature due to access to be a key ingredient for climate change. uptake of good practices On climate financing and support for climate • CBFF also found that scaling up 2 smart agriculture, working with ONEC, the Bank Partners (e.g. CIAT, ONF successful sustainable agriculture continues development of Investment Plans International, EcoAgriculture pilots requires fund lengths under the SREP in Benin, Lesotho, Madagascar, Partners) work to advise on beyond ten years Malawi, Sierra Leone and Zambia. investments and provide • Stafford Capital Partners, Althelia • The Bank is supporting these countries to technical assistance to Climate Fund, and BioCarbon Fund access highly concessional financing envelope investees in conjunction with Initiative for Sustainable Forest up to USD50 million to develop investments Landscapes form partnerships transformational renewable energy with trusted implementers both operations. geographically broad and high- • GEF resources will continue to be leveraged in touch, with high-quality extension areas of climate change mitigation and land degradation.

Source: Pretty and Bharucha 2014; Pretty et al. 2011; Schlenker and Lobell 2010. AFRICAN NUTRITION TRUST FUND

OBJECTIVE: The African Nutrition Trust Fund will improve food security and prevent malnutrition by increasing support for community led nutrition programs in high need countries.

Key components Problems addressed Priority Areas

 1 Malnutrition across Africa has significant health Governance and leadership in Manage a trust fund to invest in the nutrition sector community nutrition programs and economic consequences • Malnutrition costs Africa USD $25B and 11% of and country capacity building in  Capacity building and skills select countries GNP every year • Africa is the only major world region that saw development for nutrition an increase in the number of stunted children 2  Regional harmonization of nutrit Partners such as GAIN, SUN, in the past decade • 36% of African children under 5 years are ion curricula, norms and standar and the John Kufuor ds for food fortification Foundation provide technical stunted due to nutrient deficiencies, and 18% are underweight, with particularly poor support  nutrition in West Africa (22% of children Support to agro food processing underweight) for highly nutritious food 3 • Secretariat housed at the AfDB • Poor access to nutritional foods for pregnant (supplementary, complementary • Oversight committee: women and young children leaves 4 of every 10 and therapeutic food) and; representatives of donors to the African children with underdeveloped brains,  • Trust Fund. Potential donors - and lower cognitive abilities as a result Ensuring the agriculture projects are nutrition sensitive Micronutrient Initiative, Bill and Nutrition interventions are often under-funded • Melinda Gates Foundation, and insufficiently integrated between health and Dangote Foundation and others. agriculture programs • Technical review committee • Nutrition receives 1.4% of the development aid amount required to reach global nutrition goals

Source: UNICEF, 2015; FAO, 2009; UNECA, “The Cost of Hunger in Africa,” 2014; Black et al. 2013; World Bank press release, 2015; MDG Fund Key Findings Report; Nutrition Trust Fund Concept Note. V. Collaborations and partnerships.

40 Achieving agricultural transformation in Africa will require strong partnerships and collaboration AFRICAN DEVELOPMENT BANK GROUP

CONTACT: Dr. Chiji Ojukwu Email: [email protected]

THANK YOU / MERCI

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