AFRICAN FERTILIZER FINANCING MECHANISM AFFM STUDY (Sponsored by UNECA & AFFM) On PROMOTION OF FERTILIZER PRODUCTION, CROSS-BORDER TRADE AND CONSUMPTION IN AFRICA June 2018 Table of Contents List of Tables, Figures and Text Boxes .................................................................................................. v List of Acronyms and Abbreviations ................................................................................................. vii Acknowledgements .............................................................................................................................. viii Executive Summary .................................................................................................................................. x PART 1: INTRODUCTION TO AFRICA FERTLIZER FINANCING MECHANISM IN AFRICA ....................................................................................................................................................... 1 1.1 Status, Trajectory and Way Forward of Agricultural Development in Africa .................... 1 1.2 Trajectory of Agricultural Development in Africa ................................................................. 11 1.2 Motivation of the study ............................................................................................................... 16 1.3 Objectives of the study ................................................................................................................ 18 1.4 Scope of Work ................................................................................................................................ 19 1.4 Methodology .................................................................................................................................. 23 PART 2: REVIEW AND ANALYSIS OF FERTILISER TRADE: PRODUCTION, CROSS- BORDER TRADE AND CONSUMPTION PATTERNS ................................................................. 24 2.1. Introduction .................................................................................................................................. 24 2.2. Trends in Fertilizer use and Production in Africa ................................................................. 28 2.2.1 Fertilizer use in Africa ............................................................................................................ 28 2.2.2 Fertilizer production in Africa .............................................................................................. 33 2.2.3 Fertilizer Nutrient Supply, Demand and Balance in Africa .............................................. 38 2.2.4 Fertilizer Exports, Imports and Cross-Border Trade .................................................................. 42 2. 3. Constraints and opportunities for fertilizer production, use and trade in Africa .......... 49 2.3.1 Market Development Constraints ........................................................................................ 49 2.3.2 Infrastructural Constraints .................................................................................................... 54 2.3.3 Technical Constraints ............................................................................................................. 59 ii 2.3.4 Opportunities for Fertilizer use and production in Africa ................................................ 62 2.4 Concluding Remarks on Fertilizers Production, Trade and consumption ........................ 66 PART 3: MAPPING FERTILIZER INDUSTRY CLUSTER DEVELOPMENT ............................ 68 3.1 Fertilizer Cluster Development .................................................................................................. 68 3.2 Conceptual Mapping of Potential Fertilizer Production for Africa .................................... 71 3.3 Mapping of Viable Fertilizer Plants in Africa ......................................................................... 77 3.2.1 SWOT Analysis for Cluster 1 ................................................................................................. 78 3.2.2 SWOT Analysis for Cluster 2 ....................................................................................................... 80 3.2.3 SWOT Analysis for Cluster 3 ................................................................................................. 84 3.2.5 SWOT Analysis of Cluster 4 .................................................................................................. 88 3.2.3 SWOT Analysis for Cluster 5 ................................................................................................. 91 3.2.2 SWOT Analysis for Cluster 6 ................................................................................................. 93 3.3 Overall Conclusion .................................................................................................................... 96 PART 4: FERTILIZER INDUSTRY FINANCING ............................................................................ 98 4.1 Manufacturing and Processing (blending) Plants ................................................................ 100 4.1.1 AfDB Africa 50 Fund and other AfDB sources ................................................................. 101 4.1.2 Private Equity Markets/Funds ............................................................................................ 102 4.1.3 African Governments ........................................................................................................... 104 4.1.4 Pension funds and Insurance Companies ......................................................................... 109 4.1.5 Local, Regional and International banks ........................................................................... 110 4.1.6 Development Partners .......................................................................................................... 113 4.1.7 Capital Markets ..................................................................................................................... 114 4.2 Importers, Distributors and Agro-dealers .............................................................................. 115 4.3 Farmers .......................................................................................................................................... 117 4.3.1 Non-Governmental organizations and foundations ........................................................ 117 iii 4.3.2 Governments/Public Institutions ........................................................................................ 119 4.3.2 Microfinance Institutions and others ................................................................................. 120 4.4 Financing requirements ............................................................................................................. 122 4.5 Overall Summary ........................................................................................................................ 122 PART 5: REVIEW AND ANALYSIS OF POLICIES AND REGULATIONS HINDERING OR FAVOURING FERTILIZER PRODUCTION, CROSS-BORDER TRADE AND CONSUMPTION IN AFRICA............................................................................................................ 124 5.1 Agricultural production and fertilizer related Policies ....................................................... 124 5.2 Fertilizer Input Subsidies .......................................................................................................... 126 5.3 Standards, Regulations, Institutions and Enforcement ....................................................... 132 5.3.1 Human health Risk assessment, management and security ........................................... 145 5.3.2 Environmental Risk assessment and Management (Use and disposal of waste) ........ 147 5.4 Trade Based Policies ................................................................................................................... 149 5.5 Tariff barriers ............................................................................................................................... 153 5.6. Non-Tariff barriers .................................................................................................................... 155 5.7 Review of analysis of transport cost in fertilizer trade ........................................................ 162 5.8 General Conclusions .................................................................................................................. 174 PART 6: SUMMARY OF FINDINGS, CONCLUSIONS AND POLICY RECOMMENDATIONS ...................................................................................................................... 177 6.1 Summary of Findings ................................................................................................................. 177 6.2 Conclusions .................................................................................................................................. 182 6.3 Policy Recommendations .......................................................................................................... 184 7. REFERENCES .................................................................................................................................... 188 iv List of Tables, Figures and Text Boxes List of Tables Table 1: Estimated fertilizer requirements (metric tons of products) to meet country agricultural targets 10 Table 2: Yield Potential with fertilizer use in Africa ...........................................................................................