Idit Miller Agribusiness Presentation at the European Commission

How to boost sustainable

agriculture to meet food security

challenges – the development of

agribusiness in Africa

Idit Miller, EMRC VP & Managing Director

SEMINAR ON FOOD AND NUTRITION SECURITY AND SUSTAINABLE AGRICULTURE IN THE FRAMEWORK OF THE PROGRAMMING 2014-2020 OF THE EUROPEAN COMMISSION COOPERATION Brussels, 28-30 January 2013

Presentation structure

1. EMRC at a glance: mission, history, activities, objectives

2. EMRC’s AgriBusiness Forum and partners

3. General overview of the strengths and weaknesses of Africa’s agriculture

4. Linking smallholder farmers to markets

5. Case studies

6. Lessons learned & Recommendations for an inclusive & sustainable growth

to meet food security challenges

Mission

& Vision

EMRC is an international organisation with a vision is to see a thriving private sector in

Africa through partnerships and investment.

EMRC’s mission is to contribute to the development of the private sector in Africa for a

sustainable and responsible economic growth.

We do this by growing cross and intra-continental business partnerships with and

between the public and private sector.

We thus contribute to fulfill the 8th Millennium Development Goal to: develop global

partnerships for development.

Established in 1992, EMRC has TWO decades of experience, which include:

- BUSINESS FORUMS: promoting business partnerships with the developing world and

organising dozens of business meetings in Europe & Africa: Amsterdam, Rome, Lisbon,

Cape Town, Johannesburg, Paris, Kampala, Utrecht, Dakar and Brussels.

- TRADE MISSIONS: for economic and agricultural knowledge-sharing

-PROJECT INCUBATOR AWARD: an initiative launched to encourage innovation and

entrepreneurship in Africa among SMEs. Participants submit their proposals and finalists

present their projects at the forum. The winner receives a US$15.000 prize (sponsors

included: Rabobank Foundation, AfDB, Hivos/VC4Africa).

- B2B SESSIONS: hundreds of pre-organised meetings where business connections take

place and potential partnerships are established.

History

In the last 4 years alone, EMRC has gathered over 4500 professionals who share the same goal: to create business partnerships for economic growth

and sustainable development in Africa!

Our forums and missions are supported by our partners who help us champion business

partnerships for the sustainable development of Africa’s private sector:

Government bodies

International organisations

Bilateral & multilateral donor organisations

Banks

Academic & research institutes

Global brands

Partners

Among our partners:

Republic of Uganda Republic of Senegal

- The AgriBusiness Forum is an international showcase event which aims to strengthen

the Agri-Food sector in Africa, by encouraging partnerships, exchanging best

practices and attracting investment

- It is an annual event with about 400 experts and decision makers including private

entities, financiers, donors, multinationals, researchers, governments, int’l organisations,

NGOs and consultants from around the world

- First launched in Europe and now annually taking place in an African business hub,

each edition of the forum revolves around a core theme that tackles the

challenges and opportunities in the Agri-Food sector in Africa

What is it …? “Africa can feed itself and the world if our governments commit to transforming

agriculture into a viable industry.” Zimbabwe Prime Minister Morgan R. Tsvangirai – AgriBusiness Forum 2011

Africa’s

Agriculture

at a glance

At EMRC, we believe that the food crisis is a threat that can

be looked upon as a business opportunity for Africa’s economic growth. Why?

1. Africa contains around 60% of the world’s uncultivated

arable land

The world consumes more food

every year. By 2050, food

consumption will grow by 70% (FAO)

2. Africa has a young population : 65% below 35 years and

half of them between 15 and 35 years old

3. In contrast to past tendencies, investment in agriculture is

increasing. In 2003 at the AU meeting in Maputo African

Governments committed to dedicate 10% of their national

budgets to agriculture (“Maputo declaration”)

Africa’s strengths and weaknesses for agricultural development are the result of underutilised assets:

Land: “There is still a lot of underutilised water and land resources in Africa. Africa has 60% of the world’s remaining uncultivated land suitable for farming.” Ralf von Kaufman, FARA

“Africa has the potential to feed not just the continent‘s citizens, but also help create a secure global food system.” AGRA Chair, Kofi Annan.

“When done right, larger-scale farming investments can promote sustainable agricultural and rural development, and can directly support smallholder productivity, for example, through out- grower programs.” Ngozi Okonjo Iweala, former MD, World Bank

1. LAND

Labour: Agriculture employs 65% of Africa’s labour force BUT farmers are aging: the average age of African farmers is 60. In parallel, Africa has a young population: 65% below 35 years and 35% between 15 and 35 years old

Smallholder farmers represent 80% of all African farmers, providing essential livelihoods. (Average farm size in Africa is 1.6 ha - 27 ha in Europe and 120 ha in the USA)

Smallholder farmers face many problems: - High geographical dispersion; - Weak infrastructure networks; - Weak organization and education; - Tend to market small volumes; - Deal with dysfunctional input markets (lack of certified seeds, fertilizers, etc.); - Lack services: credit, information, technical assistance

Africa’s strengths and weaknesses for agricultural development are the result of underutilised assets:

2. LABOUR

Africa’s strengths and weaknesses for agricultural development are the result of underutilised assets:

Capital: There’s a shortage of opportunities, not funds

“There’s no scarcity of capital for projects in Africa, but investors are seeking capable entrepreneurs that can make a success of their venture.” Barbara D’Amato, CEO, Trilogy Capital, USA

“Wide scale investment in agribusiness and agro-industry in Africa is presently constrained by: Human and institutional capacity deficits.” Ralph von Kauffman, FARA

New trend: addressing the financial needs of the missing middle gap (SMEs) and financing agric. cooperatives.

3. CAPITAL & MANAGMENT

Linking smallholder farmers to markets

“What needs to be done: recognizing smallholder farms as agribusinesses, regardless of their size or scale”

Kandeh Yumkellah, DG, UNIDO

Improve access to modern technologies and assets

• Agric. mechanization

• Modern irrigation

• Improved seeds

• Soil fertility (fertilisers)

• Pesticides

• Innovative financing schemes

• Agricultural training and research

Improve access to markets

• Improve rural infrastructures

• Improve crops shelf life / post-harvest treatments

• Process crops

• Link producers to markets: out growers schemes

Steps

Forward

Out-growers’ schemes

•Buyer sources directly from

individual farmers

• Seasonal sourcing; little

product specification

Informal model

• Semi-formal

• Limited direct firm/farmer interaction;

• Enhanced but limited product specification

Intermediary Model

• Buyer sources from farmers or farmer groups, but TA/input/services via third parties (often cooperatives);

• Higher level of product specification

Multipartite Model

Linking smallholder farmers to markets…

The future of Africa?

Steps

Forward

• Buyer provides TA/inputs and services to the farmers, purchases the crop

• farmers provide land & labor

• Strong buyer/farmer coordination;

Centralized Model

• Buyers own or control land used by farmers, who supply labor

• Buyers provide TA/ inputs/ services

• Buyers supervise production via in-house technical staff

Nucleus-Estate Model

Multipartite Model

SAB Miller & CDM Cassava Beer Project

Mozambique

SABMiller, the parent Company of Cervejas de Mocambique (CDM), is engaged in a

local sourcing initiative to stimulate agriculture in Mozambique.

The project utilises recent breakthroughs in brewing techniques to enable SABMiller to

produce clear beer replacing traditionally imported malted barley with locally grown

cassava.

A supply “partnership” has been formed between CDM and DADTCO. CDM is

responsible for the supply side of the cassava; DADTCO is responsible for the processing

technology; manages the farming programme; cassava processing; Smallholder farmer

development; cassava development

Case

Study

Centralized Model

AECF/BIO-UNITED Organic Cocoa Beans Project

Sierra Leone

Project financed by the Africa Enterprise Challenge Fund (AECF) AECF agreed to provide a grant of just under US$1 million to BIO-UNITED matching a company contribution of US$1.3m BIO-UNITED coordinates the harvesting and collection of organic cocoa beans in the project region among pre-registered farmers, and then sells it to Barry Callebaut By helping farmers improve the quality of the cocoa, fermenting and drying the cocoa appropriately, BIO-UNITED is encouraging smallholders to professionalize their activities

Some results:

1313 tons of cocoa produced in 2010 8000 active farmers Increase of revenues: from Leones 1,600 /lb (in 2000) up to Leones 4,000 /lb (in 2011) – (or : around 0,55€/kg in 2000 to 1,38€/kg in 2011)

Case

Study

Nucleus Estate Model

Illovo Sugar Project Malawi

Rural social and economic development through sugar cane agriculture Raise and manage income and provide technical assistance for rural communities Establishment by Illovo Sugar Malawi of a 300 ha irrigated sugar cane farm (with a grant by AECF of US$1.5mln, and a contribution from Illovo and business partners of another US$1.5mln) (Cash/Goods/Skills/Services) Support expansion initiatives – secure cane supply / managed by Illovo The Malawi Sugar Estates provide services for employees and the surrounding communities:

Some results:

13 000 children attend estate schools - 4 400 houses are provided for employees 12 medical clinics provide healthcare for employees

and dependants - 25 000 patients a month visit the clinics Free drinkable water, electricity and sewage are provided

Case

Study

Lessons learned from our last

AgriBusiness Forums

International Financial Institutions, Donors, Multinationals, NGOs and experts now

adopt two new approaches to address agribusiness development

Value Chain Approach

•Definition: full range of activities required to bring a product or service to the market through the different phases of production

•Adopting a market system perspective: investment needs are identified and technical interventions are designed to upgrade activities and improve returns at different points along the chain, including: production, post-harvest handling and distribution, marketing and logistics, agribusiness service providers.

Inclusive Market Development (IMD) approach

• Inclusive markets are markets that extend choices and opportunities to the poor as producers, consumers and wage earners. Inclusive markets thus create jobs and affordable goods and services needed by the poor.

•The IMD approach focuses on entire markets & sub-sectors that are important to the poor by addressing barriers to inclusive market development at various levels (micro, meso and macro). Such barriers include: lack of appropriate policies & infrastructure, limited access to finance and markets, missing business and value chain linkages, or capacity constraints

Recommendations – Johannesburg Declaration: On engaging the Private Sector in furthering Africa’s AgriBusiness, Food Security and Nutrition Agenda

Adopted during the High Level Public-Private Dialogue (PPD), facilitated by the UNDP, at the Agribusiness Forum - 19 October 2011 Among others the declaration urges the public sector to:

- Incorporate private sector stakeholders in agricultural policy, design, development and programme implementation efforts – particularly to unlock private sector investments; - Expand policy development efforts that support transformation and value addition in the agriculture and agribusiness sector; - Promote increased public investment in agriculture – supporting infrastructure (e.g. roads, electricity, warehousing, irrigation and distribution) to reduce costs and increase the competitiveness of agricultural value chains; - Implement policies that help improve access to finance within the agricultural/agribusiness sector, especially for smallholders and small and medium enterprises (SMEs); - Strengthen efforts to remove barriers to intra-African trade.

Among others, the declaration urges the private sector to:

- Engage in public-private dialogues and platforms, to explore and further public-private partnerships and collaboration;

- Expand inclusive business models to create new jobs and income-generating opportunities within the agribusiness/ agriculture sector;

- Accelerate efforts to mobilize private capital in support of value chain development, along with important technical assistance to improve smallholders and SME’s capacity to produce quality products in a timely manner;

- Promote capacity development, technology transfer and innovation…

Among others, the declaration request Africa’s Development Partners to :

- Increase the resources deployed and programmes initiated to support inclusive private sector development …;

- Increase support for catalytic financing mechanisms and matching grant facilities to promote the development of inclusive models and inclusive markets.

Recommendations – Johannesburg Declaration: On engaging the Private Sector in furthering Africa’s AgriBusiness, Food Security and Nutrition Agenda

THANK YOU FOR YOUR

ATTENTION!

Idit Miller, EMRC VP & MD Email: [email protected] TEL:+32.26261515

FAX: +32.26261516

EMRC www.emrc.be