importantAgriculture in Africa sector report 2015.pdf

8/17/2019 importantAgriculture in Africa sector report 2015.pdf

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Sector Report

Agriculture

in Africa

kpmg.com/africa


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The series has the following reports:

• Private Equity in Africa• Construction in Africa

• Insurance in Africa

• Power in Africa

• Healthcare in Africa

• Banking in Africa

• Manufacturing in Africa

• Fast-Moving Consumer Goods in Africa

• Luxury Goods in Africa

• The African Consumer and Retail

• White Goods in Africa

• Oil & Gas in Africa

• Life Sciences in Africa


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Table of ContentsIntroduction and Overview 1

Key Drivers 2 Policy 3

Donor Aid 3

Infrastructure 3

Fertiliser 5

Access to Finance 5

Looking Forward 5

Nigeria 6

Angola 6

Ethiopia 6

Ivory Coast 7

Mozambique 7

Nigeria 8

Rwanda 9

Tanzania 10

Zambia 10

Conclusion 11

Sources of Information 11

Contact Details 11


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1 | Agriculture In Africa

Introduction and Overview

Agriculture has the greatest potential to lift theAfrican continent out of poverty and alleviate hunger,but the sector has struggled to perform in recenthistory, with reforms happening excruciatinglyslowly. According to the World Bank, agriculturecontributes 32% to Africa’s GDP and providesemployment to 65% of the labour force on thecontinent. In fact, in many countries in Africa, up to85% of the workforce is employed in the agricultural

sector. Furthermore, an estimated 38% of Africa’sworking youth is presently employed in theagricultural sector. Despite these numbers, African

soil remains greatly underutilised and the continentstill imports a substantial deal of its food needs.According to Trade Map, African countries importedabout US$94bn worth of agricultural productsduring 2013, compared to exports amountingto about US$60bn. In addition to the significantlabour resources as yet untapped, Africa is home tomillions of hectares of unexploited arable land. It isestimated that about 60% of the world’s availableand unexploited cropland is in sub-Saharan Africa.Furthermore, only between 5% and 7% of thecontinent’s cultivated land is irrigated, which leavesfarmers exposed to the elements.

Given the nature of African agriculture, where alarge proportion of farmers are smallholders orsubsistence-based, it is essential to invest in anddevelop accessibility to quality inputs, marketsfor produce, good soils and soil managementtechniques, innovative finance tools and otherresources needed for sustained agriculturalproduction. Moreover, the lion’s share of Africanfarmers use non-modern techniques in theirproduction process and this limits their productivity,while the lack of irrigation leaves them exceedinglyvulnerable to weather shocks and often lacking

adequate inputs, efficient markets and thenecessary technology to ramp up production tolevels beyond personal use.


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Agriculture In Africa | 2

Key Drivers

The key drivers which could see the Africanagricultural sector shift to a higher growth trajectoryare all rooted in government policy. With subsistenceand small scale farming forming the bulk ofagricultural activities on the continent, the provisionof co-operative structures, financial backing, stablemarkets, improved infrastructure and knowledgesharing initiatives all stem from government andorganisational structures on all levels. Unfortunately,there is not one blueprint that fits all the regionson the continent and some countries have fared

better than others in this regard. Governmentand multilateral organisations need to focuson spreading skills and knowledge, increasingfertiliser use, increasing the availability of financing,implementing technologies to improve yields –including research into improved seed varieties – andimproving infrastructure. If reforms are implementedefficiently, these focus areas will combine to lead tosignificant increases in yields in order for Africa tofeed itself and ultimately lift a large proportion of thepopulation out of extreme poverty.

Policy

As mentioned above, the role the government playsin the agricultural sector in the African context ispivotal, on all levels. In 2003, at the African Union(AU) summit in Maputo, African leaders pledgedto allocate at least 10% of national budgets toagriculture, to adopt sound agricultural developmentpolicies and to achieve at least 6% agriculturalgrowth p.a. and created specific plans like theComprehensive Africa Agriculture Development

Programme (CAADP).

Central to the CAADP’s policy objectives are a seriesof interventions designed to strengthen policyprocesses and implementation:

• Support institutions in order for them to be moreefficient and accountable;

• Improve governance of natural resources;

• Encourage planning and implementation on moreinclusive foundations based on experience;

• Improve coordination, partnerships and alliancesboth within and between the private and publicsectors;

• Foster public investment in agriculture;

• Increase production of / and access to quality dataand knowledge, and provide information to thepublic.

In addition to budgetary thresholds anddevelopmental targets, the broader strategyalso included the concept of regional economic

integration that was supposed to facilitate crossborder trade and investment and create economic/ agricultural hubs that would in theory be moreefficient than individual nation states. In theframework of the AU, these regional economiccommunities are the building blocks for Africa’seconomic integration and almost by definition playan important role in regard to the harmonisationand coordination of agricultural policies and ascomponents of overall agricultural development inrelation to the CAAPD. However, the problem here isthat the obsession with creating regional economic

integration hubs and expanding these into an Africanwhole often inhibits national agricultural developmentpolicies with the result that despite the grand designsof NEPAD, the AU and its CAADP, the record is notimpressive.


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Overall policy development and specificallyimplementation in the agricultural sector has beendisappointing over recent years and in fact hasshown some signs of going backward in respect ofmeasurable outcomes. In fact, the UN estimatesthat sub-Saharan Africa has the highest prevalenceof undernourishment in the world, with onlymodest progress in recent years. The organisationestimates that around one in four people in theregion remains undernourished. Moreover, sub-Saharan Africa has actually regressed over the pasttwo decades in terms of feeding its people. Theamount of undernourished people in Africa rose

from 176 million in 1990-92 to 214.1 million in 2012-14. Although this represents a proportional declinefrom 33.3% of the total population to 23.8% ofthe total population, sub-Saharan Africa is the onlymajor region in “The State of Food Insecurity in theWorld, 2014” report where the actual number ofundernourished people increased over the pasttwo decades.

Individual nation states have done better than othersand in almost all cases individual states have tended

to make better progress that the regional integrationschemes. According to the NEPAD website, 30countries have signed up to the CAADP Compactsince 2003, though only eight have surpassed the10% budgetary allotment target. Although thereis certainly a place for mega policy programmessuch as the CAADP, especially over the longerterm and there is a tendency by donor nations andorganisations to look to integrate their contributionsto CAADP objectives, the results of this scheme isspeckled over the past decade.

It seems clear that overall policy direction and

specifically mechanisms for policy implementationregarding agriculture in Africa requires a majoroverhaul. The concepts at the top level are necessaryand even visionary but they are simply too grand, toobig, unmanageable and unfunded. At the other endthe initiatives and interventions are too small andtoo limited. It seems most governments continue toignore the potential of agriculture to alleviate povertyand improve overall quality of life.


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There is a clear shift away from nation state donorsto multilateral structures with targeted interventionsin African agriculture in an attempt to make someadvances in critical areas of African development(food security) where progress over the past decadeor more has been slow. In addition, donor nationsare now tending to either band together withNon-Governmental Organisations (NGOs) whoseexpertise and knowledge of what is required isbetter at directing aid than government agencies orbypassing direct government aid where much is stilllost to corruption and mismanagement.

In addition, the vast majority of donor interventionsare now dovetailing with AU and NEPAD initiativessuch as the CAAPD policy objectives in order toensure African voices have a say where the moneyis spent. Individual nation state donor aid tends nowto be related to colonial ties – so the United Kingdomtends to still provide individual support to selectedcountries mainly those once its colonies – whilePortugal supports Angola and Mozambique andGermany helps Namibia. However, the bulk of donoraid in 2015 and beyond in relation to agriculturaldevelopment is likely to come from public-privatejoint ventures with NGOs holding specialist

knowledge playing pivotal roles.

Examples of this relatively new approach todonor aid include the Multi-Donor Trust Fund andAgriculture Fast Track Fund (AFTF) approved bythe African Development Bank (AfDB) in 2013.Financially backed by the United States and Sweden,with grants from other countries such as Denmark,the AFTF current holdings are some US$23m withnew pledges for 2015. The AFTF has awarded twogrants worth almost US$650,000 to high valueagriculture infrastructure projects in Tanzania andtwo grants worth almost US$1.5m to high value

agriculture infrastructure projects in Mozambique.According to the AfDB, the AFTF operates in sixpilot countries - Burkina Faso, Ivory Coast, Ethiopia,Ghana, Mozambique and Tanzania with more to beadded as additional funding is secured.

The AU declared 2014 the Year of Agriculture andFood Security, and African Business predictsthat agriculture and agribusiness will grow into aUS$1trn industry in sub-Saharan Africa by 2030 –from just US$313bn in 2010. “As well as increasedinterest from private equity, increasing foreigninvestment came from NGOs, such as Grow Africa,which doubled investment to US$7.2bn.” More tothe point, much of this investment/donor capitalis being directed through the CAADP. Multipartyorganisations such as the Global Donor Platform forRural Development that includes almost every singlemajor donor nation from the Americas to Europe and

beyond support African agriculture by aligning withthe CAADP structures, principles and processesjointly established by AU/NEPAD and other CAADPconstituencies. Development partners engagewith CAADP in accordance with the “Joint DonorPrinciples for Agriculture and Rural DevelopmentProgrammes” that translate the Paris Declarationand Accra Action Agenda commitments into theAfrican Rural Development context. According tothe Global Donor Platform for Rural Development, itprovides a focal point for day-to-day interaction withthe CAADP country team, and coordination with

their international counterparts.Donor aid for agricultural development is a criticalcomponent of overall development and food securityfor many African countries and the approach donorsare now taking of teaming up with NGOs withseveral decades of experience of dealing with theproblems and challenges of African agriculture isan extremely positive development. Despite yearsof donor aid – much of it stolen and mismanaged –agricultural development has continued to lag andcontinued to enjoy a low priority. In many cases inthe past donors were at fault for misdirecting their

aid and taking a “we know best” attitude. The futurelooks more promising.

Donor Aid


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Infrastructure

It is no secret that the key to unlocking Africa’seconomic potential lies with addressing the severeinfrastructure deficit. Specifically with regard toagriculture, the state of roads and storage facilities inAfrica pose a significant hurdle for farmers. The direstate of the continent’s roads and storage facilitiesresults in a substantial proportion of agriculturalproduction never reaching the end user. The WorldBank reported in 2011 that the amount of grainslosses in sub-Saharan Africa amounts to US$4bneach year, which in turn is more than the amount ofannual food aid received in the region and equivalentto the annual caloric requirement of 48 million

people. The African Postharvest Losses Informationsystem (APHLIS) estimates that between 10%and 23% of total cereal production goes to waste

in Africa post-harvest. Of this, 2% - 5% is due tofarm storage, 1% - 2% occurs during the transportto the market phase and a further 2% - 4% goes towaste in the market storage facilities. In fact, a studyundertaken in Uganda, Tanzania, and Kenya in 2008,found that transport costs make up about 76% oftotal maize marketing costs. While the remainderof the losses typically occur on the farm level, theabovementioned areas present an opportunityfor government to make a significant contributionby upgrading roads and establishing co-operativeorganisations which could result in better storagefacilities. We expect the agricultural sector to be one

of the main beneficiaries as the continent steps upinfrastructure development over the medium tolong term.


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Africa, on average, uses far less fertiliser than otherparts of the world. According to the InternationalFertiliser Society, average fertiliser use in sub-Saharan Africa is about 8 kg/ha compared to theinternational average of about 107 kg/ha. This isextremely worrying, given that the rate of soildepletion is estimated at 60 kg/ha. As such, it isclear that the level of fertiliser use needs to rise ifthe continent is to increase agricultural output. Thefact is that many African farmers do not have theresources or knowhow to properly utilise fertilisers.On the other hand, the subsidising of fertilisers is acontroversial topic, with many experts suggesting

that it is a costly exercise with only modest returns.Proponents of this system believe that fertilisersubsidies are the only way to start up Africanagriculture, reverse nutrient depletion, and deliverfood security and income benefits to the rural poor.

Although the overall level of fertiliser use remainslow, there have been some success stories withregard to increased fertiliser use on the continentalready. Malawi is regularly offered as example.

During the mid-200s the government implementedan extensive fertiliser subsidy scheme followinga disastrous corn harvest in 2005 that left almostfive million (nearly 40% of its population at thetime) needing emergency food aid. The subsidyprogramme, with the help of favourable weather,resulted in the country turning things around toproduce record crops in 2006 and 2007.

It is agreed that the effectiveness of fertilisersubsidies will vary from area to area. Nevertheless,the fact is that Africa needs to fight the depletionof nutrients and increase yields to address the food

scarcity on the continent and increase growth in thesector. Case-by-case analysis is needed to decideon the appropriate channel to increase fertiliser use,be it traditional subsidies, demonstration packs,vouchers, matching grants, and loan guarantees.Whatever the channel, it is expected that theincreased use of fertilisers will be a key driver ofagricultural development on the continent over themedium to long term.

Fertiliser

Access to Finance

Small scale farmers generally lack access tofinancing, which in turn deters the use of improvedcultivation techniques and fertilisers. In manyinstances, the smallholder farmers are under

more traditional land tenure and cannot use theirholding as collateral to borrow. In fact, accordingto the World Economic Forum’s (WEF) GlobalCompetitiveness Report for 2014-15, lack of accessto finance ranks among the main obstacles fordoing business in Africa. The survey showed thatlack of access to finance was voted the most jarringobstacle to doing business in 21 out of 32 sub-Saharan African countries included in the survey.Moreover, only in South Africa and Botswana didlack of access to finance not rank among the threetop hindrances to doing business. It is especially

concerning that 32.3% of respondents in IvoryCoast, which could again become a West Africanagriculture giant, voted lack of financing as theirgreatest hurdle to doing business. According

to the World Bank, small-scale farmers requireaccess to four kinds of financing: 1) credit usedas working capital; 2) savings for lean months; 3)transactional facilities; and 4) insurance of cropsand livestock. As the prevalence of microfinance onthe continent expands, we expect to see more andmore smallholder farmers improve their operations.However, proper regulation of this sector is of theutmost importance as credit extension remains adouble edged sword, especially during a period oflean harvests.


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Looking Forward

There is a wide range of serious obstacles standingin the way of Africa reaching its full potential withregard to agricultural development. The role ofgovernment cannot be overstated. For Africanagriculture to prosper the local authorities need totake the lead. Unfortunately most governments onthe continent are under severe fiscal pressure, withinefficient revenue collection practices, large publicwage bills and severe infrastructure deficiencies. Assuch, the necessary funds needed to kick-start theagricultural sector may not always be available ontime. Nevertheless, being a key poverty-alleviating

sector, we expect governments and NGOs on thecontinent to intensify their efforts to boost theagricultural sector over the medium to long term.In the following section we list a range of countrieswhere the agricultural sector is likely to flourishover the medium to long term, be it on the backof increased government involvement or privateentities taking advantage of the immense potentialburied in Africa’s soil. We explore some of thecountries more deeply, but expansion will of coursenot only be limited to these countries.

Key Growth Areas


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Angola

Angola has a strong agricultural heritage, with the

country once considered to be one of the region’sagricultural powerhouses. Development of theagricultural sector holds the greatest promiseof improving the lives of the Angolan people.With approximately two-thirds of the workingpopulation employed in the sector, agriculturaldevelopment holds far greater importance tothe majority of people than the oil rigs offshoreand the diamond mines in the northeast of thecountry. Indeed, according to the World Bank,Angola’s total agricultural land area amounts to59.2 million hectares (or 47.5% of the total landarea). However, the Bank estimates that a mere3.9% of Angola’s total land area is arable, with0.2% under permanent crops. The reason for thisis nearly three decades of civil war that left vasttracts of land littered with landmines, robbing the

country of its farming prowess. Plantations and

fields were abandoned as millions were displaced,infrastructure was damaged, crops and livestockwere destroyed or stolen, irrigation systems fellinto disrepair and the rural economy collapsed. Inaddition, the deterioration of roads inland inhibitedany movement of goods, and agricultural productioncame to a near stand-still. Still, as the governmentmoves to rebuild the economy, Angola’s temperateclimate and fertile soils have the potential to notonly feed itself, but also support a healthy exportbusiness. As part of the government’s plans for theagricultural sector, the country’s sovereign wealthfund, the Fundo Soberano de Angola (FSDEA),in April 2015 announced that it will set up twoUS$250m investment vehicles aimed respectivelyat the timber and agricultural sectors.


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Ethiopia

The Ethiopian agricultural sector has shown

commendable growth in recent years, achieving anaverage growth rate of around 7.4% p.a. between2007 and 2014. The country’s most importantagricultural commodity is coffee, with about 15million people directly or indirectly deriving theirlivelihoods from the product. The East Africancountry is the largest producer of coffee in sub-Saharan Africa, and is the fifth largest coffeeproducer in the world next to Brazil, Vietnam,Colombia, and Indonesia, contributing about 7% -10% of total world coffee production.

In support of the agricultural sector, the government

has created the Agriculture Transformation Agency(ATA) to drive the transformation of the sector, andto realise the interconnected goals of food security,poverty reduction, and human and economicdevelopment. Moreover, the government’s Growthand Transformation Plan (GTP 2011-15) containsambitious targets for the agricultural sector. Theseinclude enhancing the productivity and production ofsmallholder farmers and pastoralists, strengtheningmarketing systems, improving participation andengagement of the private sector, expanding theamount of land under irrigation, and reducing thenumber of chronically food-insecure households.

Sub-sectoral targets include tripling the numberof farmers receiving relevant extension services,graduating six million households from safety netprogrammes into poverty-reducing commercialactivity, and more than doubling the productionof key crops from 18.1 million tonnes to39.5 million tonnes.

The government’s focus on the agriculturalsector has yielded some promising results. Policyreforms, infrastructure improvements, resolutionof bottlenecks, and investment facilitation arebuilding the confidence and interest of domesticand international companies alike. In an attempt toincrease the participation of the sector in agriculturaldevelopment, the Ethiopian government establishedthe Agriculture Investment and Land AdministrationAgency. The agency provides integrated supportfor investors in a bid to improve their land utilisationand production. According to the agency, 3.6

million hectares of arable land is being provided for

investors engaged in the agricultural sector.

The Ethiopian government also initiated a landcertification programme which has shown strongprogress, with one million parcels of land alreadysurveyed and one quarter thereof certified.According to Grow Africa, studies indicatethat certification has increased investments,enhanced agricultural productivity by over 10%,and encouraged landholders to implement naturalresource management practices. Prior to theprogramme, the government owned all land, andland could only be leased from the government for

a maximum period of 99 years by Ethiopian law.There is some uncertainty regarding the extentto which the certificates will provide security, butthe programme signals the acknowledgementby government that land-ownership is crucialto increasing agricultural productivity. A keycharacteristic of agricultural development is thecredit required to commercially develop land.Due to the seasonal nature of output and inter-temporal dimension of costs and revenue, credit isrequired to act as a buffer over time. Lack of creditis the primary reason for underdevelopment in theEthiopian agricultural sector. Being able to acquire

credit by using land as collateral can significantlychange the country’s agricultural landscape, andenhance both productivity and commercialisation.

The government’s efforts have been wellreceived. One example is the establishment of aburgeoning flower growing industry in Ethiopia. Infact, Ethiopia was the target of the biggest privateequity investment on record for East Africa in 2014.US-based Kohlberg Kravis Roberts (KKR) investedUS$200m in Ethiopian horticulturist Afriflora,which specialises in growing flowers, most notablysweetheart roses, according to Fairtrade principles.Afriflora already employs 10,000 people, with thecompany’s website indicating that once all thenew sub-projects have been completed, there willbe work for around 15,000 people. Ethiopia is thesecond-largest regional exporter of cut roses toEurope, after Kenya, and the industry looks primedfor further growth.


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Ivory Coast

Ivory Coast was ravaged by a decade long civil

war which brought the economy to a standstill,but relative stability has returned since 2011 andthe economy has grown by near double digitlevels for two years now, while the prospects arefavourable. Ivory Coast is the largest producerof cocoa in the world, supplying about 41% ofglobal output. Ivory Coast is also Africa’s leadingproducer of natural rubber, as well as a majorexporter of palm oil products. The governmentplans to further capitalise on its abundance of arable

land. The Ivorian government’s National Plan for

Agricultural Investment (PNIA) aims to reducepoverty and lead to the local processing of half ofIvory Coast’s agricultural output. Authorities plan toinvest more than US$4bn to improve and diversifythe agricultural sector in order to create some 2.4million jobs in the sector by the end of 2016. Politicalstability has also prompted an influx of foreigndirect investment (FDI) and infrastructure spendingwhich provide further scope for expansion of theagricultural sector.


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Mozambique

Agricultural transformation receives a high level

of priority from the country’s top leadership. TheCentre for Agriculture Promotion (CEPAGRI) haslaunched a National Agri-business Forum whichmeets regularly, engages the private sector, bringstogether major stakeholders, and disseminatesinformation on investment opportunities. In addition,the government is working to remove bottlenecks toattract agricultural investments. Steps taken by thegovernment to enhance the agricultural investmentenvironment include fast-tracking land rightacquisition, investing in infrastructure, and improvingthe overall policy environment (i.e. with regards totaxation and minimum wage provisions).

There are several factors that bode well for theagricultural potential of Mozambique going forward.These include favourable climatic conditions, withvast tracts of largely unutilised arable land, fertile soiland ample rainfall, as well as tremendous irrigationpotential from major rivers. Moreover, the countryhas positive macroeconomic indicators, includinga strong GDP growth outlook and extensive importsubstitution opportunities. The government also playsa role, with support for the agricultural sector by wayof the provision of business incentives and specificagencies set up to organise and assist investors

in the agricultural sector, while the authoritiesalso enable an environment for investment, withnumerous innovative public-private partnerships.The commercial agricultural sector, while still limited,is also showing signs of rapid expansion, with theMinistry of Agriculture and Food Security (MASA)estimating that commercialised agriculture grew by36% in 2013.

A salient characteristic of land ownership inMozambique is the fact that all land is owned bythe government and that land rights may not besold, mortgaged or otherwise alienated. As a result,farmers are unable to use their land as collateralto obtain loans, which limits new investment andleads to a gradual deterioration in quality. WhileMozambique has some of the most progressiveland laws in Africa, with the 1997 Land Law widelyseen as striking a balance between protectingcustomary rights and encouraging investment, theinsecurity created by a lease contract does havea negative impact on long-term investment in theagricultural sector. In addition, implementation ofthe land laws, particularly the obligation to consultaffected communities, remains complex in practice,especially given both the pressure to fast-track

privatisation and the liberalisation of regulationconcerning land.

Mozambican authorities have acknowledged the

important position that the agricultural sectorcurrently holds in the economy, both as an employerand a means of support for the large rural population,and have recognised the role that sector will playin future development. In this regard, Mozambiquehas a clear vision for the long-term growth of itsagricultural sector. This is captured in the 10-yearStrategic Plan for Agricultural Sector Development(PEDSA). The PEDSA details steps to unleashthe vast potential of Mozambican agriculture bycreating an integrated, prosperous, competitiveand sustainable agricultural sector. By focusingon six corridors – with particular emphasis on theNacala, Zambezi Valley and Beira – the plan intendsto optimise the alignment of activities through thepublic, private and development sectors. The planspecifically focuses on the Nacala, Zambezi Valleyand Beira regions as they hold most of the country’swater resources, display high agricultural potential, aswell as integration potential with domestic, regionaland international markets. Furthermore, the planprioritises 16 agricultural commodities ranging fromrice and soybeans to oilseeds and pulses, with eachcorridor focusing on specific commodities.

While there is considerable potential for further

development, investment into the sector has beenbelow expectations, leading to the review of theNational Agricultural Sector Investment Plan (PNISA).An additional concern pertaining to the agriculturalsector is its over-exposure to adverse weatherconditions, as is evident from the floods in the firstquarter of 2015. While the damage was less severethan in neighbouring Malawi, partly due to a disaster-preparedness plan put in place by the Mozambicanauthorities last year, there has been considerabledamage done to the agricultural sector, not tomention the lives lost and uprooted by the floods.

According to the World Bank, the floods in Januarywere the worst the country had faced in a decade.Mozambique’s National Institute for DisasterManagement indicated that the flooding forcedthe emergency evacuation of about 50,000 peopleand affected a further 100,000. Floods have hadboth social and economic costs, and continue toplague the country. Coastal Mozambique is home tonine international river basins, making it especiallyvulnerable to flooding. Regular flooding severelyaffects the livelihoods of thousands of individuals thatdepend on the agricultural sector, and also devastatesthe country’s already inadequate infrastructure.

Furthermore, government finances are alsonegatively affected by recurrent flooding, forcing anincrease in emergency government expenditure.


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Nigeria

Unlike some of the other countries in this list,

Nigeria has already come a long way with regard toagricultural development. That said, the West Africannation still lists among the countries in Africa with themost untapped commercial agricultural opportunities.Agriculture remains a salient provider of employmentand livelihoods, and there remains much scopefor the sector to expand by improving productivitylevels and easing access to finance. Agricultural landconstitutes 83.7% of the country’s total land area,but arable land accounts for only around 40% of totalagricultural land. Moreover, fertiliser consumptionamounts to only 5.7 kg per hectare of arable land,compared to 17.9 kg in Ghana, 32.2 kg in Ivory Coast,53.2 kg in South Africa, and 120.5 kg in the US.

The government’s agricultural reforms – theAgricultural Transformation Agenda – are centredon import restrictions to boost local production,improving the distribution of fertilisers, a scrapping ofimport duties on agricultural equipment, and easieraccess to credit for farmers. Arguably, though, moreneeds to be done to improve the basics, such asaddressing the high levels of corruption and the poorstate of infrastructure. Key agribusiness industriescurrently receiving government support include cocoaprocessing, sugar refining, and poultry production.

Government support includes the provision ofsubsidised agro-chemicals, the rehabilitation of oldfarms, and efforts to boost local production throughlimiting imports. Apart from providing direct support,the Nigerian authorities will continue to encourageforeign direct investment in key sectors such asmaize, rice, sugar, livestock, and dairy production.

According to the former agricultural minister,Dr. Akinwumi Adesina1, Nigeria (the fourth largestcocoa grower in the world) is on track to bring cocoaproduction to 500,000 tonnes by the end of thecurrent harvest in September 2015, compared to350,000 tonnes during the 2013/14 season, on theback of the distribution of higher-yielding seeds.The new cocoa seeds reportedly yield 1,500 kg -

2,500 kg per hectare and flower within two years,

while the old seeds yielded only 350 kg - 450 kgper hectare and flowered only after five years. DrAkinwumi Adesina recently indicated that Nigeria’scocoa production could top one million tonnes by2020. At present, actual production levels continueto fall short of the government’s lofty goals becausefarmers are relatively old and their trees need tobe replanted. The majority of the country’s cocoafarmers are above 60 years of age and most cocoatrees are even older.

With Nigeria’s population set to grow to 210 millionby 2020, the need for agricultural investment both

as a source of food and employment is greater thanever. Leading the charge is Africa’s richest man,Alhaji Aliko Dangote. Dangote plans to invest aboutUS$9bn in Nigeria’s Kebbi state to cultivate anddevelop farmlands and a food processing factory.The billionaire also targets rice production, witharound US$1bn going toward the acquisition of150,000 ha of farm land in five states. As part of thisdrive, the company plans to set up two rice mills withan installed capacity of 240,000 tonnes per day.

The government has also stepped up its effortsto make Africa’s biggest economy self-sufficientin rice production by 2015. Nigeria is currentlythe largest importer of rice in the world, despite asteady increase in local production over the past fewdecades. The government also increased importtariffs in order to spur private sector development inthe rice industry, though these efforts unfortunatelyresulted in an influx of rice smuggling from Nigeria’ssmaller neighbours, especially Benin. Still, privatesector investment led to the establishment of 14 newlarge-scale rice mills in recent years. In September2014, the government announced that it had madeN13bn (about US$80m at the time) available asfinancing for the establishment of a further 10 ricemills and six cassava flour mills. The rice mills willeach have an annual capacity of 36,000 tonnes.

1 Recently elected President, African Development Bank


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Rwanda

Agriculture is a major contributor to Rwanda’s

economy. Roughly half the population is engagedin agriculture as an economic activity, with a slightmajority being women. In addition to tea and coffee,Rwanda’s agricultural sector currently producescassava, potatoes, and sweet potatoes in significantquantities, with the country producing around 8% ofAfrica’s annual potato production, according to GrowAfrica. The government has adopted a cooperativesubleasing model, in which land consolidation intofarming blocks intends to maximise yields andefficiency. Under this system, Rwanda has createdquality premium products and premium productionhubs within which smallholder farmers are hiredby companies that sublease parcels of land foroften generous periods of time. According to theagriculture ministry, difficult access to finance is oneof the major factors affecting the agricultural sector.Farmers continue to complain about the high intereston agriculture loans, which hurts efforts towardsagricultural mechanisation and increased productivity.However, this issue is being addressed, with private-sector insurers and agricultural companies providingcrop and weather insurance, while microfinanceinitiatives are facilitating farmers’ access to creditand stimulating agri-credit supply. In addition, theDevelopment Bank of Rwanda is in the processof establishing a stand-alone agricultural financingdepartment that will streamline and ensure farmers’access to long-term financing for projects that otherbanks do not fund.

According to Grow Africa, the value of registeredprivate investments in Rwandan agriculturetotalled US$512m across 184 projects between2000 and 2013. As the country’s top agriculturalexport commodities, tea and coffee have remainedsignificant investment targets, though proportionatelyonly accounting for 19% of overall investment in

agriculture. The industry is increasingly witnessing

diversification into emerging sub-sectors withgrowth potential, including floriculture, fruits &vegetables, dairy, meat, hides & skins, rice & grains,fish, honey and oils. To facilitate investors’ effortsto tap into the opportunities in these nascent sub-sectors, the Rwandan government is increasinglymaking use of partnerships with the private sector.These partnerships are aimed at adding valueand increasing exports by providing resourceand infrastructure support. Recent partnershipsinclude an agreement with Erasmus InvestmentInternational. The Rwandan ministry of agricultureand Luxembourg-based firm Erasmus InvestmentInternational signed a formal commitment worth€3.5bn last year for a wide-ranging project portfoliothat envisages investment in hillside irrigation, landcultivation, development of horticulture, fruit andvegetable processing, mechanisation, postharvesttreatment, logistics, cold storage, production andexport of silk, and livestock. Furthermore, in order tofast-track investments in the agricultural industry, theagricultural ministry and Rwanda Cooperative Agency(RCA) have identified key farmer cooperativestogether with production areas that will serve asPremium Agriculture Investment Hubs for specificcommodities, with the focus shifting towardsimproving their marketing and business skills. Themultitude of partnership initiatives create a strongclimate for value addition and export growth inRwandan agriculture. Furthermore, the agriculturalsector has also benefited from significant bilateraland multilateral support. In June 2014, the EuropeanUnion committed some €200m to the country’sagricultural sector. The fund, to be invested until2020, is part of the €460m earmarked for Rwanda’sdevelopment programme, and will cover areassuch as feeder roads, nutrition, and centralised &decentralised agriculture.


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Tanzania

Tanzania has the capacity to become a major

regional food-exporter given its abundance of naturalresources with agricultural potential. The countryshares borders with eight countries in the EastAfrican region, which provides significant marketpotential, while a coastal location with an internationalport provides potentially low-cost access to rapidlyexpanding markets in the Middle East and Asia.At present, Tanzania is yet to make full use of itsabundant resources. According to data from theWorld Bank, Tanzania’s agricultural land amounted to406,500 km2 in 2012, or 45.9% of the total land area.This is up from around 340,000 km2 (38.4% of totalland area) during 1985-2003. The agricultural sectorin Tanzania is hampered by low productivity, poorinfrastructure, and a lack of technology. Only around10% of crops in the country are cultivated with theuse of a tractor, while a further 20% is cultivated by

ox, and most crops (70%) are cultivated by hand hoe.

Furthermore, only about some 20% of areas withhigh irrigation potential are currently irrigated.

The government has undertaken various initiatives topromote development of the agricultural sector. TheTanzania Agriculture and Food Security InvestmentPlan (TAFSIP) 2011/12 - 2020/21 intends to focuson production and commercialisation of agriculturalproducts, which includes transferring technologyand subsidised inputs to smallholder farmers, aswell as public-private partnerships in the SouthernAgricultural Growth Corridor of Tanzania. The costof the first five years of the TAFSIP is estimated at

US$5.4bn, with US$2.5bn already made available.The aim of this programme is to triple agriculturalproduction over a 20-year period, leading to thecreation of 420,000 jobs.


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Zambia

Zambia’s arable land spans 752,000 km2, though less

than 20% is under cultivation. The Zambia Institutefor Policy Analysis & Research (ZIPAR) estimatesthat productivity in the agrarian sector increased by9.8% p.a. in the 2008-12 period, with the informalsector outperforming the formal sector on aggregate.Turning to recent performance, the finance ministryindicated in October 2014 that Zambia has recordeda “historic achievement” during the 2014/15 farmingseason by harvesting the highest tonnage of maizeon record. The government stated that 3.35 milliontonnes of maize were harvested on the back of an8.1% increase in area planted during that season,which, coupled with favourable weather conditionsand increased farmer productivity, translated into anincrease of 22.3% in crop yield. Increased agriculturalproductivity has also been ascribed to the adoptionof the evergreen agriculture scheme, with the WorldBank estimating that farmers using this method havereported an increase of approximately 30% in cropyields. Evergreen agriculture refers to the simplisticmethod of integrating trees into crop systems,thereby contributing to the conservation of water,improving soil fertility and combating climate change.One of the measures applied is the use of theFaidherbia albida tree, an indigenous African acacia,according to the World Bank.

In February 2015, Africa’s top cane producer ZambiaSugar, which is a unit of South Africa’s Illovo,indicated that it is planning to spend US$82m toconstruct a refinery that would double its annualrefined production. The funds will also go towardother factory improvements. Zambia Sugar indicatedthat the extra refinery and upgrades will doublerefined output capacity to around 100,000 tonnes peryear, starting in May 2016.

In order to consolidate the strong sectoralperformance, the fiscus has allocated a higherportion of state resources to agriculture in 2015.The government is also moving spending away fromsubsidy expenditure and more toward infrastructureoutlay in order to promote longer-term growth.

The government will specifically aim to recruit

500 additional extension officers, equipped withtransport facilities, to support the farming communitywith technical knowledge and an updated skillset.Furthermore, under the umbrella Farmer InputSupport Programme (FISP), the government aimsto unlock greater productivity and diversification ofcrops; to provide perspective, maize absorbs morethan two-thirds of the overall agricultural budget atthis stage. Extending on this theme, the governmentfurthermore aims to unlock the vast potential ofthe domestic agrarian sector via increased focuson conservation farming and the establishment ofsmallholder irrigation schemes, thereby limiting theimpact of adverse weather conditions. In order toachieve this objective, the state will provide supportto a projected 84,000 farmers spanning 31 districtsduring the latter half of the 2014/15 season, as wellas including an additional 6,000 hectares (ha) underirrigation in 2015. The government has alreadysupported the irrigation of 17,500 ha of land over theperiod 2012-14.

Foreign interest and investment in agriculture areexpected to increase in coming years on the backof the government’s on-going drive to develop andboost the sector via fiscal and non-fiscal investment

incentives as a means to fast-track economicdiversification. Non-fiscal investment incentivesinclude the division of several portions of landin certain parts of the country to be allocated toinvestors to develop for agricultural purposes. TheZambia Development Agency (ZDA) handles investorapplications for a Certificate of Registration (CoR),fiscal and non-fiscal incentives and immigrationspermits. In order to qualify for benefits, theminimum investment threshold for an InvestorsPermit is US$250,000, while qualification for specialtax incentives for Priority Sector or Multi FacilityEconomic Zones (MFEZ) requires a minimum

investment of US$500,000. Priority Sectors includehorticulture and floriculture. Non-fiscal benefits toobtaining a CoR include investment guarantees andprotection against state nationalisation.


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Growth in Africa’s agricultural sector has failed

to reach its potential and there is no one quick fixto get the sector on a higher growth trajectory. Aconcerted effort is needed on all spheres, fromimproving techniques, markets and access to creditfor small scale farmers, to government policies toattract foreign investment and spur commercialagriculture and increased value add. That said, thepotential for growth in the agricultural sector on the

continent is huge. Africa houses a large proportion

of the globe’s unexploited arable land and there issignificant scope for improvement with regard toirrigation, use of fertilisers and improved technology.Furthermore, the return to political stability is somekey countries and programmes by governments andNGOs could unlock significant value in the mediumto long term.


Conclusion


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Sources of Information

African Development Bank

All AfricaAphlisBloombergCentral Intelligence AgencyFood and Agriculture Organisation of the UnitedNationsForbesGlobal Donor Platform for Rural DevelopmentGrow AfricaHow we made it in AfricaInternational Fertiliser SocietyLANDac

Mozambique’s National Institute for DisasterManagementNEPADNew York TimesInternational Food Policy Research InstituteInternational Monetary FundReutersThis Day LiveThe Daily TimesTrade MapUnited NationsVanguardWorld BankWorld BulletinWorld DevelopmentWorld Economic Forum


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