Lawrence McCrystal : Managing Director, Agrifica (Pty) Ltd

1. The African Economic Forecast 2012Workshop at Hilton Hotel, Sandton; 29 February 2012Analysis of Future Trends in the Agricultural Sector of Africa Lawrence McCrystal : Managing Director, Agrifica (Pty) Ltd

2. ABOUT AGRIFICA Established : 2001, based in Pretoria Vision To see agriculture play a leading role in Africa’s economic development. Values Integrity, Honesty, High Ethical and Moral Standards; Service Orientated, Hardworking, no shoddy work. Mission To promote Agriculture and Agricultural / Agribusiness activities in Africa with SA as the springboard and involving SA Agricultural / Agribusiness Technology, Management, know-how and practical experience and skills. Activities Quarterly magazine, TheFarmAfrica Networking Opportunities: Organizing agricultural / agribusiness conferences, seminars and workshops Agri Tours – Prioritizing African farmers / business people /civil servants /academic to see what we do in SA; taking SA Trade, Farmers and Agribusiness people into Africa. Projects- Promoting, raising finance for/and implementing projects & trade with African countries. Market Research

3. BACKDROP TRENDS TO THE OUTLOOK FOR AGRICULTURE IN AFRICA Of 30 fastest growing economies world-wide, 17 are expected to be in Sub-Sahara Africa (SSA) Agriculture/agribusiness -30% of GDP 30 – 40% of foreign exchange earnings. 70 – 80% of employment Therefore what happens in agriculture will impact greatly on overall economic performance in 2012 and beyond. 1% Growth in agriculture produces 1.5% growth across the economy (calculation by the Alliance for a Green Revolution in Africa – AGRA) Rapid urbanization unfortunately mostly by the smarter, younger people. Fertility reduction. After years of neglect, agriculture/agribusiness now back in the frame.

4. Climate change effect on rainfall and temperatures. Policy – induced price distortions by governments in SSA e.g. export taxes on agricultural products, being reduced. Technology improvements bringing about slow improvement in crop yields on farms. Cereal grain output now approximately equal to that of South Asia. SSA still a huge net importer of food. World economic outlook still uncertain. Investment in Africa tends to increase when equity markets and economic growth in more advanced countries improve. If economic growth rates in more advanced economies improve prices for agricultural products will increase. If Europe, the USA and Japan remain in the economic doldrums, prices will not increase significantly.

5. Foreign aid to Africa declined to an historic low in 2006 but there have been sporadic increases since, more recently negatively affected by the recession in Europe. Agriculture/Agribusiness has been receiving a declining share of aid. China’s role in Africa has been largely focused on infrastructure provision combined with the settlement of Chinese people in Africa. Although most governments in SSA signed the Comprehensive Africa Agriculture Development Programme (CAADP) and MDG documents, including an undertaking to allocate 10% of their annual budgets to agriculture/agribusiness, only a minority have actually done so . On balance these trends are more likely to have favourable outcomes, putting SSA’s agriculture/agribusinesses sector in a better space than before, to take advantage of the increased investment needed to contribute significantly to the world’s food and fibre needs.

6. ISSUES FACING SSA COUNTRIES Globally Pledges are not being translated into effective support for agriculture partly because of the lack of capacity of African governments. Nationally There is a poor capacity (management, skills and political will) to translate fine words into actions, to use agriculture to achieve a higher growth rate across the economy, and to achieve cross-sectoral co-ordination. -- There is generally a lack of comprehensive food security strategies. Locally:- Poor capacity to set priorities and implement policies (SA’s rural development efforts are an example). Weak to non-existent local accountability. Often applies at national level too. SA is an example.

7. Most African governments are deeply suspicious of any proposals which will result in the number of people on the land reducing despite the fact that this is an inevitable underlying trend whether governments like it or not. About 90% of SSA’s food comes from farms of 3ha or less. It is well-established that larger farms lead to a better return on capital economies of scale and easier application of technology. BRIC – African trade up from US$ 22,3bn in 2000 to about $200bn now. Mostly due to China.

8. GIVEN ALL THIS, WHERE IS GROWTH IN AFRICAN AGRICULTURE TO COME FROM ? China’s increasing consumption of food per capita e.g. meat : 2001 consumption 43kg/cap. p.a 2011 rose to 54kg /cap.p.a Resulted in increased demand for soya beans for cattle feed. China’s soya bean production has dropped while consumption has risen from 28,3 mill. tons in 2001 to 71,6 mill. tons in 2011. Higher demand met through imports. Chinese self-sufficiency dropping in other crops as well e.g. maize, wheat and rice. Rising urbanization putting pressure on farm land. Same pattern in other emerging economies. African producers will thus find ready markets in these countries for these and various and other food products in 2012 and beyond particularly maize, palm oil, soya, sugar, cassava (for starch) Food security will push countries to diversify sources of food supply to avoid depending on a limited number of countries. Good for Africa.

9. The financial, technological and managerial imperatives in agriculture will drive the enlarging of farms either under ownership of investors or by getting small scale farmers to aggregate under co-ops. Sustainability of urban areas dependent on a hinterland capable of producing food and water. Urbanized civilizations have collapsed when the hinterland becomes incapable of supplying these needs. Africa likely to play a significant role in new thinking on food production for urbanized societies. Good for Africa in 2012 and beyond. Some aid agencies are seeking to transform themselves into commercial enterprises. Traditional ways of delivering aid likely to change. Good for the commercialization process in African agriculture and agribusiness. Bulk products are the main source of Africa’s agricultural export earnings. Main exporting countries are Côte d’ Ivoire, Ghana, Mali, Senegal, South Africa (by far largest), Tanzania and Zambia. Diversification into more countries is a likely trend and into processing to reduce sales in bulk. Processing presents a business opportunity for 2012 and beyond.

10. African governments are increasingly willing to revitalize agriculture/ agribusiness. Higher awareness of drag that underperforming agriculture is having on overall economic growth. Prepared to promote private-sector led developments in agriculture and agribusiness. Africa’s recovery from the global economic recession has been quicker than most other parts of the world – World Bank. GDP growth of SSA in 2011 estimated at 5,2% Mining sector’s growth in Africa should be good for agriculture/agribusiness in 2012 and beyond. Mines have land and must contribute to social economic upliftment. Opportunity for partnerships with agribusiness companies. Governments to invest more in infrastructures – roads, rail, telecommunications – to facilitate agricultural development both for obtaining inputs and improving market access. Opportunities will open for SA infrastructure designers and builders. Also for market developers.

11. Look at growth nodes for opportunities African Project Access :- Uganda’s oil producing area Liberian / Sierra Leone’s iron ore areas Angola’s sugar project (for bio-fuel) in area Burundi agricultural projects Katanga Province of DRC agricultural projects The agreement signed by the Malawi government for a 138km rail line to link the coal fields to Nacala port will open up agribusiness opportunities. The Nansanga Farm block project in Zambia offers farming opportunities.

12. CONCLUSION The drivers for sustained growth in agriculture/agribusiness in SSA at rate of around 5,5% p.a. in 2012 and 2013 are in position. Increased investment and higher prices could drive growth to 6% Jokers in the pack:- World economic recovery especially in Europe, USA, Japan. Downturn in China Half-hearted government reactions to private sector involvement because of:-

13. Deep seated suspicions and the mistaken belief that centralisation of control is best; Power of import lobbies; Corruption Week political will and poor managerial and technical skills without accountability systems at the implementation level; Drought. Upsides:- New breed of agribusiness entrepreneurs emerging; Demand driven momentum; Increased world and South Africa awareness of opportunities in Africa to fulfill food security and individual business aspirations.

14. ON BALANCE : THE AGRICULTURAL / AGRIBUSINESS OUTLOOK IN AFRICA FOR 2012/13 LOOKS POSITIVE THANK YOU Agrifica (Pty) Ltd Tel : +27 0 12 804 9729 Email : agrifica@agrifica.co.zaWeb : www.agrifica.co.za