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Africa’s agriculture challenges and potential

'Growing' Agricultural Investment Along Africa's Regional Corridors: The TransFarm Africa Concept 10 th Agri Outlook Conference 22 September 2010. Africa’s agriculture challenges and potential. Africa’s agriculture challenges :

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Africa’s agriculture challenges and potential

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  1. 'Growing' Agricultural Investment Along Africa's Regional Corridors: The TransFarm Africa Concept10th Agri Outlook Conference 22 September 2010

  2. Africa’s agriculture challenges and potential Africa’s agriculture challenges : • Highest concentration of people earning under $2/day in rural Sub-Saharan Africa • 75% of Africa’s population (450 million people) employed in agriculture and agribusiness • Half of Africa’s small farmers survive on less than $1/day • Farms of less than 3 hectares account for nearly 90% of Africa’s food production • Women provide 80% of labour on farms in Sub-Saharan Africa • Farming represents 30-40% of Sub-Saharan countries GDP and nearly 60% of export income Africa’s agriculture opportunities : • Vast masses of arable land under utilised • Africa has capacity to feed itself and export to the world – global food security issues • Increased investment interest in Africa • Africa’s population close to 1 billion people – market opportunity

  3. What is TransFarm Africa? • Vision • An African-led “demonstration” programme proving and deploying scalable, sustainable financial and institutional interventions promoting inclusive modernisation of agriculture and acceleration of the Development Corridor process. Mission • To pilot and prove the TransFarm Africa concept by clearing the way for sustainable private investment in commercial African farming ventures within development corridors that enables agriculture in Africa to become globally competitive and provide tangible economic benefits to Africa’s citizens and consumers. • Three linked elements: • TransFarm Africa (Pilot) Transformation Fund • “Removing the Barriers” of obstacles to success • Corridor development promotion and support • Implemented via partnership with local African partner and Africa-based fund manager and investment funds

  4. Agriculture most important segment of the economies of sub-Saharan Africa (“SSA”) but only starting to realize potential. Historically Agriculture in Sub-Saharan Africa However, favourable global trends, improved policy, more investment and greater attention by donors and politicians, indicates tide may be turning • African agriculture has underperformed • Inadequate infrastructure • Poor productivity, suboptimal size and limited market access for small scale sector • Poor government policies damaged commercial sector • Unequal terms of trade 4 Lion's Head Global Partners

  5. Investing in Sub-Saharan Agriculture - rationale Favorable global and regional trends = a shift in the fundamentals defining the future of African agriculture Agriculture can feed all Africa, finance economic growth and become part of the global solution for Food Security...... but strategic and catalytic intervention required in favour of market led development • Rising global demand/food security concerns • An emerging regional and domestic market • Improving infrastructure and regional integration • Substantial potential for improvement • New class of agricultural entrepreneur emerging 5 Lion's Head Global Partners

  6. Large Scale Mechanized(commercial money) Transformative Agriculture Subsistence Farming(donor focus) Dynamic and transitional consumer & export sector Export Oriented Closed System • Entrepreneurial, opportunistic • Mid-cap, growth oriented • Small Farmer ss Supplier, Employee, Customer , Partner • Large scale/high returns • Few local linkages • Small farmer engagement is ‘defensive’ & costly • Uneconomic size • Low productivity • Limited market access • Slow accumulation “Transformative agriculture” emerging as dynamic segment of African agriculture Evolving structure of African agriculture Transformative agriculture – just emerging, new and existing players,, opportunities all along value chain, new business models, able to harness value-add from small farmer segment........... but limited funding, limited understanding, many barriers Lion's Head Global Partner 6

  7. TFA Structure

  8. TransFarm Africa: Market driven regional spread of transformative agriculture TransFarm Africa TFA Investment Fund: TFA Fund manager (LHGP) w/local team TFA “Removing the Barriers” Program: NBF as implementing partner • “Market” insight on best TFA policies • Build capacity to deploy TFA policy • Promote Corridors to aid TFA policy roll out • - Work to align efforts of others • Show TFA can deliver good $ returns • Show TFA can modernize subs farmer • Harness other efforts to reduce risk • Help bring donor projects to market SCALE UP through successive funds supported by capital markets and copied by impact investors SCALE UP via adoption of best practice TFA policy and approach from corridor to corridor 8

  9. TransFarm Africa Structure $ Hewlett Foundation Investors TransFarm Africa $ TransFarm Africa Investment Fund/LHGP (TFA/NBF) Removing the Barriers Program $ Donors, Govts, RECs, private sector $50 million target Learning relationship w/ TFA Investors & entrepreneurs Equity & Debt/$1-$10m Across value chain Help small farmers & agri-entrepreneurs develop effective TFA business models Mid-cap/growth oriented Promote africa’s development corridors & help them better serve agriculture Smallholder business link Southern & southeast Africa 9 Lion's Head Global Partners

  10. TFA Impact categories • Direct: • small farmers benefit via income, security, skills; • employment creation on farms and in supporting segments; • off farm entrepreneurial business and employment creation • more affordable and better staple foods • foreign exchange saving and earnings • net local and global environmental benefits • Indirect: • Demonstrate pro-agriculture development of Corridors can have major and positive poverty effects • Demonstrate transformative investments in agriculture are good commercial bets • Demonstrate investment platforms can generate commercial returns • Develop and diffuse institutional mechanisms for promoting agriculture along corridors

  11. TFA Implementation Structure and Strategy • TFA must be Africa-based, with specific objectives, an implementation timetable and an exit route • NEPAD Business Foundation appointed as local implementation partner. Business-oriented; strong links to AU/NEPAD, AfDB, RECs; Gives TFA access to management resources of member companies • Transferring key TFA investment parameters to national agencies to ensure good deals with foreign capital critical. • Brains Trust plays key role. Composed of knowledgeable, experienced African commercial farmers, agri-business entrepreneurs and expert local NGOs • Pro-agriculture corridor promotion template difficult to diffuse. Investment in agriculture planning capacity across corridors may be better route

  12. Removing the Barriers Programme(RtB) www.nepadbusinessfoundation.org

  13. Assembly of the African Union NEPAD HSGIC External Stakeholders NEPAD Steering Committee SA Government NEPAD Secretariat (NPCA) Continental / Regional Economic Communities NBF (South Africa) Board Independent, non-profit org Private sector funded NBF NBF / NBG Counterparts Project Management Office Donors & DFI’s Sectoral Groups Legal Agribusiness Audit & Accounting Energy Finance / Banking Media ICT Infrastructure Mining & Resources Stock Exchanges Asset Mngt, Insurance & Investment Transport Water FMCG Healthcare NEPAD and NBF structure

  14. NEPAD FRAMEWORK & PRIORITIES Conditions for Sustainable Development Programmatic Priorities Agriculture, diversification of production and market access (CAADP) Political Governance and Democracy Economic & Corporate Governance (APRM) Infrastructure Development [Energy, Transport (air, rail, road, ports), water & sanitation] {STAP and PIDA} Peace and Security {African Peace and Security Agenda- (APSA)} ICT { e-schools, Uhurunet and Umojanet} Human Development, including education and health {NEPAD Health Strategy} Science and Technology {Consolidated Action Plan} Capital Flows (domestic & international) [debt cancellation, capital markets, scale up development assistance]

  15. NBF Vision and Mission • The NBF’s visionenvisages an African powerhouse that utilizes all its resources to generate innovative economic growth that engenders socio-political stability and sustainable livelihood for all its people on par with global standards. • The NBF’s missionis to create a platform for dialogue between the private and public sectors, ultimately creating a more sustainable business environment in Africa. • The NBF strategic objectives: • To facilitate and coordinate activities across sectors; • To be a catalyst for NEPAD related business opportunities by collaborating and integrating with relevant organisations across the globe • This will be done through the delivery of sustainable projects for the benefit of the African people and the prosperity of the African continent.

  16. “Removing the Barriers” programme • Many non finance obstacles to modernization of subsistence • agriculture, commercial agriculture projects and sector growth: • domestic policies trade-related, capacity constraints, organisational, regulatory, corruption, engagement • Use local and fund knowledge to identify, prioritize and tackle key obstacles • Deploy fit for purpose tactics–communications, policy reform, • influence and direct engagement, capacity building • Start with pilots then develop, test and rollout institutional • mechanisms to tackle same problems along other corridors • Strategic aim to demonstrate that focused intervention can • accelerate the transformation process

  17. Africa’s “Spatial Development Corridors”

  18. Corridor Investment Promotion and Support • African agriculture has potential to reduce poverty and finance economic growth • Regional Development Corridor strategy – focused efforts across various industry sectors allows for increased impact and alignment of initiatives • TransFarm Africa will seek to promote Corridor (and corridor agriculture) focus to donors and investors • Pilot corridor : Beira Corridor (Mozambique, Zimbabwe, Zambia, Malawi) • Other focus corridors : Nacala Corridor (Mozambique, Malawi, Zambia) • Central Corridor (Tanzania, DRC, Burundi, Rwanda)

  19. BEIRA Corridor – Mozambique, Zimbabwe, Zambia

  20. Large “anchor investments” are taking place . . .

  21. BAGC: a potential breadbasket region

  22. Virtually no commercial agriculture in BAGC today . . . (Mozambique only)

  23. . . . but there is enormous potential

  24. Infrastructure is essential . . .

  25. . . . to stimulate major new investment Number of new farms per year

  26. “Ready to go” projects identified

  27. A transformation by 2030 Now 2030

  28. Potential bottlenecks for TransFarm Africa NBF VALUE PROPOSITION Production Commercial Value Chain Infrastructure Market ENABLING ENVIRONMENT

  29. Thank you. Lynette Chen CEO NEPAD Business Foundation Tel : +27 87 310-1888 Email : lynette.chen@thenbf.co.za Website : www.thenbf.co.za

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