NEW HOLLAND AGRICULTURE.

SOWING THE SEED OF DEVELOPMENT THROUGHOUT AFRICA.

A renowned world leader in agricultural machinery, New Holland Agriculture offers the widest range of equipment to suit the needs of small-scale farms up to large plantations of Africa. Powerful, reliable and easy-to-operate 2WD and 4WD tractors, highly productive combines and a full choice of attachments: all are ready to simplify your operations and to improve your productivity. Why wait? Go to see your New Holland Dealer now. You will discover a new world of quality, technology, support and success. The world of New Holland Agriculture.

CNH Services Srl - Turkey Polaris Plaza, Ahi Evran Caddesi n.1 K.7 Maslak 34398 Istanbul - Turkey Tel. +90 2123460202

New Holland.indd 2

CNH Services Srl - South Africa Rep. Office - Unit 13 - Growthpoint Business Park Tonetti street - Midrand 1685 - Republic of South Africa Tel. +27 112053900

23/2/12 11:05:50

btsadv.com

CNH International SA - Switzerland Central office, Riva Paradiso 14 6902 Lugano - Switzerland Tel. +41 919853711

New Holland.indd 3

www.newholland.com

23/2/12 11:05:50

74

SECTOR-BY-SECTOR OPPORTUNITIES: AGRICULTURE

Hope for a better harvest

This South African mango farm has an irrigation system, but in many other African countries crops are still rain-fed rather than irrigated

Graeme Williams – MediaClubSouthAfrica.com

Invest in africa 2012

2.3_AGRICULTURE_CC.indd 74

16/4/12 10:43:26

SECTOR-BY-SECTOR OPPORTUNITIES: AGRICULTURE

Africa continues to suffer from food shortages but governments are finally making progress. Increased agricultural funding and greater use of fertilizer could increase productivity still further. Paul Wallace reports

A

frica has long been blighted by low agricultural production, and food shortages on the continent have, in extreme cases, had devastating effects. Last year’s famine in East Africa, for example, is thought to have causedbetween 50,000 and 100,000 deaths in Ethiopia, Kenya and Somalia. As such, the advancement of Africa’s agricultural capabilities is seen as a crucial step towards attaining the United Nations Millennium Development Goals, especially the eradication of hunger and poverty. Despite its frequent food shortages, Africa has huge agricultural potential. It is endowed with vast tracts of fertile soils and, in most parts, fairly high rainfall. But many analysts believe that governments have failed to exploit its advantages and develop policies to enhance food security. “They still have a lot of work to do,” says Mthuli Ncube, chief economist at the African Development Bank (AfDB). “If you look at productivity figures, they haven’t gone up a lot in recent years.” Nonetheless, change is afoot. One of the most far-reaching schemes of the past 10 years is the Comprehensive Africa Agriculture Development Programme (CAADP). Set up in 2003 by the African Union (AU) and the New Partnership for Africa’s Development (NEPAD), this framework reflects African leaders’ recognition of the importance of agriculture in alleviating poverty and hunger. Through the CAADP, the continent’s governments committed to allocating at least 10 percent of their spending to agriculture, and to achieve an annual growth rate of six percent in the sector. “It’s one of the few

75

defined agricultural frameworks in Africa that has managed to last for close to a decade,” says Richard Mkandawire, former head of the CAADP, now vice-president of the African Fertilizer Agribusiness Partnership. There has been a marked improvement in African agricultural production since the CAADP was created, he adds. “At least 12 countries have achieved agricultural growth of six percent or more over the past five years. That’s quite remarkable.”

Improving productivity There is still a long way to go, as productivity remains low. By far the majority of the continent’s farmers are smallholders whose plots are rain-fed, not irrigated, and who usually lack inputs that are common in the developed world, such as fertilizers. Many of these producers are subsistence farmers. “In Africa, we’ve tended to see agriculture more as a way of life than as a business,” says the head of an agriculturefocused bank in Ghana. Increases in output have often resulted from extending rain-fed crop cultivation on to marginal soils and reducing the fallow periods in crop-rotation cycles. But these measures have done little to increase yields per hectare, so productivity in Africa is far lower than that in most other emerging markets. Chinese farms, for instance, produce roughly five metric tonnes of grainsequivalent per hectare; those in Africa produce about a quarter of that figure. “If we just doubled productivity per hectare in Africa, we’d wipe out food insecurity,” says Namanga Ngongi, president of the Alliance for a Green Revolution in Africa (AGRA), which is chaired by former UN secretary general Kofi Annan. A lack of fertilizer use is a problem, despite its capacity to boost productivity significantly. This potential was highlighted in Malawi, which launched a widespread fertilizer and seed subsidy programme after a famine in 2004. The country subsequently increased Invest in africa 2012

2.3_AGRICULTURE_CC.indd 75

16/4/12 10:43:49

76

SECTOR-BY-SECTOR OPPORTUNITIES: AGRICULTURE

Government schemes to boost funding and banks’ growing expertise in working with SMEs mean that agriculture is slowly gaining more attention from private-sector lenders of produce is lost between farm and market, owing to poor storage facilities and bad roads. This further deters banks from lending to farmers. Without proper funding, however, farming methods are less likely to change, so perpetuating a vicious circle in the sector. Funding growth Governments are trying to rectify the situation. Nigeria Perhaps the main factor stalling Africa’s agricultural recently set up a $1.3 billion scheme to boost funding to all development, however, is a scarcity of funding. Although parts of the agricultural production chain, including growing, the figure has risen since the CAADP was launched, most processing, storage and marketing. Such schemes, and banks’ governments on the continent allocate no more than four to growing expertise in working with small and medium-sized six percent of their budgets to the sector. “That’s really not enterprises, mean that agriculture is slowly gaining more enough,” says Ngongi. “In other parts of the world, attention from private-sector lenders. 10-15 percent of national budgets are spent on agriculture.” “Traditionally, commercial banks Just as important is a lack of have had little experience of working funding for agriculture from the with smallholders,” says Mkandawire. private sector. Almost all farmers Government investment “But the picture is changing.” struggle to access credit from banks, in agriculture Other initiatives include the even though the majority of Africans creation of ‘agricultural corridors’, are employed in agriculture. Even in Other parts which promote clusters of farms and Kenya, which is regarded as having a Africa of the world agricultural services business with the fairly well-developed agricultural aim of reducing the time that it takes industry, less than six percent of bank of national budget of national budget for food to be moved from the ground loans go toward the sector, which and processed. One example is the accounts for almost a quarter of gross Southern Agricultural Growth Corridor domestic product (GDP). of Tanzania (SAGCOT). The situation is even worse in Nigeria. There, agricultural activity makes up 40 percent of GDP, but the Need for new legislation sector receives just 1.5 percent of It may also be necessary for African total bank funding. land laws to change. In many rural Banks shy away from agriculture areas, land cannot be bought by because the sector is dominated by farmers – a factor that both deters smallholders and most production is investment and makes it more rain-fed. Given the volatility of rainfall, difficult for farmers to gain access this makes lending highly risky. to loans from banks. Low investment in support “Much of the land outside urban industries and infrastructure areas is owned by communities,” says intensifies the problem. According to Yvonne Mhango, an economist at some estimates, around 30 percent investment bank Renaissance Capital. food production substantially, saving the government from having to use valuable foreign-exchange reserves to import food, as it had previously.

4-6%

10-15%

Invest in africa 2012

2.3_AGRICULTURE_CC.indd 76

16/4/12 10:43:51

Arysta LifeScience, your Crop Protection partner Our commitment in Africa

Assistance to customers Expert local team Solution to customers Industrial technology investments

Environmental care

Safety precautions Stewardship program

Public health

Wherever you are, Arysta LifeScience offers competitive solutions, well adapted to the specificity of your needs. BENIN (SDI) - BURKINA FASO (SAPHYTO) - CAMEROON (FIMEX) - IVORY COAST (CALLIVOIRE) - EGYPT (ARYSTA LIFESCIENCE) - GHANA (CALLI GHANA) - IRAN (ARYSTA LIFESCIENCE) - KENYA (ARYSTA LIFESCIENCE) - MALI (MPC) - MOZAMBIQUE (AGRIFOCUS) - NIGER (AGRIMEX) - SENEGAL - TANZANIA (ARYSTA LIFESCIENCE) - TOGO (ARYSTA LIFESCIENCE) - SOUTH AFRICA (ARYSTA LIFESCIENCE) Arysta LifeScience S.A.S. - Europe, Africa, Middle-East

Route d’Artix - BP 80 - 64150 Noguères FRANCE - Tel: +33(0)5 59 60 92 92

Arysta Life Science Corporation_placed.indd 1

12/4/12 08:22:03

sponsored feature

AGCO – African agriculture’s powerful partner Thinking of investing in African agriculture? Then you need to speak to AGCO, which has the widest experience in all sectors – from emerging small-scale farmers right through to the largest projects. As a world-leading farm machinery manufacturer, AGCO has unrivalled expertise in African agriculture, with Massey Ferguson, the region’s leader, now complemented by Challenger tracked tractors and equipment, as well Valtra tractors for specialist applications. Together, these top brands offer a diverse range of equipment developed and built specifically for African conditions. AGCO’s unparalleled expertise and local knowledge, which has been amassed over many generations, puts it in prime position to develop African agriculture, whatever ever the size of enterprise – from the largest commercial farming operations through to small-scale farmers. It always pays to pick a strong partner and with an $8.8 billion turnover in 2011, AGCO is the largest pure-play, full-line agricultural manufacturer, which sells machinery in 140 countries. A truly global corporation, AGCO has the power, equipment and support structure to make an immediate impact. AGCO’s strong reputation in the region is built on developing partnerships with customers to ensure their success.

AGCO invests in African farming

AGCO is showing its commitment to the New Vision for Africa by investing $100 million in new facilities across the continent. With Africa’s population set to rise to two billion

by 2050, the need for the highest-quality farm mechanisation and training, service and support has never been greater. In the first phase, AGCO is working with partners to develop new training centres and demonstration farms in South Africa, Zambia, Ethiopia and Morocco. A new Centre of Excellence, being built in Zambia, will feature purpose-built customer- and staff-training facilities, alongside a 100ha demonstration ‘model farm’. This will provide expert advice on sustainable farming techniques and mechanised farming systems suitable for both large- and small-scale operations. To further enhance its existing support structure, AGCO is also investing in new parts and service infrastructure across the region, including regional hubs with fast and efficient local distribution to cut machine downtime. At the same time, new regional offices are being set up to bring AGCO even closer to the market. Planned local assembly plants will not only provide machines made in Africa, but also create a wide range of new jobs.

Appropriate technology for Africa

AGCO, through its Massey Ferguson, Challenger and Valtra brands, offers an unrivalled array of equipment designed, developed and proven to excel in the most arduous conditions. AGCO and its staff understand African agriculture. For more than 60 years, Massey Ferguson has been at the forefront of mechanising

AGCO.indd 78

African farming. Now, with the addition of Challenger tracked tractors along with Valtra’s expertise in the region, AGCO provides the widest, full-line of the most appropriate drills, planters, combine harvesters, balers and materials-handling machinery. Through its wholly-owned company GSI, it is also able to offer crop-storage buildings and equipment to build a better agricultural infrastructure in the region. Improving storage and the ability to condition crops not only prevents losses, but also allows farmers to hold crops and respond to market demands and improve returns. GSI is the world’s largest manufacturer of steel farm bins and silos, as well as offering advanced driers, bucket elevators, conveyors and other handling equipment. The company also specialises in equipment for poultry and pig enterprises, providing high-quality bulk tanks and feed distribution systems, as well as housing and ventilation equipment. As a world-leading farm machinery manufacturer, AGCO is not only strengthening its position in Africa, but also delivering on its mission: ‘To provide high-tech solutions to farmers feeding the world.’

www.agcocorp.com/

16/4/12 10:22:38

SECTOR-BY-SECTOR OPPORTUNITIES: AGRICULTURE

79

Tumusiime Rhoda Peace Commissioner for Agriculture and Rural Economy Agriculture has a vital role to play in Africa’s growth and expansion. The World Bank estimates that growth in agriculture is twice as effective at reducing poverty as any other sector: it is absolutely key to Africa’s socio-economic development. In light of this, the heads of state and government of the African Union, at their 13th session of the Assembly in July 2009 in Sirte, Libya, deliberated extensively on the theme: ‘Investing in Agriculture for Economic Growth and Food Security’. Since then, an unprecedented number of AU member states have increased the share of their national budgets directed towards agriculture. They have also put in place credible investment plans in the context of the continental framework, the Comprehensive African Agriculture Development programme (CAADP). This is one of the reasons why Africa, with the exception of a few member states, has remained resilient in the face of the global fi nancial, economic, fuel and food crises and has even withstood the impact of climate change. Indeed, the African leadership has taken a lead as far as championing agriculture is concerned. To take this trend to the next level, the private sector has a crucial role to play, partnering with governments in areas such as marketing infrastructure, technology transfer, agribusiness and value-chain development. To that end, the AU has put in place a number of initiatives, including the Grow Africa Initiative in partnership with the World Economic Forum. Targeting large-scale trans-boundary projects across the entire value chain, while at the same time strengthening small holders, Grow Africa is transformative in its approach. It asks for nothing less than investment blueprints from champion countries across Africa to help engage with the private sector, scaling up over time to cover the whole continent. This presents a real opportunity for private investors. Now is the time to invest in agriculture and contribute to Africa’s sustainable development.

“People don’t have title deeds for the land, and so they can’t use it as collateral to get loans for fertilizer or equipment.” Many experts suggest that Africa will continue to rely almost exclusively on smallholders unless land laws are reformed and private investors are allowed to buy land. In Brazil, for example, agricultural production has surged over the past three decades, following the creation of larger-scale commercial farms. The same pattern could be replicated in Africa. However, while economists caution that smallholders should not be neglected – given their sheer number – there is plenty of underused land on which to develop bigger farms. “A lot of land is lying idle,” says the AfDB’s Ncube. “There’s room to support everyone.” Facilitating trade between buyers and sellers of agricultural produce is crucial, and some countries have decided to develop agricultural exchanges. The Ethiopia Commodity Exchange (ECX), for example, was formed in 2008, with the stated

aim of creating a global hub for agricultural trading and increasing price transparency. There is little disagreement that Africa has a long way to go before it eradicates food insecurity, but there are encouraging signs of progress. Five years ago, just two of Rwanda’s 30 districts were self-sufficient in food production. Today, nearly all of them are. The Rwandan government achieved this by putting in place a careful strategy. It boosted the use of fertilizer about tenfold by encouraging the private sector to distribute inputs, and it invested heavily in agricultural research, prompting the development of higher-yielding seeds. Rwanda proves that changes can be made. Once other countries follow suit, Africa will have gone a long way toward ensuring that food shortages are no longer a problem. ■ Paul Wallace is Africa editor of The Banker INVEST IN AFRICA 2012

2.3_AGRICULTURE_CC.indd 79

16/4/12 10:43:52

AFRICA’S GREEN REVOLUTION www.agra-alliance.org

AGRA_placed.indd 2

17/4/12 07:57:00

Achieving AchievingProsperity Prosperityby by

transforming transforming

African AfricanAgriculture Agriculture

The The Alliance Alliance for afor Green a Green Revolution Revolution in Africa in Africa (AGRA), (AGRA), established established in in 2007 2007 by The by The Rockefeller Rockefeller Foundation Foundation in partnership in partnership withwith the Bill the&Bill & Melinda Melinda Gates Gates Foundation, Foundation, invests invests in strengthening in strengthening Africa’s Africa’s mostmost valuable valuable assets assets – its–millions its millions of smallholder of smallholder farmers, farmers, andand the smallthe smallto medium-sized to medium-sized agribusinesses agribusinesses that that serve serve them. them. We We empower empower organizations organizations operating operating across across the entire the entire agricultural agricultural value value chain, chain, andand through through them them we are we improving are improving the the production production of staple of staple foods foods by: by:

SixtySixty newnew locallocal African African seedseed companies companies havehave beenbeen established established andand strengthened, strengthened, andand nownow produce produce nearly nearly 40,000 40,000 metric metric tons tons of improved of improved certified certified seed seed (up (up from from lessless than than 5,000 5,000 MT MT in 2007) in 2007) and,and, by helping by helping to establish to establish andand train train over over 13,500 13,500 certified certified agro-dealers, agro-dealers, that that improved improved seedseed is reaching is reaching almost almost 2 2 million million smallholder smallholder farmers farmers across across sub-Saharan sub-Saharan Africa. Africa. We We havehave improved improved national national extension extension andand research research activities, activities, • Investing • Investing in the in next the next generation generation of African of African agricultural agricultural including including sponsorship sponsorship of over of over 30,000 30,000 on-farm on-farm demonstrations demonstrations Scientists Scientists andand policy policy analysts; analysts; that that combine combine the use the use of improved of improved seedseed withwith sustainable sustainable integrated integrated • Providing • Providing smallholder smallholder farmers farmers withwith higher higher yielding, yielding, droughtdrought- soil fertility soil fertility management management practices, practices, showing showing farmers farmers howhow to achieve to achieve andand disease-resistant disease-resistant seed; seed; higher higher yields yields withwith fewer fewer inputs, inputs, whilewhile improving improving the quality the quality of their of their • Encouraging • Encouraging the use the use of proven of proven integrated integrated soil management soil management soils.soils. technologies; technologies; We We workwork closely closely withwith governments governments in selected in selected countries countries • Increasing • Increasing the availability the availability of affordable of affordable credit credit to the to agricultural the agricultural to establish to establish policy policy action action nodes nodes focused focused on revamping on revamping policies policies sector; sector; related related to seed to seed andand fertilizer, fertilizer, markets, markets, landland andand property property rights, rights, • Strengthening • Strengthening evidence-based evidence-based policy policy assessments assessments andand environmental environmental sustainability, sustainability, andand climate climate change. change. development development of farmer-friendly of farmer-friendly public public policies; policies; In collaboration In collaboration withwith other other investors, investors, innovative innovative risk risk sharing sharing • Raising • Raising the efficiency the efficiency of post-harvest of post-harvest storage storage andand processing; processing; facilities facilities havehave beenbeen put in putplace in place that that are designed are designed to leverage to leverage andand the availability the availability of $160 of $160 million million in affordable in affordable loans loans for for • Improving • Improving the access the access of smallholders of smallholders to local to local andand regional regional smallholder smallholder farmers farmers andand smallsmallto medium-sized to medium-sized agribusinesses agribusinesses markets. markets. in Ghana, in Ghana, Kenya, Kenya, Mozambique, Mozambique, Tanzania, Tanzania, andand Uganda. Uganda. By the By the endend of 2011, of 2011, more more thanthan a third a third of the of leveraged the leveraged funds funds hadhad reached reached OverOver the past the past five years, five years, we have we have made made significant significant progress progress the intended the intended beneficiaries. beneficiaries. We We alsoalso support support andand provide provide technical technical in addressing in addressing critical critical issues issues affecting affecting African African agriculture. agriculture. All ofAll of assistance assistance to a to number a number of farmer of farmer associations associations to ensure to ensure that that our work our work promotes promotes the goals the goals established established by the by African the African Union’s Union’s smallholders smallholders are able are able to meet to meet the quality the quality needs needs andand effectively effectively Comprehensive Comprehensive Africa Africa Agriculture Agriculture Development Development Programme Programme manage manage contractual contractual agreements, agreements, suchsuch as with as with the World the World Food Food (CAADP), (CAADP), andand we work we work withwith a wide a wide range range of national, of national, regional regional andand Programme’s Programme’s “Purchase “Purchase for Progress” for Progress” (P4P) (P4P) initiative. initiative. international international public public andand private private investment investment partners. partners. We We are very are very proud proud of what of what AGRA AGRA has has accomplished accomplished in itsinfirst its first So far, So nearly far, nearly 100100 MSc MSc andand PhDPhD students students sponsored sponsored five years, five years, but recognise but recognise therethere is much is much yet to yetbe todone be done to catalyse to catalyse by AGRA by AGRA havehave graduated graduated fromfrom advanced advanced studies studies programmes programmes a self-sustaining a self-sustaining African African Green Green Revolution. Revolution. We We looklook forward forward to to provided provided by African by African universities universities in 9indifferent 9 different countries, countries, andand meeting meeting the challenges the challenges in front in front of us, of and us, and welcome welcome the opportunity the opportunity more more thanthan 200200 others others are currently are currently enrolled enrolled in these in these programmes programmes to partner to partner withwith other other like-minded like-minded investors investors in the in years the years ahead. ahead. under under our sponsorship. our sponsorship. We We havehave developed developed andand are implementing are implementing breadbasket breadbasket investment investment plans plans in Ghana, in Ghana, Mali,Mali, Mozambique, Mozambique, andand Tanzania, Tanzania, which which focus focus activities activities andand resources resources in high-potential in high-potential regions regions that that will have will have transformative transformative impacts impacts in those in those countries, countries, andand demonstrate demonstrate the viability the viability of such of such investment investment strategies strategies as aas means a means Eden Eden Square, Square, Square, Block Block Block 1, 1, 5th 5th 1, Floor 5th Floor Floor #6 #6 Agostino Agostino #6 Agostino Neto NetoNeto Road Road Road of driving of driving development development andand economic economic growth growth in other in other sub-Saharan sub-Saharan Eden P.O. P.O.P.O. Box BoxBox 66773, 66773, 66773, Westlands Westlands Westlands Airport Airport Airport Residential Residential Residential Area, Area, Area, PMB PMBPMB Africa Africa countries. countries. 00800 00800 00800 Nairobi, Nairobi, Nairobi, Kenya Kenya Kenya Telephone: Telephone: Telephone: +254 +254 +254 703 703703 033 033033 000 000000 ISDN ISDN ISDN Line: Line:Line: +254 +254 +254 20 20 3675 3675 20 3675 000 000000

AGRA_placed.indd 3

KIA KIA KIA 114,Accra, 114,Accra, 114,Accra, Ghana Ghana Ghana Tel: Tel: +233 Tel: +233 +233 21 21 740 740 21 740 660 660660 // 768 768 / 768 597 597597 // 768 768 / 768 598 598598 Fax: Fax:Fax: +233 +233 +233 21 21 768 768 21 768 602 602602

17/4/12 07:57:04