The African Development Bank on course to revolutionize Africa's agriculture
In an exclusive interview to CommodAfrica, Dr. Chiji Ojukwu, director of the Agriculture and Agro-Industry Department (OSAN) at the African Development Bank (AfDB), underlines the new and daunting challenge put forth by his newly appointed President Akinwumi Adesina : scaling up agriculture throughout Africa and bringing the big players in so that everyone, including the small farmers, benefit from it. Agropoles, agricultural banks, land, motivating the youth, making small and big players work together, tripling AfDB's lending, restructuring AfDB's Agricultural Department, the clock has rung for big changes on the African agricultural scene.
Since your new president, Akinwumi Adesina, took office on September 1st 2015 after being Nigeria's minister of Agriculture, what has changed in your Department of Agriculture and Agro-Industry at the AfDB ?
Following the election of President Akinwumi Adesina, one of the priorities is agriculture. His vision is encapsulated in what is called the High Fives, or five areas he wants to exert his focus on. One of his High Fives is feeding Africa which basically entails a renewed focus on agriculture and agribusiness, the second one is Power Africa, the third one deals with industrializing Africa because the continent is endowed vast natural resources but these are not being fully utilized, the fourth one is integrating Africa and making sure issues of trade, developing our corridors, tariffs and other challenges to economic integration are addressed. The final one is improving the welfare of Africans including by addressing malnutrition, skills development, health, etc. These are President Adesina’s 5 priorities over the next 5 to 10 years.
" food imports over $ 35 billion annually"
On feeding Africa, in October 2015, President Adesina organized a high level conference in Dakar attended by Ministers of Agriculture, Finance, Trade, as well as a range of other stakeholders. The conference agreed to an 18-point action plan aimed at scaling up best practices and catalysing financing that will l propel agricultural transformation for shared prosperity. In the next 10 years, the objectives are multi-fold including the following: eradicate poverty, hunger and malnutrition across Africa, reduce our food imports which amount to over $ 35 billion annually. Dr. Adesina also wants Africa to become a net exporter instead of a net importer of food. And of course, he wants to take Africa to the top of global value chains.
Since Dakar, we have been in continuous contact with several countries that requested our assistance to develop their national agricultural transformation agendas. One of the flagship initiatives being developed to achieve this is attracting more youth to be engaged in agriculture.
AfDB has always worked on developing agriculture. So why would things work out this time ?
Two things. One is that, in the past, we have not done agriculture to scale. We have been doing agriculture at a very small level, without as much investment as could possibly make visible and long-term change. Investment originating from the public sector is grossly inadequate. This transformation agenda will see that agriculture is taken to scale. We are no longer talking about small businesses, but big businesses in various countries, big investments, the type of transformation agenda that was done in Nigeria and a few other countries, and that was helpful in bringing about notable change. We are going to exploit all the best and applicable agricultural practices that exist, take them to scale and replicate them in a number of countries.
The second thing that will change is bringing in what is called innovative financing mechanisms. Funding has always been a problem. So we are going to catalyze from the private sector, from the sovereign and pension funds and other sources to lend innovatively to agriculture. We will make sure that investment in agriculture is real and not just on paper.
Tripling lending to agriculture
How much financing does AfDB put in agriculture ?
In the past 5 years, our average annual level of lending to the agriculture sector has been around $ 612 million. We aim to triple this in the next 5 years. But this is essentially seed money because the idea is to use this lending to leverage 5 to 10 times more from the private sector.
Does this signal the end of the focus put on small scale farming ? Is it the door open to large scale high yielding modern farms?
There is no way we can sweep away small scale farming in agriculture in Africa as it still accounts for a significant share of agriculture production. But at the same time, we do not want to limit our assistance to small scale farming alone. We also want to bring in big players who will catalyse transformation.
Part of the Dakar Agreement is to have affirmative lending to support specifically small farmers. The idea is to get central banks to make resources available at single digit rates with long maturity that will support small farmers.
So the emphasis on small farmers is still there. But at the same time, we want to bring in big players who can also provide investments that small farmers will actually benefit from. This is because if we do not have entrepreneurs coming in to engage in large scale agribusiness, build big infrastructure, put in massive financing, small farmers are also likely to have access to narrow markets for their produce. So you need the big players to work alongside the small farmers in order for small farmers to benefit in terms of markets, technology, access to finance and be able to process and add value to their produce.
Bringing in big players
When you talk about big actors, you mean large agro-industrial companies?
Large agro-industrial companies would be encouraged to participate in what we call agropoles. We are developing agropoles and agroprocessing zones in a number of countries where you exploit an integrated approach to agriculture and agribusiness, including production by small farmers, infrastructure such as water production, roads, storage facilities, energy, and then supporting all this by bringing in investors that will off take products and add value to them.
In West Africa, where would these poles develop ?
In West Africa, a number of countries are already doing agropoles. But we can scale them up. Senegal is doing agropoles especially for rice so we need to work with them to expand rice production and processing. Côte d'Ivoire is also very much involved in the concept: they started smaller agropoles but following Dakar we want to expand the number of agropoles. Rice is also a big issue here: production has doubled from 400,000 MT to 800,000 MT in Côte d'Ivoire in the last one or two years and demand is about 2 million MT. Hence there is a big supply gap. Through these agropoles and focussing on those producing rice, we will also support Côte d'Ivoire.
In Nigeria, we are supporting about 4 staple crop processing zone already, with about $ 150 million. We plan to add another 4 or 5 with about $ 200 million and are discussing this with the Nigerian government.
And more will be coming. In March 2016, we will be organising a workshop in Abidjan on agropoles and bringing together countries that are already advanced in the concept such as Morocco and others that wish to invest in the acropolis approach. The event will provide an opportunity for sharing of experiences and the African Development Bank will help to co-develop these programs in these countries.
Agropoles, one of the solutions
Land tenure is a big problem in Africa. Are these agropoles one way of dealing with this?
Of course you need to aggregate land for effective agropole development. Part of the Dakar Action Plan is not just on investment, but also, on reforms that will make sure that land is available. Not only for existing farmers, but also for new farmers including the youth program. Governments must make sure that land is available for the youths. So part of the discussion will be on reforms across the continent on land to make sure land is there to support those who want to farm, especially as a business.
So the agropoles will be one of the ways of making land available. Instead of having fragmentation, there will be a level of aggregation.
How large are these agropoles ?
It depends on the countries. Some of them are big, others are small. It is configured around commodities. For example, in Northern Nigeria, meat production can run into 5 or 6 States. So an agropole focussing on meat production can really cover a vast space of land. Maize production can also cover 2 to 3 States in Nigeria.
Another problem in agriculture is high bank credit rates. What is on the AfDB agenda to deal with this matter?
This is why we are talking about innovative financing mechanisms because the current credit situation has been a constraint rather than an enabler to financing agriculture and it is not sustainable: farmers do not have access to credit and banks are not willing to finance agriculture. This we have to change. Often they are afraid of risk in agriculture, which frequently is perceived one and as a result commercial banks tend to lend to farmers at rates they are unable to afford. So if central banks were to lend to small holder farmers, it would need to be at a single digit interest rates. This is what we are pushing towards.
Secondly, we are developing a risk sharing facility in various countries and continentally. We are discussing one with the support of KfW, the German development bank and pushing that this should be at rates at which farmers and young people will afford to borrow, pay back and make a profit.
National agricultural banks, where feasible
Would the AfDB think of developing its own agricultural bank?
No, the African Development Bank cannot develop its own agricultural bank because countries are developing their own. One of the elements of the Dakar Action Plan is for the African Development Bank to support, where feasible (and that is not true of each country, we need to make sure there is a market, volumes, business), country agricultural banks or reform the ones that exist to assist them perform better.
For example, Malawi has approached us to help them set up one. We have provided for a feasibility study to ascertain if it is viable, and if affirmative, we will provide resources to get it operational. Tanzania has also requested assistance. Nigeria has one agricultural bank already, but it has not been functioning well. We provided them support to strengthen the institution and thereafter we can see how we can support them with resources to on-lend to farmers.
Does Côte d'Ivoire have this type of project ?
They have not approached us; probably this will be part of the dialogue we will be having with them. Ghana, of course, has a very big one and it is demand driven.
When the AfDB president talks about Africa feeding Africa, does this mean setting up some protectionism on agricultural imports ?
Clearly, this is not part of the discussion. I don't think the bank would do anything to distort the market. The Bank will work with others to help create a conducive environment to render our products competitive quality-wise to facilitate marketing to the EU and other markets. Since one cannot expect to produce poor quality produce and expect protection. We will push the issue of quality so that our products better compete, both domestically and internationally.
So the focus would be put more on crops to feed Africa than export?
No, exports would be part of it because the objective is to turn Africa into a net exporter, rather than a net importer which we are today. First we need to respond to domestic demand in order to assist farmers to create more wealth and become more prosperous; opportunities for exports will be exploited.
The AfDB's Agriculture Department revisited
To conclude, I will come back to my first question : in your department, how have things changed ?
We have gotten busier than we used to. Quite a number of staff are busy in the fields, discussing with governments, making sure we deliver on the Dakar Action points. Our lending volume this year will increase and we will take more programs to the Board.
Secondly, following the Dakar Agricultural Transformation Conference, we retained the services of an international acknowledged consulting form to prepare the African Agricultural Transformation Strategy, in whose design and implementation the bank would play a major role working with our partners. This will be launched formally at our annual meetings in May in Lusaka, Zambia.
When this strategy is prepared, it is likely that the configuration of the Agriculture Department of the Bank will change. The President is working at restructuring the Bank as a whole and it is likely that the status of the Agriculture Department will also be revisited so as to fully drive the continent's agenda on agricultural transformation.
On promoting big changes in agriculture, read also our interview of Jean-Marc Anga, chief executive of The International Cocoa Organization