ECA-FAO-UNIDO working lunch on public-private partnerships in agribusiness and agro-industry development in Africa through regional value commodities chains

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ECAC 334.722.26

E175 c.2

Food and Agriculture Organization of the

United Nations

United Nations Industrial Development

Organization

Uriited Nations Economic Commission

for Africa

ECA~FAO ...UNIDO Working lunch on Putdicmprivate Partnerships in Agribusiness and Agro...industry Development in Africa through

Regional Value Commodities Chains

Abuja, Nigeria 9 March 2010

..J ¹

- -

Food and Agriculture Organization of the

United Nations

. United Nations Industrial Development

.Organization

United Nations Economic Commission

for Africa

ble of Contents

Acrony-ms and Abbreviations ~ ~ v

A~()~l~<l~~Jlt ~ ~ ~

iri

I. Illtr()clt1~()1l •••••••••••••••••••••••••••••••••••••••••••••••••••••• ••••••••••••••••••••••••••••~•••••••••••••••••••••••1

1. Background ; ; 1

2. Objective of the Working Lunch ; : 2

II.. Attendance ^e._• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 3

III. .Opening session 4

~ Panel presentations and discussions ~ 7

1.. Presentation.on "Agribusiness for Development: Priority Action Areas" ;7 2. Presentation on "Agribusiness and Agro-Industries Development in Africa" 8 3. Presentation on "D evelop ing Strategic Agricultural Commodity Value Chains in

Africa: a Regional Approach" _~ 9

4. Presentation on "Agricultural Input BusinessDevelopment in Africa: Opportunities,

Issues and Challenges" ; ~ 10

5. Presentation on "Victoria Seeds Ltd and the Opportunities and Challenges in the Agri-·

input Sector in Uganda" : 11

..~ Closure of the Meeting ~ 14

Annex 1: Presentations made during the meeting ...•... 15

Annex 2: Concept note :

44

.iii

Acronyms and Abbreviations

. --'

3ADI ABR AfDB AFFM ASARECA

AU AUC CAADP CSOs FAO FDI FSSDD GAIF GDP HLCD-3A

HLCD-3ADI

IFAD IFPRI MDGs

·N EPAD

NGOs PPP R&D SMEs ECA UNIDO USAID

Agribusiness and Agro-industries Development Initiative Africa Business Roundtable

African Development Bank

Africa Fertilizer Financing Mechanism

Association for Strengthening Agricultural Research in Eastern and Central. Africa

African Union

African Union Commission

ComprehensiveAfrica Agricultural Development Programme Civil Society Organizations

Food and Agriculture Organization of the United Nations Foreign Direct Investment

Food Security and Sustainable Development Division Global Agro-Industries Forum

Gross Domestic Production

.'High-Level Conference on Development of Agribusiness and Agro-Industries in Africa

High-Level Conference on Development of Agribusiness and Agro-Industries

.in M rica .

International Fund for Agricultural Development International Food Policy Research Institute Millennium Development Goals .

New Partnership for African Development Non-Governmental Organizations

Public-Private Partnerships Research and Development . Small and Medium Enterprises Economic Commission for Africa

United Nations Industrial Development Organization United States Agency for International Development

Acknowledgment

The Working Lunch on"Public-Private Partnershipsin AgribusinessandAgro-industry Development in Africa through Regional Value Commodities Chains" was organized through a collaborative effort between the United Nations Economic Commission for Africa (ECA) , the United Nations Industrial Development Organization (UNIDO) and the Food and Agriculture Organization of the United Nations (FAO).Within ECA, the ECA-SA Office teamed up with the Food Security Sustainable Development Division (FSSDD) in the preparation and organization of the panel discussion.

ECA-SA gratefully acknowledges the collaboration with UNIDO, FAO and FSSDD for their enthusiasm and diligence which lead to the success of the panel discussion, as well as the overall . High-Level Conference on Development ofAgribusiness and Agro- Industries in Africa (HLCD- 3ADI). The Office also appreciates the support from the Government of the Republic Nigeria in hosting the event.

ECA-SA is thankful for the contribution from ECA-SA Consultant, Dr. Babatunde Omilola, who prepared the background study «Agricultural Input Business Development in Africa:

Opportunities, Issues and Challenges"and made the related presentation during the event, under the coordination of EtA Economic Affairs Officer, Mr. Jean Luc Mastaki Namegabe and the general guidance of Mr. M.E. Dhliwayo, ECA Senior Economic Affairs Officer and Head of the Infrastructure and Sustainable Development Cluster.

The Office gratefully acknowledges the inputs from Ms. Josephine Okot, the Managing Director of the Victoria Seeds Ltd for sharing the company's valuable experience in taping into the opportunities in the seeds sector in Uganda.

ECA-SAfinally extends its sincere appreciation to the participants ofHLCD-3ADI who attended . the Working Lunch and took the opportunity to share their experiences and identified ways of partnering with other stakeholders in promoting agribusiness and.agro-ind ustry development in Africa.

tl Introduction

1. Background

1. The ECA-FAO-UNIDO Working Lunch on "Public Private Partnerships in Agribusiness andAgro-industry Development in Africa through Regional Value Commodities Chains"was held at the Hilton Hotel in Abuja, Nigeria on the 9^th March 2010, as a side event within the High-Level Conference on Development of Agribusiness and Agro-Industries in Africa (HLCD-3A).

2. The HLCD-3A was organized at the Transcorp Hilton Hotel in Abuja, Nigeria from 8-1 0 March 2010, with the support of the Government of the Federal Republic of Nigeria, and under the auspices of the African Union (AU), FAO, UNIDO, the International Fund for Agricultural Development (IFAD) and ECA, in cooperation with the African Development Bank (AfDB) and other partners.

3. The HLCD-3A convened African Heads of State and Government, Ministers and senior policymakers, as well as senior representatives of financial institutions to consider and endorse specific commitments ^to enhance the role of agribusiness and agro-industries in promoting food security, employment generation and sustainable economic growth in Mrica. The meeting launched the Agribusiness andAgro-industries Development Initiative (3ADI) and considered the Programme Framework and an associated Financial Facility to support agribusiness and agro- industrial development in Africa.

The HLCD-3AD{ High Table:

Mr. Josue Dione, ECA-FSSDD Director, Mr. Kanayo Nioanze, /FAD's Presidentand Mr. Kandeh K Yumkella, DirectorGeneral of UN/DO

4. The goal of 3ADI is to have an agriculture sector which, by the year 2020, is made up of highly productive and profitable agriculture value chains that effectively link small and medium size agricultural producers to markets, supply higher-valued food, fibre,feed and fuel products, contribute to increasing farmers' incomes, utilize natural resources in a sustainable manner and generate increased and high quality employment.

5. The 3ADI embraces the principles ofthe Comprehensive Africa Agricultural Development Programme (CAADP) and emerges as a timely initiative, in the light ofthe recent Sirte Declaration on Investing in Agriculture for Economic Growth and Food Security, calling for proactive measures to increase investments in agriculture for accelerated economic growth.

6. The Working Lunch offered incisive insights through interactive panel discussions and dialogue among different stakeholders comprising agricultural enterprises, senior policymakers and bankers on the challenges and investment opportunities in agribusiness and agro-industry sectors and suggested best practices for Public-Private Partnerships (PPPs).

2. Objective of the Working Lunch

7. The objective of the side event was to seek the commitment and strong political support of African leaders, to engage all stakeholders and African development partners on the initiative led by ECA, FAO and UNIDO to trigger the structural transformation of African agriculture through the promotion of PPPs in agribusiness and agro-industries, with a view to enhancing private investment .in regional commodity value chains development within the NEPADI CAAD P framework.

8. In addition, the side event reviewed and discussed the agri-inputs market status and related business opportunities in Africa, identified constraints that are impacting on its performance and defined strategies and prospective partnerships towards market-led business development in the sector.

9. The interactive panel discussions highlighted the challenges and opporturuties in agribusiness and agro-industry sector, and suggested best practices for PPPs. The meeting provided a platform for dialogue among different stakeholders including agricultural enterprises, policymakers and the banking sector on the investment opportunities and the practicalities of investing in agribusiness in Africa.

11m A endance

10. The side event was attended mainly by the partICipants from HLCD-3D, other invited resource persons from the agribusiness community in Africa, the banking sector;:non- governmental organizations (NGOs), business support institutions and development partners.

A number of civil society organizations (CSOs), research and privatesector organizations also

attended the meeting. '

11. Representatives from the following member States attended the meeting: Angola, Cameroon, Democratic Republic of the Congo, Equatorial Guinea, Ethiopia, Gabon, the Gambia, Ghana, Kenya,Malawi, Morocco, Mozambique, Nigeria,Rwanda, Sierra Leone,South

Africa, Uganda, Zambia and Zimbabwe. .

12. The following intergovernmental, United Nations and development partner organizations . participated in the meeting:·African Union Commission (AUC) , AfDB, AU, FAO, the International Food Policy Research Institute (IFPRI), UNIDO, IFAD, ECA, the Alliance fot a Green Revolutionin Africa (AGRA),Africa'Business Roundtable (ABR), CAADP/NEPAD,the United States_Age~cyfor International Development (USAID),amongothers,

111m Opening session

13. Opening statements were delivered by M~. Jennifer Kargbo, the Director of ECA-SA and Chairperson of the Working Lunch and Dr. Kandeh K. Yumkella, the Director General of UNIDO.

14. In her opening remarks,Ms. Jennifer Kargbo welcomed thedelegates to the meeting and thanked them for finding time to attend the Working Lunch.

15. She encouraged the participants to take the opportunity offered by the platform to share their experiences and foster partnerships between national governments, the private sector and other stakeholders in addressing the factors that impede agri-inputs use towards jump-starting Africa'sstagnated agricultural productivity and identifying innovative financing mechanism for agri-inputs business development in the region.

16. She thanked FAO and UNIDO for partnering with RCA in organizing the Working Lunch to spur the development of competitive, sustainable and inclusive agro-industries and agribusinesses in Africa, as a pathway to increased economic growth and food security in the continent. The ECA-SA Director challenged the panel discussants to interrogate the structural constraints hampering the private sector-led agribusiness development in Africa and define the way forward to overcome them.

17. The UNIDO Director-General, Dr. Karideh K. Yumkella, underscored the timeliness' of the meeting and thanked ECA for taking the lead in organizing the event. He noted that financial and economic crises have heightened the fragility and lack of sustainability of a commodity price-led, economic growth-path, rooted in a continued excessive dependence on the production and exports of unprocessed primary commodities. He highlighted the fact that ,agribusiness is the key determinant of overall economic growth and poverty reduction inmost countries of sub-Saharan Africa,as it harnesses the critical linkages between agriculture, industry

and services. '

18. He recalled that African states have pledged to invest a minimum of l Oper cent of budgetary resources in the agricultural sector, and that the G-8 meeting in L'Aquila, Italy in 2009, renewed the commitment of the donor community to the CAADp, which has set an annual agricultural growth target of 6 per cent to achieve the Millennium Development Goal

(MDG) of halving poverty by 2015.

19. He drew attention to the strategy towards accelerating agribusiness development in Africa focusing on: enhancing' agricultural growth; upgrading value chains; targeting commodities and producers for value addition and social inclusion; strengthening technological effort,and innovation capacity; stimulating private enterprise development and investment; facilitating

innovative financing; improving agro-industrial infrastructure and access^to sustainable energy;

and exploiting local, regional and international demand. .

20. Dr. Kandeh K. Yumkella also called upon African countries to strengthen their trade capacities and remain engaged in international trade negotiations towards reducing trade barriers and addressing other obstacles to trade, such as high transport costs, lack of information on products and reli~blesuppliers in other countries, inadequate systems of contract enforcement and dispute adjudication, and non-official barrierssuch as roadblocks and bribes.

21.. In addition, he urged key stakeholders to focus on investment and policy changes that

"crowd in" private investment ^to resolve problems of horizontal and vertical coordination that impede the growth of agro-industries. He underscored the need to assist small and medium enterprises (SMEs) in agro-industry to expand and capture/recapture national and regional .markets and to support large-scale agro-enterprises, especially in situations where there is a potential for significant economies of scale and a scope for attracting foreign direct investment .(FD I) or accessing export markets.

The.UN/DO Director-General; Dr.

.Kandeb K Yumkella at the HLCD- 3DAopeningsession

22. Dr. Yurnkella advocated an integrated and holistic approach to regional and subregional agribusiness development, calling for new trade strategies towards the development of regional and continent-wide value chains, stronger efforts to stimulate the development of private enterprise, regional approaches to technological innovation, dynamic financing mechanisms .and energy infrastructure development.

6

23. He underscored the important role to be played by PPPs in the new approach, emphasizing the need to enhance the adaptive capabilities of all stakeholders to conceptualize, formulate, implement, monitor and audit policy instruments and programmes for value chain development to convert challenges i.r:to opportunities and opportunities into realistic sources of wealth creation through a discovery process.

24. The important issue ofclimate change as a challenge to increasing agricultural productivity and agri,business in sub-Saharan Africa was also reflected upon by Dr. Yumkella and he urged countries to develop strategies to reduce.their vulnerability to this threat and mitigate its impacts.

75. In conclusion, he expressed hope that the Working.Lunch would contribute to the discovery process leading to wealth and employment creation through the regional value chain development in Africa and provide further impetus to the implementation of the 3ADI. He then declared the Working Lunch open.

26. '.The panel discussion was organized around five main.presen tations comprising:

a. Presentation by FAO on."Agribusiness for Development: Priority Action Areas";

b. Presentation by UNIDO on "Agribusiness and Agro-Industries Development in

Africa':'

c. Presentation by FSSDD-ECA on "D evelop ing StrategicAgricultural Commodity Value Chains in Africa: a Regional

Approach",

d. Presentation by ECA-SA·on "Agricultural Input Business Development in Africa:

Opportunities, Issues and Challenges':' and

e. Presentation by the M~agingDirector of the Victoria Seeds Ltd, Uganda on "The Opportunities and Challenges in the Agri-Input Sector in Uganda". -

IV. Panel presentations and discussions

1. Presentation on "Agribusiness for Development: Priority Action Areas'"

27. The FAG Director for Rural Infrastructure and Agro-Industries Division'(AGS) , Mr.

Geoffrey C. Mrema made a presentation on Agribusiness for Development:Priority Action Areas.

He emphasized the critical role of the agribusiness and agro-industries development in achieving economic growth and reaching MDGs in Africa and noted the gaps in infrastructure development in Africa as a constraint to the overall agricultural and food value chain development in the regiOn.

28. He urged African countries to improve their Quality and Safety Systemsthrough incentives to mainstream quality assurance and management systems in the agricultural and food value chain. He called for the harmonization of food quality systems with de facto benchmarks and for strengthening the capacity of laboratory facilities, analysts and field inspectors.

29. Mr. Mrema raised the urgent need to use fiscal incentives and pilot projects to establish and support private-sector input distribution systems'an d encouraged countries to strengthen their regulations and guarantees to jumpstart innovative financial services, risk management and sharing schemes and provide comprehensive business support to agribusiness actors.. He mentioned the introduction and upscaling of agri-clinics and agribusiness service centres as a concrete and innovative way to support the value chain development in the region.

'{ .

"

The High Table for theWorking Lunch: Mr. GeoffreyC. Mrema, ,FAO-AGS, Mr. Josue Dione,

FSSDD-ECA and Ms.Jennifer Kargbo,Director EC4-SA

8

30. He also encouraged member states to mainstream value chain financing into development policy and promote an environment conducive to private sector led agribusiness development.

He emphasized the need to enhance timely financial and information flows and supportive servicesto all the agricultural value chain segments. He advocated PPP development to enhance efficiency in the delivery of local"infrastructure, community facilities and support services for agribusiness and agro-industries development in Africa, Important types of partnerships should comprise contractual arrangements (management, service and lease), Public-Private joint

"ven tures, Build-Operate-Transfer agree~entsand concessions

31. In concluding, he highlighted re:cent FAOIAGS initiatives towards agribusiness development comprising support to enhance food security through commercialization, value chains and business model development, food systems development in the United Republic of Tanzania, agribusiness support to smallholders "in Kenya, the agribusiness investment promotion case studies and the FAO"roundtable on small and medium agricultural enterprise development.

2. Presentation on "Agribusiness and Agro-Industries "

Development in Africa"

32. Mr. Patrick Kormawa, the advisor to the Director General and Coordinator of the UNIDO International Financial Institutions Partnership Unit, noted that the Working Lunch was a follow-up action to the Global Agro-Industries Forum (GAIF) held in New Delhi, India in April 2008,whereby 44 African countries called on UN agencies to organize a regional forum to deliberate on concrete actions for promoting agribusiness and agro-industries development in Africa,

33. He emphasized the backward and forward linkage potentials and multiplier effects of agribusiness and agro-industries and their significant contributions to economic growth and diversification, trade, employment and food security. He underscored the need for innovative financial and risk mitigation mechanisms and PPPs to spur the development of competitive, sustainable and inclusive agribusiness and agro-industries in Africa and urged member states and regional economic communities (RECs) to implement regional trade agreements and take necessary measures to remove barriers to intra and interregional agricultural trade to effectively link agricultural producers to markets.

34. He called upon the panel discussants to focus on all the issues and constraints impeding the progress towards adding value to primary"agricultural commodities and exploit the opportunities for processedagro-food products in local, regional and international markets. He further encouraged the participants to assess the constraints impeding on agri-inputsbusiness development in Mrica and propose concrete cost effective, sustainable and competitive ways of addressing all these issu~s.

3. Presentation on "Developing Strategic Agricultural Commodity Value Chains in Africa: a Regional Approach"

35. Mr. Josue Dione,Director ofECA-FSSDD made a presentation on"Develop ing Strategic Agricultu ral Commodity ValueChains in Africa:a Regional Approach".

36. Mr. Dione made a case for agricultural transformation, emphasizing that agriculture is the backbone of the economies of most African countries. 60-70 per cent of the poor in Africa live in rural areas with livelihoods depending directly or indirectly on agriculture, 60 per cent of the total African labour force is employed in agriculture, while the sector contributes about 25 per cent of GDP.He underlined the fact that urban poor spend 60 per cent of their budget on food staples in Africa, 'an d despite more than $US30 billion of commercial imports and $US2 ,billion of food aid, nearly one third of Africa'spopulation are still undernourished.

37. He highlighted the double disconnection between regional food and agricultural supply and demand,and between regional supply and global demand. and the extremefragmentation of agricultural market along national and subregional sub-optimal economic space. He associated the weak supply response to regional and global demand associated with the lack of a vibrant agribusiness industry and services sector to link farmers to input and product markets in ,Africa.

38. He further called upon the region to address the under-capitalization,low productivity and competitiveness of the agriculture sector,noting that Africa has a low irrigation rate of only 6 per ' cent of its arable land,'com pared to 40 per cent in Asia. Its fertilizer use is 22 per cent of world average. The region is also characterized by low infrastructure density and access, and under- developed agricultural education, research and extension, which result in low productivity. He emphasized the need to,develop regional value chains for strategic agricultural commodities to respond to the regional demand for processed products and benefit'on the opportunities offered by the global markets. He urged member States to maximize,the contribution of agriculture to economic growth and poverty reduction ~ beyond the narrow perspective "agriculture

=

farming", building on inter-sectoral growth linkages to realize the full potential of on-farm and non-farm employment and income generation.

39. Mr. Dione advised countries to deepen regional integration towards exploiting regional economies of scale, as well as complementarities at all stages of the value chains and to build on vertical coordination among the productive sectors involved in value chains and strengthen

intra-African trade. '

40. . He urged the region to map and agree on potential regional production and processing belts of strategic food and agricultural, commodities, taking into ,account agro-ecological comparative advantage dynamics and create in those belts enabling environments for private investment in agricultural input and commodity value chains (investment codes, land policies, fiscal policies, etc.).This process should go along with the creation and strengthening of regional

centres ofexcellence for agricultural research and development (R&D) along the value chain of

strategic commodities. '

j

41. Member States and RECs were called upon to invest in trade facilitation and infrastructure development to raise competitiven ess, mainstream NEPAD infrastructure corridor and spatial development initiatives into CAADP regional implementation strategy, promote PPPs for infrastructure development in the strategic commodity belts, establish a Regional Agricultural Market Information System and enhance agricultural trade capacity at State and REC levels.He underscored the need to facilitate access to financial services for strategic commodity value-chain development, in addition to strengthening the commercial and technical capacities of Farmer Organizations and Trade Associations to enhance their participation' and promote effective value-chain integration models for smallholder farmers.

4. Presentation on

I~griculturallnput

Business Development in Africa:

Opportunities, Issues and Challenges"

42. The ECA-SA Consultant.:Mr. Babatunde Omilola, presented the,ECA-SA report on

"Agricultural Input Business Development in Africa: Opportunities, Issues and Challenges". He

underscored the fact that despite its.rich agricultural resource endowment, Africa remains the only developing region where agricultural input business is not well developed. He underlined that economic growth and poverty reduction can be achieved by enhancing the productivity and profitability of the African'sagriculture through the development of agricultural input sector.

43. He reviewed' the current state 'of agricultural input production, marketing and consumption in Africa, pointing out the untapped potential in productivity attributed to a lack of widespread adoption of modern'inp uts. He noted that fertilizer production and consumption in sub-Saharan Africa continue to be low, only growing at relatively slow rates. Irrigation levels are also low compared to other world regions, with just 3.5 per cent of total cropland currently under irrigation, compared to 39.2 per cent in South Asia, while only about 5-10 per cent of the potential demand for improved seed is currently being met in the region.

44. Mr.Omilola presented major existing PPPs to illustrate the need to foster agricultural input business development in the region and noted that in order to ensure competitive, sustainable and healthy agricultural input business in Africa, the input industry should be private-sector- driven, especially within the segments related to input raw material collection and delivery, processing/semi-processing, packaging, storage, transportation;and final sale/trade.

45. He pointed out that direct interventions by governments in providing inputs can at times be more disruptive than supportive, calling on governments to focus on providing good transportation and communication infrastructure as well as,research and extension services in ~rder ^to help to promote a commercially viable market. He highlighted the low level of individual country'sdemand for agricultural inputs and advocated exploiting regional markets

in order ^to achieve economies of scale and lower marketing costs. He urged governments ^to reduce regulations that restrict regional input trade and harmonize standards across countries and commended the progress made by the Eastern and Southern Africa regions on harmonizing variety release procedures for seeds across countries, enabling breeders to market their products

to similar agro-ecological climates that happen to cross national borders.

46. He also noted that while input subsidies may be an effective strategy in the immediate aftermath of an emergency, they can often be difficultto phase out and present opportunities for capture and rent-seeking and discourage private investment.

47. Mr. Omilola advocated a holistic approach, adressing among other issues, access, affordability and availability to revolutionize the input supply system in Africa. He encouraged . member States to tackle the knowledge and financial constraints and risks faced by purchasers and suppliers alike through business alliances to strengthen the inputs distribution systems in the region.

5. Presentation on "victone Seeds Ltd and the Opportunities and Challenges in the Agri-in.put Sector in Uganda"

48. Ms. Josephine Okot, Managing Director of Victoria Seeds Ltd and Uganda's Woman Entrepreneur of the Year2009/2010, made a presentation on "Victoria Seeds Ltd Opportunities and Challenges in the Agri-input Sector in Uganda".

49. · Ms. Okot defined the pre-requisite for a well-functioning agri-input market, highlighting the importance of a supportive policy environment, improved access to affordable financial services, a strong regulatory system, developed human capital and dynamic output market and value chain.

Victoria Seeds Research and Processing Facility, Palenga, Gulu, Uganda

50. She highlighted the business opportunities offered by the seed market in Uganda and the role played by Victoria Seed Company Ltd in the sector. She noted that the industry was liberalized in late 1990's and comprises 21 seed companies in 2010. She underscored the positive role played by the harmonization of seed policies and laws championed by Association for StrengtheningAgricultural Research in Eastern and Central Africa (ASARECA) and the Uganda Government policy in promoting adoption of agricultural technologies, though the Plan for Modernization of Agriculture', the Poverty Eradication Action Plan and presently Prosperity for All in fastening the release of new varieties to face the low yields in the country.

51. She presented the business profile of the Victoria Seeds Ltd, pointingout that the company is involved in research,production, processing and marketing of seeds for cereal, legume, oil and vegetable crops through contracts with over 600 growers, most of whom are women. The firm has marketed over 70 varieties and exports its products to the regional market.The company's workforce has grown from 5 persons in 2004 to more than 80 in 2010.

52. The lack of access to available funds was highlighted by Ms. Okot as one of the major . challenges faced by her company,hampering its ambition towards up-scaling its seed production and dissemination. High cost of finance with'stringent collateral requirements was stated as limiting the performance and growth of Victoria Seeds Ltd by 19-25 per cent. Government borrowing is keeping interest high and the commercial banks consider agricultural investors to be high-risk clients, in a context where the few opportunities for equity financing are limited to debt financing. Other challenges faced by the firm comprised farmers \ weak capacity to link with agro-processors, limited access to mechanization and irrigation, lack of storage infrastructure, low access to agric-inputs and extension, poor incentives for innovation along the value chain and the erratic output price fluctuations.

12

SelectedVictoriaSeeds Ltd milestones, awardsand recognition

53. Ms. Okot also highlighted major Victoria Seeds Ltd milestones, including the YARA Prize for a Green Revolution in Africa, won by the company in 2007, the Uganda Investor of the Year Prize in 2007 and the Torchbearer -MDG3 Gender Equality and Empowerment of Women in 2008. The Firm attained first position during the Annual Source of the Nile Agricultural Show in 2006, 2007 and 2008 in the SMEISeed companies' category, and its promoter was the Honouree of the Oslo Business for Peace Award as the Woman Entrepreneur of the Year 2009/10 and Shareholder Value Champion in 2010.

54. The participants commended the quality of the presentations and the panel discussions and emphasized the"need to multiply opportunities for sharing experiences within the business community. They thanked UNIDO, FAO and ECA for providing such a unique space, allowing the banking sector, the agribusiness companies, policymakers and development partners to discuss issues pertaining to agricultural development and fostering business partnerships.

v. ^{Closure .of the eetin g}

55. Ms. Jennifer Kargbo, the Director of ECA-SA expressed her gratitude to the Government of Nigeriafor hosting the HLCD-3ADI meeting and the Working Lunch. She acknowledged with great appreciation the high level of participation, encouraging the participants to take the opportunities offered by the overall HLCD-3ADI to foster business alliances and partnerships to advance the agricultural development agenda in the region. She expressed the hope that the Working Lunch provided a space for informal networking towards integrating and strengthening the regional agricultural value chain and identifyingn~wways of promoting and enforcing PPPs in Africa.

56. Ms. Kargbo expressed her gratitude to FAO and UNIDO for a successful partnership which should pave the way for future collaboration, successfully delivering as one accord on the common activities. She also reminded the participants as they return home to embark on rigorous networking to implement the recommendations of the Working Lunch. She concluded by wishing all delegates a safe return to their respective countries and closed the meeting.

Annex 1: Presentations made during the meeting

1.1 Presentation by FSSDD - ECA

DEVELOPING STRATEGIC AGRICULTURAL MMODITY VALUE CHAINS IN AFRICA:

A REGIONAL APPROACH

JOSUE DIONE

Director, Food Security and Sustainable DevelopmentDivision UN ECONOMIC COMMISSION FOR AFRICA

ECA Special Event HLCD-3A Abuja, Nigeria

9 March 2010

~The

case for structural transformation of agriculture .

o St rat egy : Developing regional value chains of strategic food and

agricultural commodities o Way Forward: Action points

2

16

1

<.) Agriculture is the backbone of the economies of

most African countries

.~ 60-70% of the poor in Africa live in rural areas with: livelihoods depending directly or indirectly on

agriculture .

~ 60% of the total African labor force is employed in. agriculture, cor:-tributing about 25% GDP .

t'l A significant proportion of non-farm urban employment is linked to agriculture --Agricultural income multipliers of1.5 to more than 3

a Urban poor spend 60% of their budget on food staples }] Despite more than US$³⁰ billion of commercial imports

and U$ 2 billion of food aid, nearly 1/3 of the people are

undernourished . . .

3

<.) Addressing the double disconnection of farmers from

markets and fragmentation of the regional agricultural market .

H Increasing food and agricultural imports (US$ 3.8bn intra- African exports vs. US$ 33bn extra-Africa imports -

Disconnect between regional supply and demand

a Share of global agricultural exports: fell from 15°/0 in the mid-1960s to less than 4°1ocurrently - Disconnect between regional supply and global demand

~ Weak supply.response to regional and global market demand associated with lack of vibrant agribusiness industry and services sector to link farmers to input and product markets

H Extreme fragmentation of agricultural market along national and sub-regional boundaries - sub-optimal economic space

4

o Addressing the under-capitalization, low

productivity and competitiveness of agriculture

mIrrigation: only 6% 'of arable land vs. 40% in Asia

~~ Fertilizer use: 22% of world average - g% in SSA m Low infrastructure.density and access: roads, energy,

telecommunications, etc.

m Under-developed and under-funded institutions of agricultural.education, research and extension a Land productivity: less than 55% of world average

yields for rice, 34% for maize '

a Labor productivity: less than 60% of that in Asia and Latin America

5

<>

.To address farmer's disconnection from input and

product markets

:1 Responding to domestic regional demand fueled by

population growth, income growth and urbanization -esp.

dynamic regional demand for processed products .

s Responding better to opportunities of global markets, esp.

niche markets

[{ Responding to farmers' need and demand for modern farm inputs and support services (extension, financing, etc.)

o

To maximize the contribution of agriculture to economic growth and poverty reduction - Beyond the narrow perspective "aqriculture e farming"

~l Tappin$' inter-sectoral growth linkages to realize the full potential of on-farm and non-farm employment and Income generation of the food and agriculture system

6

18

o To address the fragmentation of African food and agriculture e,conomy

~ Extremely fra9mented regional economy along sub-regional and national lines - sub-optimal econom ic space '

a Fragmented market segments closed to each other but increasingly open to global trade outside of Africa

f>J Constrained perception of investment and trade

opportunities for African agribusiness communities

<>

To maximize the exploitation of regional:

a Economies of complementarities and intra-African trade potential _~Comparative advantage beyond national/sub-

regional boundaries ' '

t{ Economies of scale at all stages of the value chains

t~ Economies of vertical coordination (transactions) among the productive/services sectors involved in value chains

7

o Focus on filling the regional gap in production and trade for strategic food and agricultural commodities:

:1 Of important weight in the African food basket and rural economies

}~ Of important weight in Africa's trade balance through their contribution to export earnings or the import bill

:;} For which Africa has significant unexploited production and trade potential

o ,I n essence, deliver on one of the main outcomes of the

2006 Abuja Food Security Summit:

3 9 continent-level strategic commodities: rice, maize, legumes, cotton, oil palm, beef, dairy, poultry, fisheries

t~ 3 sub-regional-Ievel strategic commodities: cassava, sorghum, millet

8

1. Deepening regional integration to promote the·

development of coordinated value chains of strategic food and agricultural commodities and seize

opportunities of the regional market

:1: Build on the outcomes of the Abuja Food Security Summit to create aCommon African Marketof strategic food and agricultural commodities

t,~ Map and agree on potential regional production and processin9beltsof strategic food and agricultural commodities - taking into account agro-ecological comparative advantage and RECs dynamics

~;: Create in those belts an enabling environment of

preferential _re~ionalinvestment zones for profitable and secure private Investment in coordinated re$Jional

agricultural input and commodity value chains (investment codes, land policies, fiscal policies, etc.)

:~ Create/strengthenregional centers of excellence for agricultural R&Dalong the value chain of strategic commodities

9

2. Investing in trade infrastructure and facilitation to lower the cost and raise competitiveness in . regional and international markets

~~ Mainstream NEPAD inf ra st ructure corridor and spatial develo pm ent initiatives into CAADP .regional implementation strategy

t~ Promote public-private partnerships for

infrastructure in the strategic commodity belts

a

Establish a Regional Agricultural Market Information System

t-J Enhance agricultural trade facilitation

mechanisms - Capacity at State and REC levels t-l Build international trade advocacy and

negotiations skills

10

20

3. Facilitating access to financing for

str_a~egic

commodity value-chain development

t>J " Establish appropriate financing mechanisms to

fund investment in regional public goods and services for agricultural transformation "

}: Support financial "services sector development for value chain development

}1 Promote agricultural investment forums and enterprise development platforms

}: "Esta blish agribusiness joint-venture fairs

II

4. Strengthening the commercial and technical capacities of Farmer

Organizations and Trade Associations

to! Enhance participation of farmer organizations and trade associations in strategic agricultural value chain development "

~1 Link smallholder farmers to medium/large- scale agribusiness enterprises through · innovative contractual arrangements "

:-: Develop and promote effective value-chain integration models for smallholder farmers

12

Thank you.

13

1.2 Presentation by the Rural Infrastructure and Agro-Industries Division- FAD

. L\gtibllsin ess fat Development:

P rioritvActionAreas

_..!

Rural Infrastructure and Agro- Industries Division (AGS)

FAG

I Reduce Costs of Doing Business

m

Taxes, subsidies, utility costs,Jees, - licenses

00

Infrastructure development and services

. ill

lrnport, export, investment restrictions

00

Fair and transparent regulation

m

Contract law and contract enforcement

rni

Sound governance / reduced corruption

- - - - - - -

Improve Qua lity and Safety Systems

!@

Incentives to mainstream quality

assurance and management systems - e.g. GAP, GMP, HACCP

!@

Harmonization of food quality systems with de facto benchmarks (GlobaIGAP)

i!M

Laboratory facilities and analysts

IE

Field inspectors

Enhance Access to Services

f@

Input markets

o Fiscal incentives and pilot projects to establish private-sector input distribution systems

f@

Financial services

o Regulation, guarantees and pilot projects to jumpstart innovation

u Risk management and sharing schemes

f@

Business support services

o Introduction and upscaling of agri-c1inics and agribusiness service centres

rReinfor~e Value Chain Linkage~

o Furnish crucial inputs, and reduce costs and inputs supply uncertainty

o Provide marketing, business and technical extension services

u

Mobilize investment resources and improve access to financial services

u

Induce and support productivity gains; provide new technologies

o More timely payments from buyers

I Mainstream Value Chain Financing

Enabling environment (policies, regulations, institutions: the business climate)

Financial and Information flows

...

Adapted from da Silva and Batalha, 2000

Develop Public-Private Partnerships

§!

Enhance efficiency in the delivery of local infrastructure, community facilities and

support services .

§!

Many types of partnerships

u Contractual arranqernents > management, . service, lease

o Public-private joint ventures

o Build-operate-transfer agreements o Concessions

I

j

Thanks l

www.fao.org/ag/ags

1.3 . Presentation by ECA-SA JP

Agricultural I nput Business Development in Africa:

Opportunities, Issues and Challenges

Outline

• What is Agribusiness?

• Opportunities for agri-input industry development in Africa

• Trends in agri-input production, marketing and consumption in Africa

• Public Private Partnerships (PPPs) and

prospective initiatives to enhance agri-input business development in Africa

• Policy recommendations for the business ' com m unit y, policy makers and other

stakeholders

r

28

1

.

What ·is Agribusiness?

• Umbrella term for the local, national and international companies that handle or

transform the farm produce as it is passed up the long chain, called the agricultural supply chain, tothe consumer.

• In economic terms, these businesses add the most value in the supply chain.

• They typically invest their own capital in transportation, processing and wholesaling and retailing and selling commodities

Opportunities for agri-input industry development in Africa

. • Four separate categories of business

opportunities and- strategies can be ' described : financial, economic, social and political

1. Financial: Increases in the net income of farmers, marketers, processors and other private investors in the agricultural input supply chain

2. Economic: Increases in real income for the

overall society based on costs and benefits in

terms of opportunity cost

Opportunities for agri-input industry development in Africa

3. Social: Improvements in indicators of welfare that are not amenable to quantification and equity, which deals with the distribution of social benefits and costs.

4. Political: Explanation on how agri-input business is potentially affected by any government intervention in the level or

distribution of benefits through interventions such as input subsidies in order to maintain , political balance and build political support.

Challenges facing agri-input business in . Afrlca

• knowledge constraints, financial constraints and risks

• Demand side constraints and supply side constraints

• High input prices, high transport costs, transaction costs, policy incentives or disincentives through interventions such as subsidies.

'. Non-competitive behavior of marketing agents and suppliers tend to adve,rsely affect private input markets and increase marketing costs and the uncertainty of input marketing.

• Agri-input supply also tend to be limited by marketers' perceptions of low farmer demand, which implies high costs and risks in building a supply network.

Trends in agri-input production, marketing and consumption in Africa

Africa:Totalfertilizer production and consumption, 1995/96-2005/06

6.5

6.0

5.5

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So urce:IfO eAfricaFertilizerSituation Re po rt, January 2008

Sub-SaharanAfrica: Total fertilizer productionand consumption,1995/96-2005/06

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The biggest:seed markets in Africa (200S) :mAnnual dome sti c sales (m i ll i ons of US $)

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Selected Existing Public Private Partnerships (PPPs) in agri-input business in Africa

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Lessons to be drawn from existing public private partnerships ln agri-input business in Africa

• In order to ensure'competitive, sustainable and healthy agri- input business in Africa, the input industry should be private-sector-driven in which the private sector stakeholders handle various components of agri-input marketing continuum, namely: input raw material collection and delivery, processing/semi-processing, packaging, storage,transportation, and final sale/trade.

• Within public-private partnerships, the specific roles and responsibilities .of the public sector tend to include (i) enabling environment and infrastructure development; (ii) research and development of appropriate technologies; (iii) law enforcement and quality control; (iv)' maintenance of favorable tariff regime for agricultural inputs; (v) coordination of agricultural input data and information management systems; and (vi) promotion and development of marketing institutions and appropriate micro-and credit institutions and other firiancial facilities for administeringcredit to the private sector.