Harnessing Africa’s agricultural potential can serve as the much-needed game changer of the continent’s economy, AfDB President Akinwumi Adesina said on Day 1 of a three-day high-level conference on agricultural transformation in Dakar. “A bold plan to transform agriculture will boost local food production, reduce food import bills, conserve foreign exchange, increase domestic savings and assure strong.
Read below the full speech:
Opening Speech delivered by African Development Bank President Akinwumi Adesina at the High-Level Conference on Feeding Africa: An Action Plan for African Agricultural Transformation
Abdou Diouf International Conference Centre, Dakar, Senegal, 21 October, 2015
Abdou Diouf International Conference Centre, Dakar, Senegal, 21 October, 2015
Good morning everyone! Welcome to the beautiful city of Dakar, to this high-level conference on transforming agriculture in Africa.
Let me thank President Macky Sall for his outstanding leadership and support for major development issues in Africa. As Chair of the New Partnership for African Development, he continues to champion major initiatives that are critical for accelerated growth and development of the continent. I wish to congratulate President Macky Sall and the people of Senegal for the successful election of Senegal to the United Nations Security Council. When we speak about security, the most important security is the security of the stomach. That is why today, Mr. President, the African Development Bank and all the co-conveners are delighted to partner with you and the Government of Senegal on this high-level conference on agricultural transformation in Africa. We must feed Africa.
I am equally delighted that heads of states and government are here with us today, especially President Yayi Boni of Benin, President John Mahama of Ghana and the Prime Minister Augustin Matata Mapon of DRC. I want to especially appreciate all the excellent work of the African Union and NEPAD on the Comprehensive African Agricultural Development Program (CAADP). I am therefore pleased that the co-conveners of this conference – the African Union Commission and the United Nations Economic Commission for Africa – are represented here today by the African Union Commissioner for Rural Economy and Agriculture, Rhoda Peace Tumusiime and the Deputy Executive Director of the ECA, Dr. Abdalla Hamdock. And I am so pleased that Babacar N’Diaye, former President of the African Development Bank is here with us today. We stand on his strong shoulders for the excellent work and foundation he laid as President of the African Development Bank.
The high turnout of the Ministers of Finance, Ministers of Agriculture and the Central Bank Governors – the first of such at this scale in Africa – sends out a strong signal: that Africa is now ready to treat agriculture as a business. I can therefore say today that African agriculture is now open for business. And that business is to feed Africa and to unlock the potential of Africa to diversify African economies. We have farmers, civil society, private sector, development partners, young entrepreneurs, members of the press, heads of diplomatic corps in Senegal and top government functionaries here today.
Your presence, your voice and support show a strong readiness and commitment that the time to feed Africa has arrived. This clarion call is what has brought over 500 people here today, from around the world. What a turnout!
Nothing is more important than food. While Africa has risen on the back of new discoveries of oil and gas fields, no one eats oil or gas. People eat food. Access to food – in quantity and quality – is a fundamental human right. Just two few weeks ago at the United Nations General Assembly, the world took a bold decision to approve the Sustainable Development Goals. In my meeting with the UN Secretary General, Ban Ki-moon, he told me “the SDGs must succeed in Africa. If they do not succeed there, they cannot be said to have succeeded.”
Africa is clearly the continent on the rise. Six of the ten fastest-growing economies in the world are in Africa. Real income has risen by 30% in the last ten years. Foreign Direct Investment has risen to $64 billion, while remittances have reached $56 billion, exceeding total official development assistance. Despite the slow global economic growth, the continent continues to grow at 3.6% and projected to increase to 3.8% in 2016. But that is only one side of the trajectory.
The other side of the trajectory, which we must face, is that the growth process is highly unequal. Africa has today one of the highest inequalities in the world. Over 400 million live on less than one dollar per day. While poverty rates have fallen in Africa, the absolute number of poor has increased, and Africa is the only region where the absolute number of poor increased in the world. Africa accounts for 20 of the 24 countries with stunting rates of over 40%. Just last week I was in Ghana with President Mahama of Ghana, where the World Bank launched a report on “Poverty in a rising Africa” – and I am pleased that the President of the World Bank, Jim Kim, will be addressing us later this morning by video from Washington, DC. This is what we must change.
With the population of Africa expected to rise to 2.5 billion by 2050 and to 4 billion by the turn of the century – and the share of the poor rising – the question we must ask is: How will Africa feed this growing population? Will it simply depend on growing food imports? Clearly, such a scenario is unacceptable, given that over 65% of the arable land left to feed 9 billion people in the world by 2050 is in Africa. Africa must rise up and unlock its full agricultural potential – with all its bright sunshine, abundant water resources and cheap labour, Africa should be a global powerhouse in food and agriculture. Africa cannot eat potential and there is no market for selling potential.
In Nigeria we unlocked that potential when I was Minister of Agriculture. This convinces me that agricultural transformation can occur in a very short period of time. The Agricultural Transformation Agenda – which implemented wide ranging reforms with sharp focus on private sector led input delivery systems, value chain development and financing systems, led to an increase of 21 million metric tons in food production within three years. The food import bill in the country fell from an all-time high of $11 billion in 2009 to $3.2 billion by 2014. This provided much-needed macroeconomic and fiscal stabilization. Despite the devaluation of the currency, food prices did not change significantly. Direct farm jobs expanded by 3.8 million between 2012-2014. The FAO gave Nigeria an award for cutting by half the number of people that suffer from hunger.
Rwanda was able to also cut back the share of its population that is hungry from 55% in 2000 to 21% in 2010. Ethiopia has made significant progress through its agricultural transformation, reaching 4.4 million farmers. The government of Senegal, under the leadership of President Macky Sall is driving a massive rice revolution. Rice production has grown from 400,000 metric tons to 1.5 million metric tons in just one year, and the country will attain rice self-sufficiency by 2017 – a remarkable feat. Burkina Faso quadrupled its cotton production from 150,000 metric tons to 690,000 metric tons in 1995-2007 due to agricultural transformation.
We can, without doubt, eliminate extreme poverty and end hunger and malnutrition in Africa through large-scale agricultural transformations. Yes, it can be done. We must now scale up these and other success stories across Africa. We must accelerate investment in research and extension systems. Private and public extension systems should be encouraged to help spur agricultural transformation of the continent. And we must scale up social cash transfer programs to ensure households have access to quality nutritious food, as has been ably demonstrated by Brazil’s zero-hunger initiative. And we must also use climate-smart agricultural and financial risk mitigation systems – including disaster bonds and insurance systems – that build greater resilience for African economies.
Africa must accelerate agro-allied industrial development. We must not be mistaken by the conventional economic theory that reminds us of the need for labour to leave agriculture and move to the industrial sector. Where is the industrial sector to move to in Africa today? The manufacturing sector accounts for only 11% of the economies of Sub-Saharan Africa. The reality is that agro-industrialization has greatest potential for Africa to achieve more rapid and inclusive growth – and create jobs. The agriculture sector generates four times more employment than any other sector. If you want industrialization of Africa, and massive job creation, focus on industrializing the agriculture sector.
This is why we invited several Ministers of Finance, Agriculture and Central Bank Governors to this high-level conference. It is time that Ministers of Finance see agriculture differently. Only by rapidly transforming agriculture can Africa lift hundreds of million of people out of poverty into wealth. Africa must unlock its soil wealth, not just its mineral and oil wealth. With the decline in global commodity prices, African countries that rely on export of primary commodities, now face rising current account deficits and domestic fiscal imbalances. As currencies devalue, the cost of importing food is rising, which will drive up demand for nominal wage increases and put even greater pressure on public finances. Africa spends $35 billion annually on food imports – importing what it can produce – and yet posts $30 billion worth of foreign currency bonds to finance its development. By simply turning Africa into a food self-sufficient continent, this sort of money can be spent on domestic development without recourse to expensive international capital markets. A bold plan to transform agriculture will boost local food production, reduce food import bills, conserve foreign exchange, increase domestic savings and assure strong macroeconomic and fiscal stability.
For this to happen, we must change the approach to agriculture on the continent. Agriculture is not a development or social sector, neither is it a way of life: Agriculture is a business. And we must take a full value chain approach, from the farm to the table. It requires greater investments by the private sector all across the agricultural value chains, including modern seed and fertilizer (organic and inorganic) companies, agricultural mechanization, irrigation and water management, warehousing, commodity exchanges, food manufacturing and processing, logistics, cold storage and transport.
The size of the food and agricultural market in Africa is projected to reach $1 trillion by 2030. To take advantage of this, Africa must rapidly invest in supporting the development of its agro-industry. Africa should not be a consumption centre, it must be an agro-industrial centre. Africa must export processed cocoa, not cocoa beans. It must export specialized coffee with distinctively “aroma of Africa” instead of coffee beans, and export finished textile products not cotton lint. The remarkable market progress of Kenya, Tanzania, Ghana and Ethiopia in the global horticulture industry shows that with well-designed policies and financing and infrastructure support, Africa can get to the top of the global food value chains.
But for this to happen, we need energy. Lack of electricity and the unreliable power supply affects the costs of running irrigation systems, leads to massive food losses and is the major reason cited by industries for not being competitive. This is why on my assumption of duty as President of the African Development Bank, I launched a New Deal on Energy for Africa, together with several development partners. Our goal is to achieve universal access to electricity by 2025. By lighting up and powering Africa, and through the deployment of renewable off-grid and mini-grids across rural areas, industries will spring up all across the rural areas of Africa – and they will process and add value to food and agricultural products and create new zones of economic prosperity across rural Africa. As this happens, the fiscal space and the taxable base of economies will rise – and a massive number of jobs will be created.
This is why we must now invest heavily on quality and integrated rural infrastructure, from roads, rails, ports and irrigation. We must change our approach to rural infrastructure and focus on development of agricultural corridors and staple crop processing zones that will attract the private sector to invest in the rural space. Ministers of Finance should provide fiscal incentives for the private sector to move into rural areas to set up food manufacturing hubs. These hubs should be supported with upgraded infrastructure, especially water, roads and energy. In Nigeria, 14 such zones have been designed. Similar efforts are ongoing in the DRC and more are needed all across Africa. They will allow Africa to achieve economies of scale and scope in food production, processing and value addition – and create a veritable industrial growth engine all across the rural economies.
We need to look critically at how to accelerate commercial financing for agriculture. Banks do not lend to the agriculture sector and less than 3% of total bank lending in Africa goes to a sector that accounts for about 70% of all employment and over 40% of the GDP. Lack of access to affordable finance leads to underinvestment in agricultural technologies, growth of agro-allied industries and investments in infrastructure.
A financing boost is needed for the agriculture sector. Successful experiences from Nigeria, Kenya, Tanzania, Mozambique and Ghana – where I worked to help develop large risk sharing instruments to reduce the risk of lending by commercial banks to the agriculture sector in the countries – have shown that lending to agriculture is profitable. As Minister of Agriculture in Nigeria, I worked with the Central Bank of Nigeria to establish a risk-sharing facility of $350 million to leverage $3.5 billion of financing from commercial banks into the agriculture sector. Banks, which were at first reluctant to lend to the sector, began to lend. The share of total portfolio of banks devoted to the agriculture sector rose from 0.7% in 2011 to about 5% within three years. Non-performing loans were zero. By fixing agricultural value chains and de-risking the financial value chains, Africa can leverage billions of dollars in financing from its domestic financial markets into agricultural value chains.
And we must direct local capital markets – bond and equity markets – sovereign wealth funds, as well as private equity funds and venture capital funds, to provide access to long term capital to finance agricultural value chains and necessary infrastructure support systems.
What then are the roles that Central Banks and the Ministers of Finance can play? First, they can put up public funds to share the risks of lending with commercial banks. They can establish technical support facilities to support capacity building of banks to understand the risks and price their products properly. Third, they can support financial inclusion efforts to promote access to loans, savings and insurance products by farmers, building on the rapid rise of the ownership of mobile phones across Africa. The success of M-Pesa in Kenya, where over $26 billion per year of money transfers occur, provide an excellent example of how farmers can access funds from savings, credit and remittances. The remarkable experience in Nigeria with the use of mobile phones (E-wallet) to reach over 14.5 million farmers with farm inputs directly on their mobile phone should be replicated, given how this helps to improve transparency, accountability and probity in the use of public funds targeted at farmers.
To rapidly modernize agriculture, we must get the youth engaged in the sector. We must change the perception of the youths on agriculture – they must see agriculture as a business. In Nigeria, based on the work I started as Minister of Agriculture, a new generation of young commercial farmers is emerging. Known as “Nagropreneurs” they are graduates who are now engaged in major agribusinesses. Some of them are here today. One of them, a medical doctor (Dr. Aroge, who is here today.) got excited about agriculture as a business and put aside his stethoscope. Today, he has a loan of $600,000 to establish his cassava processing factory. He clearly has understood that even doctors will ask you to take your medicines, only after food! The International Institute of Tropical Agriculture (IITA) in Nigeria has started a revolution of youths in the agricultural sector, with many young graduates now running their own businesses. Many of them are here with us today. African countries must rapidly transform agriculture and modernize the sector to attract young people. Private equity funds should be established to support young agribusiness entrepreneurs.
We must concentrate efforts to ensure that women farmers benefit significantly from renewed efforts to boost agriculture. Women form a significant share of the farmers, but continue to face challenges in terms of access to secure land rights, limited access to labour-saving technologies and finance. Evidence is clear that when supported, women can help boost food production significantly. It is time that a major effort is put on supporting women farmers in Africa. This is why the African Development Bank will work with other partners to establish a $300 millionfacility for Affirmative Finance Action for Women in Africa – which will be used to deploy risk-sharing instruments for leveraging $3 billion in commercial financing and financing from microfinance institutions to women and women-owned businesses. By providing greater attention to labour-saving technologies, especially food processing technologies, women will free up time and invest this in more productive income earning opportunities.
Modernization of the agricultural sector requires that we improve the functioning of agricultural markets. Much rapid progress is being made on the development of commodity exchanges to improve farmers’ access to markets. The success of the Ethiopia Commodity Exchange is impressive. The East Africa Commodity Exchange is also a good example. Commodity exchanges allows for better price discovery and can be effectively linked to warehouse receipt systems that allow farmers to use their grains as collaterals for accessing credit from financial institutions.
There is no doubt that by investing in agricultural transformation and agro-allied industrialization, the future will be bright for Africa: incomes will rise, jobs will be created, exports will increase, Africa’s increasingly profitable agribusinesses will pay taxes and economies will boom. And agriculture will be a wealth creator, not a social transfer sector, and there will be many happy Ministers of Finance and Governors of Central Banks!
So, we must achieve four major goals for Africa as we drive agricultural transformation and agro-allied industrialization across Africa. Some may think of them as ambitious. I agree. But we must never have low aspirations for Africa! Collectively, our goals, within ten years, must be to:
Eliminate extreme poverty in Africa;End hunger and malnutrition in Africa;Turn Africa into a net food exporter; andMove Africa to the top of the global value chains.
Then, you will hear a different song in Africa. It will be the sounds of Africa’s children, running down the lush fields across Africa, well fed, in school and performing well. They will be singing “better at last, better at last, thank God almighty that our lives are better at last.”
We can make this happen, so let us rise up and do it!
Thank you very much.
Credit: African Development Bank