The African Development Bank has launched a new agribusiness development strategy in Africa, which would need $400 billion in investments from African and international finance institutions in the next ten years.
“The Bank will act as a platform to bring together enablers and capital from multilaterals, foundations, sovereign wealth funds and other financial organisations and formulating a clear working agenda across certain commodities in certain countries where transformation over a short period of time is feasible,” Aly-Khan Jamal, a partner at Dalberg, one of the bank’s consultants on the strategy, told Agri Investor at the Agrique Africa Investment Summit in London.
The African Development Bank also intends to multiply the amount it invests in agriculture, including in related infrastructure and inputs projects. The bank has invested $612 million in agriculture on the continent a year for the last five years.
Estimates of previous investment into African agriculture are hard to come by, with some commentators at the same conference saying that while investment into Africa has soared in some years, $400 billion is ambitious. The United Nations estimated direct investment from abroad in 2014 in Africa overall was $54 billion, about 5 times more than in 2009. According to Jamal’s firm, investments into sub-Saharan African agriculture across government, foreign direct investment, official development assistance, commercial lending and private equity investments totalled between $15 billion and $20 billion in 2014.
Commitments are expected to come from African sovereign wealth funds where governments could be looking at foreign exchange and diversification of economic growth sources, as well food security, said Jamal.
The bank’s Agriculture Risk Sharing Facility, announced last year and still under development, is part of the programme.
The facility is likely to be inspired by similar programmes such as NIRSAL in Nigeria, which carries out studies on national agribusiness value chains and provides credit guarantees to enable banks to lend to farmers.
“This facility … will aim to increase commercial financial institutions’ willingness to invest in the agriculture sector by reducing risk, using mechanisms such as credit guarantees,” said Jamal, adding that the facility would focus on the risks it could remove most efficiently.
“There are many types of risk, so it is about which risks we can most efficiently take off the table such as weather. But it is not efficient to take all risks off investors. You still have to have a strong stomach in some of these markets,” said Jamal.
The bank aimed to shift its thinking and those of its partners to agriculture as a business across whole production chains, including cross-border regulations and constraints to trade.
“The big pivot here is in two dimensions. Firstly, the African Development Bank is shifting the way it and its partners approach agriculture from a social sector or ‘way of life’ to looking at it as a business. Secondly, when it looks at specific commodity value chains, the Bank and its partners will take a total value chain perspective, address bottlenecks and market failures, and – from the perspective of investors – make investments much more attractive.”
“They need to continue to drive regional integration. What would be the optimum state? Multi-commodity corridors driving towards a particular port. And then thinking about the regulatory constraints and what needs to happen for that to work.”
The bank would like to turn the continent into a net exporter.
“Import substitution opportunities are a particularly key part of the agenda,” said Jamal.
Africa imported $35.4 billion in food in 2015, a value estimated to rise to $110bn by 2020, but the continent produces enough wheat and rice to export. Higher value products, such as the baobab fruit – touted as a superfood – could have export markets created.