Keynote address by Dr. Kanayo F. Nwanze President, IFAD at the High-Level Conference of Agriculture Development in Africa

Development of Agri-business and Agro-industries in Africa (3ADI)

Abuja, Nigeria
8 Mar, 2010

Your Excellencies Heads of States and Governments; 
Honourable Ministers;
Distinguished Colleagues,
Ladies and Gentlemen. 


First let me express my appreciation to Their Excellencies Alhaji Umaru Musa Yar’adua and Goodluck Jonathan for hosting this important conference. The role of agribusiness and agro-industry in reducing rural poverty goes to the heart of IFAD’s mandate. I am therefore delighted to be able to participate in today’s discussions.

I should also like to thank UNIDO and FAO as well as the African Development Bank, the African Union Commission and the United Nations Economic Commission for Africa for spearheading this development initiative. Building on the success of the Global Agro-Industries Forum in India in April 2008, I hope that we shall be able to use today’s discussions to encourage greater engagement in agro-industry by governments, the private sector and multilateral organizations. In doing so, I hope we will be able to improve the competitiveness of agribusinesses and benefit those most in need – the world’s poor and hungry.

Feeding the world’s poor and hungry is the challenge of our time. 

More than 1 billion hungry people – or one sixth of humanity –can attest to this fact, having been hit first by the food price crisis of 2008 and then by the economic downturn. And of course they also have to live with the growing impact of climate change.

Thankfully, global food security was at the top of the G8 agenda last year in L’Aquila. And thankfully, declarations from L’Aquila as well as from Maputo, Paris, Rome and Copenhagen, carry the signatures of world leaders, confirming their commitment to address food insecurity, poverty, hunger and unemployment. 

But declarations, commitments and speeches do not feed hungry people. Rather, a productive agricultural sector is what is needed. 

Agriculture has driven economic growth through the centuries, from 18th century England, to 19th century Japan, to 20th century India, to Brazil, China and Vietnam today. GDP growth generated by agriculture has been shown to be at least twice as effective in reducing poverty as growth in other sectors.

Agriculture – spanning crop production, fishing, livestock, forestry and pasture – is predominantly a rural sector activity. It is also the largest source of employment in many low-income countries. For instance, in sub-Saharan Africa, agriculture provides jobs to 70 per cent of the working population, and smallholder activity is the backbone for the agricultural sector. 

A vibrant rural sector generates local demand for locally-produced products and services.  In turn, this can spur sustainable off-farm employment growth in services, agro-processing and small-scale manufacturing. This is crucial for rural employment. Because without local jobs, poor rural young people will be driven away from rural areas in search of work in the cities. And then who will feed the world in 2020 or in 2030?   

Recognizing smallholder farms as agribusinesses, irrespective of their size or scale, is an important first step in making Africa’s rural sector a viable choice for Africa’s youth. Unfortunately, however, too many small agribusinesses in Africa are neither productive nor profitable and are trapped in a cycle of subsistence. 

Excellencies, Ladies and Gentlemen.  Allow me to present an IFAD portrait of the agriculture and agribusiness landscape at large:

a.    Agriculture is not an urban activity.  Farm lands exist in rural areas.  Agriculture or farming is a rural activity whether large or small.
b.    Commercialization of agriculture is not reserved for large-scale farming.  Commercialization of agriculture means economic profitability – producing more per unit input, whether land, irrigation, fertilizer, etc.  Agriculture is a business and our business is to make smallholder agriculture a profitable agro-enterprise.  
c.    Sixty per cent of the rural population is made up of young women and men ages 15-24.  This is either a potential for tomorrow’s food producer or a time bomb waiting to explode in urban areas.  We believe that investing in rural youth is an investment in our future.

The reason why African agriculture remains largely subsistent is because it relies heavily on basic farming practices and on government and donor handouts. The problem is compounded by insufficient access to productive assets, such as land, water and other inputs, as well as poor infrastructure, such as roads, power and storage. As a result, yields are generally too low to allow the millions of Africa’s rural households to generate any marketable surpluses. And even if the smallholders were able to produce a surplus, the disconnect between production and downstream activities, such as processing and marketing, hampers the access of their produce to markets. 

Yet urbanization, rising incomes and increased participation by women in the workforce are expanding market opportunities. If Africa’s smallholder farms were sufficiently competitive, then these growing opportunities could be exploited. 

Governments, donors and private sector operators need to act – individually and collectively – to make rural agribusinesses viable, particularly for women and youths who shoulder the future of African rural agribusinesses. We need to make rural agribusinesses the main engine of economic growth; we need to make rural agribusinesses a business opportunity for Africa’s youth; we need to make rural agribusinesses a pathway out of poverty.  

And indeed, agribusiness can provide a pathway out of poverty.  But for this to happen, States and the private sector need to work together to support smallholders.  States can support smallholders through the right policy environment – public policies that expand the choices of smallholders to sell their products on local or global markets.  The private sector, including buyers, can also improve the ability of smallholders to have access to local, regional or global markets through the right investments and through measures that incorporate rather than exclude smallholders.

I should like to suggest four courses of action to ensure the development of agribusinesses and agro-industries in Africa: 

First, African countries’ investment in agriculture must meet the Maputo target of at least 10 per cent of GDP. While a few countries have already achieved this – and should be congratulated for doing so – unfortunately many have yet to come close .  So I call on those countries to make a special effort to boost their public spending on agriculture – because time is not on our side.  

Investments – by the international community as well as by developing country governments – need to be smart. Investments need to be in the research and development of new technologies to enhance productivity and intensify production. They need to be in natural resource management, to conserve the environment while increasing yields. And they need to be in the development of infrastructure to facilitate access to markets. Indeed, support for rural infrastructure is a crucial element in the value chain approach – including last-mile roads, electrification, post-harvest facilities, support to rural institutions, such as associations and cooperatives, and access to land and irrigation facilities. 

Second, African governments must create the right policy environment to allow agribusinesses and agro-industries to develop and flourish. Market liberalization and macroeconomic policies, such as fiscal and exchange rate policies, have brought much-needed improvements already. But there is still more that governments can do both to help existing agribusinesses grow and to encourage the start up of new agribusinesses, providing much-needed employment for Africa’s youths. 

Third, smallholders need support to enable them to compete in domestic, regional and international markets. For example, training can help improve smallholders’ managerial skills. Training can also help small agribusinesses meet the increasingly stringent sanitary and phyto-sanitary standards required by the burgeoning supermarkets for their increasingly demanding customers.

And fourth, access to financial services needs to be addressed holistically. Poor access has long hampered rural agribusinesses. The recent development of microfinance in rural areas has eased some short-term constraints. But more effort is required to ensure the long-term financing needed to attract investments in activities that can sustain the viability of agribusinesses.

What does all this mean for IFAD?

Africa has always been a key focus of our work accounting for some 44 per cent of total IFAD financing. Of this, 40 per cent goes to Western and Central Africa, where we have supported 183 programmes and projects in 24 countries since 1978, amounting to US$4.8 billion of IFAD investment and cofinancing. This has allowed us to reach more than 60 million people. 

Nigeria is a major partner of IFAD in Western and Central Africa. As of today, IFAD has supported nine programmes and projects in the country with a total value of US$640 million, including co-financing from our partners. IFAD has directly provided around US$188 million. And we are planning to invest some US$83 million over the next three years. 

As we implement and plan our portfolio in Africa and beyond, we continue to explore business solutions to foster rural growth. We have financed the development of micro-, small- and medium-sized enterprises (or MSMEs) since the mid-1980s. And to date we have invested US$272 million in MSME development across all the regions we work in. 

IFAD also funds investment into local infrastructure, to provide small-scale irrigation and water control schemes, as well as communications and rural roads.  We invest in agro-processing to ensure reduced post-harvest losses and improved quality; and in market linkages as well as better access to market information, including on prices.  The aim is to strengthen each link in the value chain, from the smallholder, through the local trade agents, through agro-processing, to regional and national markets. In value terms, the total approval of IFAD projects in which value chains were either components or the primary instruments for poverty alleviation increased from 1.8 per cent in 2005 to 50 per cent last year.

The key to addressing many of these value chain issues is through partnerships. 

IFAD’s partnership with UNIDO is one example. Our two organizations are committed by agreement to the common goal of developing technologies, developing value chains and promoting energy. For example, we have worked together in Kenya on biogas and energy generation for smallholders. 

At IFAD, we are also increasingly turning our attention to the private sector. Through the Africa Enterprise Challenge Fund, IFAD is working to develop public-private partnerships with a special focus on Africa. We are also working with key partners to establish the African Agriculture Fund. Through such partnerships, IFAD – and the UN more widely – will be able to finance agricultural enterprises to improve sustainable food production and make greater progress towards halving poverty and hunger, consistent with the first Millennium Development Goal. 

Let me conclude by saying that the success of this Summit lies in our ability to spark an agribusiness and agro-industrial revolution in the rural sector. A revolution that sees sustained investment in the entire agribusiness value chain, prompting greater agricultural productivity, higher yields, increased competitiveness, and consequently larger profits for small-scale agribusinesses.  

This is attainable with the commitment of all stakeholders –governments, private sector operators and the donor community alike. This commitment must be deeply rooted in transparent partnerships and geared toward closing the gap between downstream and upstream players. Only that way will it be possible to reposition agriculture to take its leading economic role. Only that way will it be possible to spur the growth of agribusinesses and brighten the future of Africa’s young women and men. 

Thank you.