Agricultural Growth Corridors Presentation by Sean de Cleene, Vice President Business Development,...
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Transcript of Agricultural Growth Corridors Presentation by Sean de Cleene, Vice President Business Development,...
Agricultural Growth CorridorsPresentation by Sean de Cleene, Vice President Business Development, Yara International and Vice Chair Kilimo
Kwanza Growth Corridors Executive Committee, Tanzania
BAGC Investment Blueprint was launched in January 2010SAGCOT Investment Blueprint will be launched in January 2011Strong public – private partnership focus Partners involved separately in the two initiatives include:
Southern Agricultural Growth Corridor of Tanzania(SAGCOT)
Mozambique Beira Agricultural Growth Corridor (BACG)
Corridor investment blueprints demonstrate the potential to develop “clusters” of profitable agribusinesses
Agricultural clusters that support professionalisation of both small and medium sized farms require simultaneous and properly coordinated investment by the public and private sectors
Private investors
Private equity and debt capital for
agribusinesses
Service providersTransportation
Business support
GovernmentPublic infrastructurePolicy environment
Land titling
NGOsTechnical
assistance/ trainingExtension servicesSupport to farmers
organisations
Development partnersDirect funding of public goods (e.g.
backbone infrastructure)
Indirect funding of public goods through
Government
Development Finance Institutions
Expansion capital for established
agribusinesses
Catalytic FundSeed capital for medium-sized
start up agribusinesses
Agricultural Growth Cluster
Commercial Farm
New feeder road
Road/Rail
Backbone
Smallholder commercialization scheme
Smallholder service delivery scheme
Reefer container refrigeration unit
Village
Commercial Farm
Clusters provide basis for integrated approach to agricultural growth
Major benefits to farmers and local communities
Wider benefits to surrounding communities with a 25km radius of the farm hubs and clusters include:• access to inputs and markets
for smallholder farmers• provision of extension and
financial services• linkages into specific
agricultural value chains• job opportunities in the
agricultural value chain
Example: 190,000 hectares of irrigated commercial agriculture in the Beira corridor region of Mozambique delivers: 350,000 jobs; $1 billion farming revenues pa; 150 villages get electricity and water supply; 13,000 smallholder farmers gain affordable access to irrigation services; improved access to inputs, finance and markets for up to 200,000 smallholder households
Catalytic Fund – takes the early-stage risks in developing new agriculture businesses
Critical component is the need for innovative gov’t/donor financing to “kick-start”, at scale, investment in early-stage agriculture
Project concept
“Bankable” project
Patient capital – funds agricultural infrastructure including feeder roads, electrification and irrigation targeted specifically at private sector
• Innovative finance is provided by governments and donor agencies at a low cost of capital. Each $1 of innovative finance can leverage potentially more than $10 of private investment into socially-responsible agriculture businesses
H.E. Prime Minister Pinda of Tanzania at the African Green Revolution Forum: called for donors “to make the catalytic fund operational as soon as possible”
Traditional donor financing –supports government in developing policy and public goods to facilitate sustainable growth
Innovative gov’t/donor financing (promoting small holder integration into value chain)
Agricultural potential along Beira Corridor by 2030 as presented in investment blueprint
2010 2030
• <20,000 ha irrigated commercial agriculture
• Smallholders almost exclusively subsistence production
• High production and marketing costs
• >210,000 ha irrigated commercial agriculture
• Smallholders have access to irrigation infrastructure and markets
• Economies of scale increased competitiveness
Investment blueprint findings
• Limited investment into either small or larger scale commercial agriculture
• Operating costs are much higher than international benchmarks [competitors]
• Investment in new commercial agribusinesses is especially weak given high start-up costs
• Challenging business environment
• Major constraints are lack of “last mile” infrastructure to the farm gate and a lack of access to affordable kick start finance that acts as a bridge to traditional financing
• But investment blueprints clearly show there are ways to overcome these constraints . . .
The way forward
• Identify areas of high potential for agriculture “clusters” with access to infrastructure backbone
• Establish a partnership organisation to help coordinate targeted public and private investments within the corridor
• Provide new types of finance – including “catalytic financing” & “patient capital” – to overcome high start-up costs and bridge with traditional financing
• Insist on strong and direct benefits for smallholder farmers and local communities and environmental sustainability
• Support development of a range of investments along the value chain, including nucleus farms, processing facilities and outgrower schemes
• Recommend incentives needed to attract agricultural investment