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Panel Discussion: Implementing Regional Trade: Successes And Opportunities

Investment Opportunities and PPPsBy

Nana Osei–Bonsu, CEO of PEF, GhanaAt the

Brussels Briefings Feb.3, 2017

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Introduction• The share of Intra-African trade (10% AUC) remains low

compared to intraregional trade in other parts of the world (80% of trade within the EU is intraregional) ; unlocking Africa’s full economic potential would require economic integration—globally, regionally, and between rural and urban areas.•Wide gap between domestic supply and regional market demand.• Investment in infrastructure for connectivity is important, but

Policy coordination can also facilitate regional trade.

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Introduction

•Gross Domestic Product (GDP) growth in agriculture has been shown to be at least twice as effective in reducing poverty as growth originating in other sectors(World Bank)• For African countries, two inter-related challenges are

critical: Diversified the export base, to reduce vulnerability stemming from commodity price swings, and to tighten regional integration

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Trends in intra-African agricultural trade• Intra-African trade is 10% of total African trade according to

AUC• An UNCTAD study noted that between 2007–2011, 37

African countries were net food importers, and 22 were net importers of agricultural raw materials, • ONLY 17 per cent of the continent’s world trade in food and

livestock took place within Africa.• IFPRI Report also indicated that the value of intra –African

agricultural trade has grown from US$2.2 billion in 1998 to US$ 12.8 billion in 2013 – annual overall growth of 12%.

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Trends in intra-African agricultural trade• Africa remains a net importer of food of about $35 billion annually

according to the AfDB• Small scale farmers are the main investors in African agriculture

today and produce 70% of the food consumed on the continent FAO• The World Resources Institute estimate that Post harvest losses in

Sub Saharan Africa has a value of up to US$4billion per year (African farmers lose 20-40% of their harvest to pests, diseases and spoilage because of lack of infrastructure. These crops could provide minimum food requirements for at least 48million people)

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Trends in intra-regional agricultural trade in Africa (1998-2013)• Economic Community of Central African States (ECCAS) – US$14 million -

147 million

• Southern African Development Community (SADC)– US$ 871 million –3.82

billion

• Economic Community of West African States (ECOWAS)– US$494 million –

2.84 billion

• Common Market for Eastern and Southern Africa (COMESA)– US$379 m

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Key challenges• Limited access to regional and international markets: • Due to absence of standardization and tracking of food produce

(market flow would improve if products were standardised and highly traceable)• Technical barriers to trade• protectionism • Lack of coherence and absence of coordination between different

national policies and initiatives• poor infrastructure (power, transport system, ICT, etc.)• Underdeveloped human and institutional capacities• Underdeveloped or unexplored markets

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Key challengesMain challenge in addition to above stated constraints is• UNDIVERSIFIED EXPORTABLE PRODUCTS BASE . •Majority of countries within each regional block produce

virtually same RAW MATERIALS.• VITUALLY No VALUE ADDITION OR very little if any•WHY DO YOU BUY OTHERS RAW MATERIALS THAT IS

AVAILABLE IN YOUR COUNTRY

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Key challenges

• small-scale farming not comparatively articulated, capitalised and mechanised as much as large-scale forms of production (80% of Africa`s agricultural land is ten hectares or less, making smallholder farmers the largest private sector group in African agriculture)• Not much linkages to innovative practices to ensure

environmental sustainability

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Opportunities and Local Interventions Required• Technical assistance to improve product quality and management

capabilities in the SME sector to meet market specifications both locally and abroad• Provision of the right blend of low cost, long term financing • Provision of basic infrastructure e.g. roads, water, power,

telecommunication etc.• Create an effective dialogue platform to identify roles and responsibilities

including policy formulation, knowledge sharing, networking and business opportunities to enhance food and nutrition security for job and wealth creation to alleviate poverty (23 of the 25 poorest countries in the world are in Africa and 389 million of its people live in extreme poverty).

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Opportunities and Local Interventions Required• Provide Incentives for Local Value Addition of raw materials• Include MSMEs in all PPP and Local Content Arrangements• Research, Academia and Private sector collaboration to

support the development of ;-new varieties of high yielding crops= hybrids and others -provide reliable market information-development and application of new technologies

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Some International efforts to boost agriculture and trade in Africa

• AUC signing up the CONTINENTAL FREE TRADE AGGREMENT(CFTA):• The AU/NEPAD Action Plan for Boosting intra-African trade (BIAT) • The NAIP UNDER CAADP (This is a shared responsibility of both the

public and private sector, CSOs and development partners)• The new CAADP Results Framework 2015-2025 places emphasis on

the role of the private sector as a central catalyst and driver of inclusive agribusiness development

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Some International efforts to boost agriculture and trade in Africa • The African Union`s decision in 2012 to establish an African Continental

Free Trade Area (ACFTA) by 2017 in order to create a single continental market for goods and services, with free movement of business persons and investments• The ECOWAS trade liberalisation scheme (ETLS) introduced by ECOWAS • NEW ALLIANCE FOR FOOD SECURITY & NUTRITION (NAFSN) was

launched in 2012 under the auspices of the G8 as a large public-private partnership (PPP) that aims to leverage private investment in agriculture in order to improve food security and nutrition in Sub-Saharan Africa. Has not created the expected agri transformation.

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Strategies to facilitate regional & Continental investments and trade

• AfDB INITIATIVE TO ENCOURAGE COUNTRIES TO ADOPT:• AGRICULTURE RISK SHARING MECHANISMS== Nigeria & Ghana to

ensure adequate risk mitigating initiatives and products to reduce the risk of investment in agriculture to attract more investors into the sector• Predictable and market oriented investment climate in our economy

through the appropriate policy reforms• Availability of investment capital for agriculture: that is sustainable with

prioritized access by smallholder farmers, women and youth, which unlocks potential of domestic and regional markets so as to benefit family farmers and provide quality food for consumers at accessible prices.

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Opportunities and National strategies to facilitate regional investments and trade• Private sector investor focused data & knowledge sharing

resource(s) that can be utilized by both the public and the domestic private sector to showcase and promote agriculture investment opportunities to domestic private investors possibly in partnership with foreign investors in that sector• Ensure Good Corporate Governance practices• Ensure Consumer Safety and Welfare• Enforce Environmental Sustainability

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Opportunities and Local Interventions Required

• DOMESTIC AGRIBIZ CHAMBERS:• Need for effective and efficient Intermediary Institutions as the

national focal institutions to facilitate, coordinate and assist in planning i.e. PEF, GIPC etc.• Develop an inclusive domestic private sector involvement and

engagement in the implementation of CAADP at the national levels EMPHASIS ON WOMEN, YOUTH & SMALL HOLDER FARM• Harmonize and Align Investment Laws and Regulations• Demonstrate the Security of Investments and Establish Personal

Safety Environment• Harmonise Legal & Land Tenure framework

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OPPORTUNITIES FOR Investments & Trade• With 16 countries, 300 million inhabitants and a GDP of over €613

billion, West Africa has huge potential • Construction of borderless transportation system across sub-regions

linking markets and people • Identifying investment opportunities in African agriculture: (sub-

Saharan Africa has 25% of the world`s arable land but generates only 10% of its agricultural output)• Development of regional value chains around agricultural

commodities such as cassava, wheat , soya, maize ,rice and other horticultural products.

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Forms of PPP arrangements to consider• PUBLIC-PRIVATE: SEED FUNDS, IN-KIND CONTRIBUTION, TAX

INCENTIVES• PRIVATE-PRIVATE: Value chain, Cooperatives, Nucleus -Out-

grower, Contract supplies, PARTNERSHIPS • PUBLIC-PUBLIC: LOCAL COMMUNITY & NATIONAL• BOT: build, operate and transfer (BOT) system and other

special arrangements and schemes as deemed appropriate

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Opportunities for PPP Investments in Agriculture(raw material base)• Production of raw material base to support industries

such as the pharmaceutical industry along the value chain• Processing of agricultural produce into semi finished and

finished products such as chocolate, butter, cooking oil etc.• Processing of agriculture waste into other useful

purposes and products, compost for organic fertilizer, methane, electricity

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Opportunities for PPP Investments in Agriculture(raw material base)

• local production of light machinery and tools for production and harvesting• production of intermediary & finished food

products for local consumption and for exports as well

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Opportunities for PPP Investments in Agriculture(infrastructural development)•Provision of transportation Infrastructure and services (roads,

rail lines, ports, haulage)•Paucity of refrigerated transport in sub-Sahara Africa- India

131million cubic meters, Egypt 3 million, Namibia 157,000, Nigeria less than 20,000•Provision of reliable and affordable power (solar, hydro etc. low

cost power generation mix)•Building robust ICT and communication systems and services to

boost innovation and transactions.

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Opportunities for PPP Investments in Agriculture(infrastructural development)• Provision of storage facilities (pack houses, warehouses)• Provision of Special services – Niche financing • Education & Capacity building= Technical skills• Provision of Agricultural services and inputs– machinery

servicing, extension, commodity trading, fertilizer and seed supply• Creation of business linkages to facilitate investments in

agriculture by pooled resources

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Benefits of PPP arrangements to African trade•Transfer of technology•Transfer of technical skills and expertise•Sustainability of business or industry•Sustainable jobs and income (330 million young people will enter the labour market in sub-Saharan Africa mostly in rural areas)•Bridging the infrastructural deficit

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Benefits of PPP arrangements to African trade•Wealth creation for locals• Reverse rural-urban migration (if people are not given the

opportunity to earn a decent income and feed their families, they will move to urban areas and beyond, threatening food security and international stability)• Foreign exchange earnings: Development of exportable produce• Inclusive growth of communities (majority of the African poor

living in rural areas and earning an income from small family farms, investing in agriculture is essential for combating poverty)

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• THANK YOU FOR YOUR ATTENTION