“Enormous resource requirements are needed by Sub-Saharan Africa’s agriculture sector” – Kanu

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“Enormous resource requirements are needed by Sub-Saharan Africa’s agriculture sector…  The African Development Bank needs to continue to closely partner with others to effectively and sustainably build capacities within Horn of Africa countries,” - Kanu.

Question: How can the Bank work with its partners to innovatively finance the continent’s agriculture in the aftermath of the food and financial crises in order to meet the 6% annual growth target set by the comprehensive African Agriculture Development Programme (CAADP)?  

Answer: Financing African agriculture remains a challenging matter for the Bank, governments of the Regional Member Countries (RMCs), the private sector and other development partners.  It is, therefore, first crucial to put the agricultural financing deficit in context in order to appreciate the gravity of the problem.   

Question: What is the estimated level of investments required to finance agriculture to meet regional growth and poverty reduction targets?

Answer: Evidence suggest that less than 1% of available domestic private sector financing typically goes into agriculture, in spite of the widely acknowledged fact that agriculture employs at least 70% of Africa’s labor force and the sector is the continent’s economic lifeline.

Moreover, some sources estimate that Africa would need between US$32 billion and US$39 billion annually to achieve the full economic potential of its farm sector. Others approximate that additional investments of at least US$21 billion annually (including US$7 billion from the public sector) are needed by Sub-Saharan Africa agriculture sector if the region is to meet the targets for reducing poverty and the numbers of the malnourished.  These resource requirements are enormous!  

The Bank should, therefore, boldly take on a variety of engagements aimed at looking beyond conventional sources of financing and lessening the risks of lending to agriculture, including: i) developing new and more appropriate public and private sector financial products/lending instruments that can better address the needs of the majority of the smaller and medium size entrepreneurs in the agricultural value chain; ii) exploring alternative resource mobilization sources such as from Southern partners (India, Brazil, China, Argentina, etc);  iii) providing affordable loans for Africa’s smallholder farmers and the businesses that serve them; iv) working with partners to guarantee agricultural loans; v); working with RMCs and other partners to improve the performance of agricultural markets including supporting agricultural commodity exchanges; and vi) improving farmers’ financial literacy.

Question: How can the Bank sustainably assist countries in the Greater Horn of Africa to better address the recurring problem of drought in the region?

Answer: Partner with others, including the Inter-Governmental Authority on Drought (IGAD), to implement recommendations of the recent Bank-funded study on sustainable livestock development in the Horn of Africa which produced a comprehensive US$ 14.27 billion long-term (next 15 years plus) drought resilience and sustainable livelihoods programme for the region.  Short-term drought assistance to people in the region must continue to be provided, while redoubling efforts to save lives of children, mothers and the vulnerable.  Short-term effort must be linked to long-term sustainability aimed at putting an end to the “cycle of recurring crises”. Short-term relief must be linked to building long-term sustainability and resilience through climate-smart agriculture, so as to put an end to the cycle of recurring crises in the Horn of Africa.

The Bank would need to continue to closely partner with others to effectively and sustainably build capacities within horn countries and help them to establish and or strengthen structures and systems that minimize the effects of famine, especially on their health. Finally, the Bank, as the leading development finance institution, could play an advocacy role to mobilize additional resources to alleviate the impact of the crisis. It could use the Fragile States Facility to finance select priority interventions in countries identified as ‘fragile’ that have met set pre-conditions.