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African countries could borrow money internationally to invest in commercial agriculture to spread the range of manufactured products available within their economies and lead to an agricultural transformation, Ministers of Finance at the Feeding Africa Conference in Dakar affirmed Friday.
Zambia’s Deputy Minister of Finance, Christopher Mvunga, said money borrowed commercially from the international financial markets could be spent on modernizing agricultural infrastructure.
Mvunga said Zambia was spending US $250 million out of the US $1.5 billion it has raised internationally from the issuance of sovereign bonds to finance the spread and diversification of agriculture.
Zambia has been dependent on maize production to meet local demands, but experts warn over-dependence on the production of staple foods was hurting Africa’s agricultural transformation.
“We are embarking on a process to transform our agriculture and move our economy away from its dependence on staple food production and the copper,” Mvunga told a high-level panel debate on addressing challenges facing African countries in modernizing agriculture.
Zambia’s national agriculture policy emphasizes the need for policy changes to address weaknesses such as farmers’ low production capacity, research and development of new agriculture technologies and financial investments to improve soil fertility, credit to farmers and irrigation infrastructure.
The President of the African Development Bank, Akinwumi Adesina, said access to agricultural finance was possible from international development banks, such as the Arab Bank for Economic Development in Africa, but new measures were required, to ensure money spent on agriculture benefited farmers.
Africa spends $35 billion annually on food imports – importing what it can produce – and yet posts $30 billion worth of foreign currency bonds to finance its development, Adesina noted.
“By simply turning Africa into a food self-sufficient continent, this sort of money can be spent on domestic development without recourse to expensive international capital markets,” he added.
Adesina said commercial borrowing to finance agriculture through treasury bills and other instruments is possible, but warned that the impact of the commercial borrowing would not be felt unless countries sorted out the inefficiencies affecting the farmer’s access to subsidized farm equipment.
Discussions at the Feeding Africa Conference, taking place from October 21-23 on the outskirts of Dakar, the Senegalese capital, are focused on attracting investments into the agriculture sector.
The conference has successfully leveraged the policy shift amongst Finance Ministers and Central Bank Governors attending the event, to discuss how to effectively create financial instruments for agriculture.
“Africa is now ready to make agriculture a commercial activity and to promote the diversification of the African economies,” the Bank President emphasized in his opening speech at the conference. “Nothing is more important than access to food in quality and quantity.”
The conference is positioning Africa to address its lack of potential in agriculture by addressing the obvious failures in the marketing of agricultural produce, creating efficient routes for food marketing and moving to meet the domestic food requirements before creating extra food for exports.
With the decline in global commodity prices, African countries that rely on export of primary commodities, such as copper, face rising current account deficits and domestic financial imbalances.
Adesina said with currencies devaluing, the cost of importing food is rising, which will drive up demand for nominal wage increases and put even greater pressure on public finances.
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