Interview with AfDB Agriculture & Agro-industry Director, Aly Abou-Sabaa, on the outcomes of the last Ordinary Session of the African Union on Bank operations
Question: The 13th Ordinary Session of the African Union (AU) Assembly was held in Sirte, Libya, from July 1-3, 2009, on the theme: “Investing in Agriculture for Economic Growth and Food Security”. What were the major decisions taken that have an impact on efforts by the African Development Bank (AfDB) to help development initiatives on the continent?
Answer: On development and economic growth in Africa, the Summit reviewed the report of the Conference of African Union Ministers of Agriculture, Land and Livestock which was held from April 20-24, 2009, in Addis Ababa, Ethiopia.
At the end of the meeting, the Summit Declaration reiterated the commitment of the Assembly to advance the implementation of the CAADP agenda. It also upheld the Maputo Declaration on the need for countries to allocate at least ten percent of their national budgets to the agricultural sector. The assembly also endorsed the establishment of an inter-ministerial mechanism bringing together Ministries of Agriculture, the Environment, and Water to advance inter-sectoral approaches in addressing the climate change agenda. The declaration further called for additional agriculture financing initiatives that will be directed to African institutions and made accessible at the country level.
Meanwhile, recognizing the serious adverse long-term impact of the global financial and economic crisis and climate change, the Summit Declaration urged regional and non-regional stakeholders to ensure that the African Development Bank and other African financial institutions have the necessary resources to deliver the required assistance to member countries.
On the whole, the decisions taken at the summit require the mobilization of more financial resources by the Bank for Agricultural investment and more capacity building efforts at the Bank and country levels to implement agricultural programmes.
Question: Upon the request of African Ministers of Agriculture in 2006, the AfDB set up the “African Fertilizer Financing Mechanism” (AFFM). What progress has been made since then? What are the major challenges facing AFFM?
Answer: The fund was initiated in June 2006, at the African Fertilizer Summit in Abuja, Nigeria. At the summit, some African heads of state, together with the agriculture ministers and other eminent persons, resolved that it was necessary to establish an Africa Fertilizer Financing Mechanism (AFFM), for the purpose of enhancing agricultural productivity by promoting the use of fertilizers and by making fertilizers available at affordable prices to farmers. The summit noted that the inadequate supply of fertilizer as an agricultural production input was one of the constraints on food production in Africa. The AfDB was given the mandate to establish and host the AFFM with the support of the United Nations Economic Commission for Africa (UNECA), and the African Union Commission (AUC).
The mechanism’s secretariat is now fully established within the Bank’s Temporary Relocation Agency in Tunis. Three Stakeholders’ Meetings were held in 2008 to direct the thrust of the activities of the Mechanism with encouraging participation from partners (AFA; AFREXIMBANK; AGRA; AUC; FAO; IFA; IFAD; NEPAD; and UNOPS). AFFM has also prepared necessary implementation documents (Framework, Strategy, Operations Manual and Indicative Program for the period 2009 - 2011). Nominations for the AFFM Governing Council positions have been received as provided for under its framework document. The staffing of the mechanism is ongoing. The East and Southern Africa Consultative Meeting on the establishment of African Regional Fertilizer Procurement Facilities was held in Kenya in March 2009 with finance and agriculture ministers from eight countries in the region participating. Planned activities for 2009 include AFFM Governing Council Meeting in Tunis, Fund Raising and Pledging Meeting in Tunis, AFFM Consultation Meeting/Workshop for Regional Procurement Facilities Development in West Africa, AFFM Joint Sensitization Missions for financial support and AFFM Investment pipeline building missions.
Funding is the greatest constraint on programme implementation. To date, the fertilizer fund is yet to be declared effective. To be effective, the funds should receive the legally required minimum contribution of US$ 10 million. Contributions to the fund currently stand at US$ 7.65 million. Thus, the shortfall is for its effectiveness is US$ 2.35 million. The effectiveness of the mechanism is required for access to its resources for operations in the Bank’s regional member countries (RMCs).
However, AFFM is still expecting support from a number of organizations, agencies, and individual philanthropists that pledged support during the Africa Fertilizer Summit of Eminent Persons held in New York in March 2006 (prior to the Abuja Summit). Similarly, a number of organisations made pledges during the Partners Meeting organised by the Bank in Tunis in May 2007. For example, the Gates Foundation indicated that it could contribute up to US$ 10 million; the Rockefeller Foundation may contribute up to US$ 15 million within the context of their Alliance for a Green Revolution in Africa; IFAD has provided US$ 150,000 out of its pledge of US$ 200,000 to support regional operations. The IFDC also indicated that it would contribute technical assistance, information, and analytical services to help make the AFFM operational. The IFDC will also to facilitate discussions with emerging economic powers such as India and China, so as to secure their support. The Arab Bank for Economic Development (BADEA) is also poised to support specific investment opportunities. Nigeria has pledged US$ 10 million. AFFM will further mobilize additional resources through advocacy activities. The African Development Bank has provided about US$1 million from its administrative budget to kick start the programme in addition to its contribution of US$ 7.5 million from its net income to the Fund. Plans are underway to formerly launch the fund in September 2009.
The AU meeting in Libya declared that the implementation of the African Fertilizer Financing Mechanism be fast-tracked by making contributions to bridge the US$ 2.35 million gap for the immediate operationalization of the Mechanism’s activities.
Question: What are the Bank’s major strategies and actions designed to reduce food insecurity in Africa?
Answer: The current Bank agriculture and rural development sector policy was approved in 1999. Since then, there have been important changes at the institutional, regional member countries and continental levels. As a result, the Bank Group is in the process of revising its agriculture operations strategy to transform the sector’s focus from subsistence agriculture to commercial farming, strengthening the policy, regulatory framework and human capacity, and to improve its support to its RMCs in harnessing the huge potential of the sector for food security, economic growth and development.
Meanwhile, in response to the global food crisis, the Bank Group established the African Food Crisis Response (AFCR) Task Force in July 2008 to address the food insecurity in its RMCs. The task force has provided a framework for accelerated support to RMCs affected by escalating food prices. Its interventions are designed to reduce the risk of increased poverty on the continent in the short term and to ensure sustainable food security in the medium to long term.
The Bank’s proposed short term responses cover a one-year period. Four specific short term responses were proposed:
- Realignment of the existing agriculture portfolio with the aim of boosting food production. This measure comprises agriculture and non agricultural projects;
- Use of budget support instrument for quick disbursement of resources to RMCs;
- Increased dissemination of NERICA rice seeds; and
- Allocation from the Bank’s Surplus Account (UA 20 million). These short term measures have resulted in the Bank’s global approval of UA 416.54 million, UA 255.16 million of which is already disbursed.
The Bank’s medium to long term measures meanwhile will from 3 - 6 years The AFCR proposes seven approaches aiming at improving food security while taking advantage of the high food prices:
- Improved rural infrastructure;
- Operationalizing the African Fertilizer Financing Mechanism;
- Increasing NERICA rice production;
- Capacity building, policy dialogue and trade promotion;
- Scaling up private sector operations for food security;
- Promoting agricultural research, and
- Establishing a Crisis Response Facility. Gender mainstreaming and addressing climate change are core guiding principles identified under the AFCR.
In line with the Bank’s medium term strategy, through the AFCR, the Bank is projected to avail about UA 1.4 billion in the medium-to-long term to address issues of high food prices and food security. The Bank approved agricultural projects to the tune of UA 219.61 million in 2008 and committed about UA 215.3 million in 2009 to support Africa’s agricultural sector. Interventions under these operations focus mainly on rural infrastructure, including rural roads, markets, irrigation, renewable energy and ago-processing. Through its business plan which is under development, the Bank will:
- Bring around 500,000 ha under improved agricultural water management;
- Increase water storage in Africa by 1%; and
- Reduce post-harvest losses by 3%. This will result in an increase of annual cereal production of 800,000 tons and will save about US$ 400 million in import bill. The Bank’s private sector window is also supporting small and medium agricultural enterprises as well as financing fertilizer plant projects across different regions to increase food security on the continent.
The Bank Group is working at the continental and regional levels with key partners and through special initiatives aimed at enhancing investments in agriculture. This includes the African Agriculture Investment Fund and the African Outgrowers Development Fund which are being promoted by the Agence Française de Developpement (AFD), the Alliance for a Green Revolution in Africa (AGRA), International Fund for Agricultural Development (IFAD), the German Cooperation and the AfDB. These funds will focus on providing private capital for African agricultural development along the value chain and to help strengthen the financial structures of private enterprises and cooperatives. They will consequently enhance their investment programs to modernize infrastructure as well as increase and diversify food products in Africa. In addition, the Bank is actively working with the African Union and the Economic Commission for Africa to operationalize the African Fertilizer Financing Mechanism and the Congo Basin Forest Fund (CBFF) to improve the people’s livelihoods, alleviate poverty and address climate change challenges, thereby contributing to improved food security in the Africa.