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LEVERAGING INVESTMENTS TO INCREASE ACCESS TO FERTILIZER UTILISATION BY SMALLHOLDER FARMERS


Overview

  • Reference: P-Z1-AAZ-051
  • Approval date: 22/03/2018
  • Start date: 23/05/2018
  • Appraisal Date: 15/01/2018
  • Status: ApprovedAPVD
  • Implementing Agency: AFRICAN FERTILIZER AND AGRIBUSINESS PARTNERSHIP
  • Location: Multinational

Objectives

Project Objectives

The Project objectives are to expand the supply and distribution of fertilizer (+ 200,000 MT) by leveraging investments. The grantee is the African Fertilizer and Agribusiness Partnership (AFAP). AFAP's expertise would facilitate the development of sustainable, competitive fertilizer business models and increase access to finance in fertilizer production, blending and distribution. More specifically, through this Project, AFAP will: Provide technical and market development support to at least 2 large fertilizer production facilities on the African continent; Facilitate the development of at least 10 joint ventures that are doing domestic blending and distribution of fertilizers; and Design 10 fertilizer delivery systems, with agro dealer networks in selected countries.

By achieving these objectives, AFAP is committed to a process that is sustainable, locally-driven and in the interests of the smallholder farmers and rural income enhancement.


Rationale

Convened in Abuja in June 2006, the Abuja Declaration on Fertilizers delineated key actions and measures to be taken at the country and regional levels to rapidly increase accessibility, availability and incentives to use fertilizers by smallholder farmers in Africa. It called for the establishment of the African Fertilizer Financing Mechanism (AFFM) by the African Development Bank to principally finance the interventions AFAP is an innovative initiative that was also established in response to the Abuja Declaration on Fertilizers. AFAP is a partnership between a number of African and international development partners with the goal of increasing private sector participation and investment (both financial and technical) in order to increase the supply of affordable fertilizer to smallholder farmers.

Given the common vision of AFFM and AFAP, these initiatives can complement each other by ensuring that each takes leadership in rolling out only those core programs in which it has a comparative advantage, thereby increasing the potential for more sustained development results. In this regard, drawing on the AFDB's experience in supporting Africa's agriculture sector using its public and private lending windows, an operational AFFM could assist in promoting mid-term and mid-level financing for Africa's fertilizer industry through partnerships with other institutions. This might be achieved by identifying and applying innovative and targeted loan products such as lines of credit to development, commercial and cooperative Banks and trade finance facilities, complete with AFAP technical assistance and matching credit guarantees, where deemed necessary, that could better respond to the specific needs of entrepreneurs across the fertilizer value chain, particularly fertilizer importers, blenders, and wholesale distributors.

AFAP is in touch on a regular basis with most private sector companies that have a vested interested to make their companies work on the African continent. And once the larger companies are invested on the continent, it will make supply much more sustainable. With regards to the medium size companies, it is expected that the business development services provided by AFAP will help them to grow into strong companies. The hub agro-input dealer networks are an important component of distribution in the rural areas. It is only with a well-structured and trained distribution partners that the companies in which businesses AfDB would invest would then be made sustainable.

1.3.1. Alignment with Bank Private Sector Strategy

The overriding priority of AFAP is to boost agricultural productivity through increased fertilizer use, increase opportunities for Africa's emerging fertilizer sector to obtain appropriate and affordable financing to grow. The AFAP's objective of increasing smallholder fertilizer usage and users are complementary to the ideals of the Bank's Feed Africa strategy of reducing poverty more inclusively and sustainably, as well as the Bank's strategic agricultural priorities of transformation of value chains and sustainable management of the natural resource base.

In line with the Feed Africa Strategy of the African development Bank, the activities of AFAP would contribute to greater local supply, which would ultimately lead to a greater number of farmers using fertilizer, thus increasing productivity, which is central to the transformation of value chains. The measurement of success should include the increase in the total volume of production and distribution potential in the agriculture sector.


Benefits

The target beneficiaries are the (2 to 4) Fertilizer Production or Blending Facilities, (10) Joint Ventures and (10) Hub agro-input dealer networks to serve smallholder farmers and (1000) youth and women with jobs in the agribusiness sector. AFAP will facilitate the creation of at least 1,000 jobs for youth and women via those supporting business units to the market-oriented hub agro- input dealers.

AFAP will target companies, which will be seeking funding ranging from US$10- 40 million. Those companies will fall into one or several of the following categories: Agro-processors seeking to establish blending plants; Current blenders interested in large scale mechanized farming and agro- processing; New companies, which are contemplating joint ventures to launch greenfield projects; and Global fertilizer companies, which are willing and able to invest in large local fertilizer projects via subsidiaries


Key contacts

BOULANOUAR Bouchaib - AHAI2


Costs

Finance source Amount
FAPAUSD 736,019
DeltaUSD 1
TotalUSD 736,020
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