Role of private sector necessary to help de-risk financing for agriculture
The African Green Revolution Forum, held in Nairobi, Kenya, from September 5-9, 2016, discussed how to de-risk risk agriculture financing.
At a panel discussion on “Mobilizing Private Sector Financing for Agriculture”, the African Development Bank (AfDB) emphasised the importance of reducing risk in financing agriculture to bridge the US $30-billion funding gap and transform African agriculture.
Chiji Ojukwu, the Director for Agriculture and Agro-industry Department at the AfDB, highlighted that the poor level of financing from the private sector was hindering agricultural transformation in Africa: “Private financing is very low. We need US $30 billion and we will get $10 billion – so the gap is huge,” he warned.
Ojukwu told the panel that the issue of risk and lack of capacity for the private sector to offer innovative financing solutions to the agriculture sector were the main factors obstructing growth of the sector: “Agriculture is less than 4% of private-sector financing although it contributes to 20% of the economy across the continent,” he added.
He announced that the Bank would contribute US $2.4 billion annually for the next 10 years to boost Africa’s agriculture. Ojukwu cited some of the Bank’s agricultural financing mechanisms including soft commodities, small and medium-sized enterprises financing, and an upcoming risk-sharing facility. He also named some of the instruments providing grants or technical assistance such as the Agriculture Fast Track Fund and the Fund for African Private Sector Assistance (FAPA).
The panel agreed on the need for the agriculture industry to transform into a high value addition sector to enable it to compete with other economic sectors for financing.
In his keynote address, James Mwangi, the Chief Executive Officer of Kenya’s Equity Bank Group, reiterated that it was crucial for the private sector to treat agriculture as a commercial sector. “That shift is necessary,” he explained. “Agriculture is in great need of adaptability to climate change, increased productivity, scalability, financing of technology for transformation, and these offer a perfect case for private-sector financing.”
Other panelists included Vincent Ssempijja, Minister of Agriculture, Animal Industry and Fisheries in Uganda; Jose Pacheco, Minister of Agriculture, Mozambique; Linah Mohohlo, Governor, Bank of Botswana; Saleh Usman Gashua, Secretary General, African Rural and Agricultural Credit Association; and Bob Collymore, Chief Executive Officer of Safaricom Ltd, a leading mobile network operator in Kenya.