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Mobilizing private sector investments in African Agriculture

Mobilizing private sector investments in African Agriculture

Given the resource constraints of governments on the continent, the private sector, both domestic and foreign, has a potentially important role to play in financing agricultural investments on the continent, to enable countries to realize the potential of the agriculture sector for economic growth and job creation, particularly among farmers, women and youth. 

Recognizing that our continent has enormous Agricultural potential, not only to feed itself and eliminate hunger and food insecurity, but also to be a major play­er in global food markets ;Grow Africa, Volta Capital and East Africa Trade and Investment Hub partnered to organize a side event on Mobilizing private investments in African Agriculture on the sidelines of the 2018 African Green Revolution Forum (AGRF) in Kigali Rwanda.

Based on a shared vision and objectives, the meeting was designed as a tool to enhance dialogue and consultation among agricultural actors in order to propose common solutions for sustainable agriculture strategies on the continent. Which should foster a better governance of the sector and offer an innovative forum to exchange experiences, information and knowledge about agriculture development.

Speaking on behalf of Grow Africa, Mr. William Asiko stated during his opening remarks that Grow Africa recognizes the debilitating effects that the lack of financing in Agriculture has on our continent and continually endeavors to increase private sector investment in agriculture, and accelerate the execution and impact of investment commitments through its Country Agribusiness Partnerships Framework (CAP-F).  “Leveraging investments in agriculture, including from the private sector, is key to lifting millions of people from hunger and poverty in Africa and to ensuring that enough food is produced and that enough rural jobs are created for the continent’s growing population,” he added.

Ms. Kanini Mutooni, Director for investment, East Africa Trade and Investment Hub brought to the fore that there are practical constraints for Investors in Agriculture, namely:

  • High transaction costs as far as doing and structuring a deal in the continent is concerned; transaction costs ranges from 26% to 28% of the total value of a deal which is quite high and therefore the portfolio investor will focus only on large deals of more than $15 million and above.
  • Poor quality deal pipeline is another issue in agriculture on the continent, because portfolio investors are not passionate enough to make businesses investable.
  • Fund structures in Sub-Saharan Africa are typical closed funding structures which doesn’t fit the agriculture investment imperative. The ideal fund structure is an open ended fund where there is no limit on fund raising and the investment can be exited in twenty years with no problems.

During the working lunch where investments facilitators, private sector and promotion centres were invited, participants at the event were divided in 5 groups representing 5 countries: Burkina Faso, Ghana, Malawi, Rwanda, and Tanzania. Each group discussed challenges and solutions for attracting private sector investments in two agricultural value chains that are a priority to the country. Countries got to be introduced to available tools and solutions for investment facilitation.

It was also highlighted the urgent need to share key lessons learnt from the past efforts of increasing private sector investment, map out the challenges and share best practices. Emphasis was also made on the need to identify opportunities and agree on a shared view of what is needed for the major players who were in the room to increase investment level and realize the deals. At the end a call to action and a concrete action plan were drafted to mobilize private investments and accelerate the execution and impact of investment commitments.

At the margin of AGRF18 Grow Africa and IDH leadership met with the Minister of Agriculture of Cote d’ivoire, H.E Sangafowa Mamadou; to discuss the issue of rice self-sufficiency in the ECOWAS region which import for 4 billion USD of rice per year. Grow Africa and IDH presented to the Ivoirian authorities the integrated business case study initiative in order to attract private sector investments simultaneously in 6 Ecowas countries in using the comparative advantage of each country. All of these measures are geared at reducing to zero, by 2025, rice imports into the region. Mr Sangafowa congratulated Grow Africa and IDH for this innovative approach and encouraged the two organizations to move rapidly to its operationalization.