Agricultural Growth CorridorsPresentation by Sean de Cleene, Vice President Business Development, Yara International and Vice Chair Kilimo

Kwanza Growth Corridors Executive Committee, Tanzania

BAGC Investment Blueprint was launched in January 2010SAGCOT Investment Blueprint will be launched in January 2011Strong public – private partnership focus Partners involved separately in the two initiatives include:

Southern Agricultural Growth Corridor of Tanzania(SAGCOT)

Mozambique Beira Agricultural Growth Corridor (BACG)

Corridor investment blueprints demonstrate the potential to develop “clusters” of profitable agribusinesses

Agricultural clusters that support professionalisation of both small and medium sized farms require simultaneous and properly coordinated investment by the public and private sectors

Private investors

Private equity and debt capital for

agribusinesses

Service providersTransportation

Business support

GovernmentPublic infrastructurePolicy environment

Land titling

NGOsTechnical

assistance/ trainingExtension servicesSupport to farmers

organisations

Development partnersDirect funding of public goods (e.g.

backbone infrastructure)

Indirect funding of public goods through

Government

Development Finance Institutions

Expansion capital for established

agribusinesses

Catalytic FundSeed capital for medium-sized

start up agribusinesses

Agricultural Growth Cluster

Commercial Farm

New feeder road

Road/Rail

Backbone

Smallholder commercialization scheme

Smallholder service delivery scheme

Reefer container refrigeration unit

Village

Commercial Farm

Clusters provide basis for integrated approach to agricultural growth

Major benefits to farmers and local communities

Wider benefits to surrounding communities with a 25km radius of the farm hubs and clusters include:• access to inputs and markets

for smallholder farmers• provision of extension and

financial services• linkages into specific

agricultural value chains• job opportunities in the

agricultural value chain

Example: 190,000 hectares of irrigated commercial agriculture in the Beira corridor region of Mozambique delivers: 350,000 jobs; $1 billion farming revenues pa; 150 villages get electricity and water supply; 13,000 smallholder farmers gain affordable access to irrigation services; improved access to inputs, finance and markets for up to 200,000 smallholder households

Catalytic Fund – takes the early-stage risks in developing new agriculture businesses

Critical component is the need for innovative gov’t/donor financing to “kick-start”, at scale, investment in early-stage agriculture

Project concept

“Bankable” project

Patient capital – funds agricultural infrastructure including feeder roads, electrification and irrigation targeted specifically at private sector

• Innovative finance is provided by governments and donor agencies at a low cost of capital. Each $1 of innovative finance can leverage potentially more than $10 of private investment into socially-responsible agriculture businesses

H.E. Prime Minister Pinda of Tanzania at the African Green Revolution Forum: called for donors “to make the catalytic fund operational as soon as possible”

Traditional donor financing –supports government in developing policy and public goods to facilitate sustainable growth

Innovative gov’t/donor financing (promoting small holder integration into value chain)

Agricultural potential along Beira Corridor by 2030 as presented in investment blueprint

2010 2030

• <20,000 ha irrigated commercial agriculture

• Smallholders almost exclusively subsistence production

• High production and marketing costs

• >210,000 ha irrigated commercial agriculture

• Smallholders have access to irrigation infrastructure and markets

• Economies of scale increased competitiveness

Investment blueprint findings

• Limited investment into either small or larger scale commercial agriculture

• Operating costs are much higher than international benchmarks [competitors]

• Investment in new commercial agribusinesses is especially weak given high start-up costs

• Challenging business environment

• Major constraints are lack of “last mile” infrastructure to the farm gate and a lack of access to affordable kick start finance that acts as a bridge to traditional financing

• But investment blueprints clearly show there are ways to overcome these constraints . . .

The way forward

• Identify areas of high potential for agriculture “clusters” with access to infrastructure backbone

• Establish a partnership organisation to help coordinate targeted public and private investments within the corridor

• Provide new types of finance – including “catalytic financing” & “patient capital” – to overcome high start-up costs and bridge with traditional financing

• Insist on strong and direct benefits for smallholder farmers and local communities and environmental sustainability

• Support development of a range of investments along the value chain, including nucleus farms, processing facilities and outgrower schemes

• Recommend incentives needed to attract agricultural investment