An initiative of The William and Flora Hewlett Foundation

'Growing' Agricultural Investment Along Africa's Regional

Corridors:

The TransFarm Africa Concept

10th Agri Outlook Conference 22 September 2010

Africa’s agriculture challenges and potential

Africa’s agriculture challenges :• Highest concentration of people earning under $2/day in rural Sub-Saharan Africa• 75% of Africa’s population (450 million people) employed in agriculture and agribusiness• Half of Africa’s small farmers survive on less than $1/day• Farms of less than 3 hectares account for nearly 90% of Africa’s food production• Women provide 80% of labour on farms in Sub-Saharan Africa• Farming represents 30-40% of Sub-Saharan countries GDP and nearly 60% of export

incomeAfrica’s agriculture opportunities :• Vast masses of arable land under utilised• Africa has capacity to feed itself and export to the world – global food security issues• Increased investment interest in Africa• Africa’s population close to 1 billion people – market opportunity

Vision • An African-led “demonstration” programme proving and deploying scalable,

sustainable financial and institutional interventions promoting inclusive modernisation of agriculture and acceleration of the Development Corridor process.

Mission• To pilot and prove the TransFarm Africa concept by clearing the way for sustainable

private investment in commercial African farming ventures within development corridors that enables agriculture in Africa to become globally competitive and provide tangible economic benefits to Africa’s citizens and consumers.

• Three linked elements:1. TransFarm Africa (Pilot) Transformation Fund 2. “Removing the Barriers” of obstacles to success 3. Corridor development promotion and support

• Implemented via partnership with local African partner and Africa-based fund manager and investment funds

What is TransFarm Africa?What is TransFarm Africa?

Agriculture most important segment of the economies of sub-Saharan Africa (“SSA”) but only starting to realize potential.

Historically

African agriculture has underperformed Inadequate infrastructure Poor productivity, suboptimal size and limited market access for small

scale sector Poor government policies damaged commercial sector Unequal terms of trade

4Lion's Head Global Partners

However, favourable global trends, improved policy, more investment and greater attention by donors and politicians,

indicates tide may be turning

Agriculture in Sub-Saharan Africa

Rising global demand/food security concerns An emerging regional and domestic market Improving infrastructure and regional integration Substantial potential for improvement New class of agricultural entrepreneur emerging

5Lion's Head Global Partners

Agriculture can feed all Africa, finance economic growth and become part of the global solution for Food Security......

but strategic and catalytic intervention required in favour of market led development

Favorable global and regional trends = a shift in the fundamentals defining the future of African agriculture

Investing in Sub-Saharan Agriculture - rationale

Transformative agriculture – just emerging, new and existing players,, opportunities all along value chain, new business models, able to harness value-add from small

farmer segment........... but limited funding, limited understanding, many barriers

6Lion's Head Global Partner

• Uneconomic size Low productivity Limited market access Slow accumulation

• Uneconomic size Low productivity Limited market access Slow accumulation

Large scale/high returns Few local linkages Small farmer engagement

is ‘defensive’ & costly

Large scale/high returns Few local linkages Small farmer engagement

is ‘defensive’ & costly

Subsistence Farming

(donor focus)

Transformative Agriculture

Large Scale Mechanized

(commercial money)

Entrepreneurial, opportunistic Mid-cap, growth oriented Small Farmer ss Supplier,

Employee, Customer , Partner

Entrepreneurial, opportunistic Mid-cap, growth oriented Small Farmer ss Supplier,

Employee, Customer , Partner

Export Oriented

Closed SystemDynamic and transitional consumer & export sector

Evolving structure of African agriculture

“Transformative agriculture” emerging as dynamic segment of African agriculture

TFA Structure

Partners – Smallholder farmersupport

Support for smallholder farmersSubsistence -> commercial

NBF – Removing the Barriers along Development Corridors

Investors & funders TransFarm Africa

TFA Transformation Fund Market (Retailers)

Processing and/orbeneficiation

Existing small to medium size agribusiness enterprises

Capacity Development

InfrastructureWater & energy

StakeholderEngagement

Across sectors

Policy and Regulatory issues

Resource Mobilisation

MarketingComms

8

TransFarmAfrica

TransFarm Africa: TransFarm Africa: Market driven regional spread of transformative agricultureMarket driven regional spread of transformative agriculture

TFA “Removing the Barriers” Program: NBF as implementing partner

TFA Investment Fund: TFA Fund manager (LHGP) w/local team

-“Market” insight on best TFA policies - Build capacity to deploy TFA policy - Promote Corridors to aid TFA policy roll out- Work to align efforts of others

- Show TFA can deliver good $ returns - Show TFA can modernize subs farmer- Harness other efforts to reduce risk- Help bring donor projects to market

SCALE UP via adoption of best practice TFA policy and approach from corridor to corridor

SCALE UP through successive funds supported by

capital markets and copied by impact

investors

9Lion's Head Global Partners

TransFarmAfrica

Promote africa’s development corridors & help them better serve agriculture

Hewlett Foundation Investors

(TFA/NBF)Removing the

BarriersProgram

TransFarmAfrica

InvestmentFund/LHGP

Help small farmers & agri-entrepreneurs develop effective TFA business models

Learning relationship w/ TFA Investors & entrepreneurs

Smallholder business link

Mid-cap/growth oriented

Across value chain

Southern & southeast Africa

Equity & Debt/$1-$10m

$50 million target

Donors, Govts, RECs, private sector

$

$

$

TransFarm Africa Structure

Direct: • small farmers benefit via income, security, skills;• employment creation on farms and in supporting segments;• off farm entrepreneurial business and employment creation• more affordable and better staple foods• foreign exchange saving and earnings• net local and global environmental benefits

Indirect:• Demonstrate pro-agriculture development of Corridors can have major and positive poverty effects• Demonstrate transformative investments in agriculture are good commercial bets• Demonstrate investment platforms can generate commercial returns• Develop and diffuse institutional mechanisms for promoting agriculture along corridors

TFA Impact categoriesTFA Impact categories

• TFA must be Africa-based, with specific objectives, an implementation timetable and an exit route

• NEPAD Business Foundation appointed as local implementation partner. Business-oriented; strong links to AU/NEPAD, AfDB, RECs; Gives TFA access to management resources of member companies

• Transferring key TFA investment parameters to national agencies to ensure good deals with foreign capital critical.

• Brains Trust plays key role. Composed of knowledgeable, experienced African commercial farmers, agri-business entrepreneurs and expert local NGOs

• Pro-agriculture corridor promotion template difficult to diffuse. Investment in agriculture planning capacity across corridors may be better route

TFA Implementation Structure and Strategy

TFA Implementation Structure and Strategy

Removing the Barriers Programme

(RtB)

www.nepadbusinessfoundation.org

NEPAD and NBF structure

NEPAD Secretariat (NPCA)

NBF (South Africa) Board

NEPAD HSGIC

NEPAD Steering Committee

Sectoral Groups

Agribusiness

Transport

ICT

HealthcareFMCGWater

InfrastructureMining &

ResourcesStock Exchanges

Audit & Accounting

EnergyFinance / Banking

NBF

SA Government

NBF / NBG Counterparts

Continental / Regional Economic

Communities

Donors & DFI’s

External Stakeholders

Project Management

Office

Legal

Assembly of the AfricanUnion

Independent, non-profit orgPrivate sector funded

Media

Asset Mngt, Insurance & Investment

NEPAD FRAMEWORK & PRIORITIES

Conditions for Sustainable Development

Political Governance and DemocracyEconomic & Corporate Governance

(APRM)

Peace and Security{African Peace and Security Agenda-

(APSA)}

Programmatic Priorities

Agriculture, diversification of production and market access

(CAADP)

Capital Flows (domestic & international) [debt cancellation, capital markets, scale up development assistance]

Infrastructure Development[Energy, Transport (air, rail, road,

ports), water & sanitation]{STAP and PIDA}

Human Development, including education and health

{NEPAD Health Strategy}

ICT{ e-schools, Uhurunet and Umojanet}

Science and Technology{Consolidated Action Plan}

NBF Vision and Mission

• The NBF’s vision envisages an African powerhouse that utilizes all its resources to generate innovative economic growth that engenders socio-political stability and sustainable livelihood for all its people on par with global standards.

• The NBF’s mission is to create a platform for dialogue between the private and public sectors, ultimately creating a more sustainable business environment in Africa.

• The NBF strategic objectives:– To facilitate and coordinate activities across sectors;– To be a catalyst for NEPAD related business opportunities by collaborating and

integrating with relevant organisations across the globe– This will be done through the delivery of sustainable projects for the benefit of the

African people and the prosperity of the African continent.

• Many non finance obstacles to modernization of subsistence agriculture, commercial agriculture projects and sector growth:

domestic policies trade-related, capacity constraints, organisational, regulatory, corruption, engagement

• Use local and fund knowledge to identify, prioritize and tackle key obstacles

• Deploy fit for purpose tactics–communications, policy reform, influence and direct engagement, capacity building

• Start with pilots then develop, test and rollout institutional mechanisms to tackle same problems along other corridors

• Strategic aim to demonstrate that focused intervention can accelerate the transformation process

“Removing the Barriers” programme“Removing the Barriers” programme

Africa’s “Spatial Development Corridors”

• African agriculture has potential to reduce poverty and finance economic growth

• Regional Development Corridor strategy – focused efforts across various industry sectors allows for increased impact and alignment of initiatives

• TransFarm Africa will seek to promote Corridor (and corridor agriculture) focus to donors and investors

• Pilot corridor : Beira Corridor (Mozambique, Zimbabwe, Zambia, Malawi)

• Other focus corridors : Nacala Corridor (Mozambique, Malawi, Zambia) Central Corridor (Tanzania, DRC, Burundi, Rwanda)

Corridor Investment Promotion and Support

Corridor Investment Promotion and Support

BEIRA Corridor – Mozambique, Zimbabwe, Zambia

Large “anchor investments” are taking place . . .

BAGC: a potential breadbasket region

Virtually no commercial agriculture in BAGC today . . .

(Mozambique only)

. . . but there is enormous potential

Infrastructure is essential . . .

. . . to stimulate major new investment

Number of new farms per year

“Ready to go” projects identified

A transformation by 2030

Now 2030

Potential bottlenecks for TransFarm Africa

ENABLING ENVIRONMENT

Production Commercial Value Chain Infrastructure Market

NBF VALUE PROPOSITION

Thank you.

Lynette ChenCEO

NEPAD Business FoundationTel : +27 87 310-1888

Email : lynette.chen@thenbf.co.zaWebsite : www.thenbf.co.za