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Lecture by Kanayo F. Nwanze President International Fund for Agricultural Development (IFAD) at the Seminar Entrepreneurship in Africa, at Harvard University

موقع: Harvard University

18 أبريل 2016

Ladies and gentlemen,

I would first like to thank Professor David Williams for so kindly inviting me to be with you today. 

I am an African – born, raised and educated in Nigeria. And my professional life has been dedicated to agriculture and development – international in scope, but often centred on Africa.

The topic of entrepreneurship in Africa is dear to my heart. And by the end of today I hope to convince you that many of the greatest opportunities are in rural, not urban areas.

About IFAD

For those of you not familiar with my institution, I hope this talk will inspire you to do some research and to check out IFAD’s internship programme. We have room for bright, ambitious young people who want to change the world!  

Let me just say that IFAD takes a unique approach to development because we are the only institution in existence that is both an international financial institution – an IFI -- and a specialized agency of the United Nations. This means that we approach development with both an IFI's head for business and a UN agency’s focus on people.  

I am proud to say that IFAD's approach to development is one that generates exceptional and lasting results on the ground.

The richness of Africa

Ladies and gentlemen,

When I envision the future of Africa I picture a continent where the energy and creativity of 200 million young people is being channelled into creating new and exciting businesses.  A continent where small and medium-sized as well as large businesses are providing employment and contributing to a strong economic base for societies. A continent of endless possibility that has vanquished poverty and hunger.

Africa holds tremendous opportunity for entrepreneurs. Why? Partly because Africa is experiencing unprecedented growth -- in population and in wealth.

Consumer spending is expected to reach US$1 trillion – and by some estimates US$1.4 trillion – by 2020. And the population is expected to keep growing, reaching 1.34 billion by 2020, and doubling by 2050, with the largest labour pool of young people in the world. The combination of this demand for goods and services plus a large labour surplus opens the door to many exciting new opportunities for entrepreneurs.

Africa is also rich in minerals and other natural resources. Sub-Saharan Africa produces 74 per cent of the world’s platinum metals; 62 per cent of its cobalt [used for batteries and metal alloys] – 54 per cent of its diamonds, and an abundance of gold, uranium, oil and gas.

Angola's net oil exports were $24 billion in 2014 in real terms; Nigeria’s were $77 billion. Mali exported more than 53 tonnes of gold that year.

But when I envision the future of Africa, I do not see it built on a foundation of extractive industries.  These riches have not translated into wide-ranging job creation, or social welfare and stability. They have not fed hungry people. They have not reduced poverty.

In fact, there is strong evidence that poor countries with rich natural resources grow two to three times more slowly than countries without these resources.

You have all heard of the "resource curse" or dutch disease and this is exactly what continues to plague many resource-rich countries in Africa. It impedes inclusive growth. Until the continent is better able to address ongoing governance challenges, owning these resources may not actually be a long-term blessing. 

While a relatively small number of people have become incredibly rich from Africa’s vast mineral resources, poverty remains endemic. An estimated 43 per cent of Africans live in extreme poverty. This adds up to more than 330 million children, women and men.

We know that income inequality can lead to slower or less sustainable economic growth -- and the source for this is none other than the IMF! So when Africa looks at economic growth, it needs to consider ways that also promote greater income equality, that is, inclusive economic growth or, more broadly, sustainable economic and social development.

Wealth of the land

Africa also has a large and untapped natural resource that is capable of generating wealth for Africans. That resource is land. When I envision the future of Africa, I envision full use being made of the land’s agricultural potential.

Arable land is becoming a valuable commodity -- and climate change will make it even more valuable in the decades ahead.

Africa has 25 per cent of the world’s arable land, but generates only 10 per cent of its agricultural output.

Only around five per cent of cultivated land in Africa is irrigated, compared with 41 per cent in Asia. On the average, African farmers apply 10 to 13 kg of fertilizer per hectare of cultivated land compared to more than 220kg in Asia and 138 kg in South America.

Africa could easily double its productivity in the next five years simply by better management of its existing farmland. And there is even more potential when you consider that half of the world's uncultivated land suitable for growing food crops is in Africa.  

As I noted earlier, with a population set to double from 1.2 billion to 2.4 billion by 2050, there will be no shortage of opportunity for food and agricultural products in the years ahead. Already, demand is strong, and rising for quality food and value-added products.

Agriculture could generate untold prosperity for the continent by lifting millions out of poverty, and creating jobs and new industries along the length of the agricultural value chain.

The range of agricultural commodities grown in Africa is enormous, including:

Cocoa – from Ghana, Cameroon and Cote d’Ivoire

Tea – from Kenya, Rwanda and Uganda

Coffee – from Ethiopia, Kenya and Uganda

Rubber – from Liberia and Sierra Leone

Cotton – from Tanzania, Zambia and all of the west African savannah region

Timber from West and Central Africa

and fisheries from Africa’s 31,000 km shoreline

Not to mention food crops: rice, cassava, a range of highly nutritional cereals, roots and tubers, and torpical fruit trees

Too often these are exported as raw, primary products instead of higher quality, value-added products, or allowed to rot and waste on road-sides and local markets.

It is also well documented that GDP growth generated by agriculture is more effective in reducing poverty than GDP growth in any other sector. For sub-Saharan Africa, some estimates rate the effectiveness of agriculture at 11 times higher at generating growth versus all other sectors.

Not only is agriculture an engine for economic growth and poverty reduction in developing nations -- there is evidence that growth derived from staple crop production has a higher impact on poverty reduction than growth from export crops such as coffee, tea and tobacco.  Each percentage of population growth translates directly to a percentage increase in demand for all the ingredients needed for a nutritious diet.

Investing in better agricultural production would also cut Africa's food import bill, which today stands at around US$35 billion a year, excluding fish. This is money that should be fuelling Africa's growth and creating wealth and employment, not flowing out of the continent.

Ladies and gentlemen,

Over the years I have often asked myself: Why is Africa lagging behind other economies?

The continent has singularly failed to industrialize. Africa’s share of global manufacturing was only 3 per cent in 1970. In 2013, it was even less, at 2 per cent! According to the Brookings Institution, manufacturing output per person in sub-Saharan Africa is about one-third of the developing country average. And manufactured exports per person are about 10 per cent of the average for low-income countries.

Constraints to development

Perhaps because of Africa’s colonial legacy, several countries have been plagued by inadequate governance, political and civil unrest , immature institutions, corruption and lack of transparency. These impede progress at all levels, from the social to the economic.

The lack of infrastructure across the continent is also an impediment to growth. Roads are often poorly maintained or non-existent. As a result, more than one-third of sub-Saharan Africa’s rural population lives five hours from the nearest market town. This leaves them with no real chance to participate in the market economy and no real chance of improving their economic condition.

Energy supply in sub-Saharan Africa is so meagre that 621 million Africans do not have access to electricity at all. To make matters worse, poor Africans who are not on the grid pay $10 per kWh of energy, compared with Americans, who pay only 12 cents.

The best way for Africa to fast track industrialization is through agriculture and rural transformation.

Why Rural Areas?

There are powerful arguments for creating vibrant rural economies in Africa. Africa is urbanizing rapidly. And rural people will continue to migrate to urban areas in search of better lives and livelihoods as long as African agriculture remains at the subsistence level, as long as the roads are unpaved, and the villages without electricity, health clinics or clean water.

Yet rapid urbanization comes with its problems, including overcrowding, pollution and disease. Urban residents in developing countries are also 60 to 70 per cent more likely to be the victims of crime. In Africa, urbanization has mainly resulted in higher levels of poverty and inequality.

Cities have a finite capacity. They cannot provide good jobs, good housing and sanitation for every person. Urbanization does not necessarily translate into affluence. We do not need bigger cities with bigger slums.

Instead, we need a world where populations, employment, services and opportunities are more evenly distributed.

The benefits of strong rural economies reach far and wide. City dwellers benefit when there is a balanced flow of goods, services and money between rural and urban areas. And everyone benefits when there is access to healthy food, clean water and fresh air.

By investing in rural economies, we can create a range of opportunities for young people in Africa’s rural areas so that they are not compelled to migrate to urban centres and big cities where they too often fall prey to divisive rhetoric and extremism.

Sixty per cent of Africa’s population today is younger than 25. In sub-Saharan Africa, around 224 million young people will be seeking employment in the next decade. Of these, at least 60 per cent will live in rural areas.

Even using the most optimistic projections for Africa’s economic growth, it is not realistic to expect urban areas and the non-farm sectors to absorb and employ an extra 134 million people in the next ten years.

Examples of Rural Entrepreneurship

There are millions of villages in Africa, and millions of opportunities. Africa has always been central to IFAD's work.  Last year, the largest share of new IFAD financing went to sub-Saharan Africa. We have already reached more than 250 million people in Africa, and the number is growing.

Let me give you some examples, from our projects, of how rural entrepreneurship can change lives.

In Rwanda, partnerships between tea-producing cooperatives and private investors have given smallholders more control over marketing. Tea factories established by private sector partners buy directly from the cooperatives -- and the cooperatives participate as equity shareholders in the factories. Each cooperative has around 4,000 members.

In Kenya and Rwanda, IFAD is scaling up a new generation of low-cost portable biogas systems. Women who once spent hours gathering firewood have time for other economic activities. There is “bio-slurry” for crop cultivation. And better sanitation is reducing the burden of disease.

In Ethiopia, access to rural agricultural finance is making it possible for many poor entrepreneurs, including women, to process tef[1]. As you may know, tef is becoming very popular as a health grain, though not long ago it was an orphan crop.

Rewarding poor rural people for environmental services is another area of economic opportunity. When poor rural people manage the soil and conserve the water on their fields, they improve their yields and also improve the water that flows downstream.

For example, in Kenya, associations of river water users are planting trees and ground cover to protect riverbeds and natural springs.  They also monitor the pollution and sediment levels of the rivers.

To quote one member: “Before the rivers were brown after the rains, now they stay clear.”

Sometimes, it is the smallest interventions that, when scaled up, have the biggest results.

A fertilizer micro-dosing technique has farmers use a bottle cap to measure out small, affordable amounts of fertilizer. The fertilizer is placed very precisely – near the seed.

The technique is simple enough that even if a famer is illiterate, he or she can safely and easily apply the correct amount of fertilizer. It is an elegant solution to an age-old problem. Poor farmers are able to grow more food without overly-exploiting the soil.

Essential ingredients for change

Over nearly 40 years of working in agricultural development, IFAD has found that there are four essential ingredients needed for smallholders to make the transition from subsistence producers to rural entrepreneurs.

First, they need a commitment by government to establish and enforce policies that encourage higher food production by smallholders.

This includes policies that offer incentives for investment in agriculture and reduce the risks for farmers and private sector partners alike. Policies that encourage inclusive business models. Policies that facilitate the ability of poor farmers to access finance and technology and that protect their rights to water and land.

Inclusiveness

Second, smallholders need to be involved in partnerships with the private sector, but these partnerships must be mutually beneficial, equitable and transparent -- such as the example in Rwanda that I mentioned earlier. At IFAD, we work towards public, private, producer partnerships, or what we call the 4Ps. In other words, we support producers to ensure that they are included as partners in the agricultural value chain.

Third, smallholders need investment in rural infrastructure, just as big commercial farms and companies do. This includes investment in processing plants, electricity, warehouses, roads and ports. Doing this can reduce post-harvest waste and improve access to markets.

Here, there are natural opportunities for entrepreneurs. Africans are already using mobile phone networks to bypass fixed-line phone networks. The same could be done with renewable energy, such as PV panels, which have become cheap and can be installed locally, without the need for massive infrastructure spending or the global warming gasses of coal plants.  

And they also need investment in social services - such as schools, clinics and hospitals, because, frankly, would any of you dream of investing in your own business if you could not receive healthcare or educate your children?

Governance

And fourth, all Africans -- and this includes smallholders -- need better fiscal management and enforcement of regulations. Illicit outflows are estimated to cost the continent some US$69 billion. This is money that should be invested in Africa -- building its roads, installing its electricity lines, and educating its people.

Poor people are not looking for hand-outs. They are looking for economic opportunities. This applies as much to rural people as it does to city dwellers -- to smallholder farmers as well as to bigger businesses. The reality is that everyone wants to make a profit.

Africa's youth

And this brings me to the issue of Africa’s youth. Sixty per cent of Africa’s population today is younger than 25. These young people have been called Africa’s “youth bulge”, though at IFAD we prefer to think of them as Africa’s demographic dividend, offering huge promise and potential.

But people can only reach their potential if someone invests in them. As I mentioned earlier, the rate of youth unemployment in Africa remains unacceptably high. The rate of youth illiteracy – at more than 50 per cent, or 133 million – is also unacceptable. 

IFAD has long recognized the importance of young people to Africa’s future. Throughout the continent, we support the education and training of young people so that they can put their energy and creativity to productive use. IFAD encourages young women and men to invest in themselves, rather than waiting for the government to create jobs for them.

In my own country (Nigeria), the Niger Delta is better known for its violence than for its farming. For many years, it was considered a “no go zone”. 

But a project there has created more than 20,000 jobs for young women and men. I have visited the project myself and I was delighted to see the level of enthusiasm these young people have for their vegetable and fish farms. These young “agripreneurs” are running lucrative businesses and have become role models. And, they are contributing to the stability, wealth and nutrition of their communities.

In Egypt, IFAD is supporting a project on land that was reclaimed from the desert. The project has helped some 200,000 women and men -- including 110,000 unemployed graduates who have turned to agriculture-- to improve their production and connect to the export market. Today they have contracts with some of the world’s biggest companies including Heinz, and farm gate prices have risen by 33 per cent.

Conclusion

Ladies and gentlemen,

Countless reports and studies have concluded that Africa has the potential to be a great economic success. This is hardly news. But instead of all the talk about African potential, we should be discussing what is required so Africa’s people can seize that potential.

Entrepreneurs do not arise out of thin air. They appear when the conditions are right for energetic and imaginative people to seize opportunities. And these opportunities depend on the actions of governments, donors, and other institutions.  

Over the course of my career I have seen time and time again what Africa’s people can do. And I also know what Africa’s leaders and development partners must do. This includes creating a conducive environment for entrepreneurs.

The opportunities and potential are there; the time has come to move from potential to reality.

Thank you.