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Statement by Gilbert Houngbo, President of the International Fund for Agricultural Development (IFAD), at the Seminar: The future of agriculture in Africa

Lugar: Harvard University, Cambridge, USA

19 marzo 2018

I would first like to thank Jacob Olupona, Professor of African Religious Traditions and Professor of African and American Studies as well as Professor Lawrence Bobo, the Chair of the Department of African and African American Studies, for inviting me to address you today.

The International Fund for Agricultural Development (IFAD) was established at around the same time as your Department of African and African American Studies.  IFAD's mission was  – and still is  - to contribute to the eradication of hunger and poverty in rural areas. We are a unique development agency of the United Nations, since IFAD is also an international financial institution.

Africa is central to our efforts. Half of our US$3.3 billion on-going portfolio is destined for African countries.

So as President of IFAD, I am delighted to have this opportunity to bring you up to date on our latest thinking about the most effective interventions to speed economic and human development, and to share my views on why the future of Africa lies in agriculture and more specifically in rural agriculture.

Why agriculture?

Let me begin by sharing some data that show why Africa is so central to the work of IFAD, and the promise agriculture holds of moving African populations out of poverty.

Africa is experiencing unprecedented growth -- in population and in prosperity.

Consumer spending reached US$1.4 trillion in 2015, and although the rate of growth has slowed, it is still predicted to reach $2.1 trillion by 2025, driven by a young and growing population, and higher salaries, among other things. Africa’s  population is expected to grow by 20 per cent by 2025.

Each percentage of population growth translates directly to a percentage increase in demand for all the ingredients needed for a nutritious diet.

Total food and beverage markets in sub-Saharan Africa are projected to reach US$1 trillion by 2030, up from around US$313 billion currently.

Clearly, there will be new opportunities in African agriculture and food processing.

Agriculture is the backbone of many African economies. Excluding South Africa, it contributes more than 40 per cent of Sub Saharan Africa’s GDP, which is more than most other regions. In the USA, for example, agriculture contributes about 1 per cent.  And, around 80 per cent of farms in Africa are small and by small I mean less than 1 hectare.

For IFAD, this is significant because our focus is on investing in smallholder farmers to reduce poverty and improve food security and nutrition.

But why agriculture when the structural transformation agenda is more focused on accelerated industrialisation and the sustainable expansion of the manufacturing and services sectors? Because, there is clear and compelling evidence of the importance of agriculture as an engine for economic growth, poverty reduction and better food security in developing nations.

Agriculture remains vital for economic development regardless of the stage of structural transformation, as highlighted in IFAD's 2016 flagship Rural Development Report. And, the majority of countries, which have sustained a rapid transition out of poverty have done so by diversifying their economies and advancing their agricultural sectors.

Inclusive Growth and Inequalities    

There is good evidence that GDP growth generated by agriculture is more effective than growth in any other sector for reducing poverty. The exact figures are disputed – with some estimating that agricultural growth is four times more effective in reducing poverty, and other estimates as high as 11 times.

According to the most recent estimates, 227 million of the world’s 815 million chronically undernourished people live in Africa. To put that in context, Africa accounts for fewer than 17 per cent of the world’s total population but 27 per cent of the world’s hungriest.

For Africa, agriculture is particularly important and rural agriculture even more so. Six in every 10 Africans live in rural areas.  In Sub-Saharan Africa seven out of 10 are farmers. By way of comparison, here in the USA, only two in every 100 people are farmers.

The agricultural sector employs between 40 and 65 per cent of Africa’s working population. Agriculture is by far the biggest source of jobs in Africa, and is expected to remain so for the foreseeable future.

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

Today, African countries spend around US$35 billion a year importing food. That figure is expected to balloon to US$110 billion by 2025. Much of this is for staple foods – such as rice and maize – that can be produced on the continent.

This is money that should be channeled into African agriculture to fuel growth and employment, not flowing out of the continent.

Investment in agriculture not only creates jobs on the farm, but also in subsidiary trades and activities along the value chain such as processing, transportation and marketing.

This is particularly important when we consider the needs of Africa’s young people. 60% of Africa’s young people live in rural areas.

People under the age of 35 make up about 60 per cent of Sub-Saharan Africa’s entire workforce, and the proportion is growing. No other region in the history of the world has experienced the unabated population growth that Africa is experiencing. This is both an opportunity and a risk.  Too often, young people are marginalized and excluded from decent employment and from the decisions that affect their communities, their nations and their lives. The energy and passion of disaffected youth poses a danger.

Rural economies can provide an outlet for their energy and creativity, but only if they offer diverse employment options, and only if rural areas have the infrastructure – the roads, the internet connectivity, the electricity, the financial services – so that young people can see an attractive future for themselves.

What would it take for African agriculture to fulfill its potential? To start, Africa could significantly increase its productivity simply by better management of its existing farmland, and greater investment in smallholder farmers. This includes enhancing productivity by introducing the best seed varieties for each individual context, and using optimal soil and water management techniques – including minimum tillage, appropriate fertilizer, and eco-friendly pest control.

The irrigation intensity in Africa is the lowest in the world, at only around five per cent of cultivated land. This compares with 41 per cent in Asia.

On 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.

There is widespread consensus that agricultural transformation is essential. Firstly, for making it possible Africa to feed itself. And secondly, as a foundation for sustainable and inclusive socio-economic growth. And to those who believe that development efforts should be concentrated on Africa’s cities, let me just say that in Africa, urbanization has mainly resulted in higher levels of poverty and inequality.

By agricultural transformation, I mean a shift from mainly subsistence farming, to production systems that are commercial and highly diversified.

Agricultural transformation is particularly effective in reducing hunger and malnutrition, which in turn are among the main obstacles to economic transformation.

In fact, reducing hunger and malnutrition creates a virtuous cycle, leading to increased agricultural growth, which promotes investment in the modernization of agriculture, which in turn ensures the structural transformation of the economy.

The economic importance of agriculture on the continent is being increasingly recognised by governments, who ratified the Comprehensive African Agricultural Development Programme (CAADP) in Maputo in 2003.

Under CAADP, governments committed to an agricultural spending target of 10 per cent, and agricultural growth of 6 per cent per annum.

Governments that have acted on their CAADP commitments are experiencing higher agricultural growth and poverty reduction than those that have only implemented the principles, or taken no action at all.  However, the overall rate is still low, with only 15 countries meeting the agricultural growth rate target.  Overall, public expenditure on agriculture remains below 4 per cent for Africa, well below the 10 per cent target.

As we consider opportunities in Africa, we definitely cannot dismiss the strong potential of small-scale agriculture. Smallholders have roughly 30 per cent of the agricultural land, yet they produce more than 70 per cent of the food calories in Latin America, sub-Saharan Africa and South and East Asia. Globally, they are responsible for more than half of all food calories.

This is because small farmers are frequently more productive per hectare than larger farms. This is all the more impressive when you consider that smallholders have more limited access to services, markets and inputs. 

What is IFAD doing?

At IFAD, we are taking concrete steps to support inclusive rural transformation and thus contributing notably to the Sustainable Development Goal (SDG) Target 2.3, which calls specifically for "doubling the agricultural productivity and incomes of small-scale food producers….including through secure and equal access to land, other productive resources and inputs, knowledge, financial services, markets and opportunities for value addition and non-farm employment."  

As I mentioned earlier, IFAD is committed to devoting 50 per cent of our investment portfolio of projects to Africa.

We pay special attention to improving nutrition, raising incomes and reducing food insecurity. Today, we know that even a short period of inadequate nutrition in the first critical thousand days from conception to age two can lead to stunting. This causes irreversible damage to a child's physical and mental development, impairing lives and afflicting nations.

Investing in better nutrition is both a humanitarian imperative and good economics. Stunting results in losses to national GDP estimated between 3 and 16 per cent annually. Every dollar invested in stopping chronic childhood malnutrition generates a return US$16.

We also work to increase knowledge about nutrition, and to empower women so that they not only earn more but also have greater decision-making powers at home. Since 2004 IFAD has been measuring reductions in chronic malnutrition as a proxy of progress in women’s incomes and livelihoods.

Why do we do this?  Because there is good evidence that a woman’s education, health, nutritional status and decision-making power have a direct impact on the nutritional status and health of her children. This makes good economic sense.

Finally, we work hard to reduce post-harvest losses.

One-third of the food grown in Africa is lost, post harvest, largely because of inadequate infrastructure. Crops that cannot be sold quickly at the farm gate are lost to pest, disease and spoilage.

More than 600 million Africans have no access to electricity. And those who do have electricity pay heavily, with those living in rural areas paying the most. A farmer in rural northern Nigeria pays roughly 80 times more for electricity than the average resident of New York City.

Without electricity, food cannot be safely stored in refrigerated facilities. Inadequate rural roads mean that one-third of the rural population lives five hours from the nearest market town. By linking smallholder farmers to markets, and investing in better infrastructure, food losses can be reduced significantly.

And, as Africa transforms its agricultural sector, there will be growing opportunities for entrepreneurs to make their mark.

In the area of energy generation, for example, the lack of basic infrastructure means there is a clean slate for entrepreneurs interested in developing energy based on renewables. Africans are already using mobile phone networks to bypass fixed-line phone networks. The same could be done with renewable energy, such as photovoltaic panels, which have become cheap and can be installed locally, without the need for massive spending on infrastructure or the global warming gasses of coal plants.  

Similarly, greater demand means greater opportunities for entrepreneurs – whether in higher margin processed foods, or in working with farmers to expand markets for traditional crops such as plantains, sorghum, millets, amaranthus, quinoa and teff.

In many African countries, the private sector is progressively becoming the engine of agricultural growth by stimulating opportunities for increasing rural incomes and employment.

Here, IFAD plays the critical role of broker -- ensuring that partnerships between small-scale producers and the private sector are mutually beneficial, equitable and transparent.

IFAD is also designing and rolling out innovative financing instruments to make it easier for farmers and small African agribusinesses to borrow, overcoming the capital constraints that frequently hold them back.

For example, in Uganda IFAD has partnered with the European Union to create an investment fund for small and medium agribusiness development.  The Fund is a partnership between public and private investors that offers innovative financial products – such as equity and semi-equity funding—to small and medium agri-business companies that have viable plans to develop their businesses.

In Rwanda, IFAD supports a project that is strengthening producers' cooperatives to become economic partners of the private sectors in areas such as coffee, tea, and horticulture. More than 115,000 smallholder coffee growers have received training, 30 per cent of whom are women.

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.

For example, in Mali the l'Entreprenariat des jeunes Ruraux (FIER) project is focused exclusively on youth to create a new generation of entrepreneurs. Young people are included at every step, from project design to participating in supervision missions.

To receive funding and training, young people must first reflect on what they want to do and design their own project. They are then supported by training and funding, using new financial products adapted to young clients.

To ensure the inclusion of girls, every young person in selected villages is entitled to participate. The project also has women in high-level positions.

A number of initiatives linked to the project have been funded by the Malian diaspora through crowd-sourcing.

If agriculture is to drive sustained and inclusive economic transformation, there must also be more investment in research and development that sustainable agricultural intensification and improved climate resilience. Agricultural research has a special role to play in eliminating hunger. It is estimated that US$9 of food is generated in developing countries for every dollar spent on research.

Conclusion

Ladies and gentlemen,

At IFAD, we believe that the conditions in African agriculture are ripe with opportunity.

All of us here today can play a role in making this opportunity a reality. At IFAD we will continue to invest and advocate for rural transformation. And to you who are students, we need your ideas – on how to create new industries in rural areas; on technology that is affordable and can be fixed locally and inexpensively; on how to generate interest and investment in Africa’s rural areas; and in contributing to the body of evidence-based research that policy makers need to guide their decisions.

And on that note, I would now like to ask if you have any questions, or ideas to share.

Thank you!