IFAD President's statement on Impacts of investment on African agriculture and the principals for responsible agricultural investment (PRAI)

Esteemed Colleagues,
Ladies and Gentlemen,

It is an honour and my very great pleasure to be here today.

Our topic is one that is dear to my heart. My professional life has been dedicated to agricultural development – first as a research scientist, then as a development practitioner. And though I have spent most of my professional life living abroad, Africa is where I was born and Africa is still my home.

The importance and promise of agriculture to Africa cannot be over-stated. It accounts for about 30 per cent of sub-Saharan Africa's GDP, and a significant proportion of export value. And in most African countries, 60 per cent of those employed are working in agriculture.

Yet African agriculture is very far from reaching its potential. In Africa, only about 6 per cent of the total cultivated land is irrigated, compared with 37 per cent in Asia. It is estimated that irrigation alone could increase output by up to 50 per cent in Africa.

Similarly, farmers in sub-Saharan Africa use less than 13 kilogrammes of fertilizer per hectare. This compares with about 73 kilogrammes in the Middle East and North Africa, and 190 kilogrammes in East Asia and the Pacific. Small increases in organic or inorganic fertilizer use in sub-Saharan Africa could produce dramatic improvements in yields.

Africa also has the largest share of the world's uncultivated land with rain-fed crop potential. Unlike many other parts of the world, in Africa there is room for agriculture to expand.

Today, small farms represent 80 per cent of all farms in sub-Saharan Africa. They contribute up to 90 per cent of production in some countries. Yet too many smallholders are poor. This is the reality of today, but it need not be the reality of tomorrow.

Small farms are often more productive per hectare than large farms. And in Africa, they have the potential to be key suppliers to growing urban markets as well as rural markets.

Demand for food and higher-end food products is growing across the continent from Africa's burgeoning middle class. And there is growing foreign interest in the untapped potential of Africa's fertile land.

But where there is opportunity, there is also risk. Clearly, we are happy to see signs of renewed interest and renewed investment in African agriculture. But there is a real danger that the very people who most need to benefit from the new opportunities in African agriculture will be left behind. In this context, the Principles for Responsible Agricultural Investment are crucially important.

Investment in agriculture in Africa is key to ending hunger and poverty on the continent. It is estimated that growth generated by agriculture in sub-Saharan Africa is eleven times more effective in reducing poverty than GDP growth in other sectors for sub-Saharan Africa.

In a region where poverty rates are 48.5 per cent, there is a moral imperative to unleash the poverty-reducing power of agriculture. This means investing in development that is environmentally, socially and economically sustainable, and that is inclusive of smallholders. 

If smallholders are excluded from the region's food security response, they will follow a well-trodden path to over-crowded urban areas and abroad. Rural areas will become increasingly depopulated. Food demand will be met by  high-input carbon-intensive farms without addressing poverty, unemployment or greenhouse gas emissions.

But by investing in agricultural systems that are inclusive of smallholders we can transform rural. Africa needs vibrant rural areas that offer a variety of enterprises of all sizes, providing employment, income and food security, as well as offering essential environmental services.  

As we invest in agriculture, it is important to recognise that farming, even at the smallest scale, is a business. Indeed, smallholders are the primary on-farm investors in agriculture; they invest not only their own money but also their time and labour.

IFAD has worked in rural development in Africa for 35 years, supporting projects that enable poor rural people to grow and sell more food, earn more money and determine the direction of their lives. About 50 per cent of our new financing is directed to the region, with about 43 per cent last year going to sub-Saharan Africa alone.

We not only invest in the region, but leverage co-financing for rural and agricultural development. In the past five years, IFAD has provided US$840 million and raised another $850 million from local co-financiers including government, for public-private partnerships. Much of this funding has been specifically earmarked for input supply, market infrastructure, information and marketing outputs.

At IFAD, we have seen time and time again the transformation that occurs – in individual lives and entire communities -- when smallholder farming is recognised as a business, and when farmers have the resources they need to invest in and grow their businesses.

This includes ensuring that poor rural women and men in Africa have secure and equitable access to land and natural resources. 

Land is the biggest asset that poor rural women and men have. But land is not just an economic asset, it also has great social and cultural significance. 

Over the years, IFAD has supported a range of measures to strengthen land tenure security and access to natural resources for poor rural people. This includes securing land and natural resource rights through inclusive business models in number of countries including Burkina Faso, Sierra Leone and Uganda; working for women's land rights in the Gambia, Kenya and Niger; and improving access and tenure of irrigated land in Ethiopia, Malawi and Rwanda.

In a few minutes, you will hear about an IFAD-supported project in Uganda which exemplifies inclusive, sustainable development. When I visited the project last year I met farmers who were able to send their children to school, pay for medical expenses and build better homes for themselves. This is the type of public-private partnership that we need to see throughout Africa, with government, the private sector, civil society and smallholders all benefiting from working in partnership.

As investment in rural Africa grows, we must ensure that there are mutually beneficial partnerships between smallholders and other private sector investors. These can take many forms, including out-grower schemes, contract farming or joint share equity schemes.

At the same time, African nations must make a true and concerted effort to improve the business environment. Let me speak bluntly. Although there has been significant progress in recent years, African nations still dominate   the bottom of the World Bank's rankings on Doing Business.

There is a pressing need for all African nations to create environments that can attract public-private partnerships. This includes developing transparent, accountable and accessible institutions that can provide real-time, one-stop business advice to smallholders, as well as domestic and foreign investors.

More broadly, African countries must continue to defend the foundations of democracy and safeguard the political stability so critical to economic growth. Governments must be consistent and predictable in their trade-related policies, not changing them impetuously and in the process scaring away potential investors. This change has already begun in large parts of the continent, but more is needed.

Today we will explore how to increase responsible investment and learn from the right type of investments that are already happening. This topic is of the utmost importance. Issues of food insecurity, poverty and hunger lie at the root of so many of Africa's problems.

If we can transform rural areas so that they provide jobs as well as food, and become engines of economic growth, we will not only create a world that is food secure, but a world that is more secure on every front.

 I believe that the Principles for Responsible Agricultural Investment have an essential role in achieving this.

Thank you.

Yokohama, Japan
2 June 2013