Ten years ago, a group of 53 African ministers of agriculture met in Abuja, Nigeria to discuss what they referred to as “Africa’s fertiliser crisis”. They shared their collective observations on the state of the continent’s agricultural production systems at the time, agreeing unanimously that “bold and urgent action” would be needed if the sector were to play its part in tackling the widespread rural poverty, hunger, and malnutrition facing its population.
Crop yields in Africa were only 10-25 percent of the yields found in the developed world, leaving the continent dependent on billions of dollars worth of food imports. No great surprise, fertiliser use was also around 10 percent of the global average. Around two-thirds of Africa’s soils were thought to be degraded, causing an estimated $4 billion in GDP losses on the continent each year.
African leaders knew these losses were untenable, given high levels of poverty in a rapidly expanding population. In response, they called for a systematic increase in average fertiliser use – from 8kg per hectare to 50kg per hectare by the year 2015.
Fast forward to 2016, and another African city – this time in Marrakesh, Morocco – is playing host to another important meeting: the annual UN climate talks. Thousands of delegates will descend to discuss how to reduce anthropogenic greenhouse gas emissions while building the resilience of societies and economies against global warming.
Food security in Africa will be a key concern at the conference with the Moroccan government launching its AAA initiative, which focuses on Adaptation in African Agriculture.
African farmers are among the principal victims of extreme temperatures and weather events, which are expected to worsen as a result of climate change. As just one example, the recent devastating El Niño-induced drought left millions in Southern and Eastern Africa in need of food assistance when crops failed across the region.
It is, therefore, the ideal moment to revisit the issue of Africa’s fertiliser crisis and determine how to move forward on the agenda set in Abuja ten years ago in a “climate-smart” way. Climate-smart agriculture requires agricultural practices that provide the “triple win” of boosting productivity and livelihoods, increasing resilience and minimising greenhouse gas emissions. Fertilisers play a crucial role in all three areas.
Food security in Africa will simply not be achievable without fertilisers. Vast tracts of Africa’s arable land lack the nutrients needed to grow healthy crops. Applying appropriate fertilisers according to soil type will not only improve soil conditions but also enhance the productivity of food crops as yields increase.
By helping farmers to crop more crops on less land, fertilisers also help farmers spare more forests and pastures from conversion to farmland – one of the biggest single drivers of climate change. And nutrient-rich, healthy soils tend also to be more resilient under stressful growing conditions, which reduces crop losses and helps farmers adapt.
It is important to recognise that mineral fertilisers do have a carbon footprint, estimated at 2.5 percent of global greenhouse gas emissions, but consider this: fertilisers are also responsible for around 50 percent of our total crop production worldwide. And considering that the agricultural sector as a whole represents 12 percent of all greenhouse gas emissions, fertilisers’ contribution starts to seem negligible.
Nonetheless, the fertiliser sector continues to be committed to reducing its carbon footprint globally by promoting farming techniques that allow for better nutrient uptake: 4R Nutrient Stewardship, a management technique that makes best use of site- and crop-specific practices in the four areas of nutrient management (using the right nutrient source at the right rate, at the right time and in the right place), and Integrated Soil Fertility Management which recommends using organic sources of nutrients that are available on-farm (e.g. animal manure and/or crop residues) and then supplementing them with manufactured fertilisers to sustainably increase yields.
In Africa, however, the most urgent priority is to ensure that the continent’s millions of farmers have sufficient access to both sources of nutrients in order to redress soil degradation and boost yields. This requires everyone’s support. The African leaders who met back in 2006 called for “immediate steps to accelerate investment in infrastructure, particularly transport, fiscal incentives, strengthening farmers’ organisations, and other measures to improve output market incentives”.
Progress on this is being made. The African Fertiliser and Agribusiness Partnership (AFAP), for instance, is investing in wholesale rural infrastructure by developing better inland storage and distribution facilities for fertiliser and supporting “hub” agro-dealers. These agro-dealers often have better access to credit (for the initial purchase of inputs) as well as more capacity and incentives to provide the right advice to farmers. As such, they can provide the right products consistently and at scale to retail outlets, farmer groups and cooperatives.
There are many tools and technologies available that are appropriate even for the smallest-scale African farmers. Soil testing devices such as the SoilCares scanner can give recommendations on which fertilisers to use within 30 minutes of running a test. Other techniques such as micro-dosing – in which very small amounts of fertiliser are applied next to the rooting zone of the crop – helps reduce waste and lower costs.
Digital tools, such as the GreenSeeker, can analyse the level of nitrogen in a crop, and guide a farmer on how much fertiliser to apply to optimise crop growth. Simple colour charts that allow farmers to monitor the nutritional status of plant leaves can do a similar job. Speciality fertilisers that are blended according to local soil needs are also key – with results from Ethiopia having already boosted yields by up to 65 percent.
“If agriculture is to become a viable livelihood for the growing African population – the majority of whom will be young people – it needs to become more productive, and more lucrative. Fertilisers remain essential to this.”
And yet, already a year after the deadline for the Abuja Declaration has expired, African fertiliser use is still nowhere near its target of 50kg per hectare. In fact, it’s only about 13kg per hectare on average and with lots of variation from region to region. If agriculture is to become a viable livelihood for the growing African population – the majority of whom will be young people – it needs to become more productive, and more lucrative. Fertilisers remain essential to this.
Healthy soils can build a foundation on which to build a thriving agriculture sector in Africa, and by reviving the momentum to restore them, we can make food security and resilience to climate change on the continent a reality.
Charlotte Hebebrand is director general of the International Fertilizer Industry Association. The IFA is hosting a side event at the UN climate talks on the role of farmers in implementing the Paris Agreement.
Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.
AFEX Raises $50Million for Agri-SMEs, Africa’s First Warehouse Receipt Backed Commercial Paper
AFEX CEO, Ayodeji Balogun (Source: AFEX)
AFEX Commodities Exchange Limited (AFEX), Nigeria’s leading private commodities exchange company, has announced the first Warehouse Receipt Backed Commercial Paper in Africa, with tech-enabled operations and a 24-hour fast cash turnaround for borrowers. With over $50 million raised for Agri-SMEs, this bridges the funding gap between lenders and borrowers in the Nigerian agricultural sector with a commodity-backed instrument – for the first time.
The AFEX financing deal will help eradicate the high cost of procurement incurred by processors by deploying a discounted value of a warehouse receipt distributed among five leading players in the Food and Beverage, Trading Poultry and Animal Feed segments in Nigeria. The receiving companies are top 10 players in their respective segments. They have now been enabled access to a tool for managing price volatility, enabling up to 30% direct savings on prices.
“With our vision to reach a cumulative total of over $5 Billion in investment to the agriculture sector over the next five years, this financing deal is right on track to achieve this goal’’ – said Ayodeji Balogun, CEO, AFEX Commodities Exchange. “As we move towards building a derivatives market in Africa, we want to be able to reduce exposure to price risk for stakeholders, by enabling them to hedge their positions and trade in commodity derivatives.”
The warehouse receipts, which can then be transferred from commodities to a financial asset and listed under the borrower’s portfolio on the AFEX trading platform, will create a sustainable funding structure and address underfunding in the Nigerian agricultural sector. With the warehouse receipt system linked to financiers, the system allows financiers value and marks the commodities’ price to market on a real-time basis.
“Our mission is to provide low-risk working capital facility for stakeholders in the Agro sector, in a way that is transparent and has a very high viable investment return’’ – said Akinyinka Akintunde, VP Financial Markets at AFEX. “As a licensed commodities exchange and warehouse receipt system operator, we deploy a warehouse receipt system and collateral management infrastructure to increase market confidence for both lenders and borrower.”With AFEX’s goal to support Africa’s food security while promoting a fair exchange of value among players in commodity value chains, this deal’s social impact is delivered through market access for farmers and reduced post-harvest losses. AFEX continues to contribute to the United Nations Sustainable Development Goals 1, 2, 5 and 8; no
poverty, zero hunger, gender equality, decent work, and economic growth.
SunCulture secures $11m debt facility from SunFunder syndicate to expand solar irrigation in Africa
SunCulture CEO and co-Founder, Samir Ibrahim (Source: YouTube)
SunCulture, a solar irrigation company headquartered in Nairobi, Kenya, today received the first disbursement from a new $11m syndicated debt facility to expand its operations in sub-Saharan Africa.
The new loan is groundbreaking for the “productive use” solar sector due to its size and its innovative combination of working capital and end-user financing.
Arranged by SunFunder, the co-investors in the facility are Nordic Development Fund; Triodos Investment Management, through its Hivos-Triodos Fund; SunFunder through its Solar Energy Transformation Fund; AlphaMundi through both its SocialAlpha and AlphaJiri Investment Funds; and the AfDB’s FEI OGEF managed by Lion’s Head.
This will enable SunCulture to scale up renewable energy installations at smallholder farms and households that will mitigate over 20,000 tons of CO2 annually – as farmers replace diesel pumps with solar ones – whilst facilitating income growth and job opportunities in rural communities.
SunCulture has pioneered a “Pay-As-You-Grow” business model to make solar-powered irrigation affordable for smallholder farmers in sub-Saharan Africa, combining end-user finance, value-added services, modern climate technology, and access to improve productivity. A recent report developed by Dalberg Research shows that irrigation systems and solar-powered water pumps can increase farmers’ production between 2 and 4 times, and their income between 2 and 6 times.
Samir Ibrahim, Chief Executive Officer at SunCulture, said, “The past year was devastating for the millions of smallholder farmers in Kenya; 87% are in a worse financial position due to the pandemic. 81% of SunCulture farmers, however, were able to increase their revenue from farming in 2020. Solar irrigation helps create food security and sovereignty, and it also helps lift people out of poverty. This facility further enables our efforts to support farmers by
providing them with more of our solar solutions, and faster.”
Jemimah Kwakye-Fosu, Investment Officer, who led the transaction for SunFunder, said: “We are delighted to have led this syndicate of proactive lenders who worked well together for a common goal: to help SunCulture reach many more farmers. It shows how working capital can be combined with end user financing, which is essential for making productive use technologies affordable.”
Surabhi Mathur Visser, Head of Investments at SunFunder, said: “This is a pioneering transaction that demonstrates how productive use technologies like solar irrigation can be scaled up. SunFunder arranged this facility with a similar-minded group of lenders to support an innovative product and business model. We look forward to seeing SunCulture grow in Kenya and new markets.”
Karin Isaksson, Managing Director at NDF, said: “This loan to SunCulture is the second e[tended to a company graduating from the EEP Trust Fund managed by NDF. It is a clear demonstration that we can deliver on the new NDF Strategy and its commitment to provide flexible and scalable financing as well as catalytic impact. It has all the ingredients that define NDF’s added value in the climate financing landscape. It demonstrates our capability to convene and mobilise additional financing, as well as our unique mix of financing instruments to match the needs of our partners, public or private. We are proud to be standing with our partners and supporting the emergence of a greener economy, precisely at this time of COVID-19.”
“Since our first investment in 2019, SunCulture has made huge strides to unlock the potential of smallholder agriculture through innovative products and consumer credit. FEI-OGEF is happy to be able to refinance our inventory loan into this new working capital facility and continue that growth alongside a committed and constructive group of lenders,´ noted Harry Guinness from Lion’s Head.
Judith Santbergen, Senior Investment Manager at AlphaMundi, said: “Since 2018, AlphaMundi has successively provided support to SunCulture through a combination of technical assistance and debt investment. We are e[cited to continue and increase our investment in the company via this new, innovative working capital facility.”
Sjoerd Melsert, Senior Investment Manager at Triodos Investment Management, said: “SunCulture is a great e[ample of an innovative company that is active on the nexus of renewable energy and agriculture, using solar energy to increase farmers’ incomes. Our facility supports the further growth of SunCulture’s pay-as-you-go solar portfolio, leading to a more sustainable and higher production for smallholder farmers, which is fully aligned with the
mission, ambition and activities of Hivos-Triodos Fund.”
Cocoa Pricing: Why Public-Private Sector Partnerships are Key to Sustaining the Livelihood of Smallholders Farmers in Africa
Pricing is a debating point in the cocoa sector, dominating contemporary stakeholder conversations; especially African cocoa producers. This is a result of the historically low cocoa prices that do not provide a fair income to farmers involved in cocoa production. Despite the announcement of the Living Income Differential (LID) by both Cote d’Ivoire and the Ghana Cocoa Boards, there still exist questions on the sustainability of this intervention – to take farmers out of poverty. Stakeholders in the African Cocoa industry need to rethink its strategy to improving farmers’ livelihood, by increasing their earning potential through value chain efficiency, facilitated by public-private sector partnership.
Interventions aimed at income enhancement and lifting farmers out of poverty are often based on the assumption that the said interventions, alone, are enough for the solution being pursued. On the surface, the decision to increase the farmgate price of cocoa and LID by an additional $400 a tonne on all cocoa contracts, appear to be a solution to lifting farmers out of poverty. However, even if farmers’ incomes were to increase – through increased farm gate prices – other structural issues like small farm sizes and low productivity levels will still keep these farmers below the poverty line.
For Cocoa farmers to earn a fair wage from their input, issues like ageing plantations, lack of adequate training and financing as well as direct access to the market, need to be addressed. These structural issues pose a more significant threat on the livelihood of cocoa producers in Africa. Price increases on their own are not enough to lift the poorest farmers out of poverty. Price interventions like the LID must go hand in hand with other policies and programme, implemented to increase the volume and quality of beans produced. Achieving this will require a multi-stakeholder collaboration involving both the private and public sector aimed at not only improving the quality of lives of farmers but ensuring that the cocoa value chain is optimized.
To enable smallholder farmers benefit in an egalitarian way from the cocoa industry, the focus should be towards improving value chain efficiency while addressing structural challenges in the sector. This is achievable through a public-private collaboration that will drive private sector operations to deepen financial markets, scale-up infrastructure investments and enhance productivity and quality through training and input supply.
Through collaborating with Cocoa Cooperative Societies –providing training, input financing and market access, AFEX has enabled smallholder farmers to increase their productivity, while producing to international standards. With technology like AFEX Workbench – a value chain management platform which facilitates input sourcing, loan administration, sales, a transparent and efficiently executed cocoa process is achieved.
A public-private sector-driven model will create a sustainable approach which will revitalize and boost cocoa production in Africa – creating jobs and improving the living standard of the farmers. While the government takes the driver seat to develop policies and the infrastructure to catalyze this growth across the cocoa ecosystem, private sector organizations will ensure value chain efficiency – increasing the benefits stakeholders gain from the industry.
AFEX is committed to providing the support and technology to improve the quality of life for African cocoa farmers and their communities.