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Policy uncertainty holding back investment in agriculture

Agriculture harvest or plantingSince its establishment in 2011, Grow Africa, an initiative that seeks to accelerate investment in agriculture, has mobilised US$14bn in private sector commitments. However, so far only $2.3bn has actually been invested.

Grow Africa executive director William Asiko speaks to How we made it in Africa about the gap between commitments versus actual investments, land issues, and which African countries have been successful at agricultural reform. Below are edited excerpts.

Just under 20% of investment commitments made by Grow Africa partners have so far been actualised. What is the reason for this big disparity?

Any economist will tell you that capital detests uncertainty. You will only invest when you are certain you are going to make a return. People talk about Africa being risky. Actually the private sector is telling us – with $14bn in pledges – that they actually don’t see Africa as a risky place to do business. But what they are concerned about is uncertainty – of policies, for instance.

The easiest is the policies – creating policies that incentivise farmers but also make it easier for investors to invest. Those are the things that’ll attract investments. If a company wants to invest in farming, are they going to be able to get a title for their property, and will they be able to resolve disputes in a court that is fair? Those are the kinds of things the private sector doesn’t like.

Large-scale commercial farming has been controversial in some markets, such as Ethiopia, where there have been accusations of land grabbing. Do these huge investments come at the expense of local farmers?

Ethiopia is one of the countries doing very well in attracting private sector investment. They have created very sound policies. They have created agro-processing zones. They have set aside land banks for the private sector to take advantage of. They have built wonderful infrastructure, so route-to-markets are not disrupted. So Ethiopia has done very well – yet you have this lingering perception that communities are being stripped from land. It’s a very unwise government that will take land from a community and give it to the private sector without some form of compensation. There are perceptions, and I think it’s important for the media to establish the facts to ascertain what has actually happened.

Small-scale agriculture is unlikely to fix Africa’s food security challenges. Does the answer lie in giving land to the private sector to invest in commercial farming?

I think that is certainly one of the solutions. However, land-use policy is a very sensitive and political issue in Africa. It is not as easy as saying, “This land is laying idle, let’s take it.” Some countries, such as Rwanda, have been very successful in converting idle land by giving it to people who will farm it. But in order to successfully do that, you need to put in place very strict governance procedures in your country, where people have confidence the law is being applied fairly.

If you go to some countries, some communities feel they are being disadvantaged against other communities. You’ll find it very politically sensitive to do those kinds of things. But don’t forget some countries have been successful. Kenya, for instance, has set aside agricultural land for private investors in the coast region – the Galana Kulalu irrigation scheme is an example.

In your opinion, which African countries are getting it right in terms of policy, agricultural reform and support for the industry?

I am biased here because I am Kenyan. I think Kenya is one of the leaders in the agricultural space in Africa. We have programmes to revive and improve coffee, pyrethrum [and] cotton production. Kenya also stands out because the private sector is very active in agriculture – not as much as we’d like, but they are active. When people think of consumer goods company Bidco Africa, for instance, they don’t think of agriculture yet this is an agro-processor and all of Bidco’s raw materials are agricultural.

Another country that’s been very successful is Ethiopia. They have done very well in terms of access to markets with the Ethiopia Commodity Exchange (ECX). My list would also have Tanzania with Kilimo Kwanza (an initiative to transform the country’s agricultural sector). Tanzania has made a deliberate attempt to uplift agriculture by increasing investment. In fact, Tanzania is the only country in East Africa now close to fully implementing the Malabo Declaration (to allocate at least 10% of public expenditure to agriculture). Tanzania is now at 8.9%, and is ahead of other East African countries.

How come you are not mentioning Nigeria? It has, for example, implemented reforms in delivering inputs directly to farmers using mobile phone wallets?

You have to take into account how much the sector is actually contributing to GDP. Nigeria’s agriculture industry has had some big improvements over the last few years – but if you look at it as a contribution to GDP, it’s still relatively small.

The challenges and solutions to Africa’s agricultural sector are well known. Why is progress moving so slowly? 

When I sit next to a minister for agriculture, I am blown away by what they are doing. The problem with government policy is it takes time to get results – but people want to see them immediately. So, we have to be patient.

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