How Can CAADP Aligned Initiatives Help to Foster Private Sector Financing in Support of Country Plans: Harnessing Private Sector Financing to Generate Effective Agricultural Investment Hosted by: CAADP Joint Action Group for Private Sector Initiatives Moderator: Michael Sudarkasa, UNDP AFIM

CAADP aligned Private Sector Initiatives AGRICULTURE FAST TRACK FACILITY Agvance Africa

Inclusive investment in food security and growth Calvin Miller Senior Officer Agribusiness and Finance, FAO CAADP Partnership Platform Meeting, Addis Ababa, March 25, 2013 De-risking finance and investment

Production Price Operational Financial Institutional Infrastructure Quality control Technology Logistics Seasonal glut Infrastructure Storage Price Product loss Govt. policy Technology Supply of RM Human resource Product quality Govt. policies Producing Storing Processing Marketing Input Supply Quality Availability Infrastructure Knowledge Financial Challenges and opportunities to address risks all along the value chain How can we structure finance and investment to address client and country needs and risks”

Finance – Loan guarantees – Insurance products – Value chain financing – Savings and asset capitalization – Contracting and out grower schemes – Warehouse receipt systems – Organizational and institutional development – Training -- financial literacy, management, marketing De-risking finance and investment

De-risking Finance and Investment (2) Investment ▫ Regulatory frameworks conducive to investment ▫ Private-public co-investment ▫ Investment funds ▫ Political and catastrophic guarantees ▫ Political and economic stability ▫ Ministerial capacity development on investment promotion ▫ strategic investment approaches and incentives

Tomas Sales, Program Manager, UNDP AFIM – Southern Africa Regional Service Centre, Johannesburg, South Africa, CAADP Partnership Platform, Addis Ababa, March 25, 2013

Input SuppliesGrowing CropHarvested Produce Food & Energy Store Produce Store Process Transport Plant Harvest International/ Local market Manufacture Transport Flow of Money V A L U E Financial Solutions Banking Relationship Flow of money most important in financing agriculture … Figure 1: Flow of Money Along the Value Chain Hans Baryamujura, Head, Agriculture Finance, Barclays Africa CAADP Partnership Platform, Addis Ababa, March 2013

Challenges: Agricultural Value Chains in Africa Small Scale Farmers (Majority of the African Farmers) Agro Dealers Input Supplies Growing CropHarvested Produce Food & Energy Store Produce Store Process Transport Plant Harvest Consumer Manufacture Transport Barclays/Absa Bank 1212 Figure 2: Disconnect in the African Agricultural Value Chain Characteristics (Right) Less risk and target for all financial institutions Most multi banked  Size of the banks  Local presence of the bank Bank loses client’s turnover (Client diverts bulk of transactions) Limited local supply (size of operations) Limited local demand (purchasing power) Characteristics (Left) Less risk and target for all financial institutions Most multi banked  Size of the banks  Local presence of the bank Growth not as quick/aggressive as expected Limited repeat business (Most are new farmers) VITAL ACTIVITIES MISSING Technical support Services i.e. Mechanical services, inputs, storage, etc. Poor Profitability of the smallholder farmers Lack of crop insurance Lack of collateral