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A stronger role of the private sector, focus on women economic empowerment and call for more involvement of farmers at the CAADP Partnership Platform 2015

14.07.2015Erick Sile, Agricultural Finance Senior Advisor, GIZ/MFW4A

The 11th CAADP Partnership Platform (PP) took place in Johannesburg, South Africa from 25th to 26th of March. This year's theme was "Walking the Talk: Delivering on Malabo Commitments on Agriculture for Women Empowerment and Development", in alignment with the 2015 African Union (AU) theme on women's empowerment and development. Since this partnership meeting immediately followed the Malabo Declaration, the gathering presented an opportunity for participants to re-examine the commitments made by African Head of States in Malabo in regards to the agricultural growth and transformation agenda. In light of AU's theme for 2015 on Women Empowerment and Development, the meeting sought ways to translate the Malabo commitments into concrete actions that would result in equal access to resources and opportunities for women. It is in this context that the NEPAD Agency launched the Programme "Women in Agribusiness" to support the economic growth and empowerment of African women.

Lessons learned during the first decade of the CAADP implementation fed the reflections that led to the CAADP Results Framework. This Results Framework document, along with the Malabo Declaration, will be translated into action through the Implementation Strategy and Roadmap and the Programme of Work, documents which were drafted prior to the Platform meeting. Although the Malabo Declaration reemphasizes the need for public investment (at least 10% of national budget to agriculture), there have been urgent calls throughout the proceedings to find ways to increase funding from the private sector. The private sector funding will not only leverage existing public investments, but it will also fill the important financing gap necessary to meet the needs of investments expected to boost the agriculture sector. Moreover, implementation of the Malabo Declaration has to go beyond planning and investments to emphasize reforms in economic policies and institutional capabilities through the creation of an economic environment that fosters innovation. To support an increasingly strong private sector in Africa, all economic policy actions should put greater emphasis on farmers and entrepreneurs who are at the centre of all these reforms.

The CAADP highlighted some challenges that could affect the implementation of the Malabo Declaration. These challenges revolve around the need for more coordination and harmonization among stakeholders involved in the CAADP process. Stakeholders should particularly take the advantage of favourable economic policies and increased dynamism of the private sectors to re-mobilize various actors and partners towards financing agriculture. In addressing the challenges of the implementation of the Malabo Declarations, specific economic policies should be designed to accelerate the contribution and inclusion of women who are by far the largest providers in the agricultural production segment in Africa.

Key recommendations for CAADP implementation were given along the following five areas.

  1. Ending hunger and malnutrition in Africa by 2025: participants at the PP called for investments in more nutritious food and the need to increase dedicated financial resources to promote nutrition activities. In order to address nutrition issues, participants reckoned it is important to diversify food intake beyond known staples and cereals, and promote the use of micronutrients balanced fertilizers. Participants also felt strongly about the need to draft a nutrition advocacy document to complement the CAADP Results Framework and Programme of Work.
  2. Inclusive agricultural growth and transformation: Policies and regulations should favour access to land and credit, as a way to encourage young people and women in agriculture. Policies should also be conducive to the development of innovative financing mechanisms such as warehouse receipt systems and allow "smart subsidies" to increase access to inputs. Participants recommended the need for an inclusive value chain approach with strong farmer organizations. Such complete value chain would lead to sustainable contractual arrangements.
  3. Boosting intra-African trade: regional trade integration, fast-tracking of the continental free trade agreement, harmonization and enforcement of non-tariff measures are some of the most important actions that need to be taken to boost intra-African trade. Value chain actors should be trained on business and trade in order to be able to comfortably engage in global trade issues.
  4. Building resilience and reducing vulnerability to risks: Climate change adaptation and risk mitigation strategies should be mainstreamed in investment plans. There is also a call to develop a continental framework on integrated risk management in agriculture. Sound economic policies should create incentives for investments that result in an enabling and more predictable market environment.
  5. Mutual accountability: the CAADP Results Framework is the mechanism that countries will use to measure results. However, quality data should feed the process of measurement. To facilitate the biennial review process countries have to undergo, it is important to prioritize and focus on a set of core and easily measurable indicators of agricultural growth and development.

The CAADP has once again demonstrated the need for a multi-sectorial approach based on a strong political commitment supported by the allocation of adequate resources for implementation.

Advancing Agricultural Finance Policy Coordination in Africa

29.06.2015Erick Sile, Agricultural Finance Senior Advisor, GIZ/MFW4A

Agricultural finance has been deemed a "policy orphan" in Africa. The lack of coordination among stakeholders further deters the process of establishing common guidelines that are necessary to pull the required public and private resources towards the achievement of a common goal: providing adequate and affordable financial services to the agricultural sector.

Access to agriculture financial services remains a challenge throughout Africa, affecting both the capacity of smallholders to generate sustainable income from their farming activities, and the ability of countries to attain food security and self-sufficiency. An overall financial systems approach to agricultural finance, rather than a "funding agriculture" approach, should be adapted to unleash the potential of the agricultural sector. As such, there is need for a strong agricultural finance policy coordination to guide the often-fragmented interventions that are ineffective among government ministries, regulatory and supervisory authorities.

To address the challenges facing access to agriculture financial services, the Making Finance Work for Africa (MFW4A) Partnership has been supporting the implementation of the Kampala Principles, a set of 11 policy principles that suggests the actions most urgently required to unlock agricultural finance in Africa. Since the first Kampala Principle called for the existence of "a single entity as the advocate of agricultural finance", it became apparent to examine the state of agricultural finance policy coordination in Africa, in order to assess not only the different policy frameworks of the various countries, but also the level of coordination for the potential establishment of agricultural finance policy in these countries.

A recent study commissioned by MFW4A, in collaboration with GIZ, drew on the agricultural finance policy case study experiences in five African countries across different sub-regions. It suggests recommendations to enable country-level stakeholders to strengthen agricultural finance policy coordination, and provides the relevant background and orientation for the Partnership and its Agricultural Finance Stakeholder Working Group (AFSWG) for future advocacy and implementation activities in agricultural finance. The result of the study confirms the lack of agricultural finance policy coordination across case-study countries, despite the existence of well-articulated agricultural sector policy documents. The study also reveals the strength of agricultural development policy documents drafted as a result of the Comprehensive African Agricultural Development Program (CAADP) process. However, key players such as central banks and other financial sector regulatory and supervisory authorities, private sector financial institutions, agribusinesses and civil organisations along value chains have often not been involved in the drafting process of the CAADP investment plans. Moreover, agricultural development policy documents do not address the key issues of access to finance in a holistic way, failing to take into considerations constraints to access agricultural finance faced by smallholder producers and institutions.

Lack of collateral, high transaction costs, weak legal and regulatory frameworks, limited appropriate financial instruments, high perceived risks of agricultural loans, weak financial infrastructure, limited financial literacy of clients are some of the shortcomings to agricultural finance. While these constraints are common to most African States, each country uses different mechanisms to address them, and are often fragmented.

A dedicated policy response is necessary to address the challenges posed by agricultural finance. This will result in building a sound financial system able to increase financial intermediation in favour of the agricultural sector. A policy response will also serve as the basis on which financial institutions and the private sector would develop adequate products, tools and mechanisms to meet financial needs of various actors along the agricultural value chains.

In the process of developing an agricultural finance policy, the role of a coordinating body becomes even more important. Such an entity will not only bring all the relevant stakeholders from the public and private sector around the same table, but it will also ensure that elements of agriculture and elements of finance are both considered when establishing an agricultural finance policy framework. The juxtaposition of agricultural development and financial systems policies in one policy document will result in responding to specific needs expressed by the agricultural sector.

The National Agricultural Investment Plans (NAIPs) developed as part of the CAADP process highlight issues of agriculture finance in some countries. While the CAADP process could offer a coordination avenue to address agriculture finance in a holistic way, NAIPs have tended to focus primarily on public sector investments. The active participation of the private sector in the CAADP process could lead to successful agriculture finance mainstreaming in the NAIPs, provided key aspects of sound-practice agricultural finance policy are integrated in the process.

 

Erick Sile joined GIZ/MFW4A in November 2014 as the Agricultural Finance Senior Advisor to support NEPAD/CAADP. Previously, he worked for the United Nations Capital Development Fund (UNCDF) as Regional Technical Advisor, helping to promote financial inclusion. As Program Manager and Project Director at the World Council of Credit Unions (WOCCU), he worked in several countries in Africa developing policies and procedures, implementing various methodologies of reaching out to the unbanked. Erick holds an MBA in Finance and Information Systems from the University of Wisconsin, Madison, USA.

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