Agricultural Growth Corridors Presentation by Sean de Cleene

Agricultural Growth Corridors Presentation by Sean de Cleene, Vice President Business Development, Yara International and Vice Chair Kilimo Kwanza Growth Corridors Executive Committee, Tanzania

BAGC Investment Blueprint was launched in January 2010 SAGCOT Investment Blueprint will be launched in January 2011 Strong public – private partnership focus Partners involved separately in the two initiatives include:

Southern Agricultural Growth Corridor of Tanzania (SAGCOT)

Mozambique Beira Agricultural Growth Corridor (BACG)

Corridor investment blueprints demonstrate the potential to develop “clusters” of profitable agribusinesses Agricultural clusters that support professionalisation of both small and medium sized farms require simultaneous and properly coordinated investment by the public and private sectors

Clusters provide basis for integrated approach to agricultural growth Service providers Transportation Business support Agricultural Growth Cluster NGOs Technical assistance/ training Extension services Support to farmers organisations Private investors Private equity and debt capital for agribusinesses Village Smallholder commercializatio n scheme Commercial Catalytic Fund Seed capital for medium-sized start up agribusinesses il /Ra e d a Ro kbon c Ba Reefer container refrigeration Commercial unit Farm New feeder road Farm Smallholder service delivery scheme Development Finance Institutions Expansion capital for established agribusinesses Development partners Direct funding of public goods (e. g. backbone infrastructure) Indirect funding of public goods through Government Public infrastructure Policy environment Land titling

Major benefits to farmers and local communities Wider benefits to surrounding communities with a 25 km radius of the farm hubs and clusters include: • access to inputs and markets for smallholder farmers • provision of extension and financial services • linkages into specific agricultural value chains • job opportunities in the agricultural value chain Example: 190, 000 hectares of irrigated commercial agriculture in the Beira corridor region of Mozambique delivers: 350, 000 jobs; $1 billion farming revenues pa; 150 villages get electricity and water supply; 13, 000 smallholder farmers gain affordable access to irrigation services; improved access to inputs, finance and markets for up to 200, 000 smallholder households

Critical component is the need for innovative gov’t/donor financing to “kick-start”, at scale, investment in early-stage agriculture H. E. Prime Minister Pinda of Tanzania at the African Green Revolution Forum: called for donors “to make the catalytic fund operational as soon as possible” Traditional donor financing – supports government in developing policy and public goods to facilitate sustainable growth • Innovative gov’t/donor financing (promoting small holder integration into value chain) Catalytic Fund – takes the early-stage risks in developing new agriculture businesses Project concept “Bankable” project Patient capital – funds agricultural infrastructure including feeder roads, electrification and irrigation targeted specifically at private sector Innovative finance is provided by governments and donor agencies at a low cost of capital. Each $1 of innovative finance can leverage potentially more than $10 of private investment into socially-responsible agriculture businesses

Agricultural potential along Beira Corridor by 2030 as presented in investment blueprint 2010 • <20, 000 ha irrigated commercial agriculture • Smallholders almost exclusively subsistence production • High production and marketing costs 2030 • >210, 000 ha irrigated commercial agriculture • Smallholders have access to irrigation infrastructure and markets • Economies of scale increased competitiveness

Investment blueprint findings • Limited investment into either small or larger scale commercial agriculture • Operating costs are much higher than international benchmarks [competitors] • Investment in new commercial agribusinesses is especially weak given high start-up costs • Challenging business environment • Major constraints are lack of “last mile” infrastructure to the farm gate and a lack of access to affordable kick start finance that acts as a bridge to traditional financing • But investment blueprints clearly show there are ways to overcome these constraints. . .

The way forward • Identify areas of high potential for agriculture “clusters” with access to infrastructure backbone • Establish a partnership organisation to help coordinate targeted public and private investments within the corridor • Provide new types of finance – including “catalytic financing” & “patient capital” – to overcome high start-up costs and bridge with traditional financing • Insist on strong and direct benefits for smallholder farmers and local communities and environmental sustainability • Support development of a range of investments along the value chain, including nucleus farms, processing facilities and outgrower schemes • Recommend incentives needed to attract agricultural investment