The evolution of blended finance to enhance agricultural project production in West Africa
THE EVOLUTION OF BLENDED FINANCE TO ENHANCE AGRICULTURAL PRODUCTION IN WEST AFRICA
Agricultural development in West Africa has been constrained by a number of trends that have caused a dramatic decline in production relative to population growth over the past 20+ years.
There has been a confluence of negative factors that have contributed to this decline and traditional development assistance and private sector investment approaches have not been able to overcome these broader macro forces.
The consequences of this decline include a lack of food security, high youth unemployment/social instability, as well as personal and national economic vulnerabilities. What is clear now is that traditional approaches to reversing these trends are not providing solutions fast enough for the burgeoning populations in the region.
Urbanization trends driven by perception of more attractive jobs in cities which remove skilled labor and capital from the agriculture heartland
Illegal migration to Europe through precarious land and sea borders
Constrained access to capital for local producers (both in quantum and cost)
Revenue from extractive industries and increasing public sector employment providing easier alternatives to working the land
Local currency depreciation and volatility discouraging international investment
Perceived political risk by international investors
The decline in agriculture is particularly acute in the area of “primary production.” The actual cultivation of crops and the creation of aquaculture and animal husbandry units have not been perceived as the “sexy” segment of the sector. I believe this is precisely because it is the most challenging segment of the business from an operational standpoint. It is far easier to operate milling equipment for example, than it is to engage in the hard graft of cultivating and harvesting rice or other staple crops. Yet the vast majority of rice mills in Nigeria operate at less than a 30% capacity utilization.
TIME FOR A NEW APPROACH
In order to overcome the challenges to self-sufficiency in agriculture, West Africa needs a new approach to financing: an evolved version of “Blended Finance” is the solution.
Blended Finance is the “strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets.” It typically focuses on the scaling up of existing operations by a single private sector operator.
AGRICULTURE and THE SUSTAINABLE DEVELOPMENT GOALS (SDGs)
On 25 September 2015, the 193 Member States of the United Nations adopted the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable Development, global objectives expected to guide the actions of the international community over the next 15 years (2016-2030).
The new Agenda includes:
17 goals, 169 targets and 230 indicators
Means of implementation and the global partnership
Review and follow-up.
Two other major outcomes in 2015 are integral to the 2030 Agenda:
Addis Ababa Action Agenda, a framework for financial and non-financial means of implementation
Paris Climate Agreement, a global treaty to limit climate change
… to be continued