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Speech: Making agricultural development in Africa a good business

Commission Européenne - SPEECH/13/298   10/04/2013

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European Commission

Andris Piebalgs

European Commissioner for Development

Making agricultural development in Africa a good business

Agribusiness Forum / Brussels

10 April 2013

Commissioner Cioloş,

AUC representatives

Distinguished Guests,

Ladies and Gentlemen,

Agriculture in Africa accounts for 65 percent of total employment and 32 percent of GDP. Increasing investments in agriculture – starting with support to small farmer and other domestic investors – stimulate increased production and can potentially create wealth for smallholders and rural communities. As such, it is key to fighting food insecurity. Moreover, it makes good business sense.

That’s why I am delighted that we’ve come together today to discuss agricultural development in Africa and the role public efforts can play alongside those of small farmers and businesses in realising the vast potential agriculture offers to pull countries and millions of people out of poverty.

We believe agriculture-based inclusive growth is crucial to poverty alleviation and wealth creation. Accordingly, smallholder-based agricultural development is a focal area in our European Agenda for Change, which aims to increase the impact of EU development policy.

Developing a viable and vibrant agriculture sector in Africa is a development challenge. However, it is also a significant market opportunity for companies – especially small and family farmers, who are the largest private investors in African agriculture. For African agribusinesses to make the most of the opportunities in the agri-food sector there needs to be a sustainable shift from subsistence agriculture to a productive agricultural industry that allows farmers to take part in the market economy.

Such a shift will involve far-reaching structural changes to boost production, productivity and, eventually, incomes for small farmers and other SMEs alike. But production increases must be environmentally friendly and socially sustainable. This can be done by increasing access to sustainable agricultural methods suitable for smallholders and by encouraging more women to seek training and access to land and credit.

What is “sustainable agriculture”?

But what do we mean by “sustainable agriculture”? Well, beyond the purely environmental, sustainable agriculture is also about economic viability and social acceptability. Delivering public goods like environmental benefits is closely interlinked with the capacity of agriculture to be economically sustainable, generate adequate family income, and be socially sustainable.

Basically, sustainable agriculture is about improving the quality of life in rural areas. The EU promotes sustainable agriculture at home and in developing countries, where it involves adopting more productive methods that are ecologically efficient, using inputs such as water, land, plant protection chemicals and fertilisers sparingly and effectively.

Governance

Our European Agenda for Change supports sustainable agriculture as an engine for inclusive and sustainable development. It recognises that the preconditions for such development, and for a thriving business sector, are the same: good governance, rule of law and human rights. Businesses need a favourable business environment to generate economic growth. This makes the business sector an important and natural advocate for good governance, transparency and accountability. Indeed, as I have said before, the private sector’s ability to trigger investments and to create wealth and jobs can be crucial to development.

Responsible investments

We as policy-makers can promote inclusive investment in more direct ways. But with accountability comes responsibility. In October 2012 the Committee on World Food Security launched a two-year consultation to develop principles for responsible investment in agriculture that respects rights, livelihoods and resources.

The principles are designed to complement the recently endorsed “Voluntary guidelines on the responsible governance of tenure of land, fisheries and forests in the context of national food security”. They will address all types of investment in agricultural value chains and food systems, and will include concerns of host countries and investors. Smallholder-sensitive investments may include, for example, tax incentives for investments that source produce from small-scale producers or involve them as shareholders in the business venture.

The Comprehensive Africa Agriculture Development Programme, run by the New Partnership for Africa’s Development and the African Union, also highlights the importance of attracting responsible private investment into the sector and putting quality control systems in place. The EU contributes financially to the CAADP and is committed to playing an active part in the affairs of this Africa-led, Africa-owned programme. To that end, it recently agreed to become chair of the donor group to the CAADP for a year.

Examples of our approach in action

All in all, we believe that the prospects for real public-private cooperation to build sustainable and resilient agriculture in Africa are good. In fact, our work with the private sector in African agriculture is already showing promise. For instance, via the Farm Income Diversification Programme, the EU is helping move Malawi away from imports towards production and exports. By increasing productivity and producing greater value from agriculture, the programme will help smallholder farmers see farming as a business activity rather than solely as a means of subsistence.

Its first phase brought a 50 percent rise in average farm incomes, a steep increase in milk production, and a sharp fall in post-harvest grain loss, thanks to over a thousand new granaries. A remarkable start, by anyone’s calculations. The second phase, which will run until 2015, will assist some 46 thousand smallholders in diversifying their income through various means, from training and knowledge-sharing to better primary crop storage and more agro-processing.

African farmers’ organisations also play a crucial part in tackling the challenge of reducing rural poverty and enhancing food security. They put their producers’ concerns, interests and solutions to other economic actors, to governments and development partners. Recognising this, the EU has provided 26.9 million euro to Farmers Africa to help farmers’ organisations across the continent to evolve into stable, performing, accountable organisations able to effectively represent and advise their members.

Many African agricultural value chain entrepreneurs are caught in the so-called “missing middle”, between rural microfinance and large commercial finance providers. Smallholders and small businesses need financial resources to make the sector sustainable and inclusive.

To address these issues the African Agriculture Fund came into being as a private equity fund in 2008. The EU has put 10 million euro into the fund’s Technical Assistance Facility to enable small businesses, small-scale farmers, farmers’ organisations and cooperatives to benefit, directly or indirectly, from AAF investment windows.

We are also promoting transformational development partnerships with the private sector, such as the Southern Agricultural Growth Corridor of Tanzania, or SAGCOT.

This year EU donors will provide more than EUR 50 million to this inclusive, multi-stakeholder partnership. SAGCOT has already done much for agricultural production, infrastructure and technologies, job creation and rural incomes in the region. To exploit that potential further, the Commission is looking to enhance cooperation on SAGCOT with the government and other public and private development partners.

Ladies and Gentlemen,

These examples are just some of the many traditional and new actions we are pursuing as part of our commitment to help working small farmers, SMEs and other businesses. At a global level, the EU will remain proactive in international fora and contribute to improve the "investment climate" in agriculture while safeguarding the interest of the poorest.

The G8 "New Alliance", to which we actively participated, shows the interests from all stakeholders to move in this direction and to bring genuine benefits in job creation, food security, nutrition and other areas too. This is not about paying lip service to agricultural entrepreneurship. Our ultimate aim must be to enable everyone in society – producers, workers and consumers – to enjoy the fruits of sustained and sustainable growth. It is an aim we can achieve far more easily if public and private actors work together.


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