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Sub-Saharan Africa need to increase fertilizer use to unlock agric potential

According to consulting firm McKinsey, sub-Saharan Africa excluding South Africa, will need to increase the use of fertilisers and improved seeds by eight and six times, respectively, to unlock its full agricultural potential.

At least 8 Billion US Dollars of investment in basic storage and 65 Billion US Dollars spending on irrigation will be necessary in order to boost total irrigated area to 15 per cent from its 2019 level of 5 per cent. Furthermore, additional investment will be needed in basic infrastructure such as roads, ports and power. It is estimated that more than 60 per cent of the sub-Saharan population is comprised of smallholder farmers. Although the number of medium-sized- which span 5 ha to 100 ha- farms is rising, small-scale plantations still account for the vast majority of cultivated land throughout the continent. In Nigeria there are currently fewer than 100 farmers throughout the whole country who operate at least 50 ha of land.

Small-scale commercial farmers, who own cultivated farms bigger than subsistence farming, produce about 85 per cent of Africa’s agricultural output, while the remaining 15 per cent comes from subsistence farmers and large-scale plantations. Though many of Africa’s subsistence farmers live below the poverty line, this is not necessarily the case for small-scale commercial farmers. However, the lack of education, difficulties in gaining access to funding and the low use of inputs can all have a substantial and negative impact on productivity levels.

In many African countries women account for at least half of the labour force. The average age of farmers in Africa is 60 years, according to the FAO. However, this may change in coming years as the increased use of technologies in agriculture on the continent, especially in precision farming, may assist young people and women in moving into farming.

Beyond public investment, according to the report, access to finance is a major issue for most of the continent’s farmers, especially for smallholders. Estimates show that only about 10 per cent of African households in rural areas are connected to formal financial institutions.
However, innovations such as microfinance and mobile banking are opportunities to boost African farmer’s access to loans. As mobile penetration has increased to reach 44 per cent in 2017, local entrepreneurs and international institutions have developed digital financial solutions for Africa’s farmers.

These solutions are wide in scope and variety, including products like e-wallets that can be used as business accounts by farmers or mobile phone apps, such as Farm Drive, that can help farmers to develop much-needed credit history. The report further said mobile applications providing micro-insurance and index-based crop insurance are also being developed across emerging markets, including Africa.

The World Bank, for example, is developing an index-based agricultural insurance in Cote d’Ivoire for Ivorian farmers who are increasingly vulnerable to climate change and extreme weather events. A pilot phase was launched in 2018 for four crops- cocoa, cotton, rice and corn. The World Bank listed index insurance as a good tool to improve the farmers resilience, helping them boost their yields and get access to desirable funding.

Further, the report said Africa has vast swathes of uncultivated area. In 2013 the World Bank said the continent had 200m ha of suitable land that could be used to grow crops, which is almost half of the world’s usable and cultivated land. However, the region faces major issues hindering the development of additional land. It said over 90 per cent of rural land in Africa is undocumented, making it vulnerable to land grabbing. In Cote d’Ivoire, where most of the rural area indeed remains unregistered, the land continues to be extremely fragmented, making it difficult to develop profitable businesses on some of the larger plats of land.

In Egypt, meanwhile, almost 85 000 acres of agricultural land have been lost to illegal construction projects since the 2011 unrest, according to data from the Ministry of Agriculture. This prompted the Egyptian government to crack down on people building illegally on farmland. In some countries, women are also banned from land rights due to customary laws that are regularly enforced.

Recent analysis cited in an article from consulting firm Mckinsey said the majority of the unused land across Africa is located in areas barely reachable due to poor road networks and infrastructure, while some others are located in conflict of forest areas. It is estimated that only approximately 20m to 30m ha of additional land in sub-Saharan Africa- which is mostly located in nine countries and would represent a potential increase of 10 per cent- has the potential to be turned into cultivated area in the shorter-term.

The report said large land deals are also underising scrutiny in Africa. In 2018 India’s Karaturi Global asked for compensation from the Ethiopian government, which had cancelled the company’s lease, saying it failed to reach progress targets. According to McKinsey, 420 large agricultural deals, that each span 10m ha have been signed in Africa during 2000-16, but few of them have yet to be effectively implemented.

It also noted that most countries in Africa have greatly underdeveloped agro-industrial sector. That means that Africa’s exports are mostly comprised of raw products like agricultural commodities, including cocoa and coffee, and that finished goods account for the majority of the continent’s many imports. According to African Development Bank, ‘’little attention has usually been paid to the value chain through which agricultural commodities and products reach the final consumers within the country and abroad.’’ In the areas of Africa that are considered more rural, agro-processing is usually non-existent or quite basic, a fact that can sometimes result in significant harvest losses, the bank said.

Despite the challenges ahead, prospects for Africa’s agricultural sector are relatively positive. UN institutions expect cultivated areas to expand and farmers to increase their use of inputs, such as fertilisers, pesticides, improved seeds, irrigation systems and mechanisation. Innovations and greater access to technologies are expected to aid in developing smart and precision farming techniques and promoting their widespread use.

The report said, despite increased production, food security will continue to depend on global markets and significant imports of finished goods for the medium term. Contributing to this, food consumption is projected to surge as the population is expected to double by 2050 and become increasingly urbanised. At the same time, the continent is facing growing challenges.

Climate change is anticipated to be the most influential and is already directly affecting millions of farmers and households across the continent. In this context, experts have called for African governments to increase investment in the sector, including in infrastructure and agri-business and to continue improving their policies and governance. These challenges, according to the report, would encourage agriculture to truly transform into one of the strongest pillars of Africa’s successful long-term economic development.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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