9 October 2017

Africa: Rural Employment, Innovative Financing and Agricultural Development to Accelerate Sustainable Growth in Africa

analysis

Africa is often described as the world’s youngest continent: 220 million Africans are between 15 and 25 and are expected to be around 350 million by 2030. Such youth is certainly a great opportunity but it is also a challenge, especially considering that certain factors, if not managed properly, like youth employment, have the potential to become strong threats for our societies. We therefore urgently need to find sustainable prospects for these new generations in order to take advantage of their fantastic energy and prevent them from becoming a challenge.

Like anywhere else in the world - the UN estimates that 66% of the world's population will be living in urban areas by 2050 - young Africans living in rural areas are virtually connected to the outside world. They dream of leaving their villages and aspire to modernity. However, many of these young people from the rural exodus quickly find themselves caught up in a very precarious situation, which is often due to poorly controlled urban development.

Just like urban policies are key for the continent’s growth, employment and rural development are crucial elements, even though their importance tends to be overlooked. Let us recall that a considerable number of young people will be entering the labour market in the coming years: nothing less than 440 million young Africans aged between15 to 35 by 2030, two thirds of whom will be coming from rural areas.

How can the market absorb these new workers? How can we ensure that the rural world creates wealth and becomes a job provider on its own?

To address these challenges, the agricultural sector, which currently employs 60% of the African workforce and contributes up to 25% of the continent's gross domestic product (GDP), will have to go through a transformation process. Of course, such transformation will depend on the development of other sectors: trade, energy, roads, education, new technologies ...

In order to prosper in a sustainable manner and maintain its food sovereignty, Africa crucially has to produce what it consumes whilst reducing its imports of processed products. Indeed, many opportunities in the agricultural sector are still largely underexploited due to limited access to capital: the sector attracts less than 5% of loans from the continent’s financial institutions, while less than 10% of producers have access to credit. Sector-tailored financing is therefore the first challenge to address if Africa wants to achieve sustainable growth.

Traditional sources of financing and investment in Africa’s agriculture sector are no longer relevant and past experience has confirmed the need for alternative and innovative financing methods such as those offered by the private sector as a complement to development aid. Because of their holistic, collaborative and strategic nature, coupled with multilateral management, these innovative financing tools help increase productivity and agricultural development by catalysing private investment and addressing market failures.

These include risk management tools such as index-based climate insurance that helps farmers mitigate climate risks; collateral products such as warehouse receipt programs that eliminate the need for external collateral; or private partnerships such as equitable assistance programs for smallholders that connect agriculture and food companies with farmers, thus enabling bank financing of agricultural inputs to improve productivity.

Obviously, the rapid growth of mobile phones throughout Africa is offering even more opportunities for transformative innovations to improve rural development financing. For example, Nigeria and Kenya were the first countries to develop subsidy distribution systems for farmers for the purchase of fertilizer thanks to partnerships with mobile technology companies and network providers. In Nigeria, an estimated 4.3 million farmers have benefited from the Mobile Portfolio Program subsidising the purchase of Cellulant fertilizer, while the cost per farmer receiving subsidies is said to have decreased from USD 225-300 in 2011 to USD 22 in 2013.

In conclusion, let us recall that whilst public sector investment is certainly important for agriculture, private sector is ultimately the driving force behind rural development activity and growth. African states must mobilise all their efforts to create a conducive environment for an increased commitment from the local private sector.
Today, Africa remains the only continent to be a net importer of agricultural products, whilst more than half of African people depend on agriculture for all or part of their livelihoods. Promoting sustainable agricultural growth through innovative financing and private sector participation will therefore increase incomes and improve the overall living conditions of one in two Africans!

Africa will have 2.5 billion inhabitants by 2050 and must now provide itself with the means to achieve its ambition if it is to achieve the prosperous future to which it aspires.

Fati N'zi Hassane is Head of Program, Skills and Employment for Youth, NEPAD

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