This week, business leaders, project developers, development finance professionals, institutional investors representing pension and sovereign wealth funds, as well as policymakers meet in Johannesburg for the second Africa Investment Forum convened by the African Development Bank.
The Forum is an innovative marketplace - dedicated to moving development ideas and projects to bankability, to mobilizing capital, and to accelerating the financial closure of deals that can improve the lives of millions of people. Among other things, the Africa Investment Forum has the potential to accelerate Africa's agricultural transformation.
In much of Africa, 60% or more of the working population is employed in agriculture. And yet agriculture only contributes about one quarter of Africa's GDP, with the continent mainly producing and exporting raw products and importing significant amounts of processed food. The sector punches below its weight. And yet there is huge potential for income and job creation if Africa can increase productivity and move up the value chain to produce more, higher value-added, processed food.
The bottom line is that African agriculture must move from being a "way of life" to a resilient, sustainable business sector that creates prosperity, jobs, as well as improves incomes and livelihoods of rural people. The Africa Investment Forum convenes players in the agriculture and agribusiness sector who come together to roll up their sleeves and explore business and investment opportunities. The Forum's concrete "boardroom discussions" connect investment projects with investors. It brings together entrepreneurs, project developers and investors interested in agriculture to make deals.
Last year's Africa Investment Forum saw nearly 2,000 participants from 87 nations gather to discuss more than $46 billion-worth of boardroom deals. One of the highlights was a transaction involving Ghana Cocoa Board, designed to help Ghana's cocoa sector - which employs some 800,000 farm families, producing crops worth about $2 billion in foreign exchange annually. The presence of Ghana's Head of State, H.E. Nana Akufo-Addo, in the boardroom session galvanized investor interest in a sector so important for Ghana, one of the world's top cocoa exporters.
This year, Ghana's Cocoa Board returns to the Forum to sign a Facility Agreement for a $600 million syndicated receivables-backed term loan aimed at enhancing Ghana's cocoa productivity. The investment deal - also involving Credit Suisse as well as Industrial and Commercial Bank of China Limited - was born out of the Africa Investment Forum.
This year's Forum will also see a focus on Special Agro-Industrial Processing Zones, or SAPZs. There is often little investment interest in Africa's rural areas, due to a lack of transport, energy and other critical infrastructure. SAPZs are a solution to connect rural areas to regional and global supply chains, so that they can produce higher value-added processed goods in areas of higher agricultural productivity. SAPZs gather most or all the elements of an agricultural value chain in one area: from farm to fork. Aside from attracting investment, SAPZs are also important from a development perspective because that they help to raise rural incomes and create job opportunities for Africa's surging youth population.
When properly designed and well executed, SAPZs are powerful tools toward removing barriers to access to technology, infrastructure and resources to Africa's industrialization. By increasing the transformation of products like cotton, cashew nuts, cocoa and livestock, for example, SAPZs have the potential to improve Africa's overall trade balance. Many African countries have committed to integrating SAPZs in their national development strategies - the Africa Investment Forum will showcase SAPZ plans out of Benin, Chad, Ethiopia, Gabon, Senegal, South Africa, and Togo.
The Bank provides support to attract investors in the agro processing space via fiscal, regulatory, and infrastructure incentives. To make the concentrated, all-in-one-place SAPZ activity work smoothly, innovative companies pursuing SAPZs in Africa need investors.
Investor opportunity abounds, boosted by prospects of an integrated African market via the Continental Free Trade Agreement (AfCFTA), which promises to usher in the economies of scale needed for SAPZ-produced or processed goods to participate in strong regional agriculture value chains catering to a population of more than a billion people with a combined GDP of $3.4 trillion. This can then provide a springboard to global markets.
We see this vision for Ethiopia, a nation embracing the SAPZ concept with support from African Development Bank and other partners, to promote the advancement of Ethiopian crops like oilseed, wheat and maize, beef and dairy livestock and of course, its world-famous coffee. With SAPZ projects launched in Ethiopia, the impact is expected to translate into $1.5 billion in private sector investment and the creation of 400,000 jobs - with 70% of them targeting youth.
We often hear the clichés about 'Africa Rising' and Africa being the 'new hot spot' for investment. Yet Africa has not suddenly appeared! It is home to more than half of the world's fertile, yet largely uncultivated, cropland. African agriculture is a big business opportunity - by most estimates, the continent's food and agribusiness market will be worth one trillion US dollars by 2030. Yet this requires investment.
Only $7 billion per year is invested in Africa's agriculture sector - that needs to rise to about $45 billion per year to harness agriculture's power and move Africa up the value chain to create jobs and revenue. It is time to put investment money where many mouths have been talking about Africa's 'Green Revolution,' for years. It is time to equip Africa with the financial tools to grow into the reliable food production resource that feeds Africa as well as ensures that Africa does its part to feed the world. It is time for Africa to move from an aid paradigm to an investment paradigm - this is what we are doing this week at the Africa Investment Forum, in Johannesburg, South Africa.
Dr. Jennifer Blanke is the African Development Bank Group's Vice President for Agriculture, Human and Social Development.