Africa needs $2B for a fertilizer fund. Can it raise the money?

A cash-strapped fund that aims to improve agricultural productivity in Africa is set for a major revamp with plans to raise $2 billion as part of a drive to triple fertilizer use on the continent over the next decade. The African Development Bank has big ambitions for the fund, which it plans to scale up and transform so that it can help “feed Africa.” The plan is part of a broader push by African leaders, who in May pledged to triple fertilizer use on the continent over the next decade. The aim is to boost food production and improve the quality of African agricultural soils, which are in decline amid overuse and the effects of climate change. But the challenge is large — the Africa Fertilizer Financing Mechanism, which was conceived in 2006 but didn’t start work until 2018, currently has around $36.5 million in funding. $2 billion is the amount AfDB — which administers the fund — estimates that Africa’s current fertilizer input market needs. Known as the Africa Fertilizer Financing Mechanism 2.0 road map, the reform plan entails attracting billions in new financing and diversifying its financing instruments, as well as “refining and streamlining how the Mechanism works,” the fund’s coordinator, Marie Claire Kalihangabo, told Devex. Getting to that $2 billion target will be tough, Kalihangabo admitted. “Raising awareness about the importance of fertilizer use to improve agricultural yields in Africa is central to the Africa Fertilizer Financing Mechanism’s mission – not only to help feed Africa, but also to position the continent toward becoming a breadbasket to the world,” she said. “However, the Mechanism is now operating using quite limited resources given the current size of Africa’s fertilizer market and its needs.” More than 140 million people face acute food insecurity in Africa despite the continent containing some 60% of the world’s arable land. Africa’s agricultural yields are among the world’s lowest. Access to more fertilizer can help, experts argue, hence the plan to triple its use, particularly among smallholder farmers. The pledge was made in the Nairobi Declaration, signed during the recent Africa Fertilizer and Soil Health Summit held in the Kenyan capital. In the declaration, leaders committed to “fully operationalize” the fund to improve procurement and distribution of both organic and chemical fertilizers. They also directed that a soil health fund be created within the fertilizer fund. Details are still being worked out, but it will support research, innovation, capacity building, and startups focused on fertilizer use and soil health, Kalihangabo said. Funding challenges The creation of the Africa Fertilizer Financing Mechanism dates back to 2006 at the first Africa Fertilizer and Soil Health Summit in Abuja, Nigeria. But it took over a decade to get off the ground. The plan was to increase the use of fertilizers from 8 kilograms per hectare to 50 kilograms in 10 years. However, progress has fallen short — more than 40 African countries fall below the 50 kilograms target, averaging 18 kilograms of fertilizer per hectare of cropland, according to the African Union. Meanwhile, it took until 2015 for financial contributions to roll in. The fund became operational in 2018 after recruiting a secretariat, developing a strategy and operational guidelines. While African Union member states committed to funding it in Abuja, to date only Nigeria and Tanzania have contributed to the overall operations, according to Kalihangabo. Other financing has come from foreign donors, namely the Norwegian Agency for Development Cooperation and Global Affairs Canada, while AGRA and African Development Bank Group have also paid in. Currently, the fund has projects in Côte d’Ivoire, Ghana, and Zimbabwe, and it has implemented trade credit guarantee projects in Nigeria and Tanzania. It launched projects in Kenya and Mozambique this year, and will launch one more in Uganda this month. Getting enough funding for the next phase will be a challenge, Douglas Kerr, vice president of business development at the International Fertilizer Development Center, told Devex. “There is certainly a great sense of momentum — the international donors, the bilateral and multilateral [organizations] are lining up and have large sums of money ready to invest in the continent,” he said. “We are now looking to leaders of African organizations to step up and seize the reins and that also implies funding,” he added. A localized approach IFDC’s Kerr also welcomed the news that a soil fund would be created. This marks a positive development from the 2006 Abuja summit which focused more on increasing the volume of fertilizer being used, he said. Implementing the soil fund’s aims will require a localized approach: “African soils are remarkable and complicated, showing extreme variability from one locality to another,” he said. “With this new focus on soil health and technical advances since Abuja, it’s now going to be more about assessing the situation of soil health in each specific context with regard to particular crops and the agricultural economy. “We are talking about a hyper localized approach, which the U.S. government is already investing in through the Space to Place program, and so we need to see politicians in each country step up and show leadership,” he said. The Space to Place program, which IFDC is implementing across a number of African countries, aims to help smallholder farmers use fertilizer more efficiently in order to improve productivity and financial returns by giving them “hyper-localized soil fertility and soil health recommendations” derived from regular soil data and testing. Challenges and solutions Alongside fundraising, other challenges facing the fund — and increasing fertilizer use more generally — include limited transportation networks which hinder distribution, along with limited storage capacity for fertilizers, which can lead to loss and reduced quality of the fertilizers, Kalihangabo explained. Attracting investment in the sector can also be tricky in countries where government policies make doing business difficult, while unfavorable tax regimes, foreign currency challenges and bureaucratic hurdles can also delay financing and implementation processes, she added. In response, AfDB’s new road map for the fund will propose changes including diversifying its financing tools, including risk sharing instruments that will enable co-financing, and attract greater private-sector investments in inputs production, supply, distribution, and extension services, Kalihangabo said. The fund will also “advocate for” greater investment in transportation and storage infrastructure to improve fertilizer distribution efficiency. It will also support nations to strengthen policy and regulatory frameworks and make sure they have “stable, nimble and supportive agricultural policies,” she said, Finally, the fund will also champion the promotion of regional trade agreements to create a more stable and integrated fertilizer market, Kalihangabo explained. Working with smallholder farmers However, not everyone is convinced that more fertilizer is the answer. In fact, the AU’s pledge to triple fertilizer use received pushback from attendees during the summit, including Bridget Mugambe, a program coordinator with the Alliance for Food Sovereignty in Africa, or AFSA, a coalition of civil society groups that advocates for agroecology. Speaking to Devex at the time of the announcement, she said that overuse of mineral, or chemical, fertilizers was the main reason Africa’s soils were in poor health — and so increasing chemical fertilizer use would only make things worse. “As the soils get more depleted of their nutrients, you have to add, so we see people moving from 60 kilos to 100 kilos, applying more and more fertilizer, which is not sustainable,” she said. Steve Wiggins, agriculture and rural development expert at the ODI think tank, told Devex that it was positive to see an emphasis on soil health within the Nairobi Declaration, and also the focus on working alongside smallholders to improve their soil and conserve both soil and water. If manufactured fertilizer can be made available at a lower cost to farmers to complement these efforts, so much the better, he added. “We have seen remarkable examples in Africa of farmers taking the lead and developing technologies to improve soil health, not least in Burkina Faso, Niger, and Mali. “So it’s not only and always a question of creating new science, it’s also sharing local knowledge and finding ways for formal science and local knowledge to complement one another,” Wiggins said. According to Kalihangabo, the fund has already helped smallholder farmers. For example, in Nigeria, it provided a $2.4 million trade credit guarantee which was leveraged 4.6 times and financed 76 retail agro-dealers who in turn gave more than 66,000 smallholder farmers credit for fertilizer payable after harvesting. Other past initiatives supported by the fund include supporting soil analyses that help farmers understand their soil status and needs and receive soil- and crop-specific fertilizer. The fund has also financed farmer capacity building through demonstration plots and farmer field days, Kalihangabo said.