WINDHOEK – Better access to credit, especially for smallholder farmers, could bring about a revolution in African agriculture.
Further agriculture must stop being treated as a development programme and rather as a business and the nature of new growth in Africa must open up to rural economies to unlock agriculture’s potential. These were some of the key messages at the Fin4Ag International Conference held in Kenya earlier this month, according to a media release last week by Meatco, Heiner Böhme, Meatco’s Executive for Procurement, attended the conference that brought together more than 700 financiers, farmers, regulators and agricultural finance experts, from public and private organisations from across the globe, to look at new ways of boosting finance for smallholder farmers. With participants from over 80 countries, it was deemed the largest conference ever held on agri-value chain finance, and the largest forum to bring Information Communication Technology (ICT) solutions for agricultural finance to a mainstream audience.
The conference focused on ways of revolutionising agricultural finance by encouraging financial innovation in the developing world. “The core message was that agriculture should be treated as a business. The conference resolved that there is a need for financiers (like banks) to start looking at agriculture, more specifically farming, as a sector in which they can invest. This, however, can only be realised if financiers gain a better understanding of agriculture, and if farmers in turn gain a better understanding of the financial world,” Heiner says.He adds that financiers were encouraged to identify innovative ways to fund agricultural programmes.
The Deputy Governor of the Bank of Ghana, Millison Nahr, stressed the important role central banks play in terms of financing the agricultural sector.
Millison said the financial sector can assist farmers by providing them with loans, and talked about the importance of working with robust farmers’ organisations. “In addition, there is an urgent need to help farmers’ organisations build their capacity and become more business-savvy,” he said. He argued that governments need to create an enabling environment to encourage financial institutions to work more closely with the agricultural sector.
Potential and challenges
African countries spend around U$35 billion on food imports every year. Instead of being a net importer of food, the conference highlighted that Africa should be a net exporter. However, limited irrigation, poor infrastructure, limited value-adding, high post-harvest losses and most importantly, lack of access to credit, means that farmers are failing to fulfil their potential.
In a panel discussion Heiner shared some of the challenges faced by Namibian farmers. “For most smallholder farmers, the greatest challenge is marketing their cattle to demanding consumer markets in South Africa and Europe,” he said. This includes producing cattle that will ultimately comply with the quality and all legal requirements to qualify for export, for example, traceability of the animals or the European Union’s 90/40 day residency rule. This rule requires that cattle be registered on the national database for at least 90 days, and must have been kept on the last holding for at least 40 days. This rule mostly addresses the risk of foot-and-mouth disease.
According to Heiner, another challenge for cattle farmers in Namibia is access to finance. Cattle need to be raised over a period of up to four years to reach their best market potential. “Smallholder and communal farmers need bridging capital to achieve this under extensive grazing conditions. Insufficient cash flow forces communal and smallholder farmers to sell their weaners at an early stage,” he said.
However, having sufficient cash flow to move up the value chain is not only limited to smallholder farmers. Commercial farmers own land and are able to provide it as collateral to financial institutions, the challenge is to find other means of collateral for communal and smallholder farmers that are acceptable to the banks: for example, livestock, which is a movable asset.
“From the perspective of Meatco as a major player in the Namibian meat industry, we need to secure a critical mass of slaughter cattle per year, and it is in our interest to partner with farmers and financial institutions to unlock value-adding potential not only for the producer, but for the country as a whole. Furthermore, it is important not only to enable the farmer to produce beef, but to enable the farmer to produce beef in a long-term and sustainable manner,” he said.
During the panel discussion Heiner also shared what Meatco is doing to assist farmers through initiatives like the former Ekwatho and now Meatco-owned Cattle (MOC) schemes. The former Ekwatho Scheme as well as the MOC initiative is offered to farmers over a longer period to raise cattle extensively on pastures. All production risk lies with the producer, as well as purchasing and selling the animals at the right price. Currently, Meatco has over 20,000 head of cattle financed through the MOC on farms all over Namibia.
In addition, Meatco also provides a contract feeding product offered to feedlot owners who nurture animals under intensive conditions over a short period of time, about100 days. Such owners are reimbursed for each kilogramme of value added to the animal. In this situation Meatco takes the risk of the purchasing and selling price but all production risk lies with the farmer. Meatco still controls and monitors all animals on the ground and provides technical assistance to the participating farmers. “Overall, the financial exposure of Meatco with banks has reached close to N$120 million (US$14 million) within six months. Furthermore, we have reached the targets of year three of our projects in just six months, which shows how popular these financial schemes are amongst Namibian farmers,” he said
By Deon Schlechter