SME Times News Bureau | 05 Feb, 2018
A $5 billion Exim Bank of
India fund to support Africa's agriculture development through the
"Feed Africa" project seems to fit into the Africa
Development Bank's plans to improve the agriculture sector to
increase food supply, provide jobs and propel economic growth on the
In it's Economic Outlook for Africa 2018, the
Africa Development Bank (AfDB) has noted that even though the
agricultural sector is the primary employer in many African
countries, particularly in rural areas where a majority of the people
live, the sector's productivity remains low.
average share of agriculture in employment was 51 per cent between
2011 and 2016, and the share of agricultural value-added remained
virtually unchanged at about 15 per cent," the AfDB said.
Exim Bank of India, in a working paper published in May last year,
planned to create an initial corpus with $5 billion to be sourced
from the country's foreign exchange reserves.
country's reserves are in the region of $375 billion. The proposed
amount of $5 billion constitutes less than 1.5 per cent of the
reserves, and would not dent the foreign exchange reserves
According to Exim Bank, the fund would
serve as a conduit for promoting investments in African agriculture
and to meet India's import requirements of pulses and oilseeds,
besides creating tremendous goodwill. The AfDB said that, in 16
countries, the sector accounted for more than 30 per cent of output,
and in Liberia and Sierra Leone in the West Africa region, more than
48 per cent.
The working paper has proposed that African
economies could avail development assistance from India to create
agriculture infrastructure, adding: "The agricultural land
supported by such eco-system could be leased to Indian firms for
"This approach would mitigate the
risks associated with upfront investments of the Indian investors.
The lease rentals could serve as cash-flow to service the debt,"
Exim Bank said, adding, "Indian investors would require funds to
pay upfront lease rentals, besides sourcing of agricultural inputs
It said the funding requirements
could be met by Exim Bank's Overseas Investment Finance programme.
However, it is proposed to create a dedicated India-Africa
Agriculture Development Fund to support the Indian investments in the
African agriculture sector.
"This would entail
setting in place an appropriate institutional mechanism for the
management of this fund. It is here that the role of the country's
apex export finance institution, viz., Exim Bank, could gain
significance since it has been actively financing overseas direct
investment through its flagship programme," Exim Bank said.
addition, it said, the funds could be utilised to extend medium to
long term foreign currency finance to Indian enterprises planning to
invest in the African agriculture and allied sector.
sector in Africa has a bright future if the needed investment, like
the Exim Bank has suggested, brought in to play. In the last decade,
AfDB said, cereal yields have increased and "agriculture has a
huge potential to provide high-productivity jobs, create wealth, and
propel economic growth in Africa, especially if countries can expand
agricultural exports." The AfDB believes "a robust and
thriving agricultural sector can also stimulate broader economic
It therefore asked African governments
to stimulate the creation of backward and forward linkages to other
sectors, including manufacturing, logistics and retail, strengthening
local operators and stimulating demand.
AfDB believes that
there are three key interventions that could unleash the potential of
the agricultural sector: Ensuring "acceptably egalitarian access
to land, facilitating the use of modern inputs, seeds, and
technologies, by improving access to credit and other means as well
as strengthening the ability to develop and adapt agricultural
In addition, the AfDB says, for
employment in the sector to increase, countries need to improve
access to international agricultural markets, balance socio-economic
demands with environmental considerations, and adapt to and mitigate
the effects of climate change.
It is not only the
agricultural sector that Exim Bank should be looking at, the AfDB
says, adding that Africa's infrastructure stock was low, particularly
in the power sector. "More than 640 million Africans have no
access to energy, giving an electricity access rate for African
countries at just over 40 per cent" -- the world's lowest.
AfDB has directed potential investors' attention to the continent's
energy potential, especially renewable energy, which it said was
enormous, yet only a fraction is employed. Hydropower provides around
a fifth of current capacity, but not even a tenth of its potential is
utilised. Similarly, the technical potential of solar, biomass, wind
and geothermal energy was huge, it said.