Log in / Register
Home arrow Economics arrow Finance for Food
< Prev   CONTENTS   Next >

6.1 Capital Requirements

To finance the corridors, several types of capital and investments are needed. This calls for a rethink by donors and governments as to how they have traditionally financed agriculture. Much more focus is needed on financing the private sector to assist in bridging the early stage development of a commercial model, with smallholders as a key component, to the point that such an investment is ready and can be employed by mainstream commercial investors. Catalytic financing that blends “social venture capital” and match grant financing is sought to support companies and organizations to undertake project development that can be brought to scale; “patient equity” is needed to finance the scalable irrigation infrastructure development to farm-gate, catalytic value addition, and post-harvest development; commercial debt and equity is required to invest in on-farm operations, value addition and services; public investments and grants are called on for public infrastructure and targeted support to smallholder farmers.

Aiming to harness total private sector investments to the tune of $3.59 billion for the two corridors combined, a Catalytic Investment Fund (CIF) has been established for each of them: with initial commitments of $15 million for BAGC, and pledged commitments of over $70 million for SAGCOT from players including the World Bank and USAID, the government of Norway and the government of Tanzania itself. In late 2010, the first round of loans to several start-up agriculture businesses in the Beira corridor region was provided by AgDevCo and by the time of going to print 23 catalytic investments had been made under the fund.

However a critical component of the catalytic fund approach is that such financing will leverage in additional private sector investment. Conservative estimates in the case of SAGCOT are that initial catalytic funding and similar investment facilities to the tune of $100 million will leverage an additional private sector financing of $500 million.

To highlight this fact, the first infrastructure investment on the ground was made by Yara, when we launched our $20 million investment into a new fertilizer terminal near the port of Dar es Salaam in January 2011, at the same time as the SAGCOT blueprint was launched. The investment, declared the CEO and President of Yara International ASA Jørgen Ole Haslestad, served to strengthen the company's long-term commitment to the development of Tanzania's agricultural sector. Interestingly, the terminal was a result of an initial invitation from Tanzania to come and help stabilize the fertilizer market. Since then we have developed a constructive dialogue with the government and President Jakaya Kikwete, a strong supporter of the SAGCOT. The fertilizer terminal, with a revolving storage capacity of 45,000 tons, is a crucial component in improving the input supply chain and bringing vital crop nutrition to the interior, through the corridor.

At the same time as easing the access to minerals and helping to stabilize the fertilizer market, the terminal contributes to improve the efficiency of the key regional port of Dar es Salaam. Port efficiency is crucial in international trade, the World Bank states,[1] requiring both institutional and infrastructure investments. In eastern Africa, several countries are land-locked, dependent on the harbors of their neighbors. Not only has trade been complicated by political disputes, the quality of transportation services and the capacity of port handling have often been particularly weak, adding further to the high costs of long transportation routes.

  • [1] World Bank, “World Development Report 2010: Reshaping Economic Geography”, 2010.
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >
Business & Finance
Computer Science
Language & Literature
Political science