CAAST-Net + Workshop“Africa-EU ST&I cooperation in Food and Nutrition Security: Innovation & private sector engagement”

26 November 2015, Johannesburg, South Africa

“The growing global demand for agricultural innovation makes it vital

to assess the characteristics that separate effective from ineffective

innovation fund mechanisms”

DESIGNING AND IMPLEMENTING AGRICULTURAL INNOVATION FUNDS:

Lessons from Competitive Research and Matching Grant Projects© 2010 The International Bank for Reconstruction and

Development/ The World Bank

1. New research needs from the private sector

2. Funding innovation through innovative research funding

3. Funding innovation through agribusiness funding

Research gaps:1.Research into processing, storage, food preparation and other food interventions post-farm Example: EC/FP7 AFTER: African Traditional Food Revisited by Research ; DANIDA/UniBRAIN incubators; Soy milk Benin2.Mechanization and renewable energy3.Healthier packaged food Example: Pack4Food

Renewable Energy research needsIrrigation: Diesel pumping systems fueled with biofuel, micro-hydro, solar PV, windAgro-processing: Biodiesel pumps, micro-hydro, microgrids, solar dryersMechanical energy: Biodiesel pumps, micro-hydroCooking: Cleaner biomass cookstoves, biogas, solar cookersCooling/refrigeration: Larger-scale solar PV and wind, biodiesel, and micro- and picohydro stations (power generation of under 5 kW); biodiesel engines

1. National research funding2. Value chain based research

funding3. International research funding

(int)

Some countries have managed to put in place structures or platforms to encourage operational use of research results by producers and took a serious option for solving the problem of financing the system

Public funding (donors or national subsidies) can complement participants’ fees: a % of the increased global turn-over of a value chain, on charged services

In Senegal, In Senegal the Fonds National de Recherches Agricoles et Agro-alimentaires (FNRAA) offers competitive funds for research addressing the real needs of producers & private sector. FNRAA is a mechanism for funding public agricultural research since it involves innovative farmer organizations directly via the Conseil National de Concertation et de Coopération des Ruraux in its decision-making and evaluation. It allows research orientation to the demands made by the producers and agribusiness needs.

In Burkina Faso, the Ministry of Research Science and Innovation created in January 2011 the National Fund for Research and Innovation for Development (FONRID).orientation of research towards demand and national priorities; improving the quality of scientific research;the promotion of invention and innovation;diversification of the scientific, technical and financial partnership.

In Ivory Coast 18 value chains work with the Fonds Interprofessionnels de la Recherche et du Conseil Agricole  (FIRCA) and 13 to 14 are collecting fees. The value chain actors identify the projects which FIRCA finances in the field of applied research, agricultural advice, technical training and the reinforcement of capacities.Examples: hevea , palm oil, coffee, cacao, pigs,  poultry, fruit-citrus

GlobE - Global Food Security. Federal Ministry of Education and Research of Germany Reduction of Post Harvest Losses and Value Addition

in East African Food Value Chains (University of Kassel): pastoral meat value chains (RELOAD research project)

Trans disciplinary research: Stakeholder processes, knowledge integration and collaborative learning

Two Dutch Funding instruments on food security challenges Netherlands Organisation for Scientific Research the Global Challenges Programme the Applied Research Fund : involvement of

practitioners

1. African banks2. National SME funding (Ghana, Nigeria,

South Africa)

3. EC-SME equity funds (int)4. NGO-SME equity funds (int)5. International research funding

(int)6. Investment funds(int)7. Matching funds (int)

Most banks have SME departments – but exceptionally agribusiness - with varying degrees of understanding of what constitutes an SME, whether by annual turnover, number of employees, or financing needs.

A number of banks are also trying to formalise their relationships with agri SMEs through ‘Business Clubs’ for SME managers and overseas trips to market trade finance products.

Financial institutions are not lending to agricultural SMEs (the ‘supply’ side).

And SME agribusinesses are not applying for finance (the ‘demand’ side).

too risky and unprofitable to lend topoorly managed, inexperienced and lacking sound business plansundercapitalised and without

sufficient assets such as land against which to lend

There is a ‘missing middle’ of financial products that are suitable for agricultural SMEs and that this is holding back their growth.

Agricultural SMEs tend to be too big for very small-scale loans offered by NGOs and others, but too small to be able to borrow money from commercial lenders affordably and viably

There is a need for innovative funding schemes to bring tailor-made loan products to agricultural SMEs

In Nigeria: the Fund for Agricultural Financing (FAFIN) and the Nigerian Funding and Youth Empowerment Programmean innovative agriculture-focused investment fund that provides tailored capital and technical assistance solutions to commercially-viable small and medium-sized enterprises (SMEs) and Intermediaries across the agricultural sector27 Nagropreneurs that received the initial grant through the Federal Ministry of Agriculture (FMARD) and Rural Development under the Youth Employment in Agriculture Programme (YEAP).One of the funders is KfW. KfW Development Bank carries out Germany’s Financial Cooperation with developing and emerging countries on behalf of the German Federal Government.FAFIN has a preference for investment opportunities that enable import substitution, increase food security, or bridge gaps and fix inefficiencies along supply chains.

In South Africa: Agro-Processing and Agriculture funding The Industrial Development Corporation (IDC) of South Africa funds the development of competitive proposals  of competitive processed food, beverage, fibre, forestry and derivative industry that optimally utilises and develops local and regionalresources to supply domestic demand and increase participation in international trade.This is achieved by expanding production capacity and promoting value adding expansionary agro processing activities in a manner that fosters economic inclusivity.The business unit of IDC provides support to a wide range of economically viable activities in agro-processing (food and non-food) sectors such as: Maize, Wheat and sugar, Livestock such as cattle, poultry, pigs and game, Fishing and aquaculture, Beverages, Forestry, Horticulture including fruit, vegetables, nuts, tea and coffee

In Ghana: EDAIF : Export Development Agricultural Investment Fund (2000, amended 2011) Development and promotion of agriculture, relating to agro-processing and agro-processing industry;Provision of credit, refinancing and credit guarantee through designated financial institutions to persons in the agriculture and agro-processing sectors of the economy;Appraisals and studies necessary to determine areas of the agriculture and agro-processing sectors that need intervention; andMonitoring and evaluation of the interventions.

ICCO Cooperation, an international Dutch development organization launched in May 2015 its Agri-Business Innovation Challenge 

The purpose is to kick-start and boost the business of innovative agri-entrepreneurs in Uganda.

There were cash prizes up to EUR 20,000 for the three most promising businesses to roll out their business models, and a chance to qualify for investment by the ICCO Investment Fund.

Rabobank Foundation supportsAfrican exporters of fruits and vegetables can benefit from slow capitalfarmers to combine forces by forming cooperativesthe purchasing power, the sales position and obtain financing to develop farming and export operations. It allows to commission research according to FO and private sector priorities

22 June, 2015. Utrecht. Rabobank. Conference "The Future of Farming

and Food security in Africa".

Entrepreneurs 4 entrepreneurs (Belgium)Drink yoghurt Laki Laki in Kenia Farm in Thika, factory in Juja Nutritious breakfast (tourism) and orphanage.Request: 25,000 Euro for business plan development REEL FRUIT (Nigeria)Vitamin rich food snacks. Mechanized food processing. Request: 80,000 EuroGeoffman Chili (Uganda): Chili pepper for food, pharmacology, pepper-spray. The trees prevent erosion. Request: 50,000 Euro

The Delegation of the European Union to Uganda launched in 2015 a SME Development Fund (Equity Fund) It will be open to all sectors of agribusiness, including livestock.Invest in commercially viable enterprises with strong growth potential that empower smallholder farmers in Uganda to increase their revenue, livelihoodFund size: USD 30 million (at first closing) – EU will invest EUR 10 millionInvestment period: 5 yearsThe EU/Uganda aims at targeting at least 25-30 companies with the first closing of the fund.

The set up of this fund was informed by a study on the commercial beef industry.

The overall objective of this study was to contribute towards obtaining an insight into the beef value chain in order to design interventions that lead to commercial sustainable solutions that contribute to better performance through a public-private partnership with focuson small and medium enterprises.

1. Investment: Individual investments in the range of € 200,000 - € 5 million.

2. Business Development and Advisory Services

3. Value Chain Analysis for better accountability and decision making.

• EU blending framework. • Call for Proposals (Grants): Smaller size

investments may be addressed through Call for Proposals

• Financed out of thematic programmes, as well as regional and country programmes.