Tuesday, 4 April 2016 | Tony O. Elumelu, CON’s speech at the Chicago Council on International Affairs’ Agriculture Symposium
Co-Chairs of the Chicago Council’s Food and Agricultue program, Dan Glickman and Doug Bereuter; Ambassador Ivo Daalder, President of the Council; Dr. Rajiv Shah; Distinguished Policy-makers, Technocrats, Investors, Industry, Researchers, Journalists, Academia, Civil Society and Scholars; Ladies and gentlemen;
It’s a pleasure to be here with you this morning. My name is Tony Elumelu and I am the Chairman of Heirs Holdings, an African proprietary investment company which invests long term in strategic sectors across Africa. I am also the Founder of the Tony Elumelu Foundation.
I want to thank the United States Government and the Chicago Council for your continuing leadership in matters of food security and emergency food assistance.
The global food security paradox is a very sad one. On the one hand there is more than enough food to feed the world’s 7 billion inhabitants. There are surpluses in – mountains of grain; pyramids of meat; and rivers of milk in some world regions. On the other hand, too many beg and hope for their next meal. The other sad paradox is that my continent, Africa, which holds 60% of the world’s uncultivated arable land, is home to the largest population of chronically hungry, malnourished and, in some years, starving people. And we are a net importer of food.
So, my remarks will focus on this region and what can be done to address this situation. As the Chicago Council’s report states, by 2050, the world’s population will be 9 billion and 66% of this population will live in cities. So, we need to plan NOW to feed the FUTURE population! In Africa, the rate of migration from rural areas to the cities is happening at an even more rapid pace. This is an undesirable phenomenon, because farming there is a labour intensive endeavour. And when young people leave the rural areas, manpower is lost, along with the transfer of skill in crop cultivation and animal husbandry which will, cumulatively, have negative consequences on food supply and cost in a country.
To effectively tackle this problem, we first need to ask ourselves why this is happening. The answer is simple. People move in search of better opportunities elsewhere and jobs!! The high rate of urban migration in Africa, particularly among young people, is largely because the rural economy – which is predominantly agrarian – has been stagnant. Africa has a comparatively young population and needs to create millions of jobs a year for the over 10 million young men and women who will enter the workforce each year between now and 2030. If that challenge is met, Africa can become the engine of global economic growth for years to come. If not, we risk mass unemployment, political and economic instability. In essence this DEMOGRAPHIC BOOM could easily spell DOOM. While the high rate of rural urban migration in African has become a socio-economic, security and environmental concern, it is important to understand that THESE YOUNG PEOPLE ARE NOT FLEEING FROM FARMING AS AN OCCUPATION. THEY ARE FLEEING FROM POVERTY!! The two have become conflated because farming seems to have failed an entire generation. Too many young Africans have grown up watching their parents labour for a lifetime as subsistence farmers, only to remain desperately poor subsistence farmers! African farmers mostly subsist on one growing season and only realize one-fifth of what U.S. farmers would harvest from the same hectare of land. We need to turn-around this sector now!
The good news is we can do this and I will show you how later on, when I discuss the Tony Elumelu Entrepreneurship Programme. This is an example of how excited young people can get about agriculture when they have the tools and are presented with opportunities which facilitate success! I am an advocate of the philosophy of Africapitalism. Africapitalism asserts that the private sector must acknowledge and embrace its role in advancing development, particularly in Africa. Africapitalism promotes long-term investments in strategic sectors which unlock both economic and social dividends.
Agriculture is arguably the most strategic sector on the continent because: It delivers 2-3 times the return on investment, in terms of improved economic well-being, as other sectors, represents 32% of Africa’s GDP; and employs 65% of the working population. Most importantly, it is the sector where the poorest on the continent are most likely to be engaged in their struggle to survive. Unlike in Western societies, Africa’s farmers are among its poorest citizens. What this tells us is that to succeed, any programme or initiative aimed at eradicating or alleviating poverty or stimulating job creation or facilitating gender empowerment, MUST tackle the agriculture sector.
Basically, I believe that IF WE TRANSFORM THE AGRICULTURE SECTOR, WE WILL TRANSFORM THE AFRICAN CONTINENT! But we cannot achieve this transformation without addressing the critical nexus between strategic sectors of agriculture, transportation and power! Economic sectors do not operate in isolation! They are interdependent on each other. In order to boost the agriculture sector, we need investments in roads to facilitate the transportation of produce and finished goods from rural areas to urban markets. We also need investments in energy for processing and preservation, particularly to support the cold chains required to meet the new dietary demands of urban consumers. And of course we need financing to underpin all of these infrastructural needs. And we know that African governments do not have enough capital to deliver on these infrastructural needs alone. The private sector however, has and can access the capital, expertise and discipline to help meet these needs. Africapitalism provides a bridge to the solution.
Africapitalism requires governments and the private sector to work in “SHARED PURPOSE;” to achieve what Dr. Jim Kim, President of the World Bank, calls “SHARED PROSPERITY.” That is GDP growth MUST permeate multiple sectors and levels of society. SHARED PURPOSE is critical to achieving economic growth and development objectives. African governments are starting to understand this and are working with the private sector to construct roads that open up rural and remote areas to move products to market; and to connect countries to take advantage of larger regional markets. For example, between 2010-2014, the African Development Bank partnered with African governments and the private sector to finance the construction and rehabilitation of 230,000 kilometers of feeder roads, enabling 563,000 people to benefit from improved access to transport. In the power sector, working with African governments and private sector leaders, President Obama’s much-lauded Power Africa Initiative, is boldly tackling the challenge of expanding access to electricity that will unlock opportunity and growth across countless other sectors and innumerable businesses. Through Power Africa, the U.S. government has engaged 120 public and private sector partners, and marshalled $43 billion to create 60 million new power connections. My company is part of this initiative. Through Transcorp Power, Heirs Holdings made a $2.5 billion commitment to deliver 2,500 Megawatts under Power Africa. Transcorp is a key player in the Nigerian energy market and, currently, generates about 19% of Nigeria’s power. When investors respond to government commitments and step up to partner with them, THAT IS SHARED PURPOSE! THAT IS AFRICAPITALISM.
Another example I would like to cite is that, in response to the African Union’s Maputo Declaration of (2003) where African governments committed to spend 10% of their national budgets on agricultural development, the United Bank of Africa (UBA) Group, which I chair and which operates in 19 countries across Africa, stepped up to the plate and is now the top lender in Nigeria among peer banks. When financial institutions recognize government priorities and deliver capital to amplify their efforts, THAT IS SHARED PURPOSE! THAT IS AFRICAPITALISM.
Heirs Holdings is directly invested in Agriculture through the African Commodities Exchange and East African Exchange which are commercial platforms in Nigeria and East Africa aimed at helping subsistence farmers become entrepreneurs by giving them access to multiple and competing buyers, so they can get better prices for their produce, and reduce post-harvest losses through warehousing. AFEX will also create financial products to give farmers access to credit and enable them to wait for better prices and get up to 25% more for their produce. We also aim to make small farmers more competitive by facilitating the aggregation of products of similar quality to fill large orders from urban areas. For processers who have made large investments in the manufacturing, sector we are looking to provide them with a reliable supply of raw materials and quality assurance. When large corporates embrace a government agenda of improving the income and bankability of small-holder farmers, THAT IS SHARED PURPOSE! THAT IS AFRICAPITALISM.
If the public and private sector work together in SHARED PURPOSE, we will be able to retain the knowledge and manpower needed in rural areas to support agriculture, and control the rate of urbanization because we will have made it possible for our young people to earn a good living and grow their businesses right where they were born and raised, as agro-allied entrepreneurs. To illustrate this point, I’m going to tell you about some the Tony Elumelu Foundation’s Entrepreneurship program. The Tony Elumelu Entrepreneurship program is a $100 million commitment to identify, train, mentor and seed 10,000 African businesses over the next 10 years, towards creating 1 million jobs and $10 billion in additional revenue across the continent. While the program is sector agnostic, agriculture represents over 30% of the 65,000 applications we received, for 2015 and 2016. That means 30% of the best 2,000 ideas selected to benefit from this merit-based program are agro based. What this tells you is that Africa’s entrepreneurs have not given up on agriculture! They see it as a sector full of opportunities that will bring them wealth! And they have innovative, scale-able and transformative business ideas for this sector.
In other words, they are the “Missing Middle” identified in the Council’s report – the bridge between farming entrepreneurs and urban consumers. They are also developing the supply chain for the emerging urban African middle class that has disposable income and whose nutritional preference includes fresh fruit and vegetables, meat, and dairy. They, and others like them, are stepping up to meet the nutrition demands of growing cities while developing the productivity component and supply chain for their rural partners. And between their innovations and access to finance from the Tony Elumelu Foundation, they are overcoming the constraints of the weak enabling environment for business. These entrepreneurs and others like them in other sectors are going to make a world of difference in Africa! They are the people that will fuel Africa’s economic future! Of all my investments over nearly three decades on the African continent, I believe these entrepreneurs will prove to be the best investments I have made. I want to wrap up my remarks about the impact of urbanization, public private sector collaboration and entrepreneurship on food security in Africa, by saying that I believe that agriculture is an inherently profitable sector because people must eat. Prioritizing and transforming this sector in Africa is not just a moral imperative, it is a smart business strategy that will save lives, unlock jobs, grow economies and stabilize regions.
Investing in Agriculture not only gives us the ability to achieve SDG2 of “Ending Hunger,” it also has the ability to help achieve other SDGs such as good health, economic growth and infrastructure, thereby transforming the continent. Everyone – from the public to the private, the scientific, academic, media and the non-profit sectors – has a role to play. And we must work in “SHARED PURPOSE.”
I started by recognizing U.S. global leadership on matters relating to hunger and food security and I want to finish there, albeit digressing to discuss emergency food aid because it is an important debate in U.S. foreign policy circles. When it comes to foreign assistance, THERE IS NO MATCH for the decades of generosity of the American people!
What I want to urge you to ensure is that, even as we work to prevent food crises by investing in agriculture, when it becomes NECESSARY to feed people, that the U.S. provides the MOST EFFECTIVE KIND OF HELP. Every year, the U.S. provides over $1 billion in food aid globally. This is a life-saving policy. And EVERY LIFE IS PRECIOUS! What is missing from this policy, developed in the 1960s, is FLEXIBILITY!! In some cases, food will need to be shipped to some places to save lives. But in other cases, food is available in the affected region that can be; bought more cheaply, delivered faster; and without distorting local markets. The distortion of local markets is a critical issue because, no matter how hard they try, local farmers CANNOT COMPETE with FREE food!
I know that NO AMERICAN wants to save lives while impoverishing local and regional farmers. Therefore, it is time to EMPOWER the Administrator of USAID with the MAXIMUM FLEXIBILITY TO PROVIDE THE BEST ASSISTANCE IN ANY GIVEN FOOD CRISIS. The food aid set-aside is but a drop in the ocean of US agricultural output and shipping routes.
Regardless, Food aid MUST NOT become an industry. Those involved should be seeking to work themselves out of a job! Policy-making is not for the faint of heart. It requires KNOWLEDGE and it requires COURAGE. We KNOW that flexibility is the right way to do food aid that will save more lives. I want to appeal to the U.S. Congress and the next President of the United States to join champions like Representatives Ed Royce and Eliot Engel and Senators Bob Corker and Chris Coons in making the COST-EFFECTIVE and COURAGEOUS decision to PASS BILLS THAT FIGHT FAMINE WITH FLEXIBILITY. And I’m appealing to all of you here to make sure that they do it.