Agriculture and Private Sector Development

Agriculture

Agriculture and Private Sector Development

Commentary
Posted on: 15th October 2012

Laurence, a widow unable to find a means to earn a living, left her home village near Gisenyi in western Rwanda and travelled eastward. She eventually re-settled in Gahara, a town in Kirehe – some 300km from where she set off – along with the three younger siblings she cares for. It was there she heard about an agribusiness company, Ikirezi, operating nearby.

The company produces and exports high quality essential oils, such as geranium and patchouli, to buyers in the US and EU, sourcing solely from small farmers in Rwanda. Since beginning to work with Ikirezi, Laurence purchased her own plot of land, constructed a house for her family, and has been able to provide school fees and health insurance for her siblings. Nicholas, the founder and Managing Director of Ikirezi Natural Products, began with a vision of providing small producers with a high revenue alternative to subsistence farming and creating a new export revenue stream for Rwanda.

Across sub-Saharan Africa, the majority of people depend on agriculture as their main source of food and income. In recent years, many African governments have implemented ‘supply-push programmes’ to increase agricultural productivity: providing free or subsidised inputs like seeds or fertilizer, or building infrastructure. This approach, which is similar to what was done in the Green Revolution in Asia, has led to some improvements but it has its limits. Countries now face the challenge of encouraging private investment in agriculture, which requires government to rethink its approach and the institutions it needs to implement it. This is why we have set up a new Agriculture Practice at AGI – our aim is to support governments to get more of the right kind of investment in agriculture, and ultimately to improve living standards, reducing poverty and hunger.

Rwanda is a small country, but eighty per cent of the population depends on agriculture for their income. Across the nation, there are several million farmers like Laurence, and now the issue for the government is how they can help connect people like her with buyers like Nicholas.

The Government of Rwanda has invested heavily in rural development: roads, schools and health clinics. But agriculture is harder. Each farm is a small family business. Farmers produce mainly subsistence crops they know how to grow even if the potential for increased income is limited. And Rwanda is so densely populated that every patch of land is already being cultivated. So the government can’t give land to investors. It needs to connect investors with farmers and reduce the risk both parties face.

The Ministry of Agriculture in Kigali was not set up to play this role. Historically, the Ministry has successfully designed and implemented rural infrastructure projects and subsidy programmes to boost production and achieve national food security.

Since 2007, the Ministry has dramatically increased levels of productivity, five to six-fold, in staple crops. This is no small feat: it has helped the country achieve food security. But, Rwanda’s ambitious goals for growth over the next five years – 11.5 per cent nationally and 8.5 per cent in the agriculture sector – require government to act as an enabler of private investment, a very different role from the past.

AGI’s Agriculture Practice supports all of our the countries we work with who face the common challenge of adapting their institutions to encourage private investment in the agriculture sector. Sharing insights across projects has helped us develop appropriate and effective solutions quickly. In response to the need in Rwanda, the government created a new Agriculture Delivery Unit (ADU) within the ministry, with plans to hire a mix of Rwandan young professionals and international experts to staff it, including support from myself, as the agriculture adviser on our AGI Rwanda Project team. In collaboration with senior staff at the Ministry, we developed the concept for the ADU through extensive consultations with government institutions and investors in the agriculture sector to clearly understand how to design the functions of the unit to effectively address the gaps in the existing skills and systems.

The job of the unit is to connect investors with farmers, and then make their investments a reality. It helps investors, because they have a single point of contact with the government. And it helps the rest of government plan better. For instance, with better coordination, the Ministry of Infrastructure can deliberately plan for utility or road development according to the needs of agribusiness investment sites, so that a new oil processing facility gets an access road and power supply. Ultimately, farmers earn more, and investors like Nicholas are able to get more products to their customers.

The Agriculture Delivery Unit has begun as a small team working in close collaboration with the Rwanda Development Board, the national investment promotion agency. Together, they are shifting the mind-set in the Ministry to better serve the needs of investors.

Since Nicholas set up Ikirezi, he has benefitted from this change in thinking: “The Ministry has the language now and strong messages from the top about the importance of private investment, but it takes time for this change to trickle down to the implementers. And policies are now in place, which help us do business. When Ikirezi started out, there was no framework for land access, and now the Land Centre and legal frameworks are in place.”

Rwanda is embracing private sector-led agricultural development as the key to unlocking growth in the sector, and AGI is helping the government build the institutions to make it happen. Like other countries in sub-Saharan Africa, the transition is a work in progress, but if it succeeds, there will be many more opportunities for African farmers like Laurence.

 


The work described here was carried out by the Tony Blair Africa Governance Initiative, it is now being continued by the Tony Blair Institute for Global Change.

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