Changing economic outlook -

Implications for Agriculture in

Africa

Agribusiness Forum – 2009

Kalyan ChakravarthyYES BANK

Cape TownJune 15, 2009

Agribusiness Forum – 2009

Scope

• Global agriculture scenario

• Situation in Africa

• Key inferences

Population is on the rise…

Population is on the rise… (cont’d)

• Global population increases by 200,000 people per day

• 75 mn Chinese urbanise every 15 months

The world is urbanizing

• Metropoles are the nodes of the 21th century network economy

• Knowledge and creativity are the crusial assets in the network economy

• ICT is key driving factor

• Agro production is in transition towards urban agriculture

• The distinction between urban and rural areas within metropoles is vanishing

• Spatial organisation of industrial agro production systems is still based on traditional land dependant forms

Food consumption pattern is changing…

• Rising global population and rising

GDP per capita is pushing up

overall food demand

• Urbanisation and a newly-forming

middle class especially in China

and India has resulted in shifting

Convenienc

e Foods

Diet/Function

al/Organic

Foods

Eastern Europe

N. America, Japan, W. Europe, Australia

and India has resulted in shifting

food habits and dietary

preferences

– Increased demand for high value

processed foods, meat, fruits and

vegetables

– Meat consumption in China has increased four fold (from 10kg per capita per annum to 40kg in less than a decade)

Dairy, Meat, Fish, Fresh Fruit Juices, Beverages

Snacks/Prepare

d Meals

Carbohydrate Staples

Surviving Mass

Market

Convenience

Food Service

Snacking

Quality

Hygiene

High

Technology

Africa (Sub-

Sahara)

India, China, Latin America

…and there has been a sharp decline in the availability of key commodities

…and commensurate increase in food prices

• Global food capacity reduced by explosion in biofuels with oil price increase

– Diversion of corn for ethanol production in recent years (the >100$/barrel era)– Oil prices have firmed up again (>70 $)– Biofuels set to consume 30% of US corn by 2010

• Credit crisis– Credit is at a premium and has impact on capital formation in agriculture in the – Credit is at a premium and has impact on capital formation in agriculture in the

short/medium term• Agri infrastructure projects – Project finance• SMES in Agriculture – Business loans• Farmers – Crop loans

– Not as badly affected as other sectors and long term prospect for investments in agriculture sector looks good

• Climate change– Global food productivity reduced as environment changed– Water security a major issue– Continuous droughts (in Australia, India and Africa)

Per capita arable land availability has been an issue

Nutrition security is a cause of concern

Africa is well positioned to meet these challenges

• 53 countries with unique value propositions

• Land mass greater than USA, China and Europe combined

• “Uncrowded space” of opportunities for water, land

• Demographic drivers stronger than • Demographic drivers stronger than any other nation (including India and China)

• Important trading partner for the West– Africa provides 18% of the USA oil

supply compared with 16% from the Middle East

• Relatively insulated from global credit crisis

Africa is well positioned to meet these challenges (cont’d)

Unleashing the true potential of Africa –Key imperatives

• Optimization of natural resources– Traditional farming methods may look sustainable but are often

not

• Not just the quantum of production but the nature and • Not just the quantum of production but the nature and quality of production would be important– Integration with the demand side of the food chain

– Education and training of all key stakeholders in sustainable farming practices

• Adaptation to deal with extreme climate conditions will be vital

Thank you!

kalyan.chakravarthy@yesbank.in