Dear Friends and Colleagues
The Great Fertiliser Push in Africa: Who Stands to Gain?
The African Centre for Biosafety (ACB) has released a new report which looks at the aggressive fertiliser push in Africa against the backdrop of the continent’s new Green Revolution, which seeks to replicate the Green Revolution experiences of Asia and Latin America.However, the current push will drive small-scale farmers in Africa to adopt expensive inputs and the ACB questions the sustainability of this model.
The global synthetic NPK (nitrogen-phosphorous-potassium) market was worth over USD 200 billion in 2012 and Africa is now a target for massive fertiliser production investment with its imminent natural gas boom. The Abuja Declaration on Fertilisers of 2006 called for average fertiliser use in Africa to increase from 8 kg per ha to 50 kg per ha by 2015. Many players including those from the fertiliser industry, the Alliance for a Green Revolution in Africa (AGRA), and the G8 New Alliance on Food Security and Nutrition have been prime movers in the process.
A key avenue of access to fertilisers for smallholder farmers has been through Input Subsidy Programmes (ISPs). The report cites concerns over the sustainability and effects of the ISPs including benefitting richer farmers over poorer ones, low levels of crop response, low or negative profits, ‘leakage’ of subsided fertilisers into the commercial market, and the heavy toll ISPs place on national budgets taking money away from critical crop and soil research for local alternatives.
The key findings, executive summary and description of the report are reproduced below.
With best wishes
THE POLITICAL ECONOMY OF AFRICA’S BURGEONING CHEMICAL FERTILISER RUSH
African Centre for Biosafety
• Agriculture is dependent upon nutrients found in the soil; humans have been supplementing soil nutrients with external sources such as animal manure and leguminous plants since the dawn of agriculture.
• Today the global fertiliser industry is controlled by a handful of extremely powerful corporations. In 2012 the global sales of NPK fertilisers alone were over US$200 billion. In 2010 BHP Billiton, the world’s largest mining company, attempted a US$40 billion hostile takeover of Canada’s Potash Corp, one of the world’s largest fertiliser companies.
• Fertiliser use is currently low in Sub-Saharan Africa—1.6% of the global total. However, parts of the continent are said to be teetering on the edge of a natural gas boom which is expected to stimulate massive investments in fertiliser production across the continent. Accordingly the fertiliser industry has planned investments totalling upwards of US$8 billion in new fertiliser plants.
• Fertiliser is central to the new Green Revolution push in Africa. The Abuja Declaration on Fertilisers for an African Green Revolution (2006) called for an increase in average fertiliser use on the continent, from 8kg per ha to 50kg per ha, by 2015.
• Similarly, the Alliance for a Green Revolution in Africa (AGRA) has placed increased fertiliser use at the centre of its activities. By the end of 2013, 55% of AGRA’s Soil Health Programme grants had been spent on increasing fertiliser supply in 12 African countries. AGRA’s largest single grant to date was its US$25 million contribution towards the establishment of the African Fertiliser Agribusiness Partnership (AFAP).
• The private sector is most conspicuously represented within the new Green Revolution push by the Norwegian Fertiliser giant, Yara International ASA. Yara is one of the key private sector players behind the New Alliance for Food Security and Nutrition, initiated by the Group of Eight (G8), and the Grow Africa platform, a joint programme of the World Economic Forum (WEF), the African Union Commission (AUC) and the New Economic Partnership for Africa’s Development (NEPAD).
• The re-emergence of fertiliser subsidies in many African countries has further complicated the issue. In 2011 ten African countries spent over US$1 billion on agricultural input subsidies. ‘Smart’ (or targeted) subsidies have been encouraged by the Abuja Declaration and other organisations such as the World Bank. However, documented experiences have described problems such as elite capture (i.e. the appropriation of resources intended to benefit the larger population by a few individuals or organisations of superior status); political interference; and the divergence of scarce resources away from important areas of agricultural research, such as crop and soil science.
About This Paper
In the past few years the African Centre for Biosafety (ACB) has embarked on a research programme to track, monitor and critique the plans and activities of the Alliance for a Green Revolution in Africa (AGRA) and, more generally, initiatives aimed at advancing a Green Revolution in Africa. These include the links to private agribusiness expansion and the implication of these for small-scale farmers on the continent. ACB has identified seed and soil fertility as strategic entry points into broader debates about agricultural development in Africa, and the role of private profit in improving conditions of producers and consumers. This is based on the current importance being placed on ‘modern’ input supply to kickstart the Green Revolution. The wider use of improved seed and inorganic or synthetic fertilisers is considered essential in the Green Revolution modernisation of African agriculture.
In 2012 ACB produced an overview and initial critique of AGRA’s core programmes on seed and soil health, followed in 2013 by a detailed response to AGRA’s Africa Agricultural Status Report 2013. As this project progressed ACB realised the need also to track implementation, otherwise the enquiry would remain at the level of broad, discursive critique only. It is important to discern how farmers and their organisations are engaging with Green Revolution projects and programmes. Accordingly ACB has launched a field research programme in partnership with farmers, farmer organisations and other Civil Society Organisations (CSOs) on the continent, both to track the actual implementation of AGRA and other Green Revolution projects, and to consider the impacts on small-scale farmers as a differentiated category in which not everyone is equally affected. ACB will use this research to inform strategic and practical approaches together with its partners at national, regional and continental levels in its work towards food sovereignty in Africa. This paper seeks to cover some of the trends in fertiliser use in Africa, provide an overview of the policy environment and explore the connections between some of the key players involved. This publication will later be accompanied by a short study on the African Fertiliser and Agribusiness Partnership (AFAP), which was launched at the African Green Revolution Summit of 2012.
Soil performs numerous functions vital to life on Earth, including the filtration and regulation of water cycles, the recycling of decaying plant and animal matter and as a regulator of biological and chemical cycles (including those of carbon, phosphorus and nitrogen). It also provides the medium upon which food, medicinal and fibre crops are grown for human use, together with a wide range of important building materials, such as clays and sand. The diversity and abundance of life that exists within the soil is greater than in any other ecosystem.
Healthy plant growth requires the presence of 16 essential elements. Of these elements, hydrogen, carbon and oxygen are obtained mostly from the air and water; the remaining elements come from the soil. Some of these nutrients, including nitrogen (N), phosphorus (P), potassium (K), calcium (Ca), magnesium (Mg) and sulphur (S), are required in large quantities and are known as macronutrients. The link between soil fertility and agricultural production has been recognised since the beginning of recorded history. In Europe archaeological evidence has emerged of farmers using manure and water management techniques up to 8,000 years ago. In The Odyssey Homer refers to the application of animal manure to vineyards. The emergence of a coal-based economy in the mid-19th century, for the first time, provided large sources of external nutrients for agriculture and led us down the present trajectory of high external input agriculture. Many of the chemicals and processes used to create fertilisers were first used for the manufacture of explosives. The discovery of the Haber-Bosch process in 1908 (whereby atmospheric Nitrogen could be converted into Nitrogen fertilisers, using natural gas) dramatically increased access to cheap fertiliser. After the Second World War, much of the excess munitions stockpiles left-over were re-channeled into fertiliser production. By the end of the 20th century global fertiliser use had increased tenfold. According to the Food and Agriculture Organisation (FAO) of the United Nations (UN), the total demand for fertiliser nutrients is expected to grow by 1.9% per annum from 2012 until 2016, to reach a total consumption of 194.1 million tons. To meet this, the International Fertiliser Association (IFA) expects the implementation of 58 new urea plants between 2010 and 2015, while rising natural gas prices in the Middle East (which currently accounts for 32% of global urea exports) has spurred interest in exploiting natural gas sources in Africa. In the global fertiliser industry, scale is everything. A modern urea plant costs approximately US$1 billion to construct. In 2012 global sales of NPK fertilisers (complex fertilisers providing nitrogen, phosphorus and potassium) were worth over US$200 billion. The same year, the two biggest fertiliser companies by revenue (Agrium and Yara) made US$16.5 billion and US$15 billion respectively. Profit margins have also been rising—from 2008 to 2013 the average profits of the top ten global fertiliser companies increased by 173%. At the height of the fertiliser price boom of 2008-2009, members of Canpotex, Canada’s legal export cartel for potash fertilisers (containing potassium), were recording profit margins in the region of 480%.
With fertiliser production limited to natural gas deposits (in the case of nitrogen-based fertilisers) or geographically sparse mineral deposits of potash and phosphate rock, the last five years have seen a flurry of activity, with some of the world’s largest mining companies entering the fray. In August 2010 BHP Billiton, the world’s largest mining company, launched a massive US$40 billion hostile takeover bid for Canadian mining house The Potash Corporation of Saskatchewan (commonly known as Potash Corp). The importance of Potash Corp and its vast potash reserves was not lost on the Canadian government, who rejected the bid, or the Chinese government, who gave tacit backing to state-owned chemical company Sinochem to try to disrupt the bid by BHP. Bill Gates, through his private investment vehicle, is the largest shareholder in the Canadian rail network, which has just signed a ten year transport contract with the Canadian potash cartel. Gates has also invested in Egyptian fertiliser company OCI N.V. Though Africa accounts for less than 1.6% of global fertiliser consumption, parts of the continent are said to be poised on the brink of a natural gas boom expected to stimulate massive investments in fertiliser production across the continent. A brief review of the literature reveals planned investments upwards of US$8 billion in this regard. Parallel to this is the recently established push for an African Green revolution, which seeks to replicate the Green Revolution experiences of Asia and Latin America on the African continent. While slightly more nuanced than earlier attempts, the current push continues to drive small-scale farmers in Africa to adopt expensive inputs and produce surpluses for market. Fertiliser plays a fundamental role in this model. Several large fertiliser companies, including Yara, Notre Chemical Industries of Nigeria, South Africa’s Omnia, and the Office Ch้rifien des Phosphates in Morocco, also known as OCP Group SA (OCP), already have significant operations on the continent; they stand to benefit handsomely from this fertiliser impetus. The push for increased fertiliser consumption across the continent is most clearly articulated in the Abuja Declaration on Fertilisers, announced at the African fertiliser summit of 2006. It calls for Africa to increase its overall fertiliser use to 50kg per ha by 2015, and proposes a number of actions to achieve this. Although accurate and up-to-date information on progress towards this goal is difficult to find, it is fairly clear that this target is a long way from being met. The African Fertiliser Funding Mechanism (AFFM), proposed under article 11 of the Declaration, is still not fully operational. Despite progress being slow, many of the policy initiatives have acquired lives of their own within African Regional Economic Communities (RECs). In the intervening period the Alliance for a Green Revolution in Africa (AGRA) has been, arguably, the most prominent platform advocating the Green Revolution in Africa, and its language and logic is echoed in the more recently created Grow Africa, and the G8’s New Alliance on Food Security and Nutrition. By the end of 2013 AGRA’s soil health programme had devoted US$37.5 million—55% of its total investments—to increasing fertiliser supplies in Africa. AGRA’s largest single commitment to date has been a US$25 million contribution towards the establishment of the African Fertiliser Agribusiness Partnership (AFAP), a public-private partnership. AFAP provides credit guarantees and grant funding to fertiliser companies wishing to establish operations in the three countries of AFAP’s initial focus— Ghana, Mozambique and Tanzania. The International Fertiliser Development Centre (IFDC) has had a presence on the continent since 1987 and is another significant player in the fertiliser push in Africa. The IFDC’s donors include all the major fertiliser industry bodies, and from 2009 to 2011 it also received over US$16.6 million from AGRA. Its projects across the continent range from strengthening agro- dealer and input networks to the privatisation of Rwanda’s fertiliser value chain. It works closely with AGRA and the United States Agency for International Development (USAID) on a number of projects. In 2013 it trained nearly 690,000 Agribusiness stakeholders in Africa. USAID has been very active in West Africa, working on the harmonisation of fertiliser policy and regulations, and agro- dealer and farmer training. It has also funded a number of studies, conducted by the IFDC, into increasing fertiliser use in seven countries in eastern and southern Africa. Grow Africa and the New Alliance for Food and Nutrition have also prioritised the increased use of fertilisers. Five of the country co-operation frameworks within the New Alliance call for the creation of fertiliser policy, as well as more private sector participation in the fertiliser arena. The fertiliser industry is also well represented within the Grow Africa initiative, in which the Norwegian fertiliser giant, Yara, is by far the most prominent actor. Yara is the world’s largest producer of ammonia, nitrates and complex NPK fertiliser and has had a presence on the African continent since 1929. The company celebrated its centenary in 2005 by launching the Yara Foundation and the Yara Prize for a Green Revolution. (Controversially, the first prize winner was Ethiopian president Meles Zenawi). Yara has been one of the key players behind the World Economic Forum’s foray into African agriculture, through Grow Africa and the agricultural corridors approach.
The issue of fertiliser use in Africa has been further complicated in recent years through the revival, after a long period of being out of favour, of fertiliser subsidy programmes, described arguably as ‘the region’s most important agricultural policy development in recent years’. In 2011 ten African countries spent approximately US$1.05 billion on Input Subsidy Programmes (ISPs), amounting to 28.6% of their public expenditures on agriculture. Approximately 40% of the fertiliser consumed in Sub-Saharan Africa is subsidised to varying degrees. Inspired by the sudden resurgence in ISPs, a number of detailed academic studies on fertiliser subsidies have recently been undertaken and have found mixed results at best. In Zambia, Malawi and Tanzania evidence has emerged of elite capture, even though the subsidies were supposed to be targeted at the poorest. Another commonly reported problem is the ‘leakage’ of fertiliser meant for the subsidy programme into commercial markets or even other countries. Further, fertiliser subsidies divert scarce resources away from important research into crop and soil science. In Zambia less than 15% of annual agricultural expenditure goes into such research, compared with 40–70% of the agricultural budget which is spent on subsidy programmes. Malawi, which went from a period of food deficit to food surpluses following the implementation of input subsidies, is often held up as a shining example of the effectiveness of ‘smart subsidies ‘. However, issues with agricultural data, the problem of elite capture and the huge costs of these programmes have left many experts questioning the long-term sustainability of ISPs.