Strategy for agricultural transformation in africa

Figure 18: Current funding for agriculture development in Africa vs. requirements for 
transformation (US$bn/year) 
 
4.9 
There are sufficient resources within Africa and key potential partners for this 
gap to be met
. What is required is a combination of raising government spending on 
agricultural transformation, raising more catalytic funding from the Bank and other multilateral 
and bilateral institutions, and catalyzing greater investments from the private sector: 

African governments spent ~$12bn on agriculture in 2014. Meeting the Malabo 
commitments of allocating 10% of public budgets to agriculture would imply raising 
this level of spending to ~$40bn based on 2014 budgets, which would be more than 
sufficient to meet the entire financing needs of transformation. However, the feasibility 
of increasing public spending to this level, given the original Maputo declaration was 
made in 2003, is low; financing a business-led transformation agenda 100% through 
government funding is unlikely to achieve desired results without significant 
distortionary effects. A partial increase of government investment into transformation 
is important, especially for country-level ownership, but other levers are required. 

Multilateral and bilateral donors, plus foundations and non-governmental organizations 
spent ~$3.8bn on agriculture in Africa in 2014. The AfDB intends to raise its average 
annual investments into agriculture by $1.8bn to reach $2.4bn per year, raising total 
level of available funds from this category of financing to ~$5.6bn per year.

Private sector and institutional capital will be a critical source of financing; commercial 
bank lending to agriculture is ~$660m per year, out of a total of ~$14bn per year
35
, or 
4.8% of annual lending. Existing net assets in Africa are also material: net banking 
assets are ~$800bn in Sub-Saharan Africa alone
36
, African sovereign wealth funds have
assets under management (‘AUM’) of ~$160bn, pension funds constitute $380bn 
35
 Based on the World Bank’s definition commercial bank lending (public and publicly guaranteed, plus private 
non-guaranteed) and other private credits, for Sub-Saharan Africa and North Africa, for 2014
36
 KPMG, 2014 
Sources: OECD DAC CRS database; 
http://www.governmentspendingwatch.org/spending-data
; Initiative for Smallholder Finance, “A Roadmap For Growth: 
Positioning Local Banks For Success In Smallholder Finance,” 2013; Dalberg, “Catalyzing Smallholder Agricultural Finance,” 2012; IFC, “Closing the Credit Gap 
for Formal and Informal Micro, Small, and Medium Enterprises; EY, “Africa 2015 Making Choices”; IFC, “Private Equity and Emerging Markets Agribusiness: 
Building Value Through Sustainability,” 2015
$9bn
$3bn
~$32-40bn
~$23-31bn
Govt Spending
<$1bn
Gap