Opportunities & Challenges in major global fertilizer regions Africa Argent Chuula Chief Executive Officer, COMESA-ACTESA
Outline Background: The Problem Global Fertilizer landscape Africa current fertilizer landscape Macroeconomic Development In Africa Africa s Fertilizer Market in the Global Context Challenges Interventions Opportunities The Big Picture
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Yield (t/ha) Problem: Poor seed, Poor soils, Poor Field management = Low productivity 6 5 4 3 2 1 0 Eastern Africa Southern Africa Western Africa Eastern Asia Southern Asia South-Eastern Asia 3
THE FOOD SECURITY CHALLENGE + 1/3 Principle Food Security Seed System Fertilizer System Agronomic/Technical Practices 1 4
Background Regional Regional Fertilizer markets face many challenges: Low yield and rain-fed dependent production systems Poor agriculture technology High marketing costs Limited public resources Different Policy Framework on fertilizer trading Weak fertilizer manufacturer High taxation, VAT High logistical costs: 30-70% of costs Different fertilizer blend specifications in Africa As a result Fertilizer cannot move from country to country Increases the cost of production Productivity enhancement Roads, rails, and ports Storage infrastructure Photo here Steering the Fertilizer Industry through Challenging Times
Facts History shows that no region in the world achieved Food Security and achieved substantial productivity increases without significantly expanding Fertilizer use Greater use of Fertilizer is indispensable for an African Green Revolution: Farmer Education on Fertilizers: Concept & USE Steering the Fertilizer Industry through Challenging Times
Global Fertilizer Landscape 2012-2016 and beyond The World demand for total fertilizer nutrients is estimated to grow at 1.9 percent per annum. The demand for nitrogen, phosphate, and potash is forecast to grew annually by 1.3, 2.0, and 3.7 percent, respectively The global potential nitrogen balance (i.e., the difference between N available for fertilizers and N fertilizer demand) as a percentage of N fertilizer demand rose by 2 per cent in 2012 to 4-5 per cent in 2013 and 2014. and a further around 8 per cent during the last two years of the forecast period, i.e,2015 and 2016. Steering the Fertilizer Industry through Challenging Times
Global Fertilizer Landscape 2012-2016 and beyond The global potential balance of phosphate also has risen from 2.1 million tons in 2012 to 3.8 million tons in 2016 or from 5 per cent of total demand to 8 percent. The global potential balance of potassium as well rose significantly from 8 million tons in 2012 to 15.6 million tons in 2016 or from 25 per cent of total demand to 42 percent. Steering the Fertilizer Industry through Challenging Times
Africa Fertilizer facts Small fertilizer markets (majority of countries use < 100,000 tons annually) Majority of these markets are liberalized but there is still substantive government involvement (subsidies) Average fertilizer use 8 kg/ha (mainly for cash crops) Agronomic efficiency low: 10 kg grain / kg fertilizer Fertilizer demand SSA: 1.4 million mt nutrients Global fertilizer demand: 175 million mt nutrients Less than < 10% of global population Less than <0.8% fertilizer use Africa use orthodox technology of fertilizer use and application Steering the Fertilizer Industry through Challenging Times
Africa s Fertilizer Landscape GENERAL (FAO) Africa accounted for about 2.9 percent of world fertilizer consumption in 2011. Its current share in world consumption of nitrogen is 3.3 percent, phosphate 2.6 percent and potash 1.8 percent. The average growth rate in demand for Nitrogen, Phosphate, and Potash for fertilizer was 2.6, 2.9, and 3.3 percent, respectively, between 2012 and 2016. The fertilizer nutrient supply/demand balance indicates that Africa region would remain a major exporter of phosphate, followed by nitrogen. For potash, the region would continue to depend solely on import. Steering the Fertilizer Industry through Challenging Times
Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 13-Aug Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 11 Trends in UREA Fertilizer Demand and Supply in the COMESA region 1,400 1,200 1,000 800 600 400 200 - @World Kenya Malawi Mozambique Rwanda Tanzania Uganda Zambia Source: AMITSA
Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 13-Aug Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 12 Trends in NPK 17-17-17 Demand and Supply in the COMESA region 1,400 1,200 1,000 800 600 400 200 - Kenya Rwanda Tanzania Uganda Source: AMITSA
Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 13-Aug Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Trends in CAN Demand and Supply in the COMESA region 13 1400 1200 1000 800 600 400 200 0 Kenya Malawi Tanzania Uganda Zambia Source: AMITSA
Fertilizer Use Per Hectare in Selected Countries, 2014 Figure 1. Fertilizer Consumption per Hectare of Arable Land for Selected African Countries, 2006/2007 Uganda Madagascar Mozambique Tanzania Sub-Saharan Africa Senegal Ghana Zambia Cote d'ivoire Malawi Africa Kenya South Africa Non-Sub-Saharan Africa World Egypt 2.0 3.0 5.0 7.0 9.0 9.0 12.0 14.0 18.0 21.0 25.0 37.0 47.0 72.0 118.0 448.0 0 100 200 300 400 500
Africa s Fertilizer Landscape 2012-2016 North Africa The share of North Africa in world consumption of Nitrogen is 1.7 percent, Phosphate 1 percent and Potash 0.5 percent. The growth rate in demand for Nitrogen, Phosphate and Potash for fertilizer is expected to be 2.3, 1.7 and 1.2 percent, respectively Egypt and Morocco have a major share in consumption in North Africa Steering the Fertilizer Industry through Challenging Times
Africa s Fertilizer Landscape 2012-2016 Sub-Saharan Africa Sub-Saharan Africa in world consumption of Nitrogen is 1.6 percent, Phosphate 1.6 percent and Potash 1.3 percent. 2012-2016 and Beyond The growth rate in demand for Nitrogen, Phosphate and Potash for fertilizer is expected to be 2.9, 3.7 and 4.2 percent, South Africa, Nigeria, Ethiopia, Kenya, Zambia, Malawi, Ghana Zimbabwe and Tanzania are the major users of fertilizers in Sub-Saharan Africa. Steering the Fertilizer Industry through Challenging Times
Fertilizer Supply Chains in Africa SC1 SC2 SC3 SC4 SC5 Overseas Manufacturers Overseas Manufacturers Overseas Manufacturers Overseas Manufacturers Importers Domestic Manufacturers Importers Importers Importers Wholesalers/Distri butors Export Crop Company NGOs SOEs/Ministry of Agriculture Extension units Agrodealers Village stockists Company Distn Scheme (large companies producing cash crops for export Farmer Group Service Centers Small-scale farmers Small-scale farmers Outgrowers Farmer group members/ SSF
Fertilizer Distribution Channels in Africa 1 18
Africa s Fertilizer Challenges Infrastructure: Poor/lack of High Price of fertilizers Enabling Policy Environment: Poor/Lack of Unbalanced trade with international Markets Weak Supply/Distribution chains/ channels Inefficiency leading to Higher Fertilizer Prices Food Shortages due to Low production Recurrent hunger in selected countries/regions Steering the Fertilizer Industry through Challenging Times
Interventions Abuja Declaration June 13, 2016 African Heads of State and agricultural leaders wrote the historic Abuja Declaration on Fertilizer for an African Green Revolution at the conclusion of the Africa Fertilizer Summit, which was held June 9-13, 2006, in Abuja, Nigeria Abuja Declaration called for: Increase fertilizer use from 8 kg/ha to 50kg/Ha by 2015 COMESA- ACTESA has in place its fertilizer program in response to the Abuja Declaration Steering the Fertilizer Industry through Challenging Times
ACTESA s Role in Fertilizer Business Establish business linkages in value chain leading to Reduction in transaction costs Increase the use of inputs Increase agricultural productivity Facilitate harmonization of fertilizer standards and quality across the region Assist agribusiness partners with training, mentoring and collaboration to identify and address Fertilizer value chain needs, potential partners and deliver real sustainable change Act as a conduit between private and public sectors, as well as a coordination mechanism for donors, to ensure utilization and use of Fertilizer 21
Africa s Macroeconomic Indicators Despite the slowdown in the global economy, Africa reported 6.6% growth in 2013. Sub Saharan African growth alone stands at 5.7%. Export performance remains strong; inward investment is strong (AfDB 2013 Annual Report) Contrary to popular perception, intra-african trade and investment has been growing Our cities are booming behind strong retail demand for goods and services. Real GDP has doubled in 12 years. More Food needed Population has doubled/tripled in the last 20 years Africa's population is now 1.2 billion Offering a potential market with a GDP of 2.6 Trillion Africa s per capita GDP has crossed the 1000 US dollar barrier in a number of countries. Hence Increase in disposable income Infant and maternal mortality is down by a half Steering the Fertilizer Industry through Challenging Times
Unlocking Africa s Fertilizer Business Potential The Current Fertilizer market situation: Supplies are incapable of meeting demand requirements Ready and available market Opportunity Upstream, fertilizer importation is often fragmented and inefficient Ready and available market Opportunity shortage of warehouses hinders importers and distributors from buying when costs are low Ready and available market Opportunity Demand: Smallholder use of fertilizers in Africa is low but increasing There is need to chart a new path Lack or weak production to meeting demand Establish production Opportunity Establish bulk fertilizer holding warehouses Large manufacturers place fertilizer in the warehouse and small consignments can be purchased by small importers as needed Steering the Fertilizer Industry through Challenging Times
Demand-Side Policy Interventions National Govts are now Implementing measures to dramatically increase output market demand Reviving traditional extension systems and complementing them with agrodealer technical advisory services Update Fertilizer Recommendations Develop national soil maps and establish at least 1 soil testing facility in each country 24
Transportation and Logistics Establish bulk fertilizer holding warehouses Large manufacturers place fertilizer in the warehouse and small consignments can be purchased by small importers as needed Upgrade road, rail and port facilities Long-term solution because is capital-intensive Priorities once funds are available: upgrade ports and improve road and rail infrastructure
26 Role of the Public Sector in Intra-African Trade Market Development Provide public goods for which there are limited profit incentives for the private sector: Roads, rails, sea port, airport Research, development, and extension Rule of law & Security Financing through taxes, government borrowing, etc Facilitation-Trade restrictions can cost countries substantial foreign exchange and tax revenue
Country deficits: Potential Fertilizer Market (mt) Country Required Amount Actual/Current Market Opportunity Ethiopia 1,000,00 750,000 250,000 Kenya 800,000 634,000 166,000 Malawi 600,000 270,000 330,000 Mozambique 650,000 105,000 550,000 Tanzania 574,000 279,000 295,000 Uganda 300,000 41,000 259,000 Egypt 1,800,000 600,00 1,200,000 Swaziland 320,000 69,000 251,000 Zambia 700,000 400,000 300,000 Madagascar 500,000 263,000 237,000 Rwanda 350,000 41,000 309,000 27
Regional deficits: Potential Fertilizer Market Country Required Amount Actual/Current Market Opportunity Congo DR 1,000,000 60,000 940,000 Sudan 1,200,000 600,000 600,000 Zimbabwe 800,000 260,000 540,000 Total Deficit 5,027,320 28
ACTESA-GPCA Partnership ACTESA GPCA ACTESA is ready to partner with GPCA to transform Africa through FERTILIZER Business 29
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