TERMS OF REFERENCES FOR THE DEVELOPMENT OF NATIONAL FERTILIZER STRATEGIES IN AFRICA

1.  Rationale

NEPAD is convening a new initiative as a first step towards rapidly increasing fertilizer use by millions of smallholder farmers in Africa, the Africa Fertilizer Summit. The goal of the Summit is to build consensus around the key issues constraining increased fertilizer use in Africa and to agree on a future strategy for accelerating the access of millions of poor farmers to fertilizer and other complementary inputs, in order to help them raise farm production and achieve improved food security.

The objectives of the Summit include:

1.      Affirm the critical importance of fertilizer in contributing to rapid and sustainable pro-poor agricultural productivity growth in Africa;

2.      Review evidence on use of fertilizer in Africa’s agriculture and identify the primary policy, institutional, financing, and infrastructural and market constraints that limit the access of fertilizers by poor farmers;

3.      Learn about different innovative approaches that have been used to build rural input market infrastructure to supply agricultural inputs to the rural poor; and

4.      Agree on a strategy for developing an African Fertilizer Action Plan to accelerate the access of millions of poor farmers to chemical fertilizers and other complementary inputs.

The expected outputs include national fertilizer strategies and strategies for the regional integration of fertilizer markets.  The objective of the national fertilizer strategies is to identify actionable programs which represent the critical first steps for establishing private-sector led fertilizer markets to meet the supply and use requirements needed to attain the CAADP target of 6% annual growth in agricultural production. The regional fertilizer strategies will be developed by the RECs to advance and sustain this objective.

This terms of reference provides a blueprint for the development of the national fertilizer strategies.  Each national strategy is to be comprised of actionable programs in key policy and or market development areas that a country can implement in the short-term (3 years) to boost its fertilizer sector and accelerate access to affordable fertilizers in a timely manner. The blueprint outlines the expected tasks of a small team of  agricultural marketing experts whose goal is to study and propose bold actions for improving the supply and distribution of fertilizers in the country.  The thesis is that, while developing national fertilizer markets requires a long-term approach there are deliberate actions that can be taken in the short-term that will boost the fertilizer market and place it on a path of irrevocable growth.

2.  Why A Summit?

NEPAD places emphasis on agriculture as the lead productive sector that provides the main source of livelihoods and income for Africa’s rural population. With 70% of the poor living in rural areas agriculture development is the key to achieving the MDGs.  Therefore, NEPAD members endorsed a Comprehensive Africa Agriculture Development Plan (CAADP) that set targets to 2015 of 7% per year average growth in GDP and 6% per year average growth in agricultural production.

The driver for fertilizer demand is agricultural production in response to the effective demand for agricultural products, both food and fiber. At current annual growth rates (3.28% annual average during 1997-2001) the majority of African countries would not meet the Millenium Development Goal of halving poverty by 2015.  In particular, reaching the CAADP target will require a substantial increase in fertilizer use. There has been little or no growth in fertilizer use for the past decade leading to nutrient mining and declining soil fertility. Substantial growth in fertilizer use is a prerequisite to achieving the goal of agricultural growth in Africa. Average fertilizer nutrient application rates in SSA need to increase from 9 to 23 kg/ha according to FAO within the next decade in order to prevent continuous mining of plant nutrients and low productivity.[1]   These estimates by FAO are based on achieving the Millenium Development Goals (MDG) objective of halving the number of undernourished people by 2015.

The effort required to achieve the CAADP targets will necessitate a significant departure from the recent past. The FAO projections indicate that 7 African countries would need to produce up to 10% more food, 27 countries between 10 and 25% and 12 countries in excess of 25% more food by 2015. Yields will need to be increased by significantly more than 1% per year for most crops to reach the production goals. Staple cereal crop yields will need to increase by approximately 30% for both rainfed and irrigated crops and staple root crops by approximately 20% over the 15 year period to 2015. (Table 1)

When translated into fertilizer need FAO predicted that the Africa requirements by 2015 for the increased yields and area expansions are an increase in total nutrients of 47% from 3.024 million tons to 4.48 million tons, equivalent to an average annual growth rate of 2.6%. For SSA the projected increase is 63% or an annual growth rate of 3.3% (Table 2). The related effective demand for this volume of fertilizer nutrients will depend in particular on continuously increasing fertilizer use profitability through higher commodity prices received by farmers.

National increases of fertilizer consumption ranging from 10% in Algeria to over 108% in Ethiopia and 240% in Angola and 28 countries requiring more than a 50% increase by 2015 represent a massive undertaking compared to the stagnant growth of the last decade. National strategies and action plans need to be formulated to translate these projections into reality.

Clearly, achieving the CAADP targets will require a significant departure from the past. Achieving even half of the fertilizer requirement will require a change in mindset and practices with respect to the fertilizer market in African countries.

3. Goal and Objectives

The goal of this terms of reference is develop national fertilizer strategies that represent the critical steps necessary to boost the fertilizer markets in Africa.  The fertilizer markets in the various African countries are at different levels of development and have different strengths and weaknesses, as well as opportunities for growth and development.  During this self-assessment exercise, countries should identify their demand and supply side constraints in order to identify their strengths and weaknesses, and opportunities for and threats to growth. Based on this constraint analysis, countries should identify the priority areas for bold actions which are most likely to accelerate access to, affordability of and incentives to use fertilizers.  Second, the advanced countries should highlight existing measures and interventions that have had success in increasing fertilizer use and supply and options for scaling up or replicating these initiatives elsewhere. Similarly, countries whose fertilizer markets are at the less advanced stages or have suffered setbacks in recent years should reflect on where they went wrong and on this basis identify the priority areas which are most likely to place them on the path of irrevocable growth.

4. Tasks

Task 1: Trends in fertilizer use  (See A1)

Provide an accurate overview of trends in fertilizer use and crop production.

Task 2. Availability of natural resources for fertilizer production (See A2) 

Determine the availability of raw materials for fertilizer production (natural gas and coal, phosphate rock, sulphur, potash) and the economics of fertilizer production and competitiveness vis-à-vis imports. Producing countries should report production capacity for domestic consumption and for export (number of factories and production capacity of each). Environmental aspects associated with fertilizer production should also be discussed.

Task 3: Supply and distribution of fertilizers (See A3)

Describe the supply of fertilizers (for the past 20 years) and determine the systems by which private operators import/produce and distribute fertilizers to small-scale farmers.

Task 4: Supply and demand side constraints (See A4)

Analyze the constraints affecting fertilizer supply and use for both commercial and food crop sectors. These may consist of supply-side and demand-side constraints that increase farmgate prices of fertilizers and discourage use.

Task 5: Safety Nets

Safety net programs are intended for poor subsistence farmers who are excluded from the market due to lack of purchasing power. Countries should:

a)      Identify and describe existing safety net programs by Government and/or development partners that influence the supply, distribution and use of fertilizers and assess the impact on the supply and use.

b)      Propose recommendations to improve their performance (targeting) and minimize negative impacts on private sector.

c)      Determine the extent of these farmers in the country and options for jump-starting their participation in markets.

Task 6: Existing Measures

For all these describe existing measures and interventions implemented to increase fertilizer use and supply and describe and quantify measures needed to scale-up or improve existing initiatives to increase fertilizer use and supply.

5. Organization of work

From the above constraint analysis the key constraints should be identified and then a national fertilizer strategy developed that will address the constraints in a cost effective manner.  It must consist of clearly defined actionable programs with a clear set of quantifiable objectives, specific steps to implement the actions, and a timeframe.

This consultancy should be undertaken by 2 agricultural marketing specialists with experience in the use and commercialization of fertilizers in the country.  This team of national counterparts should work with a local rural development expert, who knows well the problem of fertilizers and other agricultural inputs in the country.

6. Timeline

The strategy will be developed between December 2005 and April 2006. The first draft will be submitted to the IFDC/NEPAD Secretariat by March 15^th, 2006. The final draft will be submitted to NEPAD/IFDC by April 30^th, 2006.

7. Expected Output

There will be a 30 page report outlining a strategy for developing a national fertilizer market.  The report will include an operational plan to boost the fertilizer market within a 3 year period. The report should describe the specific activities and resources involved and where possible the proposed activities should have a timeline and performance indicators. Specifically, this report will contain the following:

1. Trends in consumption of fertilizers based on an assessment of needs for main crops
2. Delineation of the key supply side and/or demand side constraints
3. Success stories: descriptions of innovative interventions including an impact assessment.
4. Recommendations to boost the fertilizer market in the country. Examples include but are not restricted to the following:
   1. Recommendations to improve the policy and regulatory environment for private sector-based fertilizer supply systems
   2. Recommendations for financial mechanisms that will enable farmer associations and dealers to purchase fertilizers and other inputs through commercial banks and/or micro-finance institutions.
   3. Programs to build human capital (marketing and technical skills of dealers) for market development.
   4. Options to reduce marketing costs and improve dealer networks and business linkages across the marketing chain.
   5. Recommendations to improve research and extension support
   6. Options to convert government, donor and NGOs activities into market-friendly interventions.

Table 1

Yields in Africa