Middle East & Africa Agribusiness Insight

INSIGHT
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October 2023
ISSN: 2054-1295
Middle East & Africa Agribusiness

Insight Contents
Africa ...............................................1
Africa Africa Machinery Outlook:
Africa Machinery Outlook: Prospects Dimmed In Prospects Dimmed In Near Term
Near Term Due To Economic Headwinds And Poor Due To Economic Headwinds And
Farm Margin Poor Farm Margin ..............................1
Africa GM Outlook: Still In Nascent
Key View
Stages, But Some Liberalisation
• In South Africa, tractor sales is likely to remain subdued in the coming months due to Amid Food Security Challenges ..7
the El Niño phenomenon, load-shedding and the need for alternative power supplies Africa Fertiliser Outlook: Still-
and fuel. H123 saw relatively more robust agricultural machinery sales mainly as a tail- Elevated Prices To Exacerbate
end benefit of the past season when large harvests and higher commodity prices
Impediments To Usag................... 15
boosted grain farmers’ finances. Going forward, higher input costs, higher interest rates,
and lower replacement demand for the next season due to robust machinery sales in
the past few years will place a cap on machinery demand. However, an increasing focus
on sustainable agricultural mechanisation, rapid urbanisation, the adoption of innovative
technology, the growth of medium-scaled farms, and increased production and export
of commercial crops in the country is likely to drive growth in agricultural machinery and
equipment demand in the coming years.
• In September 2023, the South African Agricultural Machinery Association (Saama)
stated that August 2023 tractor sales of 697 units were approximately 12% less than the
791 units sold in August last year. On a year-to-date basis, tractor sales were down by 5%
during January to August 2023. Twenty-four combine harvesters were sold in August
2023, the same as in August 2022. On a year-to-date basis, combine harvester sales
were up 40% more than January 2023. Saama stated that sentiment in the market was
still positive but many farmers were now showing caution in regard to the forthcoming
summer crop prospects.
• Thus far in 2023, slow economic growth, high inflation and tighter financial conditions
have hurt farm profitability in SSA. We hold a neutral-to-negative view on the short-term
prospects for agricultural machinery imports for the African region.
• In SSA, it is our view that economic growth will slow in four of the five largest markets,
namely Angola, Kenya, Nigeria, and South Africa, while Ethiopia, where we anticipate
economic growth to reach 6.0% in 2023 (as of August 2023), is set to outperform. In Head Office
North Africa, we believe that Egypt's real GDP growth will accelerate from 4.2% in
30 North Colonnade, Canary Wharf,
FY2022/2023 (July 2022-June 2023) to 4.4% in FY2023/24 due to rising investment
London
from GCC countries promoted by the privatisation plan and higher capital spending,
E14 5GN, UK
while Algeria will exhibit a less pronounced slowdown, with growth set to fall from 3.3%
in 2022 to a forecasted 2.1% in 2023.
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Middle East & Africa Agribusiness Insight
• We believe that the contractual distribution model will become more common across agricultural machinery sectors in Africa,
capable as it is of circumventing the low capacity of the majority of farmers to afford items of agricultural machinery. This could
take the form of either a dispersed rental system or the communal (or, community-based) ownership of agricultural machinery
products. We note, too, the potential for novel agtech applications to ameliorate agricultural outcomes in Africa but we caution
that mass deployment and adoption is first contingent on the development of wider network infrastructures, although markets
with extensive mobile coverage could stand to outperform.
• Several states across Africa have made the modernisation of the domestic agricultural sector a central economic target, a
reflection of the potential to alleviate rural poverty and to stimulate both the rural as well as the national economy of so doing,
and we have identified Algeria, Ethiopia, and Morocco as leading efforts in this regard, which will support agricultural capital
investment flows through the medium term.
• South Africa was the region’s largest importer of tractors in 2021, followed by Morocco, Egypt, and Tanzania, while the combined
value of all of Africa’s tractor imports equated to under 5.0% of the global total in the same year. In terms of agricultural
machinery (excluding tractors), Nigeria was Africa’s largest importer in 2021, ahead of South Africa, Angola, and Zimbabwe, with
combined foreign purchases in Africa here valued at under 4.0% of the global total.
It is our view that the evolution of four major dynamics will determine the pace of mechanisation across the
agricultural sectors of Africa between 2023 and 2027:
• the rate of farmer-income growth, the product of both enhanced productivity and elevated commodity prices (as has been the
case since Q222);
• the development of downstream agricultural processing capacities and the extension of farmer partnerships with established
food companies;
• the continued extension of targeted state support and financial incentives to the domestic agricultural sector and agricultural
machinery manufacture sector;
• the evolution of foreign exchange rates across Africa, as a continued weakening will undermine agricultural machinery imports;
• and, the expansion (or otherwise) of access to credit and favourable lending rates as well as cooperative risk-pooling structures.
Several Major Africa Economies Set To Slow In 2023

Real GDP Growth (%, y-o-y)
e/f = BMI estimate/forecast. Source: National Sources, BMI
However, we believe that agricultural machinery investment faces significant headwinds in the short term. The rise in
the cost of agricultural inputs has reduced the pool of funds available for capital investment across Africa but lower application rates
of products such as fertiliser and pesticides will weigh on upcoming harvests, which will then weigh on farmer incomes. Moreover,
the financial capacity of states to support agricultural capital investment through 2023 has been significantly undermined through
fitchsolutions.com This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in
the report are solely derived from BMI and independent sources. Fitch Ratings analysts do not share data or information with BMI.
Page 2
the Covid-19 era, while the depreciation of currencies across the region and the widespread tightening of monetary policy across
Africa will also diminish agricultural machinery purchases. On an inter-regional basis, we expect drought conditions in both North
Africa and across the Horn of Africa to depress agricultural production volumes. Finally, we highlight that elevated fuel costs will
further act to increase the operational costs of and so reduce investment in agricultural machinery.
Agricultural Input Costs Have Surged, Weighing On Capital Investment Decisions

Grains-To-Fertiliser Price Index
Source: World Bank, BMI
1. Africa Starts From A Low Base Of Mechanisation
According to the United Nations, mechanisation levels on farms across Africa are currently deficient, with the number of tractors at
43 per sq km in South Africa, compared with 128 per sq km in India and 116 per sq km in Brazil.
Per the FAO, Africa has less than two tractors per 1,000 hectares of cropland, less than one fifth of level observed in South Asia and
Latin America. This reflects disparities in the levels and rates of economic growth between these regions, while Africa’s low base of
mechanisation is borne out in the prevalence of smallholder subsistence farming in the region’s agricultural sector. The sector also
(partly, as a result) generates low crop yields, which stimulates high levels of import demand and thereby undermines both food
security as well as the resilience of agricultural. In 2014, the Malabo Montpelier Panel (MMP), a group of international agricultural
exports, recommended that African states formulate and implement agricultural mechanisation strategies in order to stimulate
agricultural production growth. Four years later, the MMP considered 12 African states as having generated robust growth in
agricultural mechanisation, including Ethiopia, Morocco, Rwanda, Tanzania, and Zambia.
Africa’s new tractor market is traditionally dominated by Algeria, Morocco, and South Africa, which account for a high share of
Africa’s total tractor purchases each year. However, we note that the majority of these purchases tend to be the at lower-end of the
market, with about four fifths of less than 100 horsepower and most being two-wheel drive. Tractor ownership on an individual or
household basis is made challenging due to the limited access to collateral (required to support a loan application) and consequent
high cost of borrowing. As noted by the FAO, the ‘lack of finance is the overwhelming reason’ behind farmers’ inability to purchase
agricultural machinery.
Page 3
Financial Conditions Set To Remain Tight In 2023, Weighing On Agricultural Investment

Central Bank Policy Rate (%, eop)
f = BMI forecast. Source: National Sources, BMI
2. Global Players Starting To Establish Presence In Africa
Prior to the Covid-19 pandemic, a number of global agricultural machinery firms had voiced increasingly optimistic views on the
prospects for sales growth in Africa. John Deere, for instance, expected sales to rise at a pace of 8-10% through the medium term
(albeit from a low case), while pointing to Angola, Ethiopia, Nigeria, and Zimbabwe as promising markets. In 2021, John Deere
delivered close to 1,000 tractors to Ethiopia, up from 60 tractors just five years earlier. In April 2021, John Deere announced its
intention to expand construction equipment sales operations to 18 African economies, which is indicative of the positive spill-over
effects that the growth of construction and infrastructure sectors can have in attracting global machinery firms to new markets.
Simultaneously, firms such as Hello Tractor, the so-called ‘Uber of tractors’, have allowed for the purchasers of new tractors to
operate them at a higher utilisation factor than would be possible on an individual basis. By facilitating the hiring out of agricultural
machinery to those in need of it, the financial profile of an investment in such machinery can be improved, a particular advantage in
markets in which access to credit remains tight. In August 2022, John Deere made a minority investment in Hello Tractor, which is
based in Kenya, following Hello Tractor’s successful participation in John Deere’s ‘Start-Up Collaborator Program’, launched in 2019.
10 Markets Account For Two Thirds Of Africa's Total Tractor Imports

Africa Tractor Imports (USDbn, 2017-2021)
Source: Trade Map, BMI
In our view, the corporate landscape of Africa’s agricultural machinery sector will remain relatively stable through the medium term,
in part as the sector’s growth prospects have somewhat dimmed in the aftermath of the Covid-19 pandemic and its consequent
macroeconomic headwinds. This also reflects the development of brand recognition across Africa and the fact that the relatively
small pool of potential investment funds will act to constrain the number of firms entering specific markets. We do note, however,
Page 4
that several Indian firms are seeking to expand export sales to Africa under the ‘made-in-India’ campaign, which we consider to have
moderate growth potential through the medium term. India’s low-cost manufacturing base and the fact that its product offering is
concentrated at the relatively low-end (and, therefore, less expensive) of the global market suggest that its exports will be well-suited
to Africa’s demand profile. However, we caution that export flows will be constrained due while India’s domestic tractor production
continues to rise and that the establishment of firm trading relationships and their associated logistical and transportation networks
will require an investment of time.
Over the past five years, AGCO, the US-based agricultural machinery firm, has expanded its presence in Africa and has built new
production facilities in Algeria, South Africa, and Zambia. AGCO’s 2020 annual report made clear that its long-strategy includes the
further expansion of its production facilities and related supply chain capacities in Africa. At the end of 2020, AGCO also adopted a
new two-tier distribution model, which will allow direct communication with vehicle dealers, to improve the efficiency of its sales. For
us, this development highlights the importance of a flexible business model when operating in Africa, whether in terms of retail
outlets, such as dealers, but also in terms of customer financing channels and terms, which may also include community-based
investment, when the cost of a machinery item is divided between households.
10 Markets Account For Three Quarters Of Africa's Total Soil Preparation/Cultivation Machinery Imports
Africa Agricultural Machinery Imports (USDmn, 2017-2021)
Source: Trade Map, BMI
3. Constraints On The Adoption Of Agricultural Machinery And Other Technologies
There is no single reason that sufficiently explains the low rate of adoption of agricultural machineries and other technologies
across Africa, a reflection both of the heterogeneity of the markets that make up the continent as well as the complex nature of
technological adoption itself. Instead, a series of constraints on adoption can be identified and, when integrated into a holistic
framework, can be used to evaluate the specific binding constraints in a particular area or region and to identify practical policy
levers with which to compensate for them.
We note, too, that while the lower levels of economic development that characterise a number of African states are often
considered to lie at the heart of low rates of agricultural technological adoption this approach not only fails to generate specific
policies applicable to and practicable within the agricultural sector itself but also mistakes the symptom of other constraints for their
cause. In other words, low rates of technological adoption and low levels of economic development are both the result of specific
constraints, rather than the latter serving as the determinant factor of the former.
Page 5
In broad terms, five major varieties of constraints on Africa’s adoption of agricultural machinery and other associated technologies
have been identified:
• Credit, Liquidity, and Savings Constraints: the lack of access to financial mechanisms through which farmers are able to
fund capital investment that would otherwise exceed their capacity to fund from their income – in Africa, where about four fifths
of all farmers operate under two hectares of land, the prevalence of smallholder activities amplifies the impact of narrow access
to credit.
• Insurance Constraints: the lack of access to risk management products, such as crop insurance, creates an incentive to
favour low-risk, low-return technologies, which seek to stabilise rather than grow farmer income, and so will act to depress
investment in novel agricultural technologies.
• Knowledge (And Training) Constraints: an awareness of agricultural technologies, especially those at the novel end of the
technical spectrum, and an understanding of both the means by which to deploy them effectively and the potential yield-
enhancing benefits of so doing are all necessary conditions for the mass adoption of agricultural machineries.
• Transaction Cost and Infrastructure Constraints: the fragmented nature of agricultural supply chains across much of
Africa serves to reduce the return to the farmer of investment in new machinery and technologies, and thus discourages
investment in new products. In particular, the impact of relatively low levels of investment in distribution and storage facilities,
such as cold storage, serves to limit the return to the farmer of higher or more efficient cultivation.
• Imperfect Market Constraints: the inefficient allocation of labour (in both time and space) and the lack of clearly defined land
rights both act to reduce the return on investment and to increase the risk attached to a particular investment insofar as
machinery utilisation rates will lower than optimal and the benefit to the farmer of higher rates of future revenue will not be
guaranteed.
Significant Variation In Access To Agricultural Credit Across Africa

Credit to Agriculture (2015USDmn)
Source: FAO, BMI
Page 6
KEY MACROECONOMIC & AGRIBUSINESS FORECASTS (2018-2027)

Geography Indicator 2018 2019 2020 2021 2022e 2023f 2024f 2025f 2026f 2027f
Global Real GDP growth, % y-o-y 3.3 2.6 -3.0 6.1 3.1 2.5 2.2 3.2 2.9 2.9
Global Wheat Price, Usc/bushel, ave 509 498 551 707 910 671 633 623 610 600
Global Soybean Price, Usc/bushel, ave 941 901 956 1,362 1,515 1,405 1,350 1,300 1,220 1,220
Global Corn Price, USc/bushel, ave 378 392 368 564 681 555 500 450 400 350
Global Rice Price, USD/cwt, ave 11.54 11.57 12.89 13.59 16.81 16.80 15.50 14.75 14.00 13.25
Algeria Real GDP growth, % y-o-y 1.2 1.0 -5.1 3.4 3.3 2.1 1.9 1.8 1.8 1.9
Angola Real GDP growth, % y-o-y -2.0 -0.7 -5.5 0.7 3.1 0.1 0.6 2.0 3.1 4.2
Egypt Real GDP growth, % y-o-y 5.3 5.5 3.6 3.3 6.7 4.2 4.4 4.6 4.0 4.1
Ethiopia Real GDP growth, % y-o-y 6.8 8.4 6.1 5.6 4.4 6.0 6.8 6.9 6.6 6.8
Kenya Real GDP growth, % y-o-y 5.6 5.0 -0.3 8.4 4.8 5.2 5.4 5.0 4.9 5.0
Morocco Real GDP growth, % y-o-y 3.1 2.9 -7.2 8.0 1.3 1.8 3.1 3.2 3.7 3.4
Nigeria Real GDP growth, % y-o-y 1.9 2.2 -1.8 3.6 3.3 2.0 2.9 4.0 3.1 3.9
South Africa Real GDP growth, % y-o-y 1.8 0.1 -6.2 4.8 1.9 0.5 1.9 2.3 2.4 2.5
e/f = BMI estimate/forecast. Source: National Sources, BMI
Africa GM Outlook: Still In Nascent Stages, But Some Liberalisation Amid

Food Security Challenges
Key View: GM adoption in Africa is still in its nascent stages, and we expect overall adoption for GM and biotech to remain sluggish
over the coming decade as inherent structural challenges, bureaucratic inertia and institutional deficits continue to limit uptake.
That being said, GM seed varieties not intended for human consumption, such as cotton, will probably intensify. In our view, South
Africa is likely to consolidate its position as a regional leader of GM development, although some other markets, such as Ghana,
Ethiopia, Nigeria and Uganda, are beginning to show some signs of regulatory liberalisation.
• The adoption of GM crops in Africa has been gradual resulting from policies in different African countries, influenced by political,
social, and business conditions. Firm decisions and regulatory frameworks by governments approving GMO cultivation on a
commercial scale would enhance the acceptance from society.
• African scientists are scaling up research on genetically modified (GM) crops such as maize and cassava to increase food security
on the continent as climate change places increased stress on yields.
• Although slow, attitudes and perceptions toward GMO crops and products have changed on the African continent, particularly in
Kenya, as more people are becoming aware of the benefits of GMO technology. This is in line with the recent reports that Kenyan
authorities approve the cultivation of GM crops to boost crop yields.
• Investment in appropriate regulatory mechanisms and monitoring mechanisms for bio-tech products - crops and animals using
biotechnology across the African continent, and structured public education on GM technology are top priorities, which
will enhance the GMO sector and improve food security in the African countries. However, despite significant opposition to GM
crops in a few African countries, increasing discussions, pro-GMO activists' processions, research and development of seed
varieties, and importantly initiatives of governments and other institutions are on the rise. Having said that, unfavorable policies
shaped by the public opinion which are being influenced by political opposition, anti-GM crops campaigns, weak and inadequate
production technology, and the absence of crop biosecurity are some constraints to GMOs acceptance, mostly in east African
countries.
• As the areas planted for genetically modified (GM) crops continue to grow in Africa, accelerated action and conducive enabling
environment in support of modern agricultural biotechnology and genomics would enhance transformation of African food
systems into a force of economic growth. Increased support for adoption of biotechnology among small players including the
new generation of farmers across Africa are vital to feed the African population which is expected to reach 2.2 billion by 2050.
• While progress has been made towards commercializing GM crops in several countries of Africa, some key challenges and
Page 7
downstream issues remain to be addressed. These include building functional regulatory systems, vibrant seed systems, local
seed production, reliable credit/financial and marketing services, and improved access to markets for small farmers. Unless these
downstream issues are effectively addressed, smaller farmers will not benefit from GM crops and concurrently, food security,
especially in many developing nations of Africa will not improve.
• In recent years, genetic modification (GM) has been successfully applied to address some key production constraints faced by
orphan crops. This has increased interest in the potential of GM orphan crops to boost local food security and agri-business.
• Bureaucratic inertia, institutional gridlock and structural impediments continue to weigh on wider uptake of GM and biotech
across the African continent.
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• On August 1 2023, the head of the Biotechnology Research Institute of Kenya stated at the Kenya Editors Guild (KEG) Members
Meeting that four varieties of Bt cotton have been recommended for release by the National Performance Trials Committee
(NPTC). While a judgement is yet to be delivered, the cultivation of Bt cotton is ongoing in the country, and the variety has
experienced very high demand in other markets. So far, Kenya has approved 58 GMO projects - 40 for contained use in the
laboratory or greenhouse, 15 for confined field trials, and 3 for environmental release or commercial cultivation, according to the
National Biosafety Authority (NBA).
• In Kenya, three varieties of Bt corn have been recommended for release but court cases are blocking their presentation to the
National Veterinary Research Center (NVRC) for consideration. The four court cases filed are against cultivating, importing, and
commercialising genetically modified organisms (GMO) in Kenya.
• On June 6 2023, the Kenyan government allowed the import of genetically modified maize after a ten year ban. This was
suspended by the courts after significant opposition to the ruling, and is now pending a ruling on an appeal by a farmers'
association that considers it illegal. Kenyan President William Ruto's recent remarks reiterating his pro-GMO stance were
applauded by several scientists in East Africa who recognise that without GMO crops and newer technologies, the region
would be more food insecure. The region is facing the worst drought in four decades and an unprecedented sixth failed rainy
season is predicted in 2023. Pro-GMO activists are actively calling for the adoption of improved seeds. However, Kenya is
currently the only nation in East Africa that permits the cultivation and importation of GM maize for human consumption.
• On April 14 2023, after years of extensive research confirming its safety and having met all regulatory stipulations and scientific
procedures, the Ghanaian government has dimmed it fit to introduce the PBR cowpea crop (a genetically modified variety) into
the nation's agricultural seed system.
• Despite calling for the adoption of improved seed varieties in order to improve the food security situation, there are anti-GMO
activists in Kenya, who filed a petition at the East African Court of Justice in January 2023, arguing about the safety of the
genetically modified crops, and access of the small-holder farmers to these varieties as big farmers will have control in this area.
Despite lifting the decade-long ban on the cultivation and importation of GMOs in the east African country in October 2022 by
the President William Ruto in response to the effects of the severe draught experienced for almost two years, the Kenyan High
Court suspended the adoption of GM crops. However, Pro-GMO activists are active in Nairobi of Kenya and Kampala of Uganda,
were seen marching through streets on February 10 and 15, 2023 calling for adoption of improved seeds. In Kenya, substantial
misinformation of about 40% of media coverage are promoting negative information about GMOs. Intensified campaigns by
politicians, both pro and against lifting of the ban, with a lot of unverified information about GM foods are creating confusions
and indecisions among public.
• Kenya is preparing to commercialize GM crops, though there remains resistance from some farmers and campaigners who
question the safety of the modified crops. Kenyan farmers will begin using GM seeds in 2023, after the government of
Kenya recently reversed a 10-year ban on GM crops. The seeds will be planted on half-a-million acres and will be drought
resistant, according to the country's agricultural authorities, thus helping curb shortages caused by the lack of rains. Kenya is
currently facing a severe water shortage caused by four failed consecutive rainy seasons, amid one of the harshest droughts the
East African region has seen in four decades.
• The lifting of Kenya's GMO ban has been prompted by the real need to ensure food security and to safeguard the environment.
Lifting the ban means that Kenyan farmers can now openly cultivate GM crops, as well as import food and animal seeds
produced through genetic modification, such as white GMO maize. Kenya is the eighth country in the continent to approve the
GMOs. They are currently approved for cultivation in 70 countries around the world. Kenya struggles to feed its 55 million
Page 8
population and has consistently had an annual deficit of 10 million bags of maize staple. The country approved the
environmental related BT cassava 4046 in Q221 after a five year study period. This paves the way for live performance trials over
the coming years.
• In Uganda, scientists have developed several genetically modified crops and other varieties, which are draught and pest-tolerant,
and high yielding which could reduce hunger in the region and counter the effects of draught. Uganda's parliament already
passed the Genetic Engineering Regulatory Bill twice, but the President Museveni rejected it. The adoption (or rejection) of GM
across Uganda is in a state of paralysis as President Museveni has, after considerable debate and multiple revisions, refused to
sign the Genetic Engineering Regulatory Law in Q122.
• The regulatory framework for culture, storing, usage, transportation, destruction or disposition of GMOs should be in place as
mentioned by Ms Nakawuki, an outspoken legislator of Uganda. The regulation should be in the form of physical barriers or a
combination of physical barriers together with chemical or biological barriers. The Ugandan lawmaker said that it is unfortunate
as the development, production, release, use, and application of GMOs is largely unregulated in the EA countries except
Kenya. East Africa (EA) is split over genetically modified organisms (GMO) use. East African governments' are still weighing on the
pros and cons of GMO, strong regulatory measures are yet to be in place. largely unregulated in the EA countries except Kenya.
• An anti-GMO group, Food Sovereignty Ghana, has filed an injunction in the court blocking the government from distributing GM
cowpea and NEWEST rice. A lengthy legal battle was ongoing as of March 2022. National Varietal Release and Registration
Committee (NVRRC) is the body responsible for approving the official release of new crop varieties in Ghana. Ghana is already
having National Biosafety Authority (NBA), Council for Scientific and Industrial Research. The major challenge for seed producers
has been the unavailability of foundation or breeder seeds for multiplication. Regulatory Approval Process, setting up scientific
institutions or laboratories are yet to establish, proper direction to the existing GMO related institutions and sound GMO structure
of the government are noticeably absent in Ghana. However, research and analysis on seeds development and overall activities
for the application of GMOs are in progress. Ghana approved first GMO crop, BT Cowpea, which is resistant to pest attack.
Genetically modified cowpea could be commercially available to Ghanaian farmers in 2024 following approval of the variety by
the National Biosafety Authority in 2022.
• Tanzania has relatively robust regulatory framework in place for GMO work in agriculture. This helps instill confidence even
among the most skeptical policymakers. One of the crops whose development was halted by the Tanzanian government was
cassava, yet it is very much a staple food in the country. Tanzanian scientists expressed optimism that sooner or later, Tanzania
would eventually reverse its ill-advised ban on GMO trials in light of emerging challenges, such as post-harvest losses, climate
change and water scarcity among others. Without GMOs, Tanzania, a country where agriculture employs 75% of its population,
and which recently stepped up its vigilance after Kenya lifted the ban on GMOs, would continue to face food insecurity.
• Agriculture Minister of Tanzania, Hussein Bashe said that the country cancelled GMO trials, but such trials only be allowed for
academic purposes, which in turn would help the country and its people to have a broader understanding of genetically
modified varieties, especially the benefits and impacts on the environment.
• GMO trials in Tanzania have taken twists and turns over the years, often dividing both the experts and politicians over legal
technicalities and safety concerns.
• South Africa will continue to cement its position as a leader of GM development and usage but we expect some other countries
to follow suit, albeit gradually.
• In 2022, HB4 wheat successfully received approval for food and feed use from Nigeria and South Africa, in addition from
Colombia, Australia, New Zealand, and the U.S.
• Nigeria authorised the use of BT cotton and cowpea by 2019 and further issued a green light for a second variety of GN cowpea
(Sampea 20-T) in 2020. In Q122, the Nigerian National Biosafety Management Agency continued to work towards establishing
safety standards for GM.
Low Yields A Major Theme Across Africa
African countries have experienced serious and chronic food shortages in the past three decades and have historically
faced domestic production deficits about one in every three years. The continent's agricultural yields are very low by global
standards and crops are highly dependent on weather patterns, with heavy rains often leading to outbreaks of disease for
vulnerable crops, such as cocoa, while prolonged episodes of dryness have dire consequences for grain crops.
Page 9
Most barriers for GM crop adoption come from socio-economical, ethical and socio-political concerns, environmental concerns, GM
opponent pressure, perceived food safety and health concerns. Apparently these are likely reasons for slow adoption of GM crops
and weak public acceptance.
In the 1990s South Africa was the first country in Africa to commercialize the biotech production of cotton, corn and soybean,
followed by Burkina Faso (cotton), Sudan (cotton) and Egypt (corn and cotton). Nigeria authorized the use of corn and cowpea in
2019 and a new cowpea variety (sampea 20-T) in 2020. Nevertheless, South Africa is the first African country to enact Regulatory
Framework to allow GM crop cultivation, Import and Export, is also the largest user of genetically modified (GM) crops in Africa and
the ninth largest producer of GM crops in the world. According to the USDA, 90% of corn plantings, 95% of soybean plantings and
100% of all cotton plantings in South Africa are grown from GM seeds. Overall, the country had a biotech crop production area of
3.0mn hectares (ha) in 2020, up from 2.3mn ha in 2015.
Sub-Saharan Africa: A Global Laggard Struggling With Deficits

Regional Corn Production Yields, tonnes/hectare (2021/2022)
Source: USDA, BMI
Recent Developments And Long-Running Structural Challenges To Regional Adoption
On July 13 2023, Rwanda announced a draft law, authorising genetically modified organisms (GMOs), their importation,
commercialisation, and exportation. With this announcement, Rwanda follows the footsteps of South Africa, Kenya, Ghana, and
Nigeria, which have already authorised GMOs. Operators willing to work with GMOs will be required to obtain a license from the
National Environmental Management Authority (REMA). Additionally, the government plans to establish a monitoring and control
body to oversee the initial experiments with GMO crops. The country is already conducting trials on cassava crops resistant to
cassava brown streak disease (CBSD), a disease that can destroy up to two-third of crops.
Many African countries slow to adopt GM technology, including Tanzania and Kenya, had a higher ranking on the Global Hunger
Index (GHI) during the period from 2000 to 2022, compared to those that were quick adopters, including Egypt and South Africa.
The current use of GMOs in Kenya, Tanzania, and Uganda, however, is largely unknown. According to recent reports, Kenya has been
added to the list of nations that accept GMOs. Even though Kenya has made progress with GMOs, the rigid and time consuming
acceptance framework remains one of the biggest obstacles to GMO adoption. Kenyans have a negative perception of GMOs as a
result of the negative press and publicity surrounding GM products. Kenya is currently importing GM maize as a result of the severe
drought that has affected East Africa.
The situation surrounding the use of GMOs in Tanzania is not constant and, like that of Kenya, may change in the future, depending
on the extent to which the community has received the necessary education from molecular biologists, experts, and researchers. In
Tanzania, Individual perceptions on GMOs are influenced by a variety of factors - level of education, religion, age, occupation,
rudimentary familiarity with science and technology, and marital status.
Page 10
A recent International conference on GMOs and new genomic techniques in Berlin, Germany, organized by the German
government and the United Nations and Conventions on Biological Diversity, which ended on March 16, 2023, sought to promote a
broad technical and scientific exchange between scientists worldwide on the status and challenges for traceability, detection and
identification of GMOs and products of genomic techniques. The speakers called for a more comprehensive harmonization of
regulatory efforts in the handling of biotechnology products. Some harmonization has been done, especially in Europe and
Southern Africa. There is a need for enhanced expertise in biotechnology supervision on the continent, which African governments
need to take seriously.
Looking at the advancements made in other parts of the world in the field of GMO, African countries are lagging behind with a
strong need to catch up to international peers. In Africa, genetically modified crops are grown commercially in Nigeria, South Africa,
Ethiopia, Malawi, Sudan, and Eswatini. Field trials are ongoing in eleven other countries as part of approval processes. Four countries
have genom-edited crop projects in the works.
GM use across other parts of Africa will remain comparatively low (relative to other regions) over the coming years owing to
structural problems across the African agricultural policymaking. Farmers on the continent have difficulty building savings or
acquiring credit for expensive inputs, such as GM seeds and machinery. Profitability in the sector remains poor owing to low yields
and inadequate infrastructure. A large proportion of farming on the continent can be characterised as subsistence farming, as
opposed to commercial-scale farming seen across parts of APAC and Latin America.
Smallholders make up 80% of farmers in Sub-Saharan Africa (SSA), with many living from one harvest to the next, despite efforts to
move towards large scale agriculture in the 1970s and 1980s (these efforts mostly failed). According to the UN Food and Agriculture
Organization, between 1960 and 2000, 15 of 19 African countries surveyed saw average farm size decrease. However, African
farming will have to move away from subsistence agriculture and become more profitable in order to support a thriving GM
sector. We believe that partnerships with food companies, the development of cooperatives and greater access to credit are three of
the most important strategies the sector could adopt in order to achieve greater profitability.
African Markets Rank Poorly

Select Markets - Trade & Investment Risk Index Scores
Note: Scores out of 100; higher scores imply lower risks. Source: BMI
Limited Policy Coherence
Another major barrier to GM seed growth in the continent is the lack of policy alignment between African nations. According to the
New Economic Partnership for Africa's Development (NEPAD), one of the major reasons for the lack of wide-scale GM adoption is
the absence of functional regulatory systems both domestically and across the continent.
There is also little cohesion in policy decisions. According to the NEPAD African Biosafety Network of Expertise, 22 African countries
Page 11
have at least some form of biosafety regulatory framework in place (which is usually needed before field trials begin and GM
varieties are approved). At one point Uganda had been conducting field trials without biosafety laws (the country has since
implemented some basic framework governing testing) but President Museveni has not actively championed the passage of
the Genetic Engineering Regulatory Law as of Q122 and farmers remain unable to use GM. Kenya previously authorised field trials
for GM corn, but the government cancelled all tests in March 2017 and stated that the country was not yet ready for such
experimentation, but seeds were eventually commercialised in 2019 and Bt corn looks likely to be commercialised by 2023/24. In
Zambia, planting GM seeds remains illegal, but enterprises that want to buy products with GMOs must apply for a permit, and in
some cases chain stores in the country sell them without one.
Disparate GMO Status In Africa

Africa - 2018 GMO Status By Country
Notes: Countries labelled as 'Biosafety Laws' are not doing any field trials. Apart from Uganda, all countries labelled as 'Field Trials' have biosafety laws in place. Finally, all countries
labelled as 'Commercial GMO' have biosafety laws in place. Data for most countries as of 2017, but incorporates 2018 developments where available. Source: African Biosafety
Network of Expertise (ABNE), Fitch Solutions
One of the greatest points of contention over GM use in Africa is the control of first-generation seeds. First-generation seeds are
patented by seed companies and are allowed to be used for only one season before farmers have to purchase new seeds for the
following year. Using seeds derived from the resulting crops for the next season is, therefore, illegal. According to the USDA, 80% of
African farmers currently reuse seeds from the previous crop. Consequently, patent rights and investor protection will prove to be a
major obstacle for GM companies in Africa.
Page 12
Adapting GM Technology To Africa Will Support Uptake
We believe that there is great potential for GM uptake by African farmers if the technology adapts to their needs and budgets.
Developments over the last five years in GM varieties for crops such as cotton, sorghum and cassava, which are staples in many
African markets, will help to promote the technology on the continent. The greatest successes will be achieved through close
cooperation with local stakeholders, such as African scientists and farmers collaborating on improving local strains to adapt to
changing conditions.
Around the globe, GM crop-producing markets have benefitted by improved crop productivity, food security, and quality of life.
Increased income to resource-poor farmers has been a key benefit at the individual level, especially most markets using this
technology are in the developing world including Africa. Besides South Africa, technological progress is being noticed among
markets like Sudan, Malawi, Ghana, Ethiopia, Nigeria, Uganda etc. where GM orphan crops (i.e, banana, cassava, cowpea etc.) and
non-orphan crops (soybeans, maize, rice, cotton etc.) are being planted in many areas of these markets.
Moreover, the continent's traditionally firm opposition to GM technology appears to be broadly easing as a growing number of
markets are conducting field trials or improving their regulatory frameworks on GM crops. The extensive droughts and floods that
have hit the continent in recent years continue to weigh on the region's food security has the potential to accelerate a change in
mind-set. Markets in southern SSA, such as Zimbabwe, which enforce a ban on GM imports, could be forced to authorise imports of
GM food over the coming months as an extraordinary measure to alleviate food security threats, and even look to commercialise
these seeds to combat the ongoing threat of climate change. Indeed, while presenting the 2021 Budget Strategy Paper,
Zimbabwean Finance Minister Mthuli Ncube said it was time for the country reconsidered GM seeds. Articles have also appeared in
newspapers in Namibia arguing that African farmers should consider drought resistance crops, while in Mozambique, supermarkets
sell GM crops to consumers with seemingly few complaints.
SELECT SSA MARKETS - STATUS OF GENETICALLY MODIFIED SEEDS
MARKET RECENT DEVELOPMENTS PENDING APPROVAL
Ghana In Q420, Food Sovereignty Ghana took the government to court and Sweet potato (nutrient enhanced), rice
opened a legal case against distribution of cowpea and later NEWEST (nitrogen-use efficient, water-use efficient,
rice. As of Q122, trials into some potentially commercial variety of salt tolerant - newest), cowpea (Bt) cotton
cowpea and rice continue. The government hopes to make a decision (Bt), cotton (stacked traits)
based on scientific facts after having received
Ethiopia There have been efforts to increase domestic cotton production, and Cotton (Bt)
commercialisation of Bt cotton was approved in 2018. The government
has also authorised confined field trials for Bt drought-resistant corn.
Côte d'Ivoire National Biosafety Law was approved in 2016. na
Burkina Faso Cotton (Bt) has been commercialised in Burkina Faso but is not being Cotton stacked Bollgard II and Roundup
planted owing to an unresolved dispute with Monsanto regarding fibre Ready Flex (insect and herbicide tolerance),
lengths. cowpea (Bt - insect resistance
to Maruca vitrata), maize (Bt)
Senegal Updating its national biosafety law. na
Tanzania Has revised the strict liability clause in its Environment Management Maize (drought-tolerance, water-efficient
Biosafety Regulations, preventing any GM crops from being maize for Africa), maize (pest-resistant),
commercialised. It began conducting GM research trials in 2016. cassava (tolerant to cassava mosaic disease
Research trials for bt corn and GM cassava were stopped in 2021. and cassava brown streak disease)
Nigeria Signed a biosafety bill and established the National Biosafety Sorghum (bio-fortified), rice (nitrogen-use
Management Agency in 2015. Cowpea (Bt) and cotton (Bt) had been efficient, water-use efficient, salt tolerant -
Page 13
MARKET RECENT DEVELOPMENTS PENDING APPROVAL
approved for commercial use by 2019 and a second variety of cowpea newest), super cassava (fortified with
(Sampea 20-T) was approved in 2020. Nigeria continues to study the vitamin A), ht soybeans
benfits of GM rice as of Q122.
Mozambique Now in a position to start research trials of GM crops after having Maize (drought-tolerance, water-efficient
approved amendments to the Biosafety Regulations at the end of 2014. maize for Africa)
The country began its first GM corn field trial in February 2017.
Kenya Maize (drought-tolerance; water-efficient

GM gypsophila cut flowers now seem most likely to move forward to maize for Africa, Bt), cotton (insect-
open field trials given widespread enthusiasm to pioneer this new resistant), super cassava (fortified with
variety on the world market. Plans are also under way to commercialise vitamin A), cassava (tolerant to cassava
BT corn after 10-year trials complete; commercialised Bt cotton in mosaic disease and cassava brown streak
2019. In July Q221, Kenya approved environmental release of BT disease), sorghum (enhanced pro-vitamin A
cassava (4046) and authorised national performance trials. The levels, bio-available zinc and iron), sweet
National Biosafety Authority has also developed draft regulations on potato (resistance to sweet potato virus
animal biotechnology. disease), gypsophila flower (pink colour
flower stability); bt bananas
Rwanda Confined field trials for cassava na
Niger Parliament approves biosafety law October 2019 na
Benin Passed a new bioafety law in Q121 to ensure greater compliance with na
the 2000 Cartagena Protocol on Biosafety.
Uganda Research into GM cassava, bananas, potatos, cotton and rice continues. Genetic Engineering Regulatory Law has
not been signed to date after much political
wrangling.
Zimbabwe Zimbabwe lifted a 12 year ban on GM corn in 2020 as the country na

grappled with low output and an increasing risk of famine. South
African GM corn imports were quarentined and turned into corn meal
before being distributed.
Note: Regulations as of Q122. na = not applicable. Source: USDA, Fitch Solutions
Cott
Cotton:
on: Pr
Promising
omising Outlook FFor
or GM Adoption
The BT cotton technology was field-tested and given approval for general release through appropriate biosafety regulatory
processes and technology licensing agreements by governments of Ethiopia, Sudan, and Kenya.
Scientists at the Kenya agricultural and livestock research organisation have developed cotton resistant to bollworms and maize
that is resistant to pests, as reported on February 2023.
Critical stakeholders in Nigerian modern agricultural biotechnology sector have recently urged farmers across the country to adopt
the already commercialized BT. cotton which can revive Nigeria's comatos textile industry, stating that the development of
genetically modified hybrid cotton, achieved after many years of rigorous research, can give value to the farmers in all the cotton
growing zones of Nigeria. The Federal government of Nigeria already announced plans to revitalize Nigeria's textile industry with the
introduction of BT. cotton, noting that the move would create massive employment particularly for Nigerian farmers in the country.
We expect continued progress to be made first and foremost in products that are not intended for human consumption (such as
cotton or cut flowers) and in markets where the regulatory approval process is most developed (South Africa, Kenya and Ethiopia).
Page 14
Many of the nations among the first conducting GM field trials - such as Nigeria, Uganda and Ethiopia - are major cotton producers
relative to the size of their agricultural industries. In May 2015, Ethiopia relaxed its strict policy on GMOs and commercialised GM
seeds in 2019. Ethiopia is a major producer of cotton in Africa, and the Ethiopian textile and apparel industry is considered a key
sector for the country's economic development. However, the industry's growth is outpacing domestic cotton production, making it
dependent on imports and impeding its development.
By contrast, opposition to human consumption of GM crops and in some cases lack of funding (which was the case for cotton trials
in Ghana) will ensure that policy bottlenecks remain over the coming years, which underpins our view for GM cotton to outperform
other crops. In Zambia, the government has urged the country’s National Biosafety Authority to enhance public awareness around
GM seeds given the threat of climate change on the country’s staple crops while public opposition elsewhere continues.
Nigeria ultimately commercialised some varieties of cotton but there was significant backlash in 2018. A number of civil society
groups marched against the government and protested the adoption. That said, Nigeria has since approved bt cotton and two
varieties of GM cowpea while studying some rice varieties as of Q421. Ugandan President Yoweri Museveni has repeatedly
declined to sign long-delayed biosafety legislation and has kept the status of GM paralysed in the country. In Tanzania, the
government has restated that it will never allow GM imports in order to protect local varieties from contamination, and also recently
cancelled GM research trials into drought-resistant corn and virus- resistant cassava in Q1 2021.
Africa Fertiliser Outlook: Still-Elevated Prices To Exacerbate

Impediments To Usag
Key View: Fertiliser prices have started to edge higher in H223, on the back of rising fuel prices and the continuing Russia-Ukraine
war that has constrained fertiliser exports from Russia and Belarus, exacerbating the structural impediments to fertiliser usage across
Africa. In general, uptake levels are already low due to limited farm incomes but we do expect the Sub-Saharan region to benefit
from new projects and investments over the coming years, as food security concerns continue to grow.
• Africa has the potential to become a major fertiliser market as the region has abundant mineral reserves of three major
macronutrients: nitrogen, phosphate and potash. The continent is also subject to rapid population and income growth, along
with changing food consumption habits. The region faces severe food insecurity, which is primarily attributed to inadequate food
production due to a lack of access to modern mechanisation and limited use of fertilisers. However, current regional policies
favouring domestic fertiliser production in countries like Kenya and Morocco can stimulate market growth over the next few
years.
• Low farm income levels and structural barriers will continue to limit fertiliser consumption growth in Africa over the long term.
• Sub-Saharan African markets will see new projects coming online in the coming years and consumption will grow at a superior
rate compared with other global regions.
• Aliko Dangote opened a new, state-of-the-art USD2.5bn urea and ammonia fertiliser facility in Lagos, Nigeria in March 2022.
Production commencement should help the country, and the region, with fertiliser at a time of high prices and logistical shocks.
• In Q420, Morocco-based OCP Group signed a USD3.7bn deal with Ethiopia-based Chemical Industries Corporation to build
a fertiliser plant. The facility is expected to commence production by 2026 and is likely to result in Ethiopia becoming a net
exporter of fertiliser by the end of the decade.
Inorganic fertiliser use in Africa have been rising over the last few decades, but is still low compared with other parts of the world.
Between 1980 and 1995, fertiliser consumption fluctuated around 1.0mn tonnes of nutrients per year. However, after 1995
consumption began to climb substantially, reaching almost 1.6mn tonnes of nutrients in 2010. From 2006-2017 usage doubled.
While the global average of application per hectare of cultivated land is 135kg (where about 50% of the crop yield growth is
attributable to fertiliser), in Sub-Saharan Africa (SSA) it stands at just 17kg per hectare (/ha) as of 2018, far below the 50kg/ha level
that is considered adequate.
Smallholder farmers, who make up the majority of farmers in the African region and who farm most of the land, frequently apply
Page 15
little or no inorganic fertiliser, as many farmers in SSA rely on livestock manure to maintain soil fertility. However, this has chemical
limitations (one cow produces only about 15kg of nitrogen as manure each year, while a maize crop yielding about three tonne/ha
requires about 100kg of nitrogen per hectare). Other forms of organic fertiliser also face various problems, including availability and
logistical issues. Consequently, total levels of fertiliser use are insufficient to replace the soil nutrients that are mined each year
through crop production.
Fertiliser Prices Rising Again
All five components of the World Bank’s fertiliser index staged month-on-month increases in September 2023. Phosphate rock
gained 1.1% m-o-m, potassium chloride gained 3.5%, triple super phosphate (TSP) gained 14.9% m-o-m, urea gained 15.2% m-o-m,
and diammonium phosphate (DAP) gained 15.3%. We highlight, though, that phosphate rock is the single index constituent that has
seen its price rise on a YTD basis, having gained 15.4%, while the other four have now accumulated losses of between 13.1% YTD
and 30.6% YTD. At the same time, all fertiliser products are now priced at significant premiums to their 2015-19 average with the
index as a whole 90.2% higher than its pre-Covid average in September.
A major driver of fertiliser price increases has been rising fuel prices with the World Bank’s energy price index itself increasing by
7.8% m-o-m in September. In particular, the natural gas index, which serves as the principal feedstock (and fuel) in the manufacture
of nitrogen-based fertilisers such as urea, for which a source of hydrogen is required, rose by 9.5% m-o-m in September. Echoing
the fertiliser index, the energy index has fallen by 8.9% since January but remained 51.4% above its 2015-19 average in September.
In addition, both the fertiliser and energy indices have outperformed the World Bank’s all-commodity price index, which gained just
4.7% m-o-m in September, at which time it sat at a 44.6% premium to its pre-Covid average.
One factor that continues to provide the global fertiliser market with robust price support is the Russia-Ukraine war, which has
weighed on Russian fertiliser exports despite the exclusion of the sector from economic sanctions. The conflict itself has also
supported fuel prices. Moreover, Mainland China’s request of September 2023 that urea exporters suspend foreign sales in order to
stabilise domestic prices represents another source of market tightness. Similarly, economic sanctions on Belarus, first imposed in
2020 and subsequently strengthened, have seen its fertiliser exports fall. In 2020, Belarus reported nitrogen-based fertiliser exports
of 1.2mn tonnes, which had fallen below 200,000 tonnes in 2022 (the latter based on reported mirror data).
As a sizeable component of on-farm production costs, elevated fertiliser prices, especially if sustained, have the potential to feed
through into farmgate prices and then on to food prices, stoking inflationary pressures. In the US, for example, the USDA estimate
that fertiliser costs account for almost 45% of total operating expenses for corn and wheat farmers and around 25% for soybean
farmers. High fertiliser prices can see a reduction in crop acreage and/or a reduction in fertiliser application rates, both of which
would be expected to weigh on harvested volumes. While fertiliser prices have fallen through 2023 on a YTD basis, we have noted
that costs remain well-above pre-Covid norms and so continue to pose a downside risk to our agricultural production forecasts. On
a regional basis, differences in capacities to finance higher fertiliser imports costs will also be borne out in differences in terms of
access.
Page 16
Prices Picking Up Again, But No Return To Previous Highs

US Gulf Nola - Select Fertiliser Prices, USD/short ton
Source: Green Markets, BMI
Structural Factors Keep Regional Per Capita Consumption Low
In SSA, five countries (Ethiopia, Kenya, Nigeria, South Africa and Zambia) account for almost two-thirds of consumption. In the
Middle East and North Africa (MENA), three countries (Egypt, Iran and Morocco) account for 75% of consumption. There are
numerous reasons why, broadly speaking, fertiliser demand is low in Africa. According to the Alliance for a Green Revolution in Africa,
these are divided into three categories: lack of knowledge, lack of affordability and poor incentives.
Lack Of Financing: Smallholders usually have disposable cash for a few months after harvest time but have limited cash available
during the lean season when they need to buy fertiliser and other inputs. Owing to the real or perceived risk to smallholder farming,
farmers often cannot get access to credit to buy fertiliser and other inputs from the traditional financial sector, and when they can
get loans, rates average between 20-30% per year. Regional agrodealers face similar problems.
Weak Incentives: The effectiveness of fertiliser applications depends on many factors aside from the fertilisers themselves, and
because of such risks and uncertainties, many farmers decide to use fertilisers only on crops for which they are confident they can
make a reasonable profit, reducing overall use.
Poor supply and distributions systems from port to farm mean that SSA fertiliser prices are almost double global averages and
hinder consumption. This supports illegal fertiliser trade across the region, with issues including cross-border smuggling of
subsidised fertilisers as well as the sale of counterfeit fertilisers. Moreover, international fertiliser companies often refrain from
entering partnerships with local ministries to supply subsidised nutrients owing to frequent delays in payments, which reinforces the
position of illegal fertiliser traders. At the end of the supply chain, inadequate storage facilities mean that cost-effective amounts of
fertiliser cannot be regularly purchased, resulting in substantial waste.
We believe that considerable improvements in physical and financial infrastructure remain to be made in many African countries
before fertiliser consumption approaches developed market levels. Although our Infrastructure team sees strong growth potential
in transport infrastructure in SSA countries, this will unlikely improve the fertiliser trade in the coming years. Investors will remain
cautious in their exposure to SSA infrastructure investment owing to the challenging operational environment, various
macroeconomic headwinds, poor access to electricity and underdeveloped financial markets.
Page 17
Poor Transport Network Increases Cost Of Imported Fertilisers In Africa

Selected Countries - Transport Network Index
Note: Scores out of 100; higher score = a more attractive market. Source: BMI
Movement Regarding Policy Initiatives
To deal with the low levels of fertiliser use, African governments have created multiple plans in recent years. In 2003, the
Comprehensive African Agricultural Development Plan called for a target of 6% compound annual growth in agricultural
productivity by 2015 and called on governments to allocate at least 10% of their budgets to the agricultural sector. In 2006, African
leaders adopted the 12-point Abuja Declaration on Fertilizer, which committed countries to increasing fertiliser use from the then-
average of 8kg of fertiliser/ha in 2005 to 50kg/ha by 2015.
Since 2006 to now, overall fertiliser use in Africa (both total consumption and quantity per hectare) has increased, and the outlook is
improving. Over that time, Africa is the only continent that has had annual fertiliser consumption growth exceed 8%. Some of the
notable successes have been in improving government subsidy programmes, increasing private sector participation (including
renewed external donor interest) and addressing some of financing concerns. However, other resolutions continue to see limited
progress, including a lack of national level fertiliser policies and monitoring capabilities, regional procurement challenges, and
limited intra-regional trade. This has led to calls for the African Union Commission to convene an Abuja II. This would involve
implementing initiatives to again increase fertiliser use levels, with the focus going beyond fertilisers to cover soil health, integrated
soil fertility management and the importance of farming profitability.
Subsidies: More Momentum After Abuja Declaration
Of the main reasons why many Abuja recommendations have not been met is poor government policy, notably the lack of suitable
policies and laws, poor implementation and enforcement of laws that do exist, lengthy processes for licensing new fertilisers/
commercial actors and inefficient subsidies, which has been the main policy used by governments in SSA. Fertiliser promotion
programmes in Africa began in the 1970s and were characterised by large direct government expenditure. However, these
programmes were expensive and governments lacked the capacity to implement them effectively. Consequently, many were
eliminated in the 1990s as part of structural adjustment programs.
Since Abuja 2006, subsidies have returned to an extent and remain relevant to most countries in in SSA. As of 2022 most SSA
countries have some type of subsidy programme in place, which includes allowing the private sector to import fertilisers and
remove some of the bureaucratic burden from national governments. In some countries the government manages the subsidy
programme, while in others the private sector manages the programme. The type of programmes that governments have
implemented vary significantly. Some governments are attempting to make subsidies market friendly by introducing at least some
attributes of smart subsidies, while others have used input vouchers and still others use electronic transfer or e-wallet systems using
mobile phones. Mozambique and Uganda are yet to implement large-scale subsidy programmes. Finally, government advisory
services have revived in recent years in several countries, such as Ethiopia which has invested heavily in this area.
Page 18
FERTILISER POLICY ERAS IN AFRICA

Phase 1: 1960s To Early 1990 Phase 2: 1990 To Phase 3: Mid-2000 Phase 4: 2015 To
Mid-2000 To 2015 Present
Policy context Government top-down command and Structural adjustment, Expansion of private Government
control of fertiliser value chain market liberalisation sector, smart withdrawal
subsidies
Fertiliser consumption Growth in fertiliser use and agricultural Reduced consumption Increased Shift to fertiliser
productivity consumption, blends
adoption by more
farmers
Private sector Little involvement Domestic private firms Expansion of private Competitive market-
emerge, multinationals sector: based provision,
enter and expand manufacturing, public-private
imports and partnerships
distribution
Government Price controls, universal subsidies, Liberalisation, regulation, Smart subsidies, Withdrawal from
subsidised credit, in-kind aid, overvalued removal of subsidies, promoting direct involvement
exchange rates giving incentives for use, exchange rate competition, in value chain, focus
large-scale extension, support for export liberalisation targeting small on improving
crops farmers business
environment,
incentives to ease
supply and access,
regional policy
harmonisation
Source: NEPAD, CAADP, AGRA, BMI
Production Opportunities Exist As New Plants Come Online
The African fertilisers market is fragmented with the presence of many global and local players in the region. Yara International ASA,
Israel Chemicals Ltd, Haifa Group, Groupe OCP, and Omnia Holdings Limited are some of the major players who have operations in
the region. These companies are expanding their businesses by building new fertiliser manufacturing plants to boost domestic
fertiliser production. Ethiopia, in recent years, has become a hot spot for the potassium-based fertiliser market, accompanied by
ongoing investments in the country's fertiliser sector.
Africa as a whole is a net fertiliser exporter and is projected to have a surplus of both nitrogen and phosphorus in 2022 (while
running a deficit in potash). This is mainly a result of major production facilities north of the Sahara, with production concentrated in
six countries: Algeria, Libya, Egypt, Morocco, Nigeria, South Africa and Tunisia. By contrast, SSA imports 95% of the fertiliser it
consumes. In SSA only a few corporations produce fertiliser; less than a few firms operate in any of the producing countries in the
region. However, this is not for lack of opportunity as Africa possesses considerable mineral and hydrocarbon reserves that could be
used to produce fertiliser or to power the facilities and infrastructure needed for commercialisation. Moreover, many fertiliser plants
in SSA currently operate at below capacity, hindered by severe infrastructure constraints, government intervention and scarcity of
financial capital.
We hold a favourable view on fertiliser producers in the MENA region over the coming years, and production growth will improve in
SSA as well given the number of various new projects coming online. As of 2022 there were 12 fertiliser manufacturing plants in
SSA producing nitrogen- and phosphate-based fertiliser products (there are no potash manufacturing plants). Also included in this
category are plants producing lime supplements, micronutrients and organics. In March 2022, Dangote's new fertiliser factory was
Page 19
inaugurated outside Lagos and it joins Notore Chemicals Industries and Indorama Eleme Fertilizer & Chemicals in Nigeria
to become the three main urea production plants in the region (Madagascar and Zimbabwe produce other nitrogen-based
fertiliser), while phosphate plants are located in Mali, Senegal, Togo, Tanzania and Zimbabwe. Access to ample reserves of natural
gas and phosphate rock at a cheap cost in comparison with competitors in North America, Asia and Eastern Europe underpins our
expectations for solid performance from fertiliser companies based in the MENA region.
We hold a more positive view on the near-term prospects for fertiliser production in SSA, especially for nitrogen-
based fertilisers. Over the past few years, several companies have shown interest in establishing new complexes to produce
ammonia or urea. More than a dozen projects in Nigeria, Ethiopia and elsewhere have been under study since 2010. Large
greenfield projects are also under consideration in several countries, either as autonomous projects or in partnership with foreign
entities in at least 11 North African and SSA countries.
We retain a generally positive outlook for Egypt’s fertiliser sector as initiatives aimed at boosting domestic production facilities will
yield fruit over the coming years. In addition to steady government support for the sector driven by export potential, we see recently
completed and ongoing projects driving greater output.
Recent investment has focused on nitrogen fertilisers, already the most-produced category as opposed to phosphate and potash.
Some headline projects include the upcoming fertiliser complex in Cairo by El Nasr Co for Intermediate Chemicals and one by
the German company Thyssenkrupp. Furthermore, in Q221, Stamicarbon announced a contract with Abu Qir Fertilizers Co to
increase capacity of its Abu Qir 3 urea melt plant in Egypt, with work due to be completed in 2025. Phosphate fertiliser production
also appears to be increasing, as exports have trended upwards in recent years, but with new investments focusing on nitrogen, we
expect the production gap to widen over the coming years.
We do not expect fertiliser production growth to be matched by increased domestic demand. Egypt’s use of nitrogen fertiliser per
area of farmland is high at over 340kg/ha in 2018. Furthermore, we forecast limited crop production growth in Egypt to 2025 as
arable is limited.
South Africa is one of the major agriculture-producing countries in the continent and import dependent. All the potassium-based
fertilisers are consumed domestically and 60%-70% nitrogenous fertilisers are imported. The South African fertiliser market has
been operating in a deregulated environments, with no import tariffs or government sponsored schemes. In this deregulated
environment, the prices of fertilisers marketed in the country are highly influenced by currency exchange rates (ZAR/USD), overseas
prices, and shipping costs. Thus the growers are aiming for the long term sustainability of high-quality grain production.
An increasing trend observed in the adoption of Specialty Fertilisers due to their higher efficiency. However, specialty
fertilisers are higher priced compared to conventional fertilisers. CRF, liquid fertiliser, SRF, and water soluble fertilisers are covered by
Specialty types. The demand for liquid fertiliser are keeping up in the Africa region, as the soils in the region are dry and liquid
fertiliser ensures easy absorption by the plants. Water soluble fertilser's absorption rate is more than double compared to
conventional fertilisers reaching an efficiency of about 80%-90% and reducing total fertilser use. ICL's increased focus on specialty
fertiliser offers growth opportunities compared with its mature legacy businesses.
In terms of phosphate fertiliser, Africa will see the largest increase globally of more than 20% in the coming five years. Pre-
production work has also been done in several countries with large phosphate reserves, including Guinea Bissau, Mali, Togo and
Uganda. Overall, there are around 37 new fertiliser processing and manufacturing facilities in SSA that are either operational or
expected to come online. A network of fertiliser blending plants process imported or locally produced fertiliser into balanced
nitrogen, phosphorus and potassium blends throughout Africa.
Page 20
Sustainability: Additional Fertiliser Use To Reduce Greenhouse Gas Emissions
In the context of Africa, an increase in fertiliser use will be a key driver towards improving sustainability and reducing the continent’s
admittedly small carbon footprint. Low fertiliser use is leading to the depletion of soil nutrients in many parts of Africa, and some
estimates argue that almost 100mn ha of land have already been degraded through soil erosion, leaching of nutrients and nutrient
mining via harvests. Many observers believe that the continued low or imbalanced use of fertiliser will lead to negative
environmental consequences along with reduced biodiversity. In particular, in places where fertiliser use is low, soils can’t sustain the
yields required to meet food demands. Consequently, farmers need to cultivate a larger area for crops, which means large-scale
deforestation, less biodiversity and greater volumes of greenhouse gases (GHGs). The deficit in food production also requires food
imports, which in turn stimulates environmental degradation elsewhere.
Research by Vlek et al (2017) has shown that increasing the fertiliser use in Africa by 20% would increase GHG emissions by only
0.37mn tonnes of CO2 equivalent emissions a year (a similar 20% increase in South Asia would lead to an additional 6.5mn tonnes
of CO2 emissions). However, the increased use of fertiliser would raise yields of rice by 5%, wheat by over 1% and maize by 9.9%,
which would potentially permit 2mn ha of currently cultivated land to be set aside for reforestation, thus potentially
sequestering between 7.7mn and 18.8mn tonnes of CO2 per year. The research demonstrates that significantly increasing African
fertiliser use could result in a considerable decline in carbon emissions, provided the excess land would be used for reforestation.
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