New York City, New York
REBECCA ENONCHONG: Thank you very much. We only have 20 minutes and so much to say. So I’m going to start with you Administrator Power. So normally what we think about when we talk about PPPs [public-private partnerships], we’re thinking about big companies and big governments but as we saw on the video, we are looking at, you know, at agriculture. And we're dealing more, mostly, with small businesses. How are you trying to support these small businesses?
ADMINISTRATOR POWER: Thank you. Well, first, thanks to President [William] Ruto, especially. And Secretary [Janet] Yellen, and the whole WEF crew who joined with us and showed such enthusiasm. I think they see that this is a small beginning but it is a bold and very, very tailored initiative. This is going to be important, we're going to remember the launch today, because, not just because Ruto was here, and compelling.
And we are – the video said this – videos are videos, this has been a big gap. We all have to acknowledge that, you mentioned, the bigger companies – USAID from the time we started Feed the Future, really wise people recognize that the private sector has to be at the heart of Feed the Future.
And public-private partnerships, just as you said, have defined and animated Feed the Future from the beginning. But the examples we have are, you know, let's get smallholder farmers to be part of Walmart's supply chain. Let's set, you know, a matchmate between Rwandan growers of coffee and Starbucks. PepsiCo, let's see if they can be interested in some of the chickpea farmers that we work with out in rural areas, and maybe that could service some of the healthy and more nutritious snacks that they're making. And it's worked. I mean, Feed the Future has brought down poverty and malnutrition – 25 percent in the areas that it's working. But it's only working in the areas that it’s working.
And, in those same areas were indigenous entrepreneurs, agribusinesses, that had all kinds of potential. But there was that gap – and that's what this is about. This is about this gap, where they just sort of fall through the cracks. They're too big, these SMEs, to get access to microfinance. But, they're too small to really be able to make it at the bank, at the big banks and pay those expensive capital rates.
And so, this is really aiming to come in. And yeah, we'll start with our $35 million and your $35 million, we’ll raise with WEF’s help – and Klaus and Boris help – we will raise that $200 million, we’ll get this up there. But what we really want – we want the proof of concept. We want, in building this first-loss facility – the President was talking about derisking, and making it more attractive for cheaper capital to be brought in for these individuals and these small companies to be able to access that cheaper capital. If we can show that it is working, this is a sector that needed more attention than it has been getting, and this is the beginning of tailoring that attention.
And imagine what it would mean, when you think about, who are these agribusinesses, right? These are the people who might be transporting the products from point A to point B, or bringing them to market. It might be the people that are providing the seeds and the fertilizer, or even some of the extension services that might want to get done by the state, scaling that, you know, turns a smallholder farmer into an entrepreneur, into a business person. That changes everything. That means money for school for the kids, it means not imagining another subsistence farmer, the next generation.
So this idea, and I really have to give credit to my sister here who was stewing on this, and thinking about something bold and ambitious in this niche. But I think in coming together and in naming a structural gap, that if we filled – President Ruto talked about all the arable land that goes on untilled. And we know that the performance at this point is suboptimal because we see it in all the land that could be producing that isn't. We see it and all the young people who could be working in agribusiness if they could expand in the way that many of these entrepreneurs, like the one you just saw up on the screen, would love to expand but just can't get the capital.
And so how many young people, with this youth bulge, could be helping design marketing plans and running social media campaigns, and also bridging some of the rural-urban divides that exist in so many countries these days. So, this is a big idea, trapped, now, in a medium-sized initiative. So we want to take this big idea. And first we need to hear a lot more from the African farmers themselves, from the African agribusinesses, from the African leaders and learn about how to tailor, and what's the best way to prioritize when you can't do everything. But what we think is a big idea to take the form of a very big initiative. But real thanks to Norway for making this possible. Giving us an excuse to move things a little more quickly at USAID than we're used to doing. So thank you for that. Thank you for the question.
This is different, right? It's not the Walmarts and the Starbucks. It's agribusinesses that are Kenyan. And the knowledge of the land comes from Kenya. And the knowledge of where the next big opportunity lies, is Kenyan. And following that lead, and that kind of partnership can be so important.
ENONCHONG: You said something about – it's not microfinance. And it's so nice to hear, for once, that we're not talking about African women in agriculture and microfinance, because we need the real money, not the micro money. And so I love the fact that this is looking at financing agriculture in a different way. And I'd like to know, how is it different? How, from a technical standpoint, how is this financing instrument different from the ones we've seen before? Other than the size, right, other than the amount? How are we structuring it differently than what we've seen before? Oh, I'm sorry, I'm asking you, Madam Minister.
MINISTER ANNE BEATHE TVINNEREIM: First of all, let me say I'm so excited about this instrument. Firstly, of course, because this is one of the solutions to a problem that we have seen increase since 2014, which is the increasing food insecurity of the world. But also, because we know that the ag sector is, should be, can be, the motor of economic growth in Africa. And we've seen – there are so many lost opportunities when we have not invested in the value chains, the local and the regional value chains.
We know that there are 33 million small scale farmers in Africa, most of them are only producing for their own families. At the same time the African continent imports at least $50 billion dollars worth of foodstuffs every year. Imagine the possibility for job creation and economic growth. So this is really, really exciting.
Now, to your question, how is this different? Well, like Samantha said, we have detected a gap. Where some medium – some agri SMEs fall between the cracks. What we are doing, we are putting up a fund that will support investment funds, that again, in turn invest in agri SMEs. These investment funds are, they have the knowledge on the ground of the region of the sector, they are able to detect the SMEs that can grow and scale but are still too small to get the capital from the banks. And it can also provide knowledge, technology transfer, getting, giving strategic advice to the SMEs in questions. So it really is filling a gap.
And the FASA fund, will be, I mean, we provide donor money. So this is a way of de-risking private capital, making sure that donor capital can co-finance investments and take potential first loss. And the idea behind that, I mean, we've had these kinds of mechanisms before. Some people would ask what's new, we've done it in other sectors, we do a lot of things in energy, but we know that the risk in the ag sector is considered very high. And this mechanism provides first loss money from donor capital to a sector that has been, if I may say to a certain extent, neglected.
ENONCHONG: So, the investments are planned to be between about $200,000 and $5 million. And so that's the gap that you're trying to address.
MINISTER TVINNEREIM: That's what we detected when we started working on this mechanism.
ENONCHONG: Okay, and then so what would be next? What's next for the FASA fund? What's the next step? You said $35 million each?
MINISTER TVINNEREIM: Yep. It's a good start. But it's not enough.
ENONCHONG: It's not enough. So what's the next step?
MINISTER TVINNEREIM: Well, the next step now is to find a fund manager. So any interested organizations out there, there will, there will be a call for proposals. And then, of course, we need to scale up the investment. And, like Børge Brende said, up to Davos, we're thinking, you know, really pushing it up during the next few months, getting more interested donors on the table, because there are lots of opportunities out there in the African sector.
ENONCHONG: And the timing. So you said before Davos, but what's your time frame?
MINISTER TVINNEREIM: We're setting it up now, and then we are inviting more donors on board. So no time to lose.
ENONCHONG: So, Administrator Power. And let's talk about impact. Tell us about how you perceive the real impact on the ground of the FASA fund?
ADMINISTRATOR POWER: I mean, I think as my colleague was saying, we have programs like this, you can even see it – none of us want to belittle microfinance. I mean, we see what microfinance can unlock for the small scale farmer, often female, small-scale farmer. But what we, I think, have done, and maybe you could say in different places have dabbled in – and what we're now trying to centralize, and brand, and make a thing that people can rally around – is this broader approach that centers on SME agribusinesses that are themselves the vehicles by which those small scale farmers, again, can scale what they're doing, can expand their businesses.
And it's not as if these longings don't exist, you know, in the small-scale farmer potentially about how much more land they think they could grow, if they only had X, or they only had Y. But also, in the SMEs that already exist about how they see how much more they could be doing to work with processors to take crops and turn them into fruit juices. Or, into products on the value chain and a very different part of the value chain. Or, what it would take to have more efficient transportation, and how much that could support efforts to widen the profit margins for the small-scale farmers, for the middleman, and for the agribusinesses.
So, the demands are all out there. I think what we have to work through is does it make sense to launch this in a couple of countries first? How do we grow the funds? We are incentivizing investment funds by saying that we will bear this first loss. Is that enough? These conversations are now going to take hold. We have the great Scott Nathan here from DFC – Development Finance Corporation – who in his panel may get to speak to some of this because DFC has done so much, actually, in the food security space by making a dedicated push under his leadership, and President Biden's leadership.
So, but I think what's cool about having development agencies involved as well, is that we're also there, I mean, this is the kind of thing we've been doing for some time, is helping farmers get their goods to market, helping them write business plans, helping them think about social media, and what their market share is, and this and that. So, as SMEs then get access to cheaper capital, get to pursue some of their growth dreams and proposals, we're right there with them as well with that Feed the Future expertise. So, I think that also might set this apart from a more traditional investment fund that lives apart from the public sector. And that's that can be at its best the magic of the public private.
ENONCHONG: So what would you want this room to leave with?
ADMINISTRATOR POWER: It depends if it's the people with money or to people with enthusiasm.
ENONCHONG: Both, right?
ADMINISTRATOR POWER: Spread the word, I think. I mean, this has come together pretty quickly. We're really excited about the partnership with WEF. I think that already puts us in a position, we're government officials, to benefit from incredible expertise. USAID already has a fantastic partnership with WEF, on trade facilitation, global lines for trade facilitation, that could work a little bit like this in that instance. Their network of companies tell them what's getting in the way of trade, including agricultural trade.
We USAID are working, probably with Norway, in a lot of the places in the regulatory space on customs on domestic resource mobilization. We learned from WEF's network of companies, what is needed in order for those barriers to come down and for trade to increase. It's like, it's, again, where they're doing the kind of wonky public sector stuff. They're learning what's actually happening in the real world that’s diminishing the impact on livelihoods. And so we think, both in terms of actually investing in this fund with their vast network, knowing again, that others will be bearing first loss, but also being out in the world, and helping us identify where the greatest potential exists for agribusiness. Which businesses are going to raise their hands at the non-local level. And then how do we use our collective leverage to find those local players that are just ready, bursting with ideas and potential and just missing that break that we hope this can give them.
ENONCHONG: Madam Minister, any final words from you?
MINISTER TVINNEREIM: Well, you know, we know that we need all hands on deck to solve the great challenges of our times, which is food insecurity, climate, reaching the SDGs. And as donors, we recognize that the private sector receives a high risk, there is a higher risk in investing in some of these, these markets. But we know that the opportunities are there. And, you know, by introducing mechanisms like this, and, you know, saying that we will continue, like Samatha says – continue to work on framework conditions, on the policies, but also being in there for the long haul, with partnerships to take on the risk in the actual markets that can actually improve lives and livelihoods. So let's just get the job done.
ENONCHONG: Thank you very much. Thank you.
ADMINISTRATOR POWER: To be clear, it's FASA – Financing for Agricultural SMEs in Africa Fund. FASA. Say it with me – FASA.
ENONCHONG: And there's a table with the brochures right by the door. So when you leave, please grab one and it'll tell you a lot more about the program. Thank you.
USAID at UNGA 2023
