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Speeches & Transcripts

Remarks to the African Union Summit: Ngozi Okonjo-Iweala

January 31, 2011

Ngozi Okonjo-Iweala, World Bank Managing Director Addis Ababa, Ethiopia

As Prepared for Delivery

Your Excellency President Obiang N’guema, Your Excellency Heads of Government and Heads of States, your Excellency Mr. Ping Chairman of the AU commission, honorable ministers, special guests, excellencies, ladies and gentle men,

I am delighted to be here at this summit with its theme of “Towards Greater Unity and Integration through Shared Values”.

One of our shared values is making sure we feed our people. But, as we heard this morning food prices are on the rise again. What is clear to us at the World Bank is that food price volatility is here to stay. And we must find ways to deal with this.

The World Bank food price index which measures food price movements rose by 17% between August and November 2010 and is now close to its June 2008 levels.

The increase in the aggregate index has been driven primarily by grains – which increased by 21 percent between August and November.

Maize and wheat prices rose by 36% and 11% between August and November primarily due to earlier related production shortfalls in large exporting countries.

The world has learned the hard way – from the 2008 food crisis – just what a terrible toll rising and volatile food prices can exact on people.

Today as Africans we are fortunate because the impact of this recent increase in food prices has not been as severe. In some of our countries where output has been good, as in Malawi, Kenya, and Ethiopia, prices are stable or actually falling.

Managing Price Hikes

The good news is unlike in 2008, we have been better able as a region to manage the recent increases in prices. Over the last two years, we increased agriculture productivity and production and also increased local production of food staples. Cereal production in Sub-Saharan Africa is estimated to have increased by 5.5 percent in 2010, compared to 2008 for example. This strong domestic production has helped keep prices at reasonable rates.

In the last two years countries like Burkina Faso, Malawi and others have doubled their output and some have moved from being net food importers to being food exporters. These are African success stories which we must celebrate and emulate. More importantly, this proves once and for all as President Murtharika said that Africa can feed itself. But we are not out of the woods yet.

The lesson here is that increased agricultural production and productivity and the ability to move food to where it is needed can make African countries more resilient to global food price spikes.

An Abundance of Land

Opportunities for further increases in output and productivity exist in Africa because we have a chance to raise productivity through better technical and water management and also increase output through better management of cultivated land. Africa has 50 percent of the potential 446 million hectares of uncultivated land in the world.

However this abundance of arable land has to be well managed. With food prices still volatile, large scale land deals are a growing reality on the continent. That’s why together with the FAO, IFAD, UNCTAD and WFP we have developed a set of principles for Responsible Agricultural Investment that respect rights, livelihoods and resources of all citizens, small holder farmers, the private sector and the government.

Sustainable Management

Our agriculture must also be managed in a sustainable way

We need to address climate change by addressing emissions from agriculture. Agriculture and livestock account for about 15% of global greenhouse gas emissions. In Africa, two-thirds of greenhouse gas emissions come from agriculture.

Agriculture can and has to be part of the solution. With better agriculture, land and water management practices, the sector could sequester 13% of current annual greenhouse gas emissions. There is real scope here for the “triple win” of supporting enhanced food security and productivity, climate resilience and carbon sequestration in agriculture.

Therefore, countries need to begin to think of doing agriculture differently.

Promoting value-chain development

An important part of agricultural development now coming to the fore is the need for more integration of the value chain.

The agriculture sector in Africa has been in an enclave for far too long, with the farmer in Africa and the food and retail industry offshore. We must change this. This means that we must help put in place systems to improve the transportation of goods, the flow of information, knowledge and money.

Risk Management tools

In addition to supporting the development of supply chain agriculture, we must also develop risk management tools to help our farmers better manage price volatility.

One way to do this is through the use of weather based insurance mechanisms. Another is the creation of a regional commodity exchange to enable better transparency of prices and quantities for farmers and buyers. Such an exchange can also help farmers secure predictable financing.

What can the international community and other stakeholders do to help our countries attain the above objective?

One of the ways that the international community can help countries seize these opportunities is through the Global Agriculture and Food Security Program (GAFSP).

The G20 under President Obama’s leadership in 2008 set up – the Global Agriculture and Food Security Program (GAFSP) to help countries develop and implement their long term food security investment programs.

GAFSP supports country-led approaches by specifically financing gaps identified in a country’s investment plan, as developed through the comprehensive Africa Agriculture Development Program process. This is really about putting countries in the driver’s seat. In this regard I want to congratulate all the countries that have developed CAADP plans. This approach is now a model for other regions to emulate.

GAFSP financing can be used to raise agricultural productivity; link farmers to markets; reduce risk and vulnerability; improve non-farm rural livelihoods; fund innovative new approaches to addressing food security and scale up technical assistance, institution building, and capacity development.

In other words, GAFSP can assist countries to work on all the areas mentioned earlier; GAFSP has two windows a public sector window and a private sector window.

While the World Bank Group is trustee of the fund, the AfDB, IFAD and FAO along with the Bank itself are executing agencies, the World Bank Group also acts as home of the Coordination Unit, which manages the public sector projects. IFC, the World Bank’s private sector arm, manages the private sector window of GAFSP.

A steering committee overseas the affairs of the fund and Africa is represented on the Committee by two regional policy experts, and one non government organization representative.

Since its launch in April last year, GAFSP has pledges totaling US$925 million from six countries, Australia, Canada, Ireland, South Korea, Spain and the United States and the Bill and Melinda Gates Foundation.

Since its launch, GAFSP has approved and started disbursing grants totaling $321 million to 8 countries – Rwanda, Togo, Sierra Leone, Ethiopia, Niger, Bangladesh, Haiti, and Mongolia, of which 6 are African Countries. The 6 African counties have received a total of $223.5 million, or 70 percent of all the funds.

You can say that the GAFSP is more or less an African fund.

So far, 28 countries have applied GAFSP including 14 from Africa. And in the last round of applications the GAFSP secretariat received requests totaling almost a billion dollars.

The good news is that we have begun to assist to finally implement their CAADP plans. The bad news is that only 6 of 14 African countries that applied have been assisted given the lag in getting resources.

The G20 pledged $20 billion. We know that the fiscal situation is bad in most countries so we are not pressing now for the full pledge but surely the G20 can support 1/5 of what they pledged by aiming for $5 billion over the next 5 years. That is $1 billion a year.

Action on Food Volatility

President Sarkozy said as G20 chair that he wants to support African agriculture to help limit food price volatility. We applaud him and like he said we do not need another working group to study the problem, we just need to the G20 to act.

We therefore, call on the G20 and other leaders to make good on their promises. This should be one of Africa’s asks to the G20. So we need you as heads of states to please raise this issue when you meet with the G20 leaders. We need them to fulfill a pledge they made two years ago.

For our part, the World Bank Group just finished mobilizing additional resources for our 71 poorest countries through IDA, the International Development Association, our fund for the poorest.

With your help we were able to raise a historic 49.3 billion dollars. I must take a moment here to thank all of you who helped by talking to donor countries and making the case on IDA effectiveness and results.

With additional IDA resources we hope to more than double our lending to Africa in agriculture from about $400 million a year to close to a billion.

The World Bank has also reactivated its Global Food crises Response Program (GFRP) to assist countries in need. Set up during the 2008 food price spike, over 40 million people in 40 low income countries are receiving ongoing assistance through this fund, with commitments totaling $1.5 billion. The GFRP has allocated $866 million representing 60 percent of total GFRP commitments to 25 African countries.

Working Together

Presidents, Excellencies, ladies and gentlemen; no country has grown in the last two centuries without developing its agriculture sector and improving its food security.

We also know that overall GDP growth originating in agriculture is two to four times more effective in reducing poverty than growth generated outside agriculture.

For Africa to continue to be among the fastest growing regions in the world and contribute as global player to the recovery, we cannot afford to overlook the potential of this sector for job creating and food security.

There’s clearly a need for all of us to continue this work together, as a group with shared values, and I want to say the World Bank Group is committed to working with you as well.

To paraphrase Nelson Mandela if we develop this sector: There would be work, bread, water and salt for all.

Thank You.

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