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National Bank of Malawi Agristorage Facility
‘Sowing the seeds of impact’ EIB in ACP
Brussels, 19 October 2016
Warehousing
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AFRICAN STUDY ON WAREHOUSING AND COLLATERAL MANAGEMENT SYSTEMS IN SUB-SAHARAN AFRICA (Study commissioned by AFD, CTA, IFAD 2014): A Pan-African Nine Country Study* “The [study’s nine] country reports repeatedly refer to the shortage of suitable warehouse infrastructure... ...so one of the key initiatives..would be the development and testing of a robust model for mixed public-private funding for warehouse construction...” * Burkina Faso, Cameroon, Cote d’Ivoire, Ghana, Madagascar, Mozambique, Niger, Senegal, Uganda
An important driver of African agriculture:
• Reduction of post
harvest loss • Smoothing of crop flow
around the year • Financing for the entire
value chain • Entry point into
organised markets • Improving operational
and financing efficiency
Warehouse Receipts (WR)
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A Warehouse Receipt is a receipt issued by a warehouse operator to a depositor that confirms inter alia the quantity, quality and location of commodity held in the warehouse on behalf of the depositor As a document of title, the WR gives the depositor a potentially bankable form of collateral
Warehouse Receipt Systems (WRS)
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Multilateral system in which warehouse operators are accredited to issue WRs that are managed within a registry operated by the WRS. Two services: Financing: Post-harvest financing of commodity inventories in the warehouse Trading: Deliveries of the commodity onto a commodity exchange (‘comex’)
WRS Uses and Users
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• By Farmers for Subsistence Commodities – ‘warrantage’ models in West Africa and Madagascar:
• Retain commodities for consumption in lean season, finance for and repay through other revenue streams (secondary crops, livestock, services, etc)
• By Farmers for Marketed Commodities –
most WRS in West, East and Southern Africa:
• Sell later for higher price when there are seasonal commodity price rises, finance for various purposes, repay through sale of the commodity
• By Traders and Processors to Fund
Aggregation or Unlock Working Capital from Inventories :
• use initial ‘bridging’ capital to aggregate a first tranche of commodity, finance first tranche to aggregate second tranche, finance second tranche to aggregate third tranche etc
Agricultural Storage Investment Facility
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Programme of USAID Southern Africa Trade Hub responding to the warehousing bottlenecks faced by WRS and commodity exchanges: • Inadequate condition of
existing capacity • Insufficient overall
capacity • Particular shortages
outside large metros
Working with EIB and financiers to innovate new financing structures to unlock warehousing in good condition across the focus countries*: • Long term finance • Hard and local currency • Additionality • Productisation • Blending • Risk instruments
*Malawi, Zambia and Mozambique
In brief: The Malawi example
• Objectives: • Expansion in formal storage • Support to national warehouse receipt
system
• The proposed transaction:
• Developed jointly by EIB, National Bank of Malawi (NBM), local private companies, and Agricultural Commodity Exchange for Africa (ACE) and with support by SouthAfrica Tradehub sponsored by USAID
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Transaction structure
EIB National Bank of Malawi
Loan of up to EUR 30m
Pipeline: 30-40 storage facilities across the country
Warehouse owner 1
Loan
…… Warehouse
owner 5
Loan
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delivers crops
ACE
Contribution to sector development
provides the warehouse receipt
certifies the storage facilities
Warehouse owner
EIB National Bank of Malawi
Capacity used for own needs of warehouse
owner
Available to 3rd
parties
Storage facility
constructs & operates
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High developmental impacts
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Food security and safety: • Capacity to feed around 1 million Malawians for
one year • Prevention of foodborne illness • Mitigant to impacts of climate change on food
security • Reduced post-harvest losses
Before
After
Risks & Mitigants
Access to finance for smallholders: • Making storage capacity available to 3rd parties does not
necessarily translate into smallholders using it Technical Assistance
• Depends on performance of a third party, the WRS operator ACE – positively assessed
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Conclusion
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• Technical Assistance by FAO, USAID, AFD and training provided by ACE • Long-term competitive funding from EIB
Thank You
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Contacts: Adam Gross Consultant USAID Southern Africa Trade Hub [email protected] Eva Krampe Agricultural Economist European Investment Bank [email protected]
