Your new post is loading...
Your new post is loading...
On August 4th, the International diaspora Engagement Alliance (IdEA), Developing Markets Associates (DMA), Homestrings and Small Enterprise Assistance Fund (SEAF), will jointly host the Africa Diaspora Investment Symposium. The morning event of the symposium will highlight the tremendous potential of crowdfunding and other investment channels for the African diaspora to support economic growth.
Read more: https://www.homestrings.com/news-and-analysis/2014/july/02/crowdfunding-to-ramp-up-the-african-diasporas-contribution-to-development-at-us-africa-investment-symposium-in-washington-dc/#.U7ZJBvmSzK8
Judging by the dust on the label, the bottle hasn't been handled for years, yet it feels warm to touch. Perhaps that's because it's part of a wine collection that I'm told belongs to Russian President Vladimir Putin and my palms are perspiring.
Select frontier markets, once eyed skeptically as fraught with danger, are now some of the most robust economies in the world. But the shares of companies exploring and producing in these markets often continue to lag based on long-held fears that are no longer valid. How does an investor decipher that fine line between real and perceived? Carlos Andres, the chief analyst and managing editor of the Frontier Research Report and theGlobal Resource Investor, makes his living informing retail investors about risks in the junior resource space. In this exclusive interview with The Gold Report, Andres discusses how to capitalize on the narrowing gap between real and perceived risks in South America and beyond.
The Gold Report: Carlos, you note in the January edition of Frontier Research Report, entitled “2011 In Review: A World in Turmoil,” that only three countries with major stock exchanges finished 2011 in the black: Indonesia, the Philippines and Malaysia. Is the face of global risk changing?
Carlos Andres: In a word? Yes. Some emerging and frontier markets with significant natural resource endowments continue to emerge as robust places to invest and weather economic storms for savvy investors. Paradoxically, the world’s developed economies have become the more risky markets.
TGR: What factors are contributing to that?
CA: On the one hand, robust natural resource demand has asserted itself over the last decade, led by Asia in general and China in particular. Latin America deserves favorable mention as well. This is reflected in the rise in global commodity prices over the same period. It’s being fueled by factors such as population growth, industrialization, urbanization and infrastructure development driving income growth and middle-class expansion. As a result, when you are operating in these markets, there is a strong sense of economic activity, optimism and wealth creation. It’s tangible. You can see it and feel it.
On the other hand, as has been covered ad nauseam by media of all kinds, developed world markets are mired in myriad types of interlinking crises: financial, political, budgetary, debt, employment, military, etc. This fuels a high degree of uncertainty for investors in these markets. To a certain extent this is masking the economic growth on other markets.
TGR: Can you rank what you consider the top risks in the junior resource space?
CA: There are a lot of risks competing to be on that list! Consulting firm Ernst & Young recently released its annual metals and mining Top 10 report. At the top of the list, and I don’t disagree, is resource nationalism. There’s a resurgence of resource nationalism and it does seem to be taking on a rather virulent strain as of late.
“Some emerging and frontier markets with significant natural resource endowments continue to emerge as robust places to invest and weather economic storms for savvy investors.”
Second on the list is a significant shortage of skilled geoscientists. An all-time record of $18 billion was spent on non-ferrous metals exploration in 2011. As mining activities have picked up, so has the demand for skilled and experienced workers. There are not enough of them to go around.
Another rising risk factor, stemming from the success of the sector, is cost inflation. There is competition for the factors of production, including capital equipment. This is a significant factor underpinning the viability of mining projects.
Ernst & Young also lists capital project execution, or the ability to raise enough capital to execute projects successfully. That’s obviously a problem given current weakness in capital markets. Despite record production levels and profitability, investors have fled the sector. There’s a large disconnect that should spell opportunity for discerning investors
TGR: Does that particular risk speak to a lack of skilled management, too?
CA: Yes. Management has to shepherd capital very carefully and conservatively when cash is tight. It does come down to experienced management teams who are shrewd and very nimble on their feet. They must be creative about where and how to obtain financing as well as how they allocate it. Also, their accomplishments and reputations often have a lot to do with being able to bid away financing from management teams who are weak in this area.
Ernst & Young also talks about maintaining a social license to operate, which is a sophisticated way of saying it’s a good idea to get along with the locals near the mine. As we are learning, management teams ignore this issue at their peril.
TGR: The industry has done a poor job of that, by and large.
CA: It has. It’s becoming an increasing area of concern and focus for management teams as problems have flared in various locales. The shrewd companies are beefing up in that area to respond to social needs and concerns. It requires an added dimension of expertise. These issues have added to the costs for many companies. It has become a problem for both mines that have been operating for a very long time as well as new projects.
TGR: Investing in small-cap resource plays can be a high-risk game. What are some things that investors routinely do that expose them to more risk than is necessary?
CA: It’s obviously important for investors to pick the right management with the right projects in the right jurisdictions with financial firepower. The average retail investor often falls down on the job in this area despite the fact that there are lots of good news and research resources out there to help separate the wheat from the chaff.
“Robust natural resource demand has asserted itself over the last decade, led by Asia in general and China in particular.”
There are maybe 3,000 publicly traded junior resource stocks and a lot of them are not worth their listing. The first step is to eliminate the worthless, which means the list of 3,000 quickly becomes 300 or less that are worth considering.
However, many investors who are committed to this sector tend to engage in very poor trading strategies. This is not covered nearly as much as it should be. I’ll try to reduce it to some simple ideas: When trading, investors often feel as if they have to get in on this before it’s too late and, therefore, they will chase price as it moves up. Although it is certainly possible to make money this way in some cases, it is a bad habit that will work against you in the long run.
Investors also tend to allocate far too much capital to individual companies while at the same time not maintaining sufficient cash reserves. When price moves against them, their investment capital is fully deployed. Given the inherent volatility in junior resource stocks in particular, the prices of shares can move dramatically against them. These folks end up selling with large losses. They become demoralized and never return to these markets. Whereas if they had pursued a different trading strategy, they might find themselves not only being able to endure the storm, but able to generate wealth and become successful long-term investors in the sector.
TGR: What would you suggest?
CA: Something along these lines: Investors first find a company they like. It’s at a certain price. It’s a good price, but good strategy says you shouldn’t allocate all your money at once. Given that many investors will allocate far too much of their capital to one stock, once decided on an amount, an investor should probably reduce it. It’s a good risk-management practice in volatile markets.
If you decide to allocate $10,000 (K), maybe you just spend $1K at the current price and wait and watch. If the price falls significantly, say 20%, and you still think it’s a great company in a great jurisdiction, you spend another $2.5K. You are buying on the way down because you believe in the fundamentals, rather than chasing the price up because you are relying on the herd as proof for the value of the stock. You want to be selling to the herd and not buying from them. The only way to do this consistently over the long-term is to make a habit of buying value at distressed prices, like now.
Therefore, the lower the price goes, in 20% increments, for example, you would spend larger and larger chunks of your allocation of $10K. Thus you are lowering your basis as you go. When the price finally does turn around, you will have made a significant purchase right near the bottom. It allows investors to manage emotions and risk while accumulating value. If the company’s stock takes off just after the initial investment of $1K, you may have missed out on putting $9K in, but you still get to participate in the upside and you will sleep well at night.
There are, of course, more nuances to this type of approach to trading. These are the basics just to give some idea of how investors should be thinking.
TGR: Resource nationalization is a big part of jurisdiction risk. My sense is that there’s greater jurisdiction risk now than there was even five years ago. What’s your view?
CA: It was always there, but more countries are jumping on the bandwagon and asking for a bigger slice of the pie by raising taxes, royalties and the ownership interest a country takes in a mine. In some cases, such as in Africa, there is free-carried interest where the state is entitled to 10–20% of the mine without having to bear any of the development costs. It is creating uncertainty so the analyst has to wade through this.
“With any good fortune, the buying season for gold, and potentially for mining stocks as well, is ahead of us in the fall of this year.”
Some countries, like Indonesia, are adding a new twist. In order to capture a bigger piece of the pie, the government wants to require companies that extract natural resources to build refineries and smelters to refine products in-country before they are exported. Going from ridiculous to sublime, Indonesia is also requiring that after 10 years of owning a mine, a company must divest itself of 50% by selling to Indonesian concerns.
Where it starts to get really intense is outright nationalization. We’ve seen some of that in Argentina and Bolivia lately. There were rumors in mining-powerhouse South Africa as well, but cooler heads appear to have prevailed for now.
TGR: When companies are investing the kind of capital it takes to develop a large mine, they don’t want to lose half of it after just 10 years. That’s quite extreme.
Frontier Research Report has success identifying countries where there is more “perceived risk” than there is actual risk. What are some of those jurisdictions?
CA: We like to profit on the difference between perceived risk and actual risk because we’re able to buy things really cheap if perceived risk is higher than the reality. A company’s true value is revealed when it meets significant milestones and investors take notice. However, there are times, like the present, when the margins between perceived and actual risk narrows a bit.
TGR: Or a lot.
CA: Indeed. Now is one of those times where perceived risk is moving close to actual risk. It’s narrowed, even in some of my favorite jurisdictions, like Peru, which is a mining powerhouse and is No. 2 in the world in copper, No. 2 in silver and No. 6 in gold. Nevertheless, it’s experiencing some problems with local unrest to the point where it’s receiving international attention. It’s brought a cloud over Newmont Mining Corp.’s (NEM:NYSE) Minas Conga project, which has the green light from government but is moving very slowly in the face of local opposition.
TGR: It’s forced Peruvian President Ollanta Humala to change around his cabinet somewhat in order to try to appease both sides.
CA: That’s right.
TGR: Humala is a former soldier. He’s perceived as a leftist, but is he anti-mining?
CA: No, I don’t believe he is. Prior to the election, we argued to our subscribers that if he won the presidency, given the nature of politics in Peru and the importance of mining to the economy, he would find it very difficult to enforce his platform overnight and would have to moderate it. In the lead up to the election we started to see him do exactly that.
After he was elected, he proceeded to raise royalties and taxes. The mining companies went along with that. He said he would distribute funds and enact social programs in the rural regions of Peru. It seemed to work out fairly well at first. The local unrest that developed almost immediately after he was elected took many, including me, by surprise. There has always been local unrest but it flared unexpectedly.
TGR: These communities feel that they’ve been left out of the boom that the country has participated in over the last 10 to 15 years.
CA: I think they felt that if they acted out their social displeasure, maybe they would have the backing of their leftist president, but he perhaps caught them by surprise as he proved unable or unwilling to offer that support.
TGR: Ultimately, is Peru is a good place to be investing?
CA: Will mining companies be able to execute projects in Peru and successfully move them from start to finish? Can that still happen logistically, politically, from a regulatory standpoint in Peru? Absolutely. Will investors get comfortable funding projects in a country where there is local unrest? That’s the rub. Can companies raise financing in the capital markets in order to push projects through? That’s the question mark.
In environments like Peru, where mining will continue robustly even under a cloud, it will be more and more important that investors be able to differentiate well-managed, well-capitalized companies, with sound projects.
TGR: Your model portfolio took somewhat of a beating in 2011, along with most portfolios with a focus on this particular sector. Your gold holdings included Lion One Metals Ltd. (LIO:TSX.V; LOMLF:OTCQX; LY1:FSE), Gran Colombia Gold Corp. (GCM:TSX.V), Mariana Resources Ltd. (MRY:TSX; MARL:LSE), Minera IRL Ltd. (IRL:TSX; MIRL:LSE; MIRL:BVL), Rio Novo Gold Inc. (RN:TSX), Sulliden Gold Corp. (SUE:TSX; SDDDF:OTCQX; SUE:BVL)and Azumah Resources Ltd. (AZM:ASX). Auryx Gold was in there too, but it was taken over by B2Gold Corp. (BTO:TSX; BGLPF:OTCQX).
CA: All of these companies except one are still in the portfolio.
TGR: A couple of those companies in there have projects in Peru, including Sulliden, which is suffering from the cloud hanging over Peru after Bear Creek Mining Corp.’s (BCM:TSX.V) license to mine the Santa Ana silver deposit was pulled. Does Sulliden simply wait it out or can it lift its share price by continuing to derisk its Shahuindo project?
CA: Sulliden has experienced management with a strong track record, is well capitalized with $44 million (M) in the bank and is far enough along to shepherd the project through to completion. The question is will the Peru cloud eventually lift and will markets begin to improve so that Sulliden can achieve its true value for shareholders? I believe so. As Shahuindo moves toward development over the next 18 months, its share price is likely to improve substantially. The company will release a definitive feasibility study in August, which will likely add ounces to what is already an impressive 3.4 million ounce (Moz) deposit. Sulliden is also ramping up for mine development. This company has done well for our subscribers and will likely, in our view, add more value in the near future.
TGR: What are you expecting from the feasibility study due later in August?
CA: I’m relatively certain the results will be positive. It will contain a resource estimate update to the existing 3.4 Moz deposit, which includes 66 Moz silver. The deposit remains open in all directions, including at depth, so there is excellent exploration upside. The update will likely add ounces and upgrade existing ounces that are currently in the Indicated and Inferred category. The initial production profile of the open-pit mine will be scaled down from 150,000 ounces/year (150 Koz/year)to 100 Koz/year. That will reduce the initially planned development cost of $200M by half.
With a definitive feasibility study and a smaller, simpler mine plan, the approval process will be easier to navigate as well. The definitive feasibility study will feed the all-important environmental impact assessment, which will be submitted in the fall. It should take 9–12 months to obtain approvals and Sulliden has recently hired a seasoned specialist to manage the process for them.
The Sulliden story has all the hallmarks of a management team that is thinking soberly and strategically with the wherewithal to get across the finish line.
TGR: Minera IRL also has significant assets in Peru. It has a mine in production, Corihuarmi, with about another three years of production left. Minera is counting on future production from its Ollachea project. Can Minera IRL bring it into production within that timeframe?
CA: Chances are very good. Corihuarmi, which may be exhausted by mid-2015, is currently producing 30+ Koz/year. When Ollachea comes on-line, it will have production of 117 Koz. It will be an underground mine and the access tunnel is currently under construction and progressing on schedule.
The deposit itself currently contains 2.6 Moz Indicated and Inferred with solid grades between 2.8 and 4 grams per tonne (g/t) with a higher-grade core within the resource envelope of 5.3 g/t. Ollachea also remains open in all directions.
Minera is currently in the middle of preparing a definitive feasibility study that is due by the end of the year and the company is already working on mine financing options. Permitting and financing are scheduled for 2013 with mine development in 2014 and production scheduled for 2015. So, yes, I think the schedule is reasonable.
In addition, Minera IRL is a very well-managed company with the venerable Courtney Chamberlain at the helm and roughly $45M in the bank. Finally, exercising tremendous foresight, the company has an excellent relationship with the local community through numerous programs, including an agreement that provides for a 5% ownership interest, and a recently signed 30-year surface rights agreement, which enjoyed wide spread local support.
The company should be able to weather the storm and continue advancing its projects in Peru, as well as its Don Nicolas project in Argentina.
TGR: Some of Argentina’s oil and gas resources have been nationalized in recent months. Is Don Nicolas at risk?
CA: The country does not have a history of nationalization in the hard-rock mining industry, although it does in the oil and gas industry. The nationalization of the oil company, YPF SA (YPF:NYSE), has a lot to do with the fact that Argentina has gone from energy exporter to net energy importer in a massive way over the last few years. It used to provide all its own energy, but now it’s suddenly importing large quantities of natural gas to keep the lights on and it’s been draining the country’s foreign exchange. As a result, the government has been reacting rather radically. However Argentina didn’t try to nationalize the mining industry in the 2001 crisis and so far mining companies are soldiering on.
TGR: What about the move by President Cristina Fernández de Kirchner to restrict access to imported mining equipment?
CA: The government of Argentina is not necessarily targeting mining specifically. It is making policy decisions related to keeping foreign exchange in the country. It is impacting mining companies, but it hasn’t shut things down for them. Is there added risk? Yes, especially with imposing capital controls and rules on the way dividends are repatriated and capital equipment purchases are made. It is having an impact on mines. But it hasn’t shut down operations or exploration.
TGR: What are some other junior explorers that you believe have been unfairly punished by events beyond their control, or that are unusually undervalued due to perceived risk?
CA: Gran Colombia stands out in this regard. It sits in the junior ranks in the sense that it is continuing exploration on two very promising mining areas in Colombia. In reality, it has several legacy operating gold mines with large underlying deposits that are currently under development and hence is masquerading as a junior. The company’s Marmato deposit has over 12 Moz gold and 75 Moz silver and yet it’s valuation on an enterprise value per ounce level is around US$20 or 1.3% of the gold price. That’s unbelievably low.
Marmato is in the heart of a historic mining district in the center of Colombia dating back to the centuries when the Spanish controlled it. The company is developing an open-pit mine, scheduled to begin production in 2015.
In the meantime, Gran Colombia is deriving cash flow from the existing underground mine, which produces about 30 Koz/year. The company has another well-known historic holding formerly known as the Frontino gold mine but recently renamed Segovia. Three or four underground mines are currently producing over 100 Koz/year. Segovia has 1.4 Moz so far, but it’s going to get a lot bigger. So the company has cash flow from legacy operations, a world-class deposit at Marmato, lots of silver, a solid deposit at Segovia, with tremendous exploration upside.
TGR: The deposits tend to be high-grade underground vein deposits in Colombia, but they’re difficult to exploit en masse. There are these smaller high-grade operations, but nothing at scale. That’s what Gran Colombia is trying to do with the pit at Marmato. Do you think that it will prove successful?
CA: I do. Gran Colombia has a very experienced management team that has developed large gold deposits before. Although Marmato is operating a legacy underground mine, the massive deposit is being developed with a large open-pit bulk-mining design in mind. The drill results look good and I expect the company to be able to rationalize the pit dynamics and the grade.
TGR: These older operations that Gran Colombia is running have been grandfathered into the new mining act there. However, there have been very promising, much larger deposits that have not been green-lighted. What makes you think that this one will be?
CA: Because the management team has already accomplished what no other mining company would even attempt. Both Frontino (now Segovia) and Marmato had some significant legacy issues that had previously caused miners to shun them like the plague. Frontino had a $200M legacy pension problem from a bankruptcy in the ’70s. Marmato was previously fragmented into dozens of different ownership interests. In addition, the historic town of Marmato, which sat right in the middle of the deposit, had been partially destroyed by a landslide, creating a humanitarian dilemma.
All of these issues have been completely resolved by Gran Colombia management. The company was able to raise the $200M in capital markets to resolve the pension issue in exchange for a 100% unfettered interest in Frontino. It consolidated all of the individual land holdings at Marmato so that it now has 100% ownership of the entire site. Gran Colombia has also aided the government in rebuilding the city of Marmato further down the hillside, which has been completed. All of this was considered impossible.
Atypically, the management team hails from the region and is well connected. Executive Co-Chairmen Serafino Iacono and Miguel de la Campa are from Venezuela and were responsible for finding and defining one of the larger deposits in South America. Their success with Bolivar Gold and later Pacific Rubiales established a tremendous reputation for them both and so they are able to open doors that few others can. In addition, the President and Chief Executive Maria Consuela Araujo is the former Minister of Foreign Relations and former Minister of Culture in Colombia. That gives you some idea of the pedigree of management.
TGR: Lion One appears to be sitting on the tip of an iceberg with its high-grade low-tonnage Tuvatu gold project in Fiji. How is their story coming along?
CA: Lion One is making good progress. It has become evident that the company is sitting at the periphery of a large volcanic system at one edge of a large caldera. In geologic and physical terms, it is very similar to the nearby historic and still-operating Vatukoula mine, which also sits in a caldera. For reference, Vatukoula has historic production and remaining resources totaling 11 Moz. In this context, Tuvatu has an initial existing deposit of roughly 650 Koz established in the early 2000s.
Over the last eight months, Lion One has established that consistent mineralization is extensive laterally and at depth from the existing deposit. In short, this deposit is going to grow. Another is that the company has a deep pool of local geo and mining talent to draw on from Vatukoula, who have lengthy first-hand experience with the above- and below-ground geology.
Thus, on the exploration front Lion One is working hard to nail down the geological system underpinning the deposit. At the same time, it is pushing to establish a commercially viable mine plan scenario that could support the long-term exploration and development of what is shaping up to be an extensive gold field. This is a project to keep an eye on. The company is well-managed by an experienced team and it has about $15M in the bank
TGR: Do you have some tips on how to hone our approach in order to take advantage of opportunities while mitigating risks in the junior resource space?
CA: As we alluded to earlier, on one side of the ledger, it’s important to pick the right management, projects and jurisdictions. On the other side of the ledger, it is equally important to look at trading strategies and how much money to allocate to a particular company. The tried-and-true approach is not to invest more than you can afford to lose. I know everyone knows that, but I suspect a lot of retail investors lack the discipline to stick to it. Wait for the prices to come to you. Buy light in the beginning and buy in ever increasing amounts as the price declines. The rule is accumulation rather than chasing prices as they run away from you. The downside is far too high to chase prices like that.
TGR: Did we see the bottom for small-cap resource stocks in May?
CA: Indeed, they’ve come off the bottom a little bit—especially some of the more well known ones. I think they’re still probably meandering along the bottom as a whole, but some of the more prominent names will bounce off the bottom.
With any good fortune, the buying season for gold, and potentially for mining stocks as well, is ahead of us in the fall of this year.
TGR: Hopefully, Carlos. Thanks for speaking with us.
Learn more about the companies mentioned in a special report at www.globalresourceinvestor.com.
Carlos Andres is the managing editor and chief analyst of the Frontier Research Report, a natural resource-oriented monthly investment newsletter focused on high-risk, high-reward junior exploration companies in emerging and frontier markets. Andres identifies countries and companies where “perceived” risk is much higher than “actual” risk, providing opportunities to profit significantly. Andres has been a natural resource analyst and investor for over 15 years.
LONDON: Jumia, the Lagos-based internet retailer, is expanding its operations to target those West Africans working abroad who send money home to relatives.
Meeting in Paris, the international community promised to contribute USD 11 billion to support the economic recovery of Benin, exceeding the small West African nation's fundraising goals.
Held at the headquarters of the World Bank in Paris, the Roundtable was chaired by the President of Benin, Boni Yayi. It was attended by members of the Government, international organizations like the World Bank, the United Nations Development Programme (UNDP), the World International Fund (IMF), the African Development Bank (AfDB), the African West Bank Development (BOAD), the Benin international and private investors, as well as members of the diaspora.
Benin's Minister for Development, Marcel de Souza said that "the idea of organizing this roundtable comes from the Government's desire to lay the foundations of a prosperous and sustainable economy, aiming for rates of economic growth strong enough to reverse the curve of poverty and unemployment."
While economic growth rose to 5 percent in 2013, that level is still not sufficient to create enough jobs or to substantially reduce poverty, affecting about 35 percent of the population. Almost 60 percent of the youth in Benin are unemployed.
The Government aims to boost economic growth to 8 percent and reduce the poverty rate to 25 percent over the same period.
To revive the economy, the Government of Benin also plans to invest in priority sectors such as transport, energy, agriculture and tourism. The country has many advantages, including its proximity to Nigeria and the entire West African sub-region, in addition to its political stability, macroeconomic stability and low inflation.
In terms of achieving the Millennium Development Goals, Benin has made significant progress with the implementation of several initiatives such as free primary education for girls and free caesarean sections for mothers giving birth. The objectives relating to universal primary education, child health and access to clean water can be achieved by 2015 if current efforts are maintained.
Given the limitations of development aid, the contribution of the Beninese diaspora has become a central issue for development financing. Statistics show that remittances from the Beninese diaspora, the equivalent of 4 million people, represent 2.5 percent of Gross Domestic Product.
The Government said it wishes to involve the diaspora in the development and economy of Benin.
This initiative is strongly supported by UNDP, represented in Paris by Abdoulaye Mar Dieye, Regional Director for Africa and Odile Sorgho-Moulinier, UNDP Resident Representative in Benin.
"UNDP support in this process shows our deep conviction that we must fully integrate this powerful instrument, the diaspora, at the forefront of our development financing efforts," said Mr. Dieye.
The initiative will aim to create mechanisms to facilitate and better focus the diaspora's investments. The Government is considering measures for the benefit of Beninese expatriates, including the improvement of the delivery of administrative documents, tax benefits for investors operating in strategic sectors supported by the State, and ease of access to special economic zones .
JOHANNESBURG (Reuters) - South Africa's biggest private hospital group Mediclinic International raised $300 million by issuing new shares to fund acquisitions in Switzerland, it said on Thursday.
Nigeria’s Minister of Agriculture Dr. Akinwunmi Adesina announced yesterday at the 2014 International AgrikExpo held in Lagos, Nigeria, that the size of agribusiness and agric sector in Africa is expected to grow by $1 trillion in 2030.
Adesina, who was awarded Forbes African person of the year in 2013 said that Foreign Direct Investment (FDI) into Agriculture in Africa will continue to rise until it gets to $45 billion by 2020.
The minister also stated that the Federal Government of Nigeria’s self-rice sufficiency was initiated to help save $2.5 billion annually. The country currently spends about $4 billion on importation of rice, as recently stated by Nigeria’s Central Bank’s Deputy Governor in charge of economic policy, Dr Sarah Alade.
The Minister said that rice production rose by 4.3 million metric tonnes and the number of integrated modern rice mills in the country rose from five to 15 in the past two years.
As part of Agricultural Transformation agenda by Nigeria’s Government to enhance generation of national and social wealth through greater export and import substitution Nigeria is poised towards becoming a major player in global food and agricultural market.
According to Adesina, Nigeria Launched the Growth enhancement Scheme (GES) where farmers across Nigeria receive subsidized fertilizer and seed via electronic voucher on their phones popularly called e-wallet, as part of effort to fight corruption in the procurement and distribution of fertilizers.
Within two years, the e-wallet system reached over eight million farmers and the production of millions of farmers has risen dramatically. The impact of the scheme has been massive, he added.
Nigeria is the first country in the world to adopt this electronic platform for farmers to purchase subsidized farm inputs on mobile phones.
The African pharmaceutical market is one of the fastest growing industries in the world. Nigeria alone reports an annual growth percentage of approximately 12%. It is perhaps no surprise then that one of the largest pharmaceutical companies in the world has recently invested substantial amounts of money into the African pharmaceutical.
In many rural parts of Kenya, smallholder farmers have lacked financing options that would allow them to purchase a milk cow or other tools and inputs that could make their agribusinesses more profitable. The sources of credit available to them, if any, often risked pushing them further into debt, rather than helping to lift them out. In response, the founders of Juhudi Kilimo, with their backgrounds in rural agriculture in East Africa, designed a new approach. The enterprise provides financing to livestock and poultry farmers in the form of loans based on income-generating assets, which can offer lower interest rates than general loans, and accommodate staggered or longer repayment periods. As a result, farmers are able to expand their agri-business and access improved markets for greater wealth creation.
This is just one of the many “impact” enterprises springing up across the continent to provide market-based solutions. Indeed, through our daily work and the research for our new book “The Power of Impact Investing: Putting Markets to Work for Profit and Global Good” – published by Wharton Digital Press – we’ve seen and heard about enterprises that are transforming development challenges into new business opportunities.
A growing and increasingly dynamic cohort of impact enterprises is paving the way for the impact investors that want to finance them. And we believe the rise of impact enterprises will only gain steam as a result of the youth bulge on the African continent. The population of young people is expected to double by 2045. While on one hand, this could be viewed as a major development challenge, it’s also an opportunity to harness greater innovation and leverage the information and communications technology (ICT) boom that is taking place concurrently across the continent. Such mixture of forces has already given way to technologies like mPesa, which enables people without access to traditional banking services to perform financial transactions right on their mobile phones. Or, technologies like Nestle’s CocoaLink, which have empowered cocoa farmers to access new markets, gain information and data about their crops. We can expect more to come.
The growth in African impact enterprises is fueling, but also fueled by, a range and diversity of sources of capital that could be tapped for impact investing. Investors in Europe and the United States have been focused on impact enterprises in Africa. In fact, according to a recent survey by the Global Impact Investing Network (GIIN) and J.P. Morgan of impact investors, more than half reported a focus on impact investing in sub-Saharan Africa, more than any other region. And respondents also plan to increase their allocations in this geography more than any other.
But Africa is now more than just a destination for capital – remittances from the African diaspora are increasingly important, as are the African pension funds and insurance companies that are accumulating pools of capital that could be used more strategically for social and environmental goals, as well as profit. South Africa’s $250 billion in pension fund assets could be just one place to start.
These opportunities also come with challenges. There is still a weak pipeline for impact investments – 46 percent of impact investors surveyed said that few or no deals passed their initial screening, versus 19 percent who said many did. Impact investors thus far have not been either able or willing to provide the money or technical assistance needed to get early-stage enterprises off the ground.
But this may be changing. Regional and local actors are rolling up their sleeves. For example, in 2013, the Rockefeller Foundation and the Tony Elumelu Foundation launched the Impact Economy Innovations Fund, designed to fund projects that harness market-based solutions, foster entrepreneurial ecosystems, and promote the impact investing infrastructure in Africa, with the ultimate goal of benefiting poor and disadvantaged populations and promoting more inclusive economies.
While much more work needs to be done, Africa is joining other parts of the world, including Latin America, Southeast Asia and India as a player in the global impact investing arena, offering the dual possibility of sustainable growth and attractive financial returns.
Over the weekend, the Solar Roadways project on Indiegogo reached its target of $1 million. At the time of publishing, that figure is now north of $1.4 million, with five days left to go. The concept is verging on utopian: By replacing the USA’s concrete and asphalt roads with solar panels, we could produce three times more electricity than we consume, instantly solving just about every energy problem we have (geopolitical stuff, reliance on fossil fuels, CO2 production, etc.) It’s not hard to see why Solar Roadways has attracted so much attention and money: On paper, it really does sound like one of the greatest inventions ever. In reality, though, where, you know, real-world factors come into play, it will probably never make the jump from drawing board to large-scale deployment.
Solar Roadways, the brainchild of Julie and Scott Brusaw of Idaho, have been in development since at least the mid-2000s. The concept, as described by dozens of videos and blog posts over the years, is pretty simple: We replace roads with hard-wearing solar cells. By adding other electronics, such as LEDs and touch sensors, additional functionality has also been mooted: Illuminated road markings (and animals crossing the road), roads that melt snow and ice, and so on. Electrified/networked roads could also be a key step towards self-driving cars and wide-scale EV adoption.
To be fair to the Brusaws, they’re not exactly scammers — Scott is an electrical engineer, and most of the science checks out — but so far, despite $850,000 in grants from the Department of Transport, the couple have only built a small prototype parking lot. TheIndiegogo page doesn’t exactly inspire confidence, either. Right at the bottom of the page, there’s a single line describing what the $1 million (and counting) will be spent on: “We asked for $1 million to hire an initial team of engineers to help us make a few needed tweaks in our product and streamline our process so that we could go from prototype to production.”
These engineers will be tasked with the rather difficult task of turning Solar Roadways from a utopian concept into a real-world product. I do not envy them. While no one is arguing that it would be great to turn our road system into a massive solar farm, there are simply way too many obstacles that need to be traversed — much like fusion power, cold fusion, or heck, building a frickin’ star-encompassing Dyson sphere. Chief among these obstacles is cost. While exact figures are hard to come by, there’s roughly 29,000 square miles (75,000 sq km) of paved road in the lower 48 US states. As you can probably imagine, asphalt is pretty cheap (on the order of a few dollars per square foot) — and Solar Roadways, which are essentially solar cells wedged between thick slabs of ultra-tough glass, are not cheap. Back in 2010, Scott Brusaw estimated a cost of $10,000 for a 12-foot-by-12-foot segment of Solar Roadway, or around $70 per square foot; asphalt, on the other hand, is somewhere around $3 to $15, depending on the quality and strength of the road. According to some maths done by Aaron Saenz, the total cost to redo America’s roadways with Solar Roadways would be $56 trillion — or about four times the country’s national debt.
The top piece of tempered glass on a Solar Roadways panel
Beyond cost, there are other factors like strength and durability, how to store the power, how to wire remote stretches of road into the grid, and, perhaps most importantly, how to keep the roads clean. The Brusaws say the glass tiles can support 250,000 pounds (113,000 kilos), which is certainly enough for any vehicle that might use the US road system — but what about withstanding piercing impacts? What about chemical spills and fires? If a glass tile breaks, is it easy to fix? Will the shards puncture tires?
The only actual real-world Solar Roadways prototype: A small parking lot
To get around the roads-get-rather-dirty issue, Solar Roadways proposes using self-cleaning glass — but in a kind of hand-waving way that conveniently forgets that self-cleaning materials, by virtue of being oleo- and hydrophobic, are incredibly slippery. Sounds like the perfect way to make the morning commute a bit more exciting. Suffice it to say, dirty roads, broken roads, and roads that are too far away from civilization to be useful might as well make no power at all.
With all that said, there’s still no denying that Solar Roadways are cool — but why not just, I don’t know, put solar panels along the side of the road? Or on the roof of your house? Or in the desert? Having built-in ice and snow melting is pretty neat, and lighting up when an animal steps on the road is cute, but neither are worth $56 trillion. Rooftop solar arrays are reaching the point where they’re actuallyquite cost effective in certain parts of the world — and they’re much, much cheaper than building a Solar Roadway — but adoption is still very low. As much as I’d love the US to be blanketed in green, fossil fuel-replacing electrified Solar Roadways, it just isn’t feasible. On the small scale, there could well be some companies that roll out Solar Roadway parking lots — but I think that’s about it, for the foreseeable future.
A few changes are on the way for YouTube's power users, and perhaps the most exciting feature is a way for video creators to raise money from their fans directly on the site.
People who make money from YouTube do so mainly in two ways: advertising, which of course happens on YouTube itself, and getting money from supporters — which happens elsewhere. Whether it's Kickstarter, Indiegogo or just a PayPal donation link, it means leaving the site.
If people can put a few bucks in the virtual tip jar without visiting another website, that could be more convenient.
The crowdfunding feature, announced in a video and blog post, isn't final yet, so there's no word on how the donation revenue might be split, where it will fit on the page, and so on. That information should be arriving in the next few months.
Something else serious YouTube users will find useful is an upcoming app specifically for administrating YouTube channels. Comment moderation, analytics and other options accessible from the desktop site's dashboard will be available on mobile — though there's no date on this app, either.
It's something to look forward to, and also something other crowdfunding platforms will want to take notice of. YouTube is huge, and if Google, which owns YouTube, convinces people to keep their money on the site, that could be a serious loss of revenue.
In their recent top 100 list, Business Insider shone the spotlight on women-power by revealing its candidates for the most influential tech women on Twitter. A platform in which news, updates and comments can be published and shared instantly, it was great to see the merits of this platform and those who use it recognized so publicly.
Proudly joining the final list were two African ladies with plenty of success behind their names. Ory Okolloh entered the list at number 28, while Juliana Rotich featured at number 88.
The Nigerians in Diaspora Organisation Americas (NIDOA) has urged President Barack Obama of the U.S. to step up efforts to assist Nigeria in fighting terrorism.
This is contained in a statement issued on Thursday and signed by NIDOA’s Acting Chairman and General Secretary, Dr Sandra Dafiaghor and Dr Samuel Afolayan, respectively.
The group, while acknowledging the support already being rendered by the U.S, said Obama should help by providing more sophisticated intelligence-gathering and surveillance.
The Nigerians urged Obama to further assist Nigeria with technical training for military troops, appropriate equipment and long-term support.
“NIDOA will like to thank President Barack Obama and the American people for the support and assistance being given to the Nigerian Government and people at this very difficult time.
“This has come at a time when the abduction of over 200 secondary schoolgirls has thrown the Nigerian nation and the whole world into turmoil and disbelief.
“While acknowledging that the U.S. Government has started providing assistance, the Nigerians in Diaspora Organisation calls on Obama to step up the pressure by specifically assisting Nigeria with gaps in capacity,’’ the group said.
The organisation, according to the statement, pledged its commitment to working with the Nigerian and U.S. governments in finding a sustained solution to the menace of terrorism.(NAN)
If you’re keen to remain up-to-date with all the important investment news then you can now manage your mail in a way that is both simple and effective. Read more: https://www.homestrings.com/news-and-analysis/2014/july/01/learn-all-you-need-to-know-via-the-gmail-promotions-tab/#.U7O8FfmSycA
The Sustainable Development Goals which are currently being formulated by the UN and other stakeholders, face gaps in both public and private investment in developing countries.An estimated annual $2.5 trillion funding is to be disbursed for this purpose said UNCTAD’s World Investment Report 2014 released in Nairobi, Kenya on Tuesday.
The report, which is subtitled Investing in the SDGs: An Action Plan, offers a bold framework to understand and enhance the role of private sector contributions to the pursuit of positive economic, social and environmental outcomes in developing countries.
Private sector contributions – through both good governance in business practices and investment in sustainable development – will be critical to the realization of the SDGs, the report says.
Public sector contributions will remain indispensable, but may be insufficient to meet demands across all SDG-related sectors.
Nevertheless, increasing private sector contributions poses challenges and policy dilemmas which must be addressed, says the report.
Among the key findings of the report states that estimates for total investment needs in developing countries alone range from $3.3 trillion to $4.5 trillion per year, for basic infrastructure such as
Canadian trade finance agency Export Development Canada will open its first African office in Johannesburg in 2015, Canada's minister of international trade, Ed Fast, announced on Monday.
Fast, who is on a 10-day tour of Burkina Faso, Madagascar, South Africa and Tanzania, was addressing a media briefing in Johannesburg when he made the announcement.
Fast said Canada had chosen Johannesburg as the location for its first Export Development Canada (ECD) office because of the city's economic position as the financial gateway to southern Africa.
He said the ECD, through its Johannesburg-based team, would focus on connecting more Canadian businesses, particularly small and medium-sized enterprises (SMEs), to the growing supply chains within intra-African trade.
"South Africa is Canada's most important commercial and political partner in Africa and is the only country in Africa - and one of only 20 around the world - to be identified by our government's recent Global Markets Action Plan as an 'emerging market with broad Canadian interests'," Fast said.
"When most Canadian businesses look to South Africa, they see a country so far away they think it's impossible to trade with it. The EDC will change that," Fast said, adding that on-the-ground support in southern Africa would help Canadian SMEs to boost their exports and create jobs and opportunities at home.
Fast also said the South Africa-Canada Chamber of Commerce would be revitalised to provide a forum for Canadian companies and investors in the country.
President Jacob Zuma, during the state visit of Canadian Governor-General David Johnston in May last year, said South Africa offered good investment prospects for Canadian companies, adding that they should take advantage of infrastructure projects on the continent, as well as get more involved in Africa's mining sector.
Johnston said the success of the Canadian-designed Gautrain demonstrated both the quality of South African infrastructure and the strength and expertise of Canadian technology.
There were several areas in which South Africa and Canada could co-operate, including mining, infrastructure, agriculture and education, he said, adding that the success of Africa was critical to the success of the world.
"This remarkable experiment of bringing diversity together and reinforcing democracy that we have seen in South Africa from last 19 years is inspiring all of us ... and we will be with you all the way as you bring the African continent together to extend those values and achievements that you have already demonstrated so well here," he said.
VENTURES AFRICA – According to the ex- Central Bank of Nigeria (CBN) Deputy Governor Mr. Tunde Lemo, the value of mobile money payment as at May 2014 has amounted to $1.7 billion (N271 billion) for 25 million transactions, confirming a growing adoption rate of alternative payment services in the country.
This shows an increase in mobile money transaction when compared with the figure posted in August 2013, which amounted to N10.1 billion ($61.9 million) for 1.6 million transactions. Mr. Lemo made this known while speaking at an event organized by Nigeria Deposit Insurance Corporation (NDIC), the agency responsible for maintaining Nigeria’s financial system stability.
The apex bank of Nigeria, issued a regulatory frame work for the operation of mobile payment services in the country in 2009, to reduce the Number of unbanked Nigerians. As at 2013 the apex bank granted licenses to 15 non-banking operators and 6 banks.
The Cash-Lite policy of the CBN was introduce in a bid to modernize Nigeria’s payment system; reduce the cost of banking services, drive financial inclusion, improve effectiveness of monetary policy, reduce the high security and safety risks, reduce high subsidy, foster transparency and curb corruption and ultimately meet the federal government’s Vision 2020.
The main Factor responsible for lack of traction of mobile money operations is inadequate capital investment on the part of mobile money operators.
“There is need for higher investment on agent network’s marketing than initially forecasted. N500 Million was the initial official requirement for mobile money operators but it has been revealed that 500million was inadequate”. This statement was made by Mr. Dipo Fatokun, Director, Banking and Payment System Department of the CBN.
Operators of Mobile money are complaining of lack of basic infrastructure such as power, telecommunication networks and others. There is also the difficulty in reaching the unbanked especially in remote areas as agents are not available.
According to MEF a global community for mobile content and commerce,15 per cent of mobile media users used mobile payments to pay for goods globally in 2013.
Africa continues to dominate mobile banking uptake with an average of 82 per cent of consumers engaged in this activity last year.
Although Turkey went to Somalia to provide humanitarian aid in 2011, Mogadishu has been offering more political power. If accurate steps are taken, a stronger Turkey in a stronger Somalia may be visible.
MOGADISHU – The 16th century was the first time Turks entered Somali territory when local governors asked Sultan Süleyman the Magnificent to rescue Mogadishu from the Portuguese navy, which was looting the city. Although the Ottomans lost to the Portuguese navy, they left behind mosques and a castle. After three centuries, the Ottomans were in Somalia again to help the local people who were resisting a British invasion and suffering from a humanitarian crisis. The Ottomans established an embassy, dug water wells and trained people to create an army.
Looking for value in emerging and frontier markets? Kenya and Nigeria may be just the ticket, according to asset manager Advance Emerging Capital.
As well as robust population growth, the two countries have the highest medium-term gross domestic product growth rates of all countries in sub-Saharan Africa, the investor says in a report published on Monday.
Nigeria, in addition, has recently overtaken South Africa as the continent’s largest economy.
In April, the most comprehensive set of data since 1990, showed that nominal Nigerian GDP reached $510 billion in 2013, a chunky $190 billion more than South Africa’s slow-growing economy.
“We view Nigeria and Kenya as two of the most attractive frontier markets over the next five years. The macroeconomic and demographic drivers of both countries are extremely compelling,” said Andrew Lister, co-chief investment officer of Advance Emerging Capital. Based on what he describes as attractive valuation levels of the two markets, he says now is an excellent time for investors to put money into these markets.
Advance Emerging Capital also says Kenya’s middle class has the highest proportion of entrepreneurs of any frontier market, and is rapidly developing as a regional hub for both information technology and energy companies.
In debt markets, the county appears to be on the brink of issuing its first international bond, amid renewed appetite for emerging-market assets. The Kenyan government has said it hopes to raise about $1.5 billion with the bond, which would make it one of the biggest dollar bonds ever sold by an African country.
Bank of America Merrill Lynch, too, has pulled together some data that it says backs up case for investing in the two nations. According to BAML, stocks in both Nigeria and Kenya trade at relatively attractive price-to-earnings ratios. Nigerian listed companies’ earnings growth in 2014 is forecast at a healthy 13.6% while Kenya’s companies’ earnings this year are expected to grow by 19%.
For many, a good place to enter the market is Lagos, the country’s commercial hub. Obinnia Abajue, executive director of personal and business banking at Stanbic IBTC, said it makes sense for foreign companies to operate in Lagos with its sizeable population of close to 20m and more developed infrastructure for business. However, the market is more competitive than other cities in the country.
The diaspora market is one of the biggest drivers of mobile money in Zimbabwe, according to Nkosinathi Ncube, financial services director at mobile operator Telecel.
Ncube was speaking at the 2014 Mobile Money and Digital Payments Africa conference, which kicked off in Johannesburg, South Africa, today.
“I think our biggest diaspora market going forward will be South Africa,” he said.
“The money that flows from South Africa to Zimbabwe on an annual basis is a huge percentage of the Zimbabwean GDP [gross domestic product].”
He said South African mobile operators and banks would be the country’s biggest cross-border mobile money partners.
Mobile money has become important for those residing in the country because it provides a standard unit of exchange in a country that makes use of multiple currencies, including the United States dollar and the South African rand.
“Zimbabwe has the notes of major currency but not coins. This causes problems when receiving change,” he said, adding most small retailers use small goods including sweets as an alternative to change.
Speaking of difficulties operators have faced, he said most Zimbabweans see the platform as a way to store money instead of a service.
Telecel launched its mobile money platform Telecash in January this year, entering a market previously dominated by competition operator Econet.
The company has seen dramatic growth in the platform, announcing in March the number of agents had increased by 63 per cent two months.
NEW DELHI: Connecting with diaspora community and involving them in India's economic progress will be a priority area for the new government, Overseas Indian Affairs Minister Sushma Swaraj today said.
The African Development Bank (AfDB), in partnership with AidData, launched MapAfrica at its annual meetings in Kigali. The interactive online platform enables citizens, government officials and donors to view the geographic location of AfDB’s investments in development projects throughout Africa. AfDB has long been a leader in aid transparency and partnered early on with AidData to geocode AfDB’s portfolio of projects – applying precise location information to development activities. Now AfDB and AidData are taking an important next step, building upon these geocoding efforts by matching investments with results data and beneficiary stories, allowing citizens and other users to more easily see not only what AfDB is doing and where, but also the impact of those activities.
According to AidData Steering Committee Member and Development Gateway CEO Jean-Louis Sarbib, “Results and accountability matter whether in the Global North or the Global South. MapAfrica gives citizens and professionals the information they need in an intuitive format so they can participate in the development process and improve its effectiveness."
MapAfrica, paired with AfDB’s institutionalization of geocoding and commitment to transparency, holds tremendous promise in helping to repair the broken feedback loop between donors, governments and the citizens that projects intend to help. In the future, AfDB and AidData will pilot a citizen feedback component of MapAfrica. Today’s launch of MapAfrica, alongside other data portals on aid and development including AidData’s own aiddata.org, is expanding opportunities for a broader community of users to provide hyper-local feedback on development investments, learn more about what works and engage in informed dialogue about future development priorities. For more information and to view a video about the MapAfrica platform, visit aiddata.org/mapafrica.
AidData makes development finance information more accessible and actionable by creating data, decision support tools and knowledge products that enable the global development community to more effectively target, coordinate and evaluate aid. With AidData’s comprehensive data portal – aiddata.org – development researchers and practitioners can compare data on over $40 trillion in remittances, foreign direct investment and aid from 90 donor agencies.
About the African Development Bank
The African Development Bank Group (AfDB) is Africa’s premier development finance institution. It comprises three distinct entities: the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). On the ground in 34 African countries with an external office in Japan, the AfDB contributes to the economic development and the social progress of its 54 regional member states.
Application Deadline: 30 June 2014
UNESCO in partnership with Goi PeaceFoundationand Stiftung Entrepreneurship (Berlin) has launched the Youth Citizen Entrepreneurship Competition - an exciting new opportunity to develop your innovative ideas and projects to create positive change in your community and the world.
The competition provides a global platform for young entrepreneurs who aspire to create positive change in their communities.
By highlighting the best examples of youth entrepreneurship, the competition aims to empower the young generation to take the initiative in social innovation and become pioneers in building a harmonious and sustainable society. With their innovative ideas and leadership, these global citizens will tackle some of the key challenges of today and offer a model of the entrepreneurial potential that will fuel our future.
All participants will receive free training at the online Entrepreneurship Campus. This training provides methods and techniques for developing ideas into solid business models, to turn a budding idea into a fully developed concept, or to improve on an existing business model.
Grand Prize, 2nd Prize, 3rd Prize and People's Choice Prize winners will be selected in each of the following two categories:
· Best Ideas Category: Innovative ideas and plans to be implemented (by the entrant or by others).
· Best Projects Category: Already existing enterprise which has demonstrated social impact.
Winners will be announced on the competition website, as well as the Goi Peace Foundation and UNESCO websites. Finalists not chosen as prize winners will receive honorable mention.
The Grand Prize winners and the People's Choice Prize winners will be invited to the award ceremony during the Entrepreneurship Summit in Berlin in October 2014. Here, they will present their ideas and activities to an international audience.
For more details, please visit this link: https://www.youth-competition.org/about-the-competition
WHEN, in 1961, the government of India asked a celebrated wheat breeder, Norman Borlaug, for advice about new seeds, the subcontinent was thought to be on the verge of starvation. China actually was suffering from famine. Borlaug persuaded India to plant a new semi-dwarf variety of wheat in Punjab. The next year, the country also tried out a dwarf variety of rice called IR8. These short-stemmed crops solved a basic problem: old-fashioned crops were long and leggy, so when fed with fertiliser they grew too tall and fell over. Borlaug’s varieties put out more, heavier seeds instead. They caught on like smartphones. Over the next 40 years the green revolution spread round the world, helping ensure that, where its seeds were planted, famines became things of the past.
Now a second green revolution is stirring in the fields of Asia. It will not be the same as the first one, since it will depend not on a few miracle varieties but on tailoring existing seeds to different environments. But it promises to bring similar benefits—this time to the poor lands and poorer farmers that the first version passed by (see article). Such lands are poor because they are prone to floods, drought and salinity. New seeds have been developed which can survive flooding, and soon there will be varieties that tolerate drought, extreme heat and saltiness, too, making the poorest lands fertile. So the second revolution could do even more to cut poverty than the first.In this sectionThe lure of shadow bankingPutin’s Ukrainian U-turnEverything is brokenDrug testA second green revolutionReprintsRelated topicsAsiaIndia
This revolution is all the more vital because the gains of the first are plateauing. Annual yield growth has fallen to less than a third what it was in the green revolution and below the current rise in population. Meanwhile demand for rice is rising by almost 2% a year in Asia and soaring by 20% a year in Africa.
The gap threatens to widen, because rice is exceptionally vulnerable to environmental change. Rice farmers use almost a third of Earth’s fresh water, and water shortages are pervasive. The world’s rice bowls are the deltas of Asia’s great rivers. These are subject to changing floods, rising salinity and growing heat stress. (Climate change is sometimes seen as a new problem to worry about now that the issue of providing food is settled. In reality it is a threat to future food supplies.)
A second revolution has been made possible by the sequencing of the rice genome in 2005 (the first cereal crop to be sequenced). This enabled breeders to discover the genes for flood resistance in one obscure variety from eastern India and transfer them to varieties all round the world. Breeders will soon do the same for genes that provide other valuable traits.
There are all sorts of things that governments could do to push this revolution forward, such as getting rid of price subsidies and letting farms consolidate into bigger, more efficient units. But they will also need to spend public money directly on research.
One grain at a time
The first green revolution was largely government-backed, with help from international research centres and American charities. You might think that nowadays the big agribusinesses would be desperate to lead the way, and they have indeed invested heavily in new strains of maize and wheat. But rice, the focus of the second revolution, is different. Farmers can keep the seeds from one harvest and plant them in the next with no loss of yield (unlike maize). The market for rice seeds is thus tiny, so almost all research is carried out by the state.
The amounts needed are small. By one calculation, $3 billion of rice research spread over the next 25 years would pull 150m people out of extreme poverty. That is $20 a person, a bargain compared with any other anti-poverty programme. And it has worked before. The cumulative economic benefits from public research into rice are running at almost $20 billion a year, hundreds of times the cost of the investment.
Governments, though, are nervous. Some politicians worry about publicly backing genetic research, despite all the lives it could save (the latest Luddism is in Vermont—see article). Other health ministries have moved on to sexier causes, like fighting obesity. They should think again. It is hard to think of a way to improve more people’s lives for less money.