by
"The views expressed are those of the author and do not necessarily reflect the views of UNCTAD"

Postal Address :
Postbus 74656
1070 BR Amsterdam
The Netherlands
E-mail: Caleb.Dengu@common-fund.org
Internet: www.common-fund.org
1072 AB Amsterdam
Telephone: (31 20) 575 4971
Telefax: (31 20) 676 0231
Paper by Caleb Dengu – First Project Manager
Common Fund for Commodities
8 th
April 2009

Hon. Ministers
The Secretary-General of UNCTAD
Delegates
Invited Guests
Ladies and Gentlemen:
Before I get into the day’s business allow me to give you a brief background about the
Common Fund for Commodities. As you may already be aware CFC started operations in 1991 after all countries ratified the CFC Agreement. The Common Fund for Commodities is an
Intergovernmental Financial Institution established within the framework of the United Nations with a specific mandate to support developing commodity dependent countries in their efforts to improve and diversify their commodity production and trade, thereby increasing their export earnings as well as sustain their real incomes. It is the only International Financial Institution in the world dealing exclusively with commodities.
The mission of the Common Fund for Commodities is to address the underlying causes of under-development of the commodity dependent countries including supply capacity problems, difficulties with effective participation in value chains, lack of diversification of their production and export base. It seeks to bring about structural transformation and to enable these countries and their populations to derive maximum benefits from the opportunities afforded to them by the emerging positive international economic environment.
The Common Fund is implementing its Third Five-Year Action Plan that is making every effort to contribute towards the achievement of the poverty reduction targets and objectives of the
Millennium Development Goals (MDGs). More specifically, the Fund will aim at achieving the following objectives in the Third Five Year Action Plan:
- to improve access to markets and reliability of supply for primary products and the processed products thereof;
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- to introduce price and supply risk management schemes; to expand processing of primary products in developing countries with a view to promoting their industrialization and increasing their earnings through moving up the value addition chain including processing, packaging for the consumer markets;
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- to improve the competitiveness of commodities and enhance the cost effectiveness of commodity production; to improve marketing chain including financing services, storage, distribution and transport systems; to improve market structures in the field of commodities of export interest to developing countries and to address market failures; to scale-up the impacts of improved production, processing and marketing techniques by disseminating them to the widest possible beneficiaries; to broaden the range of exportable commodities and their respective chains;
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- to encourage the corporate social responsibility of multinational and national companies engaged in the commodity sectors; and
- to highlight the importance of commodities in economic development and the concerns of commodity producers.
The Common Fund supports projects that contribute to reducing the economic imbalance between developed and developing countries. These projects should assist in making commodity chains efficient and assist with diversifying commodity production and trade. We also seek to improve quality and productivity in a sustainable way. It is our aim to develop predictable conditions in the commodity trade.The Common Fund finances projects through grant finance, loan finance or a combination of both grant and loan finance. For further information on role and operations of the Common Fund you can visit our website www.common-fund.org.
The topic for today is Financing Agriculture in Africa. The question which we should ask ourselves is what makes a sector attractive? The answer would probably profitability, employment, access to capital, access to skills and technology and good infrastructure. The status of agriculture in general and agricultural finance in particular is disappointing. It is very clear that there is lack of leadership or ineffective leadership to lead the agricultural revolution for a number of reasons.
The agricultural sector is fragmented to the extent of paralysis. If we use the example of coffee which you are all familiar with, in some countries coffee falls under the Ministry of Trade and Commerce, the coffee research falls under Ministry of Agriculture, Financing is done by private banks, the Coffee Board is responsible for regulating the industry and the traders just do what they want. The International Financial Institutions like the World Bank make their own conditions usually via the Ministry of Finance. In this kind of environment it is difficult to have a coherent Coffee Development Plan and where it exists there are no mechanism to implement the plan.
The point I am making is that benefits only arise if all the components in the supply chain are co-ordinated. Thus the role of management and leadership is paramount. Thus you need development banks to finance infrastructure and equipment, Agricultural Banks to finance plantations, commercial banks to finance working capital, and merchant banks to finance trade finance and international banks to provide the lines of credit. If I use Africa as an example it needs to design a financial sector to suit our agricultural requirements rather than use financial instruments designed for different environments with different assumptions.
It is important for us to reflect on the global financial crisis and what will be the effects on developing countries. Coffee Producing countries should not be bystanders again when the
International Financial Institutions are being reformed. The World Bank and the IMF were formed to reconstruct Europe after the war hence it has been difficult to change the agenda to suit the development requirement for most coffee producing countries. Now a major restructuring in underway but we have not put up think tanks to advocate for a position.
Recommendations
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Preparation of National Development Plans which are a product of all stakeholders and not
Ministry Officials or Donors and commitment to implementation.
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2.
Establish Think Tanks which bring together Researchers, Agronomists, Policy Makers,
Academics, Businessmen and Bankers. Life is too important to leave it in the hands of politicians alone.
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Work out mechanism to facilitate the mobilization of domestic resources to finance coffee production through the issuance of Coffee Bonds with maturity periods up to five years.
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Provide countries with Financial Advisory Services to structure trade and pre-shipment facilities.
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Work out incentives both monetary and fiscal incentive to the agricultural sector.
Agriculture requires a stimulus package.
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Integrate the sector so that every institution knows it role and that activities are clearly synchronized.
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Do not forget the farmers, there is declining intellectual capacity in the farming sector which needs to be addressed. I have attended many agricultural meetings without any farmers.
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