Tanzania - AFFM Partial Credit Guarantee Provisioning Project - Project Summary

i AFRICAN DEVELOPMENT BANK AFRICA FERTILIZER FINANCING MECHANISM AFFM PROJECT EXECUTIVE SUMMARY AFAP - TANZANIA P-TZ-A00-015 Thematic Facility AFFM PARTIAL CREDIT GUARANTEE PROVISIONING PROJECT TANZANIA May 2023 ii The Africa Fertilizer Financing Mechanism's AFFM strategic plan 2022 -2028 prioritizes the increased access to finance through capital investments, which goes a long way with the support of fertilizer policy reforms and increased smallholder farmers' access and appropriate use of fertilizer through facilitation and technical assistance. Under the first pillar of the new strategy Strengthening the fertilizer sector through access to finance and 2022 work plan, AFFM has opted to provide the Africa Fertilizer and Agribusiness Partnership AFAP in Tanzania with a second round of USD 2 million partial credit guarantee and USD 528,600 grant the Project. The project will build on the success of a first EUR 2 million Partial C redit Guarantee project approved by th e Board in 2019 , implemented by AFAP and clos ed in July 2022 . AFAP has extensive experience in imple 2menting credit guarantees and has built a sol id network of Hub Agro -dealers across Tanzania. The project was implemented in 14 regions in Tanzania with the participation of 26 Hub Agro -dealers, and 946 Retail Agro -dealers; the guarantee was leveraged over 15 times reaching 570,293 smallholder farmers of whom 37.7 were women. The new p roject is in line with the Bank's Feed Africa Strategy as it will ensure the long -term engagement of the private sector in support of additional use of appropriate fertilizer to increase food production and consequentl y food security in Tanzania and the East African region. Although reported trends indicate growing fertilizer consumption in Tanzania over years, the consumption rate rose from 15.858 kg per hectare in 2018 to 19 kg per hectare currently according to Tan zania Fertilizer Regulatory Authority TFRA, but is still far below the Abuja target of 50 kg per hectare. Tanzania is largely dependent on imported fertilizer. Estimated fertilizer demand in 20202021 was 718,051 MT of which 426,572 MT was imported, le aving a gap of over 150,000 MT after accounting for local products of about 32,000 MT. The TFRA monitors fertilizer importation, licensing of fertilizer dealers and general regulation of the fertilizer industry. While the Tanzanian government has set up the Agricultural Input Trust Fund and Agricultural products and services remains great. The financing gap for Tanzania to reach the Abuja3 target of 50 kgHa nutrients consumption is about USD 150 Million. The partial credit guarantee provided under the P roject will contribute to the availability, affordability and financing for fertilizer in Tanzania. The recent Russia - Ukraine conflict has disrupted global supply chains for wheat, maize, oil, grains and fertilizer, increasing the price of food globally and exacerbating food insecurity, especially in food import -dependent, low -income countries. Even before the Russia's invasion of Ukraine1, agricultural commodity prices rose due to extreme weather conditions in South America and the impact of the COVID -19 pandemic on global trade. iii The Bank has identified measures to increase access of fertilizer in Regional Member Countries RMCs through private sector mobilization as a thematic priority. The African Emergency Food Production Facility AEFPF is a U SD1.5 Billion fund, designed to support increased food production in selected countries. The Project will complement the Bank's Tanzania Agricultural Inputs Supports Project TAISP in the country intervention, leading to the enhancement of Tanzania's fe rtilizer importation and distribution capacity. The Project is targeting 3 suppliers and 30 Hub Agro -dealers as direct beneficiaries, 1000 Retail Agro -dealers as indirect beneficiaries and 550,000 smallholder farmers as the ultimate beneficiaries. These pr oject objectives should result in increased agricultural productivity and food security for Tanzania, aligned with the Bank's Feed Africa Strategy. The Project's implementation activities have three main components: i Hub Agro -dealer support to access c redit guarantee facility; ii support increased fertilizer availability; iii project management and coordination. AFFM will share with AFAP the credit risk involved in the transaction with the suppliers selected, at an agreed pari -passu fifty percenta ge, under the three -year implementation plan. Procurement rules for the Project will be a combination of AfDB's and AFAP's guidelines, while disbursement will be carried out under AfDB rules. AFFM will closely supervise the project implementation and will monitor the issuance of the credit guarantees to fertilizer suppliers through credit guarantee agreements between AFAP and suppliers. The implementation will also include capacity building and training, which AFAP will provide to smallholder farmers and HubRetail Agrodealers. 

Project document

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