ARC/04/4.3

Summary

The intensification of balanced fertilizer use offers great potential for achieving sustainable increases in food production in sub-Saharan Africa (SSA). Farmers will adopt increased balanced fertilizer use when they perceive it is in their interest to do so. The underpinning idea is: crops that provide stable higher profit margins will encourage farmers to adopt and increase their use of fertilizers. This is particularly the case where farmers grow crops on well-managed land (an established NEPAD–CAADP priority).

Substantial growth in mineral fertilizer use is a prerequisite to achieving the goal of 6–percent annual agricultural growth in SSA. Increased fertilizer use can lead to immediate and significant yield increases. Moreover, the lack of adequate plant nutrients impedes the profitability of other technologies substantially. Average fertilizer nutrient application rates in SSA need to increase from 9 to 23 kg/ha within the next decade in order to prevent continuous mining of plant nutrients in the soil and low productivity. This implies an annual growth rate of 2.5 percent (the growth rate was zero in the 1990s). This growth is within a reasonable range of historically observed levels in Africa (Egypt and Morocco) and other parts of the world. Serious environmental concerns in SSA agriculture originate from the lack of intensification.

Addressing the fertilizer challenge in the context of food security entails first the creation of effective demand for fertilizer. Increased demand relates primarily to fertilizer use profitability. This requires: farmers receiving a larger share of the commodity value paid by consumers; creation of farm incomes to purchase inputs through cash-crop diversification; improved farmers’ knowledge on the efficient use of mineral and organic fertilizers; and the establishment of rural input credit programmes. The supply side would benefit from fertilizer trade and information systems. Rural input development, e.g. agro-dealers linked to fertilizer suppliers and commodity traders, is essential for fertilizer availability to farmers.

Farmers will benefit from improved food security and increased rural incomes by raising the level of mineral fertilizer use. The development of local fertilizer markets will build on enhanced public- and private sector capacity and improved rural markets to enable better access to and affordability of fertilizers.

Achieving the established NEPAD-CAADP goal on food security would require a fertilizer development programme with the following proposed components and investment cost:

• implementation and expansion of 22 national soil fertility action plans on established sites of the Special Programmes for Food Security to improve land husbandry during five years involving at least 1.3 million farmers at a cost of US $ 660 million to achieve higher fertilizer productivity;
• establishment of national access to existing national and regional fertilizer market and trade information systems (through existing subregional economic cooperation agreements) at US $ 1.2 million;
• improved efficiency in procurement and development of rural markets for downstream distribution of inputs in collaboration with commodity traders within the framework of ongoing national special programmes for food security at US $ 432 million over 5 years;
• increased fertilizer manufacturing capacity to meet increased effective demand, estimated investment cost at US $ 558 million; and
• establishment of a fertilizer trade credit fund at an estimated cost of US $ 100-175 million.

Fertilizer development in support of the Comprehensive Africa Agriculture Development Programme

Introduction

1. The Organisation for African Unity adopted “A New African Initiative” in Lusaka, Zambia, in July 2001 and launched the “New Partnership for Africa’s Development” (NEPAD) in October 2001. The NEPAD aims to promote economic recovery and development in Africa over the next 15 years. With this aim in mind, the NEPAD Implementation Committee established five priority areas. While four address conditions for development, the committee established agriculture (the main source of livelihoods and income for Africa’s rural population) as the primary productive sector for economic growth. The NEPAD Secretariat developed the Comprehensive Africa Agriculture Development Programme (CAADP) with FAO assistance in pursuance of resolution ARC/02/RES adopted on the NEPAD at the 2002 FAO Africa Regional Conference in Cairo, Egypt. The CAADP aims to increase investment in land and water improvements, rural infrastructure and market access in order to increase food supply and reduce hunger. It also aims to promote investment in agricultural research in order to foster agricultural growth. Implementation of the NEPAD–CAADP and the corresponding investment of US$19 000 million a year over the next 10 years will require a substantial amount of fertilizer in order to boost production and productivity. This note on the fertilizer situation in Africa focuses on projected needs and optimal modalities for addressing food security issues, including exploration of the potential to increase fertilizer production within Africa itself.

2. There is an apparent contradiction between the imperative of increasing agricultural production and stagnant effective demand for fertilizers. Country-specific policies and investment in fertilizer use for food production intensification emerge by placing fertilizer use in the context of the agricultural economy. As NEPAD country and regional crop production action programmes develop, country analysis based on up-to-date information enables more precise and realistic fertilizer requirements. Such analysis also allows assessment of fertilizer needs to support increased agricultural production aimed at expanded agricultural commodity trade, a NEPAD priority. A distinct advantage of country analysis would be ownership of the process and its results by African countries, thereby rendering outcomes more credible to finance ministries, potential development partners and aid donors.

3. Africa has outlined a course for its economic recovery and development in the NEPAD. The long-term objective is: “to eradicate poverty in Africa and to place African countries, both individually and collectively, on a path of sustainable growth and development and thus halt the marginalization of Africa in the globalization process; and to promote the role of women in all activities.” The NEPAD emphasizes the determination of Africans to shape their own future through deliberate development choices, empowerment and self-reliance. It invites development partners to complement these efforts by creating fair and just conditions conducive to accelerating Africa’s effective participation in the global economy and body politic. The NEPAD proposes a variety of measures concerning: improved land and water use, better land tenure security, enhanced rural financial systems, and marketing that is more efficient. Other measures aim to: reduce the urban bias in public spending; improve food preservation and storage; improve research and extension; enhance the role of women; and counter donor fatigue in agriculture.

4. The aim of the NEPAD–CAADP for agriculture is that by 2015 Africa should:

• have attained food security (in terms of availability and affordability and of ensuring access for the poor to adequate food and nutrition);
• have improved the productivity of agriculture to attain an average annual growth rate of 6 percent, with particular attention to small-scale farmers, especially women;
• have established dynamic national and regional agricultural markets;
• have integrated farmers into the market economy (including improved access to markets), with Africa to become a net exporter of agricultural products;
• have achieved a more equitable distribution of wealth;
• have become a strategic player in agricultural science and technology development; and
• be practising environmentally sound production methods and have a culture of sustainable management of the natural resource base (including biological resources for food and agriculture).

African Agriculture

5. The NEPAD–CAADP aims to increase food availability for the expanding population. This entails a ‘make or buy’ decision, i.e. import or produce more. Given the macroeconomic and social goals, limited financial resources and a comparative advantage in agriculture, the NEPAD–CAADP opts to ‘make more’. Thus, in order to achieve the World Food Summit (WFS) goal of reducing the number of malnourished people by at least 50 percent by 2015, domestic production must increase. Table 1 provides an indication of the effort required to increase production, with 25 countries needing to produce 20–70 percent more food by 2015, and 20 countries 60–160 percent. One of the most important needs of the agriculture sector identified is fertilizer.

6. About 874 million hectares of Africa’s land is considered suitable for agricultural production. Of this about 83 percent have serious soil fertility or other limitations and will need costly improvements and amendments to achieve high and sustained productivity. Nutrient depletion is common in Africa and represents significant loss of natural capital valued at an estimated US$1 to 3 billion per year. If the nearly 70 million smallholder families in Sub-Saharan Africa (SSA) fail within the next decade to adopt sustainable integrated soil fertility and land and water management practices on their farms to a large extend, they will seriously jeopardise their long-term food security, productivity and incomes while environmental degradation will accelerate. Africa needs to address low farm productivity through integrated approaches combining increased use of organic matter, mineral fertilizers, hybrid seeds, irrigation or mechanisation (including reduced tillage systems) rather than each in isolation.

7. The improvement and maintenance of soil fertility is a prerequisite for achieving sustained increases in crop yields. Without adequate levels of soil fertility, crops cannot respond to other inputs such as new seeds and management practices. Most soils must receive sufficient levels of nutrients as organic and mineral fertilizers. The optimal mix between the two depends on their availability and water supplies. Mineral fertilizers supply about 44 percent of the nutrients used by crops. More efficient use of fertilizer, e.g. through improved timing, split applications, site-specific management, crop rotation, and soil testing, can facilitate higher yields with the same or even less fertilizer.

8. Protecting and improving the soil makes good business sense. Research in one country has shown that on relatively good soils initial nutrient recovery was only about 30 percent, but after 4 to 7 years of soil improvement, nutrient use efficiency increased considerably. The capture of nutrients is only about 35 percent for nitrogen and 15 percent for phosphorus without soil improvement, which is approximately half of rates typical elsewhere. This is particularly important in Africa where twice as many nutrients are lost compared to other regions. Thus, where farmers do not maintain soil fertility, nutrient losses from fertilizer application rise and fertilizer use becomes unprofitable.

9. Apart from inefficient uptake of nutrients, the total input of fertilizers is very low. Fertilizer use in Africa is only 21 kg (nutrients) per ha of harvested land per year, and is even lower in sub-Saharan Africa (SSA) at 9 kg per ha of arable land. The corresponding figures are 100 kg/ha for South Asia, 135 kg/ha for East and South-East Asia, 73 kg/ha for Latin America and 206 kg/ha for the industrial countries. Developed countries, especially in North America and Western Europe, appear to exhibit growing nutrient use efficiency, especially for nitrogen (N). While African farmers produce 7 kg of maize per kilogram of N fertilizer nutrients, farmers in North America produce five times as much with the same application also using better seeds and a different production technology. Such productivity differences constitute a major constraint for African agriculture in an increasingly competitive global market.

10. The most appropriate strategy for most African countries is one of agricultural output growth through intensification rather than land expansion into fragile and high-risk environments. Therefore, achieving sustained increases in crop yields will become even more critical. Fertilizer consumption in Africa increased by 1 percent/year in the 1990s, with annual growth rates of 3 percent in Egypt and Morocco, zero growth in SSA and a decline of 1 percent in South Africa. Table 2 enables a comparison of fertilizer application rates, e.g. farmers in East Asia apply almost seven times more fertilizers than do their African counterparts.

Fertilizers and Food Production

11. The role of mineral fertilizer in support of a growing demand for agricultural commodities is well established. The past 30 years show a positive correlation between cereal production and fertilizer use in developing countries, which currently use the bulk of mineral fertilizers and exhibit a faster growth relative to developed countries. Fertilizer is a powerful productivity-enhancing input. Indeed, one-third of the increase in cereal production world-wide and 50 percent of the increase in India’s grain production relates to fertilizers. However, African production systems can differ significantly from those elsewhere. They often consist of a mix of crops grown simultaneously in order to optimise use of the most scarce production factor, i.e. labour. In the past, the relatively ample availability of land and low population size resulted in farmers maximising production per labour unit, rather extensive production systems per unit of land, and ensuing low input use.

12. The CAADP envisages agriculture growth from higher yields through increased intensified crop production. As production technology improves, farmers will need to sustain higher yields by higher fertilizer application, in particular in irrigated production systems, a CAADP focus (Table 3). Yields will need to increase by significantly more than 1 percent/year for most crops, especially for traditional staple food crops to reach the production goals. Farmers will need to achieve higher yields under rainfed conditions when the expansion of irrigated agriculture deviates from CAADP goals on land and water development. Fertilizer use in Africa would need to increase by about 50 percent by 2015 (Table 4) in order to support crop yields in achieving the production goals established by the NEPAD and articulated in the CAADP. The estimated Africa requirements in 2015 of N, P₂O₅ and K₂O fertilizer nutrients are 2.7 million, 1.1 million and 0.6 million tonnes, respectively. Fertilizer application in SSA would need to increase from an estimated 9 kg fertilizer nutrients/ha in 2000 to 23 kg/ha in 2015. Such increased fertilizer use narrows the gap with Asian farmers by over 100 per cent in a short period. This growth implies a significant increase in crop production intensification. The related effective demand for this volume of fertilizers will depend in particular on continuously increasing fertilizer use profitability through higher commodity prices received by farmers.

13. Farmer adoption of good land husbandry is a condition for profitable fertilizer use. Twenty-two African countries are assessing the importance of soil fertility and soil degradation to people’s livelihoods to establish the extent to which food security, especially for the most vulnerable members of society, depends on soil fertility. Soil fertility, however, is just one factor that determines food security, and its importance is modified by various social, economic and institutional factors. Soil fertility management strategies are consequently highly diverse and change over time, and remedial measures must suit local conditions. There is a strong case to be made for a new, participatory approach to agricultural extension and research. The addressing of soil fertility issues through national special programmes for food security (Nigeria) and special commodity-based development initiatives (Ghana) is distinctly cost advantageous. An approximate cost estimate for such soil fertility development is US$2–4 million over five years, involving six thousand farmers per country.

Supply factors affecting fertilizer use

14. Infrastructure development is of vital importance for fertilizer availability. Internal transport costs are high in African countries. For example, they increase fertilizer-marketing costs by 33 percent in Ethiopia. For each tonne of fertilizer applied, at least 5–10 tonnes of produce have to move to markets (and ports). Many problems can arise when importing, storing, transporting and distributing a bulky input that is sensitive to heat and humidity. An adequate fertilizer supply at farm level is essential for maintaining reasonable fertilizer costs, even where domestic prices reflect real cost. Improved marketing systems, particularly through private marketing and better infrastructure, will reduce farmgate prices of fertilizers regardless of their origin. Rural-market development projects (3–5 years) for downstream distribution of inputs involving about 500 dealers per country would cost about US$18 million/year in 24 countries.

15. Landlocked countries may also be more vulnerable to supply disruptions and price instability. For example, while urea fertilizer was US$600 per tonne in 1999 in Uganda, the international price was about US$200. Existing sub-regional economic co-operation institutions need to address improvements in marketing and transport infrastructure in neighbouring countries and informal fertilizer exports from low- to high-cost countries as sub-regional integration progresses (a NEPAD priority). The estimated per country cost of establishing national access to regional fertilizer market and trade information systems is US$50 000. A further US$20 000 per country per year would cover the costs of data collection and processing in order to maintain the systems.

16. The privatization of fertilizer distribution has often been unsuccessful. The private sector has rarely had an active role in the planning of changes to agricultural services. This situation needs rectifying through increased consultation with trade associations and chambers of commerce. While many countries have liberalized fertilizer markets, support for their efficient development has lagged. Seasonality, product bulkiness and storage requirements characterize fertilizer marketing. The relatively slow stock turnover tends to associate with high financing charges and the need to offer credit or to work closely with credit agencies for its sale.

17. Following the abolition of state-run input delivery systems, the private sector has not made a major move into the fertilizer business, as there is little commercial incentive to deliver small quantities to remote villages over poor roads. Public sector support is imperative in the first stage of fertilizer market development. A smooth transition to private sector distribution becomes feasible as general economic development progresses. Other necessary changes in the production and policy environment concern seeds, water management, pest control, land tenure, taxes and regulations, access to credit, extension/technology transfer, etc. However, without fertilizers, the returns from such changes will be small and unsustainable.

18. Foreign exchange availability is relevant in SSA countries that employ foreign exchange controls. Fertilizer import costs were about US$201 million in 2000, with an average price of about US$170/tonne. To attain the derived fertilizer growth, the amount spent on fertilizer would increase by about 3 percent/year to US$351 million in 2015 at current prices. Despite such increases, fertilizer cost would remain a small fraction of the total imports of the region. In 2000, SSA spent US$360 million on maize and rice imports alone. To ensure fertilizer availability, governments should focus on providing public goods in the form of infrastructure, roads and distribution facilities in the early stages of fertilizer market development.

19. The financing of fertilizer trade operations varies considerably between countries and relates to the strength of financial institutions and the size of the national markets. Access to adequate finance from the formal banking sector can do more to promote competition and lower costs than can fiscal concessions, which may change overnight. For example, with a revolving trade credit fund financing 50 percent of the fertilizer procurement and primary distribution costs, the credit products required could total US$100–175 million.

Demand factors affecting fertilizer use

20. Fertilizer demand at the smallholder level in Africa is complex. Price is a critical variable that influences fertilizer demand and supply. Research data show the primary factor in changes in fertilizer demand is profitability of use. Research in Africa also highlights the importance of improving farmers’ crop prices in stimulating fertilizer use and higher yield per hectare. It is highly significant that changes in crop prices have a greater impact than changes in the cost of fertilizers. Research into the price elasticity of fertilizer demand shows that a one-percent increase in the crop price will be at least 25 percent more effective than a one-percent reduction in both the short and long term cost of fertilizer.

21. Price stability, farmers’ incomes and high fertilizer prices relative to output market prices are significant determinants of effective demand. Poor smallholders’ access (physical and financial) is an essential factor, particularly where fertilizer-marketing systems are fragmented and underdeveloped. Improving farmers’ knowledge of the role and benefits of fertilizer use is an ongoing process throughout Africa. However, educational programmes are largely under funded and limited in scope. Farmer awareness of fertilizer use practices varies from country to country. An important component in building demand is to improve farmers’ knowledge on fertilizer products and application. While cash crops sometimes receive fertilizer applications, food crops hardly ever do. In general, however, the long-term cash-crop price outlook is one of decline.

22. Markets in Africa are open to private sector participation. Thus, fertilizer prices reflect the influence of import and domestic marketing costs, including distribution to rural areas, and the cost of capital to finance supplies. Prices also reflect the significant business risks facing fertilizer importers and dealers as they seek to develop domestic demand. SSA imports most of the fertilizers it uses (Table 5). Their prices depend on international demand and supply. Other cost reductions relating to logistics and financing trade operations depend on the general status of economic development.

23. The ability to lower fertilizer costs varies from country to country in Africa. Improved procurement and marketing practices can reduce transaction costs, which may result in lower prices (depending on the intensity of competition in markets). As the price per unit of nutrient varies by fertilizer product, improvements in the fertilizer product mix can cut costs to farmers. Compound fertilizers account for most of the fertilizer consumed in SSA. Such fertilizers provide a balanced supply of plant nutrients. However, their lower nutrient content means that the cost per unit of nutrient may be relatively higher compared with using equally suitable straight grades. Improvements in the supply of cost-effective products will yield a favourable impact on fertilizer demand.

24. Non-price factors, such as inadequate supply, untimely local availability, and the lack of credit, also constrain fertilizer demand. However, they do so to a lesser extent than low commodity prices and high fertilizer prices in some countries. Considerable evidence suggests that physical availability has been a major constraint on fertilizer use in SSA. FAO studies in Ethiopia and Zimbabwe have shown that distance to roads, distance to fertilizer retail outlet, and availability at planting time are significant factors in determining fertilizer demand. Any fertilizer strategy for SSA should aim to increase fertilizer use profitability. Attractive produce prices for farmers and lower fertilizer cost, in conjunction with ample fertilizer availability, would stimulate demand. Problems such as quantity rationing and rent-seeking behaviour by merchants are as much a problem of inadequate supplies as of subsidised prices. If supplies were sufficient, there would be no quantity rationing or room for rent-seeking behaviour.

Selected initiatives to expand fertilizer use in Africa

25. The African Centre for Fertilizer Development (ACFD) has developed an integrated farming system to achieve multiple goals, such as improvement in crop yields, balanced diet, cash incomes, soil and water conservation, and soil fertility. Time and labour saving have also become important objectives in view of the adverse impact of reduced labour availability in the region. This farming system combines three practices: proper and timely input use (organic and mineral fertilizers, liming, seed and agrochemicals); adoption of conservation tillage; and diversified intercropping systems and agroforestry. The system has improved maize yields from 1–5 tonnes/ha to 2.7–9.3 tonnes/ha and produced 0.5 tonnes/ha of grain from leguminous intercrops, for a return on invested working capital of more than 100 percent/year. In addition, farmers can make considerable savings on labour for weeding. The diversified cropping system allows farmers to harvest a product for sale every three months, so supporting farm-household cash flow.

26. The International Fertilizer Development Center (IFDC) with its focus on soil fertility improvement and agricultural development has developed a package of inputs and practices called integrated soil fertility management (ISFM). ISFM raises agricultural productivity while maintaining the natural resource base. The package includes the combined use of soil amendments, organic materials and mineral fertilizers to replenish plant nutrients in the soil and to improve the efficiency and cost-effectiveness of external inputs. The technology package produces yields that are 2–3 times higher than national yields. The return on capital invested exceeds 100 percent, with a value–cost ratio well above 2, and returns to family labour are 2–6 times higher than the average salary in SSA. The ISFM project operates in Benin, Burkina Faso, Ghana, Mali, Niger, Nigeria and Togo with more than 2 000 farmers in 100 villages participating. The emphasis is on participatory approaches to developing ISFM options suitable to local agro-ecological and socio-economic conditions. Farmers select, experiment and adapt the methods in their own fields. This freedom of choice and action enables them to innovate.

27. A five–year program implemented with a particular focus on cotton sector inputs has set the stage for improved market efficiency and increased competition in Benin, Burkina Faso, Ghana, Mali, Nigeria and Togo. Key activities are the reform and harmonization of policies, regulations and practices relating to seeds, fertilizers and phytosanitary products. The program fosters the establishment of national and regional trade associations, and supports emerging input businesses and market information systems.

28. The Southern African Development Community (SADC) – ACFD 2002 regional consultation on “Improving fertilizer procurement and distribution to enhance food crop production in the SADC region” aimed to reverse the persistent decline in per capita food production. Smallholders do not apply fertilizers at the recommended rates or at the appropriate time. The high farmgate cost of fertilizer and its unavailability at peak demand periods are the major reasons why this sector has a very low fertilizer use adoption rate (25 percent). A regional approach is to:

• support the establishment of consortia for bulk buying and transportation;
• promote research and development to produce suitable high analysis fertilizers;
• foster joint ventures to establish fertilizer manufacturing plants;
• support strategic partnerships between stakeholders in order to enhance capacity building and interregional trade; and
• promote investment in fertilizer stocks.

Potential for and economics of fertilizer production

29. The production of mineral fertilizers is a large-scale, capital-intensive, industrial process that involves the use of natural gas and sulphur (by-products of the oil industry) and the mining of phosphate rock and potash deposits. The main determinants of the location of fertilizer production are and will continue to be the location of raw materials, the location of demand and the economics of fertilizer production. Each of these is raising environmental concerns to an increasing extent.

30. Hydrocarbons for energy and ammonia feedstock (mainly natural gas), phosphate rock, sulphur and potassium salts are the main raw materials. Natural gas is generally the cleanest of fossil fuels. It is practically sulphur-free and with lower nitrogen oxide and carbon dioxide emissions than both coal and oil per unit of energy produced. Stricter environmental regulations make natural gas the industrial fuel of choice. World energy consumption seems certain to expand rapidly with the projected growth in the world economy. This is especially true in the most populous, industrializing parts of the developing countries, e.g. China, India, Southeast Asia and much of Latin America. Fertilizer use is also expected to grow fastest in these areas. Competition between the various users is causing higher gas prices in numerous countries where ammonia producers have hitherto enjoyed cheap gas.

31. In 1997, proven global gas reserves were almost 150 trillion m³, or about 59 years of production at present rates. In 1980, the corresponding figures were 77 trillion m³ and 44 years, i.e. as time passed, proven reserves increased despite increasing consumption. Although international gas prices may rise, some African countries have an abundance of low-cost gas, much of it associated with their oil production. The entire fertilizer industry accounts for less than 2 percent of world energy consumption and this is concentrated overwhelmingly in the production of ammonia. Globally, the ammonia industry used 5–6 percent of natural gas consumption in the mid-1990s. Consequently, ammonia-based N fertilizer manufacturing has little influence on world energy prices and rarely on local energy prices.

32. Nigeria has the tenth largest gas reserves in the world. There is a programme of projects to extend development of Nigeria’s gas reserves and end the wasteful and environmentally undesirable flaring of gas from oil fields. By 2008, once the investment programme (US$8 500 million) is complete, Nigeria will be utilizing some 75 percent of its gas (the remaining part that will still be flared would suffice to meet Africa’s annual N fertilizer needs). Although it has taken 30 years to come to fruition, development of Nigeria’s liquefied natural gas export complex is now progressing rapidly; the first train came on stream in 1999. Many of the largest recent discoveries or reserves in Africa have been in remote areas or offshore where operating conditions are difficult (e.g. Mozambique, United Republic of Tanzania, Côte d’Ivoire, Angola and Equatorial Guinea).

33. Phosphate rock is the raw material for almost all phosphate fertilizers. The “reserves” of phosphate rock, i.e. deposits that are or could be mined profitably under prevailing costs, market prices and technology, are rather limited. However, the “resources” that are not economically exploitable, but which could potentially become so, are much larger. In 1998, the US Geological Survey estimated world phosphate rock reserves at about 11 000 million tonnes, with a larger reserve base of about 33 000 million tonnes. These reserves are concentrated in Morocco. At the present rate of mining, world phosphate rock reserves should last for about 80 years. A doubling or trebling of the present real price of phosphate would produce a very large increase in the economic rock phosphate reserves. Africa ranks second to North America as the largest phosphate and phosphate fertilizer exporting region in the world.

34. Potassium salts occur as underground deposits and in salt lakes. Commercially economic sources are less widely distributed than in the case of phosphate. Although potash, like phosphate, is a non-renewable resource. Its known reserves and resources are much larger than for phosphate. At present, no potash mining occurs in Africa. It is not possible to mobilize the deposits in Ethiopia and Uganda under the present economic conditions.

35. The global nutrient supply–demand balance indicates that Africa will again become a (minor) nitrogen fertilizer exporter in 2007/08, remain a major exporter of phosphate fertilizer, while it will continue to import potash (Table 6). Africa’s import dependency for its N fertilizer consumption increased during the 1990s from 38 to 47 percent. However, there are distinct sub-regional developments. The North Africa sub-region reduced its dependency from 28 to 20 percent; South Africa increased its dependency from 10 to 73 percent and SSA from 71 to 92 percent. The growth forecast for N demand in Africa is 1.9 percent/year until 2007/08, while for phosphate and potash the forecast is 1.7 and 1.4 percent/year, respectively.

36. The profitability of the fertilizer industry depends on a combination of circumstances, all of which can vary considerably both in time and place. Investment in a modern, large-scale primary fertilizer complex requires very large amounts of capital. Moreover, this cost varies significantly from site to site. For the same type and size of plant, the cost at a remote, undeveloped site in a developing country could be double that at a developed site in an industrialized country. The cost can also vary considerably according to the process chosen and the workloads of contractors and equipment vendors. In the case of ammonia, the choice of feedstock is also critical. For example, if coal were the feedstock, plant investment cost could easily be twice that of a similar gas-based plant.

37. Plant size is a critical variable in the economies of scale in fertilizer production. In the United States of America the production cost of ammonia in 1998 was US$119 per tonne in plants with a capacity of less than 1 000 tonnes/day, US$96 for plants with capacities higher than this figure. For phosphoric acid, the production cost was US$238 per tonne for plants with a capacity of less than 1 200 tonnes/day, US$185 for plants with capacities higher than this figure. In most other countries, the differential would probably be greater than this. Economies of scale in distribution and marketing also increase the advantage to producers with large-capacity plants.

38. In addition, the cost of infrastructure, such as roads, port facilities, rail access, housing, social services and local industries to supply equipment and services, is a major factor. However, as such infrastructure often also serves the development of the whole local economy, some cost sharings with government are inevitable and usually justified.

39. The lack of local experience, skills and facilities in many of the less industrialized countries also tends to make plant construction inherently more expensive. For similar reasons, plants in such countries sometimes fail to achieve consistently high operating rates. Operating rates are even more important when the capital investment is comparatively large. Low rates can have a drastic effect on profitability. However, some African countries now have large, long-established fertilizer industries at sites with developed infrastructures, and some have the advantage of very low energy and raw-material costs, abundant reserves and proximity to growing markets. As investment costs at such locations approach those in developed countries, the existing industries in Egypt, Libyan Arab Jamahiriya, Tunisia, Algeria, Morocco, Senegal, Zimbabwe and possibly South Africa and Nigeria, are likely to capture the bulk of future investment in the industry.

40. While world fertilizer shortages have never lasted long, short-term price increases have often encouraged overinvestment in new capacity. The phosphate fertilizer industry took two decades to recover from the investment resulting from a large price rise in the mid-1970s. Globally, fertilizer demand continues to increase and there is a continuing need to replace or revamp older plants. The following factors seem conducive to profitable investment in the basic raw materials and intermediates for fertilizer production:

• ample supplies of the basic raw materials;
• a large and growing domestic market; and
• investment in large-scale plants.

41. It is necessary to develop domestic markets to ensure adequate demand for fertilizer when deciding on investments in fertilizer supply capacity. Customer services and the development of improved products add additional value to the basic materials available. The construction of regional infrastructure in West Africa (gas) may provide new opportunities to ascertain the feasibility of N fertilizer manufacturing. In assessing the viability of any new projects, it is important not to isolate Africa as one region but also to consider export opportunities to other regions. New global capacity close to 3 million tonnes of exportable ammonia and 4 million tonnes of exportable urea will become available between 2003 and 2007. About two-thirds of these new capacities will be located in the Middle East (Persian Gulf area and Egypt). Other capacity expansion is scheduled in Trinidad, Argentina, Bolivia and Brazil aiming at markets in Latin America and North America.

Conclusion

42. Increased crop production through expanded fertilizer use will benefit farmers' income and food security. The development of local fertilizer markets will build on enhanced private sector capacity and improved rural markets to enable better access to and affordability of fertilizers.

43. The fertilizer development programme should have the following elements:

• implementation and expansion of national soil fertility action plans for improved land husbandry in order to achieve higher fertilizer productivity;
• establishment of national access to existing regional fertilizer market and trade information systems (through existing sub-regional economic co-operation agreements);
• improved efficiency in procurement and development of rural markets for downstream distribution of inputs in collaboration with commodity traders within the framework of ongoing national special programmes for food security;
• assessment of expanded fertilizer manufacturing capacity in conjunction with implementation of the above; and
• establishment of farmers' groups revolving funds for input procurement.

44. Mineral fertilizer use alone cannot solve all Africa’s agricultural problems. However, without its expanded use, the future may be one of cycles of low productivity, food insecurity, rising food import bills and low farm incomes.

Table 1

Increment output requirement in 2015 (base 1997–99)

Source: Based on FAO Support to “The New Partnership for Africa's Development”: Land and Water Resources Issues and Agricultural Development, ARC/02/4, Cairo, February 2002.

Table 2

Average fertilizer application rates

Source: FAOSTAT.

Table 3

Yields in Africa

Source: Based on FAO Support to “The New Partnership for Africa's Development”: Land and Water Resources Issues and Agricultural Development, ARC/02/4, Cairo, February 2002.

Table 4

Actual and projected fertilizer consumption

^X Excluding Namibia and Liberia.
^XX Excluding South Africa where fertilizer consumption is projected to decline.

Source: Based on FAO Support to “The New Partnership for Africa's Development”: Land and Water Resources Issues and Agricultural Development, ARC/02/4, Cairo, February 2002.

Table 5

Fertilizer trade in Africa, 2000 (thousand tonnes nutrients)

Source: IFA Production and International Trade Committee, October 2003.

Table 6

Forecast of World and Africa Nitrogen, Phosphate, and Potash Supply and Demand Balances ('000 tonnes N, P₂O₅ and K₂O)

Source: Current World fertilizer Trends and Outlook to 2007/08, FAO 2003