Fertilizer Trade Credit Guarantee Management

• Country: Cote d'Ivoire
• Summary: Fertilizer Trade Credit Guarantee Management
• ICT Ref No: 78494954
• Deadline: 22 Feb 2023
• Financier: African Development Bank (AfDB)
• Purchaser Ownership: Government
• Tender Value: Refer Document
• Notice Type: Tender
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• Description:
• Tenders are invited for Fertilizer Trade Credit Guarantee Management in Kenya 1. Introduction The African Development Bank is the premier Pan-African development financial institution, promoting economic growth and social progress across the continent. The Bank-s development agenda is delivering the financial and technical support for transformative projects that will significantly reduce poverty through inclusive and sustainable economic growth. African leaders established the Africa Fertilizer Financing Mechanism (AFFM) during the 2006 African Green Revolution Summit in Abuja. In the Abuja Declaration, African Union Member States committed to an initiative to improve agricultural productivity by providing financing required to improve the use of fertilizers in Africa. The Summit charged the African Development Bank with to establish and manage the AFFM. It also enjoined African Union Member States to work together to boost fertilizer use in Africa to reach the target of at least 50 kg of nutrients per hectare. The AFFM is currently housed within the Department of Agriculture and Agro-industry of the Bank. The overall objective of the AFFM is to assist African Countries in increasing agricultural productivity within the context of the Agenda 2063, the 2030 Agenda, and the Malabo Declaration. Since 2019, AFFM and local partners have successfully implemented credit guarantee programs, notably in Ghana, Cote d-Ivoire, Tanzania, and Nigeria. As a result, more than 1 million smallholder farmers have been able to obtain and utilize approximately 112,000 metric tons of fertilizer via 100+ hub agro-input dealers. To implement its mandate, the AFFM Strategic Plan 2022-2028 prioritizes initiatives to increase access and the appropriate use of fertilizer by increasing access to finance and technical assistance through facilitation and capital investments. The Strategic Plan builds on three strategic pillars: (i) Strengthening the fertilizer sector through access to finance by designing hybrid financial instruments in order to meet the the sector's financial needs; (ii) Supporting the development of viable policy reforms to improve production, trade and utilization of fertilizer; and (iii)Facilitating smallholder farmers- access to inputs and technical assistance. In its seven-year strategic plan, AFFM aims to facilitate 16 million commercially oriented smallholder farmers' access to 2,000,000 metric tons of fertilizer and other inputs in 15 countries in sub-Saharan Africa through support to SMEs involved in inputs supply and distribution. This will help reach the target of fertilizer application of at least 50kg nutrients per hectare and productivity increase of at least 35% on 13 selected Strategic commodities. One of the key activities for the AFFM is to support the provision of credit guarantees and other financial solutions along the fertilizer supply chain and, as appropriate, at growth leverage points in agricultural output value chains. 2. The program rationale and description Many African countries depend on Ukraine and Russia for wheat, maize, sunflower oil, and barley. Ukraine and Russia are major exporters of these agricultural commodities accounting for 30% of the world-s wheat, 27% of barley, 17% of maize and 70% of sunflower oil. With the war in Ukraine the price of these grains and oil seeds have soared globally with wheat futures increasing by 44% between January and April 2022. On the African continent, prices of wheat have increased by 42% in Egypt, 31% in Tunisia, 25% in Nigeria, 24% in Tanzania and 17% in Kenya. With the disruption of the war in Ukraine, there is an estimated supply gap of 30 million metric tons (MT) of wheat, maize, and oil seeds on the continent. Russia also accounts for 15% of the global trade in nitrogenous fertilizers and 17% of exports of potash fertilizer and is a major supplier of fertilizer to the African continent. The war in Ukraine has deepened the shortfall in fertilizer, driven prices higher, lowered accessibility, threatening agricultural production as many countries head into the planting season. Fertilizer is three to four times more expensive in most African countries compared to 2020 and there is an estimated gap in fertilizer supply of Mt 4 million in Sub-Saharan Africa. Energy prices are high and climbing, and the risk that food prices will continue to rise is very real. Boosting the local production of cereals and oil grains is the most effective and efficient way to build the resilience of Africa-s food systems to respond to these circumstances and mitigate risks to supply in the short to medium term. The African Emergency Food Production Facility (AEFPF) is the Bank-s rapid response framework to address the food crisis arising from the war in Ukraine, climate change, conflicts, and pests and diseases. The AEFPF will help countries address the risks to their food security by increasing food production through delivering a full package of technology and extension services to millions of farmers and increasing countries- access to fertilizer and other inputs on a national scale. The Bank has identified immediate to short-term and medium-term measures to increase access to fertilizer to its Regional Member Countries (“RMCs”) as a thematic priority under the AEFPF. The support under the AEFPF-s pillar is two-folds: (i) Financing for the fertilizer value chain under sovereign operations that meet the immediate liquidity requirements for RMCs to procure fertilizer; and (ii) use of the Bank-s Africa Fertilizer Financing Mechanism (AFFM) trade credit guarantees to deliver fertilizer needs to importers, aggregators, and other large users. The second sub-component is building upon the AFFM-s success to provide credit guarantees to importers, aggregators, and other large fertilizer users. In support of the Bank-s AEFPF, the Norwegian Agency for Development Cooperation (NORAD) has contributed funds into the AFFM to implement trade credit guarantee projects in Kenya. The credit guarantee project “Fertilizer Financing for Sustainable Agriculture Management (FFSAM)” that will be implemented for the period up to thirty-six (36) months, is expected be leveraged at least ten (10) times the credit guarantee amount, enabling access to at least Mt 28,000 of fertilizer to 285,000 smallholder farmers in Kenya. To achieve this mandate and further help de-risk the financing of the fertilizer value chain, the AFFM will work with qualified fertilizer suppliers or implementing agents interested in receiving AFFM-s trade credit guarantees. Under this co-guarantee scheme, the risk will be shared with AFFM on a pari pasu basis (50-50), to avail inputs on credit to hub agro- 3 input dealers1 and aggregators in the fertilizer/inputs value chain. AFFM will partner with suppliers directly or through implementing agents to implement a trade credit guarantee project of $2,000,000 in each country. In this regard, the supplier signs a guarantee agreement with the African Development Bank on behalf of the AFFM or with any other guarantor. The supplier is also responsible for the guarantee management and provision of capacity building to hub agro-input dealers and, where applicable, smallholder farmers. The interested suppliers can partner with locally registered technical implementing agents if required. Under indirect collaboration with suppliers through an implementing agent, the Bank, on behalf of the AFFM, signs a guarantee agreement with the agent. Alternatively, secure suppliers' willingness to sign a guarantee agreement with the Bank or any other guarantor. The implementing agent will be responsible for selecting suppliers and hub agro-input dealers to participate in the program. The implementing agent and suppliers will conjointly be responsible for the guarantee management and provision of capacity building to hub agro-input dealers and, where applicable, smallholder farmers. 3. Activities to be carried out 3.1.Facilitate access to finance - Conduct due diligence and risk assessment on fertilizer suppliers & Hub Agrodealers and select those qualified to minimize risk exposure to the credit guarantee fund - Execute the trade credit guarantee and monitor access fertilizer on credit to hub agrodealers from select fertilizer companies - Put in place the risk management (assessment, mitigation and monitoring) tools to determine individual enterprises risk profile and develop a risk mitigation plan to minimize risk of default - Document fertilizer volumes and value sold on credit to identify financial leverage of the credit guarantee - Monitor credit repayments for an early signalling/red flag potential default of qualified buyers (agro-input dealers) - Undertake activities (monitor) for any potential debt collection, payment and recovery process. 3.2.Support the increased access to fertilizer - Create upstream and downstream linkages to enhance mutually beneficial transactional relations between the parties along the chain and strengthen the distribution channel up to the farmer - Profile and map the participating Hub Agrodealers/their networks to downstream to smallholder farmers to help to determine how many retail agro-dealers can be reached by the Hub agro-dealers and the distances that farmers travel to access inputs - Build the capacity of participating suppliers, Hub Agro-dealers and maturing retail agro dealers on selected topics including among others, credit control, risk management and inventory systems, stock management, cashflow management and pricing/cost control and extension services. - Undertake the project specific Environmental and Social Impact Management Activities to ensure proper storage, handling and distribution to prevent alteration of fertilizer and ensure quality fertilizer distributed to farmers.
• Documents:

 Tender Notice