Africa is not a burden to the world but a solution – Lionel Zinsou, former Republic of Benin PM

According to SouthBridge website, Lionel Zinsou is an economist and former Prime Minister of Republic of Benin.

From 2008 to 2015, he served as Chief Executive Officer and Chairman of PAI Partners, a French private equity firm with more than € 11 billion in assets under management.

Prior to joining PAI, Mr Zinsou worked for 11 years at Rothschild & Cie, where he was General Partner from 1997. In this capacity he served as Head of Global Consumer Goods and Head of Africa Middle East until 2008.

Previously, Mr Zinsou had worked at world leading food company Danone, which he joined in 1986 as Financial Controller. He then went on to serve as its Corporate Development Director, Head of Grocery UK-USA operations, CEO of the Grocery Division and Executive Committee member.

His professional career began in public service as an academic. As a graduate from the Ecole Normale Supérieure (Agrégation in Social Sciences and Economic History – 1978) the premier French institute for higher education and research, as well as of the Institut d’Etudes Politiques (Sciences –Po) and the Paris IV and VII Universities. He worked as a Research Student at the London School of Economics. In 1978 he went on to work, first as Associate Professor and then as Lecturer in Economics and Social Sciences at the University of Paris XIII. He remained Director of the Centre for Social Sciences of the Ecole Normale Supérieure from 1983 to 1986.

During that time he also worked as a consultant to the United Nations Development Programme and the United Nations Industrial Development Organization. In addition, he was involved in two long-term missions for the French Government, first as a researcher in the “Research and Prospective” division within the Ministry of Industry (1980-1984) and then as a member of the office of Prime Minister Laurent Fabius (1983-1986).

Mr Zinsou is currently on the board of several companies including the PAI supervisory Board (Vice-chair), the Danone group Board of Directors and the Americana Board (UAE).

He is also actively involved in community work, serving as President of the Foundation de l’École Normale Supérieure, of the Foundation Terra Nova and of the Société des Amis du Musée Branly-Jacques Chirac, as well as Director of the Ashinaga Foundation (Tokyo), the Foundation Sanofi, and the Foundation Zinsou, the latter of which he also founded.

Mr Lionel Zinsou who was in Kigali, Rwanda for The AGRF (Africa Green Revolution Forum) Summit which held from September 5-9, sat down with Dolapo Aina for another interview who had interviewed previously interviewed the former Prime Minister of Benin Republic in Morocco in 2016. Do read the excerpts.

Good morning Mr. Lionel Zinsou, welcome to Kigali, Rwanda and good to see you again. Straight to the questions. Since this summit is about agriculture, funds and the continent of Africa, how would you describe the current state of agriculture on the continent?

Agriculture has always been the number one contributor to the labour market in our continent and it depends on countries, but the average for Sub-Saharan Africa has probably 50% of the active workforce. So, socially, in terms of incomes, and in terms of poverty, because it is the more vulnerable part of the labour force which is absolutely essential. And in the current situation, where we have had pandemics, but a shock, which is even stronger than the pandemic; which is inflation, impacted on many inputs. It is a very critical situation for a large part of the population in Africa. This cannot be compared to any other continent. If you take OECD (The Organisation for Economic Co-operation and Development) countries, typically, the contribution to the labour market via agriculture is sort of 3%. Here you speak the majority of the population in many countries. Something which is also an issue is that it is not the contributor to the GDP. Typically, it is a contribution averaging in Sub-Saharan Africa between 5% which means that there is an under employment and under productivity in the sector and in effect, many people will describe Africa as an agricultural economy. But it’s not the case it’s a tertiary economy, services, transport, trade, far more important in terms of contribution to the GDP, and even in the primary sector, mining etc are important in terms of contribution to the GDP. So, socially than politically, agriculture is absolutely central. But in economic terms, it is not at the proper level of recognition, but in the current circumstances and in a summit like this one, and throughout everything that AGRF; this major African Foundation, the work done on the ground, we progress in recognition that we absolutely have to bridge the gap of productivity.

And we have to absolutely address modernisation, mechanisation, better improved soils and fertilizers etc. We are by far in a situation of record of low use input, proper seeds, fertilizers, or water for irrigation. So, we have a huge work of adaptation, but we have to do this work of adaptation, in a time when you have all those shocks. But why is it a moment where the Russian agriculture contribution is essential? It is because if we have to import food and we are net importers of the food, we then have a major inflation (older population, the urban population essentially.) When we say inflation in Africa in 2022, will be high, probably 10 percent (sort of low double digits), but for food inflation, it will be far more. Today, you have estimates that you have a 30% inflation of food because of the imported food which is reflecting on the market price and which reflects as well the devaluation of our currencies, because the dollar has been growing stronger during the year against all key currencies. It’s true of Birr in Ethiopia or shilling in Kenya and Tanzania, but it’s also true of more robust currencies and it’s also true of the euro. And we have many countries very much linked and pegged with Euros; from the West African Francophone or Central Africa, Magreb, where you have strong links especially in Morocco and Comoros Islands and so on. So, you have all countries, in effect, hit by the currency inflation added to the substantial inflation of the moment. And because of that, even the domestic production follows, because substitute to Ukrainian flour and wheat, and add accordingly, you have an inflation as well. Added up to that, the fact that the cost of these things are also increasing. So, it is a shock; an immense shock, because it’s not just on the commodity market, you have it multiplied by two in one year. It is the cost of the raw material or the important product, of the local products, but it’s the cost of transport and presently, it is the cost of and implied by currency devaluation. For the recognition that in normal circumstances, we have an adaptation effort, because we are in under productivity, but in those circumstances, we have a major social issue and major budgetary issue because a situation which is not normal in normal circumstances becomes very critical in all industries.

And this is everywhere and in every room of this Convention Center. It is one of the most difficult positions to be in. But as in any crisis, you discover that you have potentials, you have innovations and technologies available. In effect, we know what we have to do to improve productivity and be shock-proof and Immune; except that (as you mentioned financing) finances are an important part in this conference as we absolutely need to organise blended finance for agriculture. And we have across the continent, a few experiences which are described here in this summit. And it’s not only microfinance, it can be blended finance, it can be serious infrastructure, project finance and so on. But what is the truth? My most significant surprise when I became Prime Minister of Benin Republic was agriculture is 27% of GDP, agriculture is 50% of the active population. It is 2% of our allocation of financing, in terms of credit, all categories of credit from micro-finance, big finance channeled by the banks, channeled and fashioned by development institutions. 2% to serve 27% of GDP and 50% of the population. This is not progressing dramatically, except with something that is a debate in this summit and which was not really present in the previous year, which is that, forestry combined with agriculture will become a very serious potential strength of Africa and that is to mobilise resources. Why? Because of the needs in the rich world, the advanced countries producing carbon certificates; compensating in the context of climate change. Africa is in a sense, the first and foremost solution and this could benefit in terms of driving financial revolution. But we are at birth of awareness but for the time being, we are in a situation which will explain for years to come, if we do not progressive rapidly in terms of poverty reduction and in terms of food safety. Because you absolutely cannot manage such an imbalance. For instance, I would use the case of Benin Republic. you cannot in a country where it is her export number one resource and more than one-fourth of her GDP and two percent of her financing. But for the time being, we are not that close but we have this one related to climate change, the need of carbon certifications in this space, Africa could well organise with the proper regulations, grow the resources. The world needs Africa, that was not the case a few years ago.

The next question is about Ukraine, Russia, Africa and food. How is it possible that Ukraine, which is currently defending herself against Russia’s war and Russia’s aggression is still able to send ships of grains to The Horn of Africa and several African countries are depending on a country still in conflict to feed them. How does that make sense?

First, I think it’s good news to see that part of the exports of Ukraine and part of the export of Russia are able to come on the world markets. Because there have been diplomatic efforts by many parties and we will have part of the supply. Because it’s not only that the Ukrainian crops were blocked. It’s also that the sanctions against Russia mean that you have restricted flows of export by Russia. And it’s not just cereal which is very important for Africa but for several countries too like Egypt and The Magreb. But it is also edible oil and a lot of markets. But the cereals and the fat are obviously essential for humans’ supply of food and animal feed. So, yes, it is a shock, which is a bit mitigated by the fact that half of those crops will reach the market. That’s why you have seen the prices going down in the recent weeks, because it wasn’t unexpected to be able to have access to part of the supply.

But unfortunately, the effect in Africa is far broader than the physical supply. You have inflation everywhere and for instance, with hydro carbons, we have to have in mind that agriculture in Africa for domestic production is dependent also on the cost electricity production and cold chain for instance. It is essential to have a cheap energy. The Ukrainian Russian war makes major supplies very much unaffordable. Also, take gas assess, it is the number one cost of manufacturers and fertilisers; you will have an impact because cost of gas which has started before the war, but has been aggravated by the war has been going up in price because of the recovery and overheat of the world economy in 2021. But it has been aggravated because of the fact that Russia is an essential exporter of gas. So, it has an immediate impact, because you could say in Africa, okay, we will receive less cereals from Russia and Ukraine, but we will substitute bionic food production of our own food cereals. We do not produce much of wheat; a bit, but not much and not enough, but a lot of maize and a lot of other secondary local domestic cereals. Except that we could well have a decrease of the domestic production as it is not in a position to be a substitute; at all. Because of the cost by more than three in the supply chain to manufacture the fertilisers in Africa. So, you see, you have complex effects, you have a direct effect, shortage, meaning inflation, imports and restricted quantities, but you have a secondary effect, you cannot mitigate because you have other factors. I have quoted energy but it could also be logistics, which means, it would be very difficult in one year to mitigate the shortage by a growth of our production.

Add to that, the climate change is really creating drought in the Horn of Africa, in the North of Africa, where you have also in Morocco and The Magreb, where you have difficult circumstances. So, we are in a difficult situation but it is not only the first effect, it is also the counter effects, the price effects of things totally out of agriculture like energy, services and logistics. Having said that, you have something which is never mentioned but which is important, some countries are net benefits of the inflation because if you are in a position to export raw materials, and with the increase in pricing, you are clearly in a better financial position. So, if you are a hydro carbon exporter, you can clearly create some budgetary space and subsidize inflationary inputs. Take Central Africa, you have Congo, Gabon and others. Simultaneously, all the minerals, the oil and the wood. The wood went up in terms of inflation even more than hydro carbon. So, some of those countries have even the situation of very difficult public budget resources. Some countries have a net excess of budgetary resources, because of the way their exports are composed. Some countries are net beneficiaries and clearly, Central Africa is in this position. Algeria can cope with the fact that they are focusing on importing dairy products and cereals massively. But conversely, they are one of the key solutions for Europe in terms of gas.

What about Nigeria?

It’s more complex in Nigeria because in Nigeria, agriculture is now more important in the GDP than hydro carbon. So, it’s very clustered as some countries that are not the majority, are in a better situation in this context. The ones exporting raw materials which in terms of prices going significantly up in the areas of exports, fiscal influence and tax revenues. Unfortunately, it’s probably 15 to 20 countries in Africa. So, it is not the majority, but it has to be underlined because it changes the situation we have had in Congo and mitigates the difficulties.

One final question. With all you said, with the current situations on the continent; agriculture-wise, what do you think is the way forward? How can the continent extricate herself from the present predicaments?

There are always major changes after such an important crisis. So for me, it’s very clear, that we have no hesitation. What we have to do is so clear, we have to finance agriculture better. And we know that it is profitable. It is not because it was not profitable, that we have not allocated resources. It is because the financial tools didn’t, and because the banking system, the microfinance system were not and had not been conceived for investment, and working capital of agriculture. It has been conceived decades ago, for the trade, internal trade, short term credit. So, we have the tools and we have to implement and it’s so clear that the benefits outweight whatever challenges we face presently.

So, for me, you will have a green financial revolution. The forestry and its attendants would be an important part of that, with the driver, which is not the situation on the continent. Also, it will have important and positive consequences on reduction of poverty. But conventions like this one where you have the bankers, you have the fertiliser manufacturers, you have the farmers and the small chain participants, just like AGRF which has one of the only strong institutions defending the small farmers, who are the vast majority on our continent. So, conventions of this sort are very important, if you want to make a coalition to be enacted and to be effective on the ground. But if something is clear, is that we do not ignore what the solutions are. And we have the technological solutions. What we don’t have yet are; the equity, the capital, the credit, and these are the burning issues discussed nowadays. And I think that we will start with a shock, a social shock, then political shocks, that is the current situation of things politically in 2022 and it will be the same in 2023.

Going forward and beyond that, I think it will have enlightened and ignited the solutions and the solutions not only for the continent and its poverty but a bit for the world. Because if we improve the growth of agriculture, and if we improve dramatically, the reforestation, it will have important consequences on the world climate change as a whole. And I think that this solution to the world’s problems through African renewal is something completely new. Africa is not a burden for the world, it is a solution for the world.