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T he global fertiliser shortage has significantly elevated Sub-Saharan Africa’s food crisis risk. On-going pressures that will influence this risk in the medium term include supply chain disruptions triggered by the Covid-19 pandemic, the Russia-Ukraine conflict, rising energy prices and climate change.

Prices have almost tripled in recent months as farmers struggle to access fertilisers from local and international manufacturers. Fertiliser has been a crucial component of commercial farming since the Green Revolution in the 1960s. It enables mass crop production at scale by raising the nitrogen content – one of the five basic requirements of plants – in soil. Roughly 50 percent of global crop yields can be credited to fertilisers.

Of the three main types of fertilisers – nitrogen, potassium and phosphorus – nitrogen fertilisers dominate, with phosphorus and potassium holding the second and third place respectively. In addition to clean water and sunlight, crops rely on a range of nutrients to deliver high-quality bumper yields, which can only be realised at scale through artificial fertilisers.

Tight supply

China and Russia are among the top five global producers of fertiliser. The former has introduced a quota system to limit phosphate exports to ensure domestic supply and strengthen local food security. This is the latest in a move by China that has resulted in a 45 percent decline in global supply. These quotas are expected to remain in place until the end of 2022. Russia’s increasing isolation has also had a knock-on effect on the global access to fertilisers. Russian and Belarusian companies, some of which are affected by sanctions, account for 40 percent of the world’s potash exports. Russia alone exports 48 percent of globally traded ammonium nitrate, the most common nitrogenous component of manufactured fertilisers.

Belarus, Russia and Ukraine exports

The International Fertilizer Development Center (IFDC), (AFO), and Development Gateway recently revised the Africa Fertilizer Watch to track the impact of the ongoing Russia-Ukraine conflict on access to fertilisers and food security in Africa. Fertiliser is a key element in the production of staple food crops in Africa, such as maize, wheat and soybeans, as well as commercial crops like coffee.

Senegalese President and current African Union chair, Macky Sall, raised the issue and its impact on African countries with Russian President Vladimir Putin during a meeting held in Sochi on 3 June. On 28 July, Russian fertiliser company Uralchem announced that it would “make a gratuitous shipment of its products (urea or NPK fertilisers) to Africa” as part of its “contribution to global food security.” Uralchem, one of the top five major Russian chemical companies, produces and exports nitrogen, potash, and complex fertilisers. The donation demonstrates soft diplomacy but with no end in sight to the Russia-Ukraine conflict and resultant sanctions, fertiliser supply will remain tight through the remainder of the year.

Navigating challenges

While the Russia-Ukraine conflict and China’s export restrictions have triggered tight supply, rising energy costs have also played a role in increasing fertiliser prices. Producing artificial fertilisers is an energy intensive exercise. Manufacturing nitrogen fertiliser relies on the Haber-Bosch process, which involves mixing nitrogen from the air with hydrogen from natural gas at high temperatures and exerting high pressure to produce ammonia. This process relies on 60 percent natural gas as composite material, with the remainder is used as power; therefore, the fertiliser production cost is closely correlated with energy costs. In its April 2022 Commodity Markets Outlook, the World Bank projects that fertiliser prices will remain high (70% higher than 2021 levels) throughout 2022 and into 2023, partly due to continued high energy prices.

Fertilizer input costs

The cost of fertilisers is inching up to prices last seen in 2007-08 when a demand spike on the back of increased biofuel production by the US, Europe and Brazil; rising energy prices; and robust emerging market demand for fertilisers. After prices stabilised,  demographic pressure and increasingly erratic weather patterns prompted African countries to increase their fertiliser use; they have become gradually dependent on fertilisers due to atypical rainfall patters.

The Intergovernmental Panel on Climate Change (IPCC), a UN intergovernmental body responsible for advancing scientific knowledge on human-induced climate change has highlighted the impact of above-average higher global temperatures and extreme weather patterns on food production. The IPCC notes that rising temperatures and low rainfall is accelerating land degradation and reducing soil productivity due to the loss of soil nutrients and organic matter, which decreases crop yields. Access to fertilisers can mitigate the worst effects of this trend.

Developing alternatives

Amid increasing global fertiliser prices and reduced supply, African countries are seeking to reduce their dependence on traditional suppliers. On 22 March, Nigerian President Muhammadu Buhari inaugurated Dantote Group’s USD 2.5 billion Dangote Fertiliser Plant. The new fertiliser plant, located in the Lekki Free Trade Zone in Lagos, has a capacity of three million metric tons annually. The fertiliser will be exported to several countries including the US, Brazil, India, and Mexico. Morocco’s fertiliser industry has significant production capacity and is among the world’s top ten exporters. The country possesses over 70 percent of the world’s phosphate rock reserves, placing it at a distinct advantage when it comes to producing phosphorous fertilisers.

Fertiliser production in Africa is concentrated in Algeria, Egypt, Morocco, Nigeria, Tunisia, and South Africa. These countries have developed fertiliser industries and relatively high levels of fertiliser use. However, Kenya and Ethiopia are rising to the challenge. Morocco’s OPC Group, a major phosphate company, signed a joint development agreement with the Ethiopian government on 14 July. OPC Group has committed to jointly creating a pan-African fertiliser production plant in Dire Dawa, in eastern Ethiopia, with an annual production capacity of 2.5 million tonnes. The plant will rely on Ethiopian gas and Moroccan phosphoric acid. Ethiopia is eyeing self-sufficiency by 2030 and in doing so, reduce its USD 1 billion annual spend on fertilisers.

Kenya’s Fertiplant East Africa brought its multi-million dollar fertiliser plant in Nakuru, northwest of Nairobi, online in June 2021. This was in response to rising fertiliser prices at the time and a desire to capture the domestic market. The plant can produce 100,000 tonnes per annum and serve two million regional farmers. The company has tailored its fertiliser for use by tea, coffee, sugar cane and maize farmers in Kenya, Uganda, Rwanda and Burundi.

Non-traditional players have seen the market opportunity. On 28 July, local parastatal Kenya Electricity Generating Company (KenGen) announced plans to establish a fertiliser plant in response to the threat of a food crisis caused by lack of access to fertilisers. KenGen will use excess power available on the grid to give it a competitive edge. Plans are the feasibility assessment stage; however, the parastatal views its stated intention is part of a wider diversification strategy aimed at reducing its reliance on electricity sales for income.

Securing access to cheap energy will be pivotal to the development of African fertiliser production capacity. Italy’s Maire Tecnimont, an engineering and construction company has factored this into their development plans. In 2021 it began working on a renewable power–to-fertiliser plant in Kenya’s Oserian Two Lakes Industrial Park via its subsidiaries MET Development, Stamicarbon and NextChem. The low carbon initiative is located close to a geothermal energy basin, and the project will operate on solar power. The company aims to ensure that fertiliser is both available and affordable for local farmers, while contributing to Kenya’s decarbonisation goals.

Looking ahead

We are only likely to see the worst effects of the fertiliser shortage in 2023. There is time lag between when crops are planted and when they reach our plates – the food currently being consumed was produced 4-6 months ago and used fertiliser purchased a year prior. Presently, most farmers purchased fertiliser in 2021 for the 2022 season; this fertiliser shortage will only really be felt 6-12 months from now during the 2023 season.

Where possible, farmers have been adapting their fertiliser use to minimise the negative effects of limited suppliers. Sustainable practices such as agroforestry, which incorporates the cultivation and conservation of trees in croplands or pastures, is being practiced in some areas. It can reduce emissions by creating additional “carbon sinks” on farms while protecting farms from soil erosion. Additionally, overall better soil management through techniques such as reduced tillage, can keep carbon in the soil while increasing productivity.

Small-holder farmers will be particularly vulnerable in 2023-24. Governmental and non-governmental support will be crucial.  Recent examples of assistance include the Tanzanian government’s launch of a fertiliser subsidy programme on 10 August and efforts by N2Africa, a large scale, science based “research-in-development” project, to improve access to existing fertilisers such as single or triple superphosphate (SSP or TSP) fertilisers in Uganda, Nigeria and Tanzania, to increase legume yields.

The Tanzanian private sector is also playing a positive role. CRDB Bank has developed a digital system for ordering and distributing fertiliser to ensure smooth delivery of subsidised inputs to farmers. Working in collaboration with the government, this imitative assists the Ministry of Agriculture to digitise the distribution of subsided fertiliser under the Tanzania Fertiliser Regulatory Authority (TFRA). The scope and pace of adoption of comparable initiatives in other high-risk countries needs to be accelerated if a veritable food crisis is to be averted.

The World Food Programme (WFP) predicts that cereal production will fall to 38 million tonnes in 2022, down from more than 45 million tonnes in 2023; it notes that 22 million people in the Horn of Africa alone are on the brink of famine. The UN estimates that 346 million people on the continent – one in four – are facing severe food insecurity. Over and above the dire humanitarian implications, this looming crisis will escalate the risk of instability in several politically fragile countries.

Some African governments have started taking steps to ensure domestic food security by re-thinking supply-chains, developing local industries and supporting small-holder farmers. Private sector players have taken note and see the innate market potential and are financing the development of new fertiliser plants. Bringing a new fertiliser plant online and achieving maximum output can take 3-5 years. In the short-term, there is scope for introducing innovative solutions such as agtech, stress-tolerant seeds , fertigation, and bio-fertilisers. The pressure to realise the potential of arable land and feed growing populations will not abate. The farmers are ready, but the question remains whether African governments and investors can rise to the challenge.