Whether for profit or social motives - and often both - an increasing number of investors are targeting opportunities in African agriculture. At the same time innovative approaches for deploying aid to support farming businesses linked to smallholders are emerging. This blog provides a snapshot of who is doing what, where and how.

15 November 2010

The UK can help Africa double its agricultural production

A submission to the UK's All Party Parliamentary Group on Agriculture and Food for Development, by Keith Palmer, Chairman of AgDevCo

Rapid growth of sustainable agriculture is essential if the poverty reduction target in the MDGs is to be met and if the global food security problems are to be solved. The appropriate response to the challenge of climate change is to develop greater resilience in agricultural systems. In Africa the two most important priorities to increase resilience are investment in irrigation and weather insurance.

Given the high quality of the natural resource base in many parts of Africa, achieving the vision of a doubling of agricultural production in 10 years is entirely feasible. Moreover it can be achieved in ways that are socially and environmentally sustainable, respond to the challenges of climate change and bring about major improvements in the livelihoods of smallholder farmers.

There are three separate but linked issues. How to bring about rapid growth of agricultural production? How to ensure that smallholder farmers are major beneficiaries of rapid growth? And how to ensure that growth of agriculture is socially and environmentally sustainable?

Doubling of agricultural production in 10 years will require heavy investment by the private sector. Currently there are major barriers to entry deterring investment by the private sector. Donors should deploy patient capital to overcome the barriers to entry and kick-start growth of sustainable commercial agriculture in Africa.

The most cost-effective way of improving the livelihoods of smallholder farmers is to develop a series of commercial farm hub/smallholder farmer support programmes. The investors in the commercial farm hubs agree to provide access for smallholder farmers to infrastructure, inputs, credit, extension services and markets at an affordable cost. The evidence shows that this approach can more than triple the incomes of smallholder farmers in a few years and markedly improve their resilience to harvest failure.

The way to ensure social and environmental sustainability and that investors in commercial farm hubs comply with agreements to implement smallholder farmer support programmes is to make failure to comply a condition of default in patient capital funding agreements.

DFID should refocus its policies and strategy for pro-poor agricultural development and stress: the importance of productivity improvement and competitiveness of African agriculture as the keys to sustainable growth and poverty reduction; the importance of directly supporting domestic farm enterprises and entrepreneurs in Africa to overcome barriers to entry and achieve international competitiveness; and the importance of conditioning support for domestic farm enterprises and entrepreneurs on their agreeing to commit to implement smallholder farmer support programmes.

DFID should build on its experience and leadership in creating novel financing and development vehicles in partnership with others to: design, fund and implement a patient capital fund aimed at stimulating new private investment in early-stage commercial agriculture hubs with smallholder farmer support programmes; provide development funding to not-for-profit development companies to accelerate the creation of investment ready opportunities; and consider how the role of CDC should be redefined to ensure that it plays a greater role supporting early-stage agriculture in Africa.

There have been numerous recent announcements about new funding for agriculture and food security (eg GAFSP, Feed the Future, CAADP) but insufficient creative thinking about how to ensure that the resources are deployed effectively. There is a real opportunity now for the UK to "punch above its weight" by leading the design and implementation of novel financing and delivery mechanisms which can make a major contribution to addressing the poverty reduction agenda, the global food security problem and the challenges of climate change.