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 September 2017

Time to direct more climate finance to irrigation?

India and China today have six times more irrigated farming per capita than Sub Saharan Africa. By 2050 that gap could be 10 times, as population growth levels off in the world's two most populous countries while doubling in SSA.

With climate change making rain-fed farming ever more precarious, there needs to be a big push to build irrigation infrastructure in those parts of SSA - and there are many - which have sufficient water. You may be surprised: SSA has one of the lowest usage rates of renewable water supplies globally (less than 5%).
This will be expensive. Efficient, well-organised irrigation systems cost around $10,000 per hectare. Doubling SSA's irrigated area from 7 to 14 million hectares, the minimum needed simply to keep pace with population growth, would have a price tag of some $70 billion. That would stretch public sector and aid budgets.
The problem is that the private sector is not rushing in to fill the gap. Greenfield agriculture projects, at least in their early stages of development, are simply too risky - and low return - for commercial capital. Moreover, developing irrigation projects so that they are both financially viable and socially inclusive takes a great deal of groundwork.
AgDevCo has spent four years putting together a pioneering 5,000 hectare irrigated farm hub scheme in Ghana, managing all the community consultations and conducting all the necessary studies and trials. We have invested some $6 million of our own funds to date.
The Babator irrigation hub has now attracted its first commercial operator who has invested $1.8 million and is growing maize and onions under pivot. The community benefits from rental payments, a revenue share and access to irrigated plots. At full operation, the community will have access to 1,500 hectares of irrigation for their own use. That is climate resilience.
There will also be an outgrower scheme designed to reach 10,000 smallholder farmers in the area, providing training on conservation agriculture plus access to inputs and a reliable market.

SSA needs many more schemes like Babator (another example in the AgDevCo portfolio is the Phata Sugar Cooperative scheme in Malawi, shown in the images below). Funding them will require a financing mechanism capable of providing billions of truly patient capital (i.e. 20-year money paying 1-2%), which can only come from the public sector.

International climate facilities such as the Green Climate Fund are potential sources of patient capital. However, the majority of funding is still directed to renewable energy projects. As the cost of wind and solar falls, isn't it time to direct a larger share of climate finance towards adaptation projects in low-income countries?
For SSA to and tackle food security and climate change over the next generation there needs to be a major push on irrigation funded by patient capital.