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In a year that was filled with a pandemic, mass unemployment, civil strife, and other once-in-a-generation calamities, it is fitting that the 2020 Nobel Peace Prize went to the World Food Programme (WFP) for its excellent work in feeding the world’s hungry. WFP is known for the role it plays in emergency relief; it is less known for its contribution to the equally, if not more, important efforts to structurally combat food insecurity.
There are few issues as troublesome as the growing food insecurity throughout the world. Nearly 700 million people went hungry globally in 2019. That number has increased dramatically in 2020. In few places is food insecurity as dire as in Africa. While the continent has pockets of richness in natural resources and agriculture, and the continent has more than a billion acres of uncultivated arable land, food is overwhelmingly imported – and in some cases exported instead of used to feed its citizens. The continent imports about 85% of its food, costing nearly $35bn, which is forecast to be dwarfed by a $110bn bill by 2025. Covid-19 has exacerbated food insecurity due to the decrease in African exports, foreign currency shortages, issues with supply chains and food nationalism. There are no easy fixes for this crisis.
Not for lack of effort or goodwill, the decisions made to combat food insecurity in Africa have largely fallen flat. Many have taken a microfinancing or ‘teach a man to fish’ approach of empowering individual farmers or small communities. Few have been able to successfully begin feeding whole cities – no less countries. Structural changes are needed to break the cycle and reimagine the fight against hunger in Africa.
Food insecurity in Africa is a big problem, in need of a big solution. The continent needs volume production, instruments that dampen the effect of nature on a steady supply of food, and a vastly improved distribution system.
Economies of scale
Achieving economies of scale is the first battle for Africa’s farmers. Historical precedents for scaling at a size of Africa’s regions do exist – some recommended, and some less palatable, like a government takeover of land or forcing small farmers out of business. Recommended solutions at a local, regional and national level include programmes for farmers to cluster their land, combine efforts and take advantage of transformation initiatives, such as those organised by the WFP-sponsored Ethiopian Agricultural Transformation Agency. Clustering land in a collaborative approach allows farmers to retain their independence but combine their land for the purpose of decreasing the average cost per unit of production.
Harvests in Africa were never very reliable and are becoming even more unpredictable due to climate change. This makes financial exposure to the agricultural sector a hazardous hobby, and stifles farmers’ appetite for innovation, such as new hybrid seeds, different crop rotations, different paradigms and better practices.
The mechanisation of smallholder farms is not an economically viable proposition and yields of smallholder farms are low. Clustering of land changes that, increases yields (the volume of produce harvested from the same acreage) and increases incomes for farmers. Collaboration structures can be organised by the farmers (e.g. as cooperatives) or through large off-takers that engage in their inbound supply chain. These collaboration initiatives create multiple economies of scale: they create better access to farm inputs (seeds, fertilizer), crop rotations, long term planning, and mechanization services at economically viable terms.
Another key component is a yield improvement programme through mechanisation. There is ample evidence that mechanisation can improve yields by 100% or more, and not only dramatically improves food security but it also has a significant impact on the living standards of farmers and job creation down the value chain. Heeding lessons from the US and European yield improvement models will enable African farmers to move more effectively and quickly. And mechanisation plays a key role in unlocking Africa’s agricultural potential by cultivating its immense untapped reserves in the form of uncultivated arable land.
Mechanisation is not cheap. It requires access to capital which is in short supply in Africa, and the low appetite to lend to the agricultural sector is not helping either. Alternative approaches, such as equipment leasing, offer solutions, but require a coordinated effort to navigate the myriad of unnecessary regulatory and bureaucratic hurdles and to raise the required funds.
Equalizing the extremes
Farmers in developed markets have a major advantage: crop insurance, which provides a safety net and improves their resilience. Harvests in Africa were never very reliable and are becoming even more unpredictable due to climate change. This makes financial exposure to the agricultural sector a hazardous hobby, and stifles farmers’ appetite for innovation, such as new hybrid seeds, different crop rotations, different paradigms and better practices. International Finance Institutions (IFIs) and Development Finance Institutions (DFIs) ought to step in and provide insurance and guarantee instruments that the leasing, financing, farm input and service providers can bake into their offerings to the farmers.
The combination of local bureaucracy and a complex international collaboration dynamic, both between African nations and between various developed nations and African nations, and with various IFIs, DFIs and NGOs leads to astonishing results: export of luxury fruits and flowers from countries with droughts and food shortages, cargo vessels full of grain rotting away in ports because of unresolved paperwork, tons of fertilizer that reach farmers well after the season has ended because no-one appears responsible for the last mile; the list of mishaps is alarmingly long, and grows exponentially. Developed nations and the institutions they sponsor could lead the way, by focusing less on ‘who is right?’, and more on ‘what could work?’. And African nations would serve their people well by taking a hard look at their bureaucracies, and the lives lost because of them.
There is no one-size-fits-all approach here. No easy fix. Farmers, governments, institutions and private enterprises will need to put in the work to begin solving for the deepening food insecurity hole that Africa has been placed in.
Developing a hybrid approach to creating economies of scale in African agriculture will set the table for success of farmers. With mechanisation, the yields will improve, and crop insurance can encourage leasing companies, financiers, and service providers to take the risks necessary to help farmers expand and modernise their operations. A more food-secure future can and must be possible for Africa. The issue is in the spotlight, thanks to the World Food Programme. The time is now for bolder action and broader, more pragmatic investment.
Frans VanSchaik is the CEO of Africa Asset Finance Corporation, which provides equipment leasing and asset-backed lending in Africa