by Kanayo F Nwanze, IFAD President
Sustainable investment in agriculture is the most effective way to reduce rural poverty, improve food security and stimulate economic growth
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Planting
maize seeds in Mswagini village,
Arusha Region, Tanzania.
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In recent years, agriculture has gone from obscurity to having a
central spot on the G8 agenda. For those working in rural development, this revival of international attention is very welcome, as is the recognition of an increased role for private sector investment.
Private investment in agriculture usually suggests the involvement of large organisations. But, cumulatively, smallholders are significant investors in this sector. There are around 500 million small farms in the world. More than 95 per cent of agricultural holdings in developing countries are less than 10 hectares. In Asia and
sub-Saharan Africa, about 80 per cent of farmland belongs to, or is cultivated by, smallholders. Around two billion people depend on these farms for their livelihood.
Smallholders invest not only their own money, but also their time and labour in their farms. Therefore, it is fair to say that they are the primary on-farm investors in agriculture in developing countries. New investments in agriculture must be sensitive to the requirements of smallholders if they are to achieve the desired result of improving global food security and reducing poverty.
The power of smallholdersInvesting in agriculture in developing countries is the single most effective method of improving food security for the world’s poorest people, while also stimulating economic growth. Growth generated by agriculture is at least twice as effective in reducing poverty as growth in other sectors. Experience repeatedly shows – in countries such as Burkina Faso, China, Ghana, India, Thailand, Vietnam and elsewhere – that smallholders can lead agricultural growth.
Successful small farms can transform destitute rural landscapes into vibrant economies, resulting in local demand for locally produced goods and services that also spur non-farm employment in services, agro-processing and small-scale manufacturing. This demand, in turn, leads to a dynamic flow of economic benefits between rural and urban areas so that countries have balanced and sustained growth.
There are sound economic reasons for supporting smallholder farming. Farming production systems have few economies of scale. Small farms are often more productive, per hectare, than large farms when agro-ecological conditions and access to technology are comparable. In India, for example, smallholders contribute more than 50 per cent of total farm output, even though they cultivate only 44 per cent of the land.
New investments must be sustainable – economically, environmentally and socially
One reason for this high productivity rate is that small farmers have a strong personal incentive to get the most out of their land and from their own family labour. Another reason is that family farms have
very low management costs and are labour intensive, while larger farms are often heavily
mechanised or have high costs involved in managing the workforce.
Nevertheless, in many developing countries, particularly in sub-Saharan Africa and parts of Asia, poor farmers do not produce enough to feed themselves and their families. Instead, they are net buyers of food
and, with incomes of less than $1.25 per day, they cannot afford to buy much.
If the goals in investing in agriculture are to improve the food security of those who are hungry and to improve the economies of developing countries, then the aim should be to transform smallholder agriculture into successful businesses that are profitable and generate surpluses, and that can help provide
career opportunities and a potential pathway out of poverty and hunger.
Targeting the investment
When one talks about farmers in developing countries, one is often talking about women. On average, women make up 43 per cent of the agricultural labour force in developing countries. In East and Southeast Asia and in sub-Saharan Africa, this figure rises to almost 50 per cent. In investing in rural areas, the capacity of women farmers to invest more effectively and with less risk must be supported, given that women in rural societies face greater constraints. Rural women usually have more limited land tenure, less access to credit and equipment, and fewer market opportunities than have men.
New investments must also be sustainable – economically, environmentally and socially – so that the benefits last, through the years and the generations. Anyone who has travelled into the rural areas of developing countries will have seen the aftermath of unsustainable development: broken tractors abandoned in fields, withered and untended trees, forsaken hillside terraces. This is the residue of development efforts that did not respect and respond to local conditions, whether cultural or environmental, and that did not work with the local community from the start.
Similarly, the Green Revolution that transformed Asian agriculture in the 1970s focused on reducing the number of crops and increasing reliance on improved seeds, fertilisers and better irrigation. It produced
remarkable short-term gains, but came at a cost to the environment and to local species.
In the years since the Asian Green Revolution it has become clear that agricultural growth must be ecologically sustainable and that a diverse range of species, genetic variation and ecosystems is necessary
in order for the land to be able to provide for future generations of farmers.
Indeed, in many developing countries, simply optimising conventional approaches, such as the simple use of fertilisers and micro-irrigation, could yield dramatic results. Only about six per cent of the total cultivated
land in Africa is irrigated, compared to 37 per cent in Asia. Irrigation alone could increase output by up to 50 per cent in Africa. Small increases in fertiliser use could also yield dramatic improvements in yields
without risk to the environment, since farmers in sub-Saharan Africa use, on average, less than 13kg of fertiliser per hectare. This compares with 73kg in the Middle East and North Africa, and 190kg in East Asia and the Pacific.
There is also a critical need to develop national and regional markets, to ensure that productivity gains from new investments have the intended economic impact on developing-country economies. Similarly, there is an urgent need to invest in basic rural infrastructure. Today, about 30 per cent of the food produced is wasted, largely as a result of the absence of such basic necessities as markets, warehouses and paved roads.
Community-driven development
At IFAD, we see time and time again the transformation that occurs when development is sustainable and when local people are involved from the start. Last year, I visited Zongbega, a village in a drought-prone region of Burkina Faso, where smallholders are using simple water-harvesting techniques such as planting pits and permeable rock dams, along with crop-livestock integration. As a result, they have restored land that was once degraded and have increased their productivity. In Niger, a water-harvesting project in the Illela department is still going, more than 15 years after the funding ended – a fine example of the benefits of community-driven development.
In recent years, we have been scaling up what we know works, strengthening value chains, extending rural finance and creating new market opportunities for smallholders and other poor rural people. This year, as
world leaders meet for the G8 in May and the G20 and the United Nations Conference on Sustainable Development in Rio in June, there is an unprecedented opportunity to solidify the role of public-private partnerships in support of agriculture. I hope their deliberations will take into account the biggest on-farm agriculture investors in developing countries: smallholder farmers.
Originally published by Munk School of Global Affairs
