Each post in this series has made clear that for supply chain actors to deliver the vast amounts of food demanded by growing cities, the investment community must help them to access, use, and maintain new technologies effectively. The investments required to feed the future are manifold, from the empowerment of female smallholders to the dissemination of updated accounting, shipping, and food marketing techniques.
While the development community has long provided essential support to help rural actors scale up their agricultural production, there remains a $90 billion investment gap in the agricultural sectors of developing countries. To fill this gap, the international community is turning its attention towards the investment capacities of the private sector.
Leveraging the Private Sector to Develop Food Systems
The private sector is well-positioned to provide the funding necessary to scale up agricultural production and supply throughout the developing world. Agri-food industries are extremely attractive to the private sector, in that they provide huge investment opportunities for a wide range of companies with the potential for huge revenue. The global food and vegetable market, for example, is projected to be valued at $2.3 trillion by 2017—more than double its worth in 2012. Several other industries, such as cold storage, fertilizer, machinery, seed, vaccines, and packaging, will see similar growth as a result of increasing food demand in developing countries.
Farmers and other rural entrepreneurs, in turn, stand to gain a great deal from private sector interaction. Private companies may offer for-profit technical assistance, knowledge transfer, and other services that development organizations cannot provide. And, agri-food enterprises in developing countries are often lacking in financial capacity. Here, private sector companies may be able to provide access to microloans and savings accounts for farmers and other SMEs, as well as insurance and risk management services—services that become ever more necessary given climate change, persistent regional conflict, and price volatility.
Spotlight: Mobile Tech
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With the majority of people in African countries equipped with cell phones, many financial institutions are collaborating with mobile providers to serve smallholders. Mobile banking is spreading across the continent; platforms like Vodafone’s M-Pesa, M-Shwari, and M-Pawa allow clients to make deposits, earn interest, transfer money, and take out loans. A number of other platforms have arisen to serve farmers, like MyAgro, which allows for incremental saving so that farmers can avoid paying a large lump sum for planting inputs. Ideas are pouring into this sector, and while there is a need for greater coordination among apps to streamline service provision, phone-based platforms are on their way to transforming Africa’s agricultural sector.
Filling the Gap
A number of governments and development organizations have sounded the call for greater private sector engagement in agricultural development, and the private sector is stepping up. In particular, Feed the Future (FTF) has held an important role in convening private sector companies to address global food security. By advocating “win-win” partnerships involving private sector-led growth in emerging markets, FTF has succeeded in fostering a number of linkages between the agricultural sectors of developing countries and local and international private companies.
One such linkage is the Southern Agricultural Growth Corridor of Tanzania—a multi-stakeholder partnership between the Tanzanian government, donors, farmers, agri-businesses, and private sector corporations designed to improve agricultural productivity throughout the country. With a detailed investment blueprint, the partnership has identified a number investment opportunities along the southern corridor of Tanzania.
Feed the Future has also contributed to the New Alliance for Food Security and Nutrition, a partnership between African governments, donors, and the private sector to increase investment in agriculture. The Alliance has facilitated the commitments of over 200 companies—the majority of which are based in Africa—to invest in African agriculture, worth $10 billion. To date, these investments have reached over 8 million small-scale farmers and have thus far created over 20,000 jobs, primarily for women.
If such investment momentum continues, and expands across the developing world, it may be that the international development community and the private sector can help reduce funding gaps in agricultural production. The many investments in small-scale farmers that we’ve detailed in this series are absolutely critical for the development of an effective and sustainable global food system. And, without tapping into smallholder productivity, it may be that the world’s largest food and beverage companies will not be able to deliver the profits expected by their shareholders. The benefits of private sector engagement in agriculture are mutual as much as they are essential to scale up food production and ensure global food security.
Read previous posts in the "Growing Food for Growing Cities" blog series:
Tackling Food Waste along the Supply Chain
Food System Resilience in the Face of a Changing Climate
Delivering Good Nutrition
Food System Development to Improve Food Security
Urbanization Is an Opportunity for Many Small-Scale Farmers
Food Security in an Urbanizing World