30 August 2012

Africa: Pumps, Policies and Private Investment - Seeing Opportunity in Small-Scale Agriculture

Photo: Karen Connif/IWMI
Solar powered pumps like this one in Ethiopia are good option when other sources of power are not available.

Washington, DC — As World Water Week draws to a close, a new report highlights the promise of small-scale irrigation schemes. "Water for Wealth and Food Security" touts simple interventions, such as motor pumps, small reservoirs and rainwater harvesting, as key tools for tackling food insecurity in sub-Saharan Africa. These technologies have the potential to protect millions of farmers by increasing crop yields up to 300 percent in some cases, researchers say.

But to reap the benefits of increased water irrigation management, investment priorities will need to change, they say. Small-scale irrigation offers a lucrative opportunity and could provide a billion-dollar boost to household revenues across sub-Saharan Africa, according to the report. Researchers are hopeful that their findings will illuminate the value of small-scale irrigation to private investors.

The International Water Management Institute, which aims to improve resource management in the developing world, spearheaded the research. Timothy Olalekan Williams, the organization's Africa director, spoke with AllAfrica about the report and the potential impact of improved water management. The agricultural economist is confident that small-scale irrigation offers big opportunities.

The report emphasizes driving changes in water management among small-scale farmers - how do you define a small-scale farm?

Plots that are a very small size - the average size is about 1 hectare. They produce food not just for their own domestic use; it's a situation where they're able to provide some surplus to the public. The land they farm and the amount of input they use is very small compared to what you find in large-scale farms. On a large farm you will find thousands and thousands of hectares, which use a lot of inputs to produce food.

Why do you focus on small-scale farmers as the target with the most potential? Couldn't you make a larger impact by targeting the big public sector projects?

Small-scale farmers constitute 80 percent of farmers in sub-Saharan Africa. They also make up a large proportion of farmers in South Asia. Given their numbers it makes sense to focus on them because we are aiming to improve food security.

That is not to say that large-scale farms are not in existence, but if you want to think in terms of the number of people you can reach and the number of lives you can influence, then you need to look at small-scale farmers.

The report concludes that by expanding the use of water management it is possible to increase yields by 300 percent - triple what people are producing now. How do you respond to critics who say this estimate is too optimistic and achievable only under ideal conditions?

When you look at global productivity and what is economically possible there's a huge a gap. It's that gap that we're trying to narrow and reach. We haven't bridged this gap yet because water and the other inputs, like fertilizer and chemicals, are needed to bridge that gap. It's not really overly optimistic; it's just saying that by easing these constraints on production we can move toward what's technically possible.

What do your see as the biggest challenge to more widespread adoption of irrigation schemes by small-scale farmers?

The first main challenge is the up-front cost of investment, the cost of water, the cost of agricultural management technologies. For many farmers, they do not have the means to adopt the technologies that can allow them to increase food security. The irony is that these technologies are not all that expensive. For instance, a motor pump that can take water out of the ground and then dissipate the water to crops is just a couple of hundred dollars. But for small farmers in Africa and in Asia this is beyond their means. So the first constraint is to find a way to add a financing mechanism to allow farmers to make the up-front investment costs.

Once the farmers have adopted the technologies, then we need to look at the constraints in term of the technical know-how to be able to apply water in an efficient manner. When farmers don't have the technical know-how they can over-irrigate and that is not an option we would like to see.

Another constraint is access to markets. For farmers to obtain the maximum benefits from the adoption of irrigation, they need access to markets so that they will have access to the inputs they need for development. The income they obtain from selling their produce will provide them with the opportunity to buy inputs and to pay for other necessities like education and health care for their children, thereby creating a multiplier effect, because when they spend money on other services then they improve the economy across multiple sectors.

The report provides multiple water irrigation solutions: motor pumps, rainwater harvesting, rural electrification, river diversions, etc. Why the variety? Why not just pick one and perfect it?

It's proven that solutions are context specific. One cannot just plug in a one-size-fits-all solution because of the agro-ecological conditions, the biophysical conditions, the socioeconomic conditions are different. When you provide multiple options it works better than trying to affix the same solution to a lot of different situations.

What we've done is to look at a range of options from which farmers can choose and pick the one that is most appropriate for their needs. For instance, some farmers don't need motor pumps; they are already organized in a communal way to harvest rainwater. Then the solution to get water from the pumps would not be appropriate for them. Across Africa and Asia the conditions are different, and there is not going to be one solution that fits all of those circumstances.

One finding that was very surprising to me was that there's often enough water, but farmers simply lack the means to harvest it. Is there a concern that once more people start using the water, there will be a water shortage? How do you regulate demand?

In some parts of the world the renewable water sources are not being fully exploited. When you look at sub-Saharan Africa, for instance, only three percent of the renewable water sources are withdrawn for agriculture, meaning there is an ample supply of water for irrigation. In some cases it's there because there hasn't been anything to tap into it yet.

You need an economic water strategy where there is ample water available. [This] implies that the water is available but we need to make the necessary investment to tap into it and use it as we like. In Africa, in particular, the idea is that if these investments are made, the water available can be tapped into.

That said, even where there is ample water, the water needs to be managed sustainably. It's important not just to look at the ample supply available now, but to look at how the water can be managed sustainably over time. With climate change we need to ensure that we can still have water for agricultural production in the future.

According to predictions, climate change will bring frequent droughts, as well as increasing floods. As the population increases, there will be increased competition for available water resources. But if we make the necessary management strategy now, we can manage the competition.

How do you see climate change impacting your research? Will most of the proposed solutions work over the long-term or will they need to be reworked to meet future needs?

When you look at the predictions for sub-Saharan Africa, they often say that climate change could reduce potential agricultural output by up to 30 percent by 2050. If we manage available water very well, if we use appropriate technologies that do not waste water, and if we manage the exchange of weather events - so that when there are floods you capture available water for subsequent use during droughts - then we can adapt much better agriculturally to climate change.

So the challenge will be to use the small-scale, efficient technologies that we're promoting through this publication to provide the right type of irrigation and at the same time meet crop water demands so that we use the necessary amount of water for crop growth. If we do that, then we will be able to ameliorate the very extreme conditions that we expect with climate change. If we are able to capture and store water that will come from extreme weather events like flooding, there will be mechanisms that will allow us to cope with climate change.

Seventy percent of smallholder farmers are women, many of whom lack resources to purchase pumps, for example. What can or should be done to address that?

One of the biggest constraints to all small-scale farmers is lack of market access and lack of access to complimentary inputs to maximize more water - things like fertilizer, insecticide and herbicide to encourage growth. Access to these things depends on the right policy incentives.

The micro financing that will allow them to be able to meet the up-front investment costs is also a policy issue. For instance, in many of the countries where we work, when crops are imported they are heavily taxed and that's a policy issue. How do you encourage the importation of crops and the materials needed to promote agricultural growth? So I would like to see more [countries] follow the path of Tanzania, which has just established a policy of allowing agricultural inputs to come in free of import duties.

That's a very good example of how policy can directly change the game and make valuable and necessary interventions. There are many countries in Africa where there are very strong directives on markets, but without access to markets and without economic incentives to promote value chain activities, farmers will not be able to do very well. And that is why we also advocate that we need policy-centered, coherent changes in terms of the economy.

Another example is rural electrification, which is used to run the pumps. Where electrical power is good, the pumps offer a much more effective and less expensive option, and it can make a big difference. If someone can turn to electric power pumps, they can have increased access to water.

How does government responsibility play into this? Tanzania's government has pledged to invest U.S.$6 million in agriculture - are other governments following suit?

What we are currently asking governments to do is to look at the potential of small-scale irrigation and agricultural management. If governments provide the appropriate support and incentives, then agricultural productivity will improve tremendously in Africa. So governments need to invest in and support small-scale, farmer-driven irrigation.

This is not to say that there's not room for investment opportunities in large-scale irrigation, but governments can do no wrong by supporting small-scale irrigation. Governments should support small-scale farmers and build their capacity by teaching farmers irrigation management, how to apply the right quantity of water to different crops, and teaching them how to use the value chains and ensuring them access to markets in an efficient way.

If governments can provide the loans that will allow farmers to tap into and be able to afford the up-front investment costs of agricultural technologies, then that would be a big plus. If governments provide the necessary infrastructure and economic incentives, those would also be big pluses. So the government's responsibility is in terms of building the necessary infrastructure, providing the necessary incentives in finance, and integrating and minimizing government intervention in markets. That is what the governments should do to promote farmer-driven interventions.

How do you encourage private investors to invest in smallholder agriculture and not information technology, for example?

What we are seeing is that investment in small-scale agricultural management can be as equally lucrative as large-scale investment, simply because you have a market that's made up of millions of smallholder farmers. By actually empowering them and making them be as productive as possible, it's very clear that it can be a very profitable business.

And by doing that you are not only getting a good return on investment, but you are also promoting social responsibility, which private investors need to be aware of, because you are providing income to a large group of people. You're also improving the food security of millions of poor people. And in that respect, what this project provides is the evidence for investors to see the opportunities and options for investment in small-scale agriculture.

The terms "land grabbing" and "water grabbing" have become media buzzwords. Is there a concern that too much private investment could exploit the farmers and take land and profits away from them?

Agricultural production involves many actors. When you look at [it] in terms of the value chain, there's room for private sector investors to come in and complement what the farmers bring because there will be rippling supply inputs, like chemicals, like pumps, to farmers. There will be others marketing the produce for these farmers and other private sector actors providing finance to farmers.

Private sector investment is needed to make these things work. Farmers are not going to import pumps; they're not going to, in some cases, market their produce. Those are areas where private sector actors step in.

Small and mid-size entrepreneurs will see the profits that can be made in efficient agricultural production. They are needed and they have a role to play in the value chain as input suppliers, as output marketers and as profiteers. They add value by providing products for these farmers. If they profit, then they can provide the necessary investments into water, agricultural production and energy.

By supplying these things to farmers, investors are enabling people to buy food from the farmers. They increase the overall income opportunities and possibilities in the value chain. In that way they are not duplicating the efforts of farmers, who are engaged in agricultural production.

They can also make sure that farmers are matching supplies to demand. One of the constraints farmers face is they have no idea what the market demands are, but the private sector generally knows what the market is looking for through their ability to link demand and supply. They also provide the necessary investment to underwrite the necessary costs in the types of agricultural production that we've been talking about.

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