A spotlight on food security as a global topic: the critical role of investments in agriculture

Publication September 2015


Introduction

The Food and Agriculture Organization of the United Nations (the FAO) recently published its 2015 report into the ‘State of Food Insecurity in the World’ and a subsequent report on ‘Achieving Zero Hunger’.

According to the World Health Organization, food security exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life. Fundamentally, this requires food to be available, accessible and of proper quantity and quality to ensure good nutrition.

The importance of food security is recognised by the international community, as reflected in the United Nation’s Millennium Development Goals, where a target was set to halve the proportion of hungry people in the world by the end of 2015.

Despite 72 developing countries having reached this Millennium Development Goal target, about 795 million people – or around one in nine – still suffer from chronic undernourishment, or hunger. The regional trends, which show varying rates of success, are displayed in the diagram below, taken from the United Nations report on the ‘State of Food Insecurity in the World’.

In Sub-Saharan Africa progress has been slow. The lack of progress in absolute terms reflects prevailing problems in the region, notably political instability, civil strife and outright war, as is the case in the Central African Republic. Eastern Africa remains the sub-region with the biggest hunger problem, being home to 124 million undernourished people. The most successful subregion in reducing hunger in Africa is Western Africa, where the number of undernourished people has decreased by 24.5 per cent since 1990–92.

Trends and levels of undernourishment in Northern Africa are very different from (and much better than) those on the rest of the continent. The generally low percentage of undernourishment indicates that, based on current trends, Northern Africa is close to eradicating severe food insecurity.

The most successful sub-region in reducing hunger in Africa is Western Africa, where the number of undernourished people has decreased by 24.5 per cent since 1990–92.

Africa Focus

Building on the Millennium Development Goals, the Sustainable Development Goals have been proposed to extend these international development targets beyond 2015. These revised goals are now seeking to end hunger, achieve food security and promote sustainable agriculture by 2030.

Despite overall progress, much therefore remains to be done to eradicate hunger and achieve food security on an international scale.

Strategies to eliminate hunger

To achieve food security and eliminate hunger, the international community needs to build upon the methods which have been employed so far. These strategic policies fall into four main categories:

Economic growth

This is a key factor in reducing undernourishment – countries that become richer are less likely to be or become food insecure. However, ‘general’ economic growth is not sufficient to ensure food security. Enhancing the productivity and incomes of smallholder farmers is highlighted as the key to progress. This ‘inclusive’ economic growth will serve to promote access for everyone to food, assets and resources.

Agricultural productivity growth

By increasing output from their finite land resources, countries can improve food supplies and ensure corresponding sustainability targets are met. Boosting agricultural output will require direct investment in a range of agricultural technologies, including irrigation systems, fertiliser coverage and spray chemical applications. Additional investment will also be required to stimulate and sustain growth of rural incomes and employment. This further investment could be achieved through private investment or through public investment, either directly in agricultural resources or indirectly through supporting the necessary infrastructure.

Markets

Through promoting trade, governments can help alleviate food insecurity. Imports will not only increase the quantity of food available, but also the variety of food available to undernourished populations. Imports will also reduce the seasonable effect on food availability and consumer prices, while mitigating against local production risks such as climate anomalies. That said, the links between food security and international trade are complex and context-specific, and so must be considered carefully by the governments concerned.

Social protection

Policies such as food distribution schemes, food-for-work programmes and incometransfer programmes are important in ensuring society’s most vulnerable are provided with access to food in times of need. These social protection measures safeguard efficient and effective distribution of necessary food resources.

Investment is key

It is clear from the findings of the FAO’s reports that to sustainably eradicate hunger, and guarantee food security, both private and public investment is required. This investment will raise rural and agricultural productivity and incomes, as well as promote more productive, sustainable and inclusive food systems.

According to the ‘Achieving Zero Hunger’ report, it has been estimated that to eliminate hunger by 2030 an average annual investment of US$267 billion from 2016 to 2030 will be required. This illustrates the sheer scale of investment necessary in agriculture and related industries over the coming years.

We envisage co-operative funding as a key conduit for enabling grass-root investment in agriculture. The pooling of resources in a co-operative allows farmers to achieve economic benefits they cannot achieve alone, not only by allowing for economies of scale, but critically by increasing their bargaining power. This translates into an ability to attract investment which individuals would not otherwise be able to access.

Co-operative structures will allow rural enterprises to access the funding needed to raise their productivity. By providing access to finance, as well as to agricultural inputs, information, and output markets, co-operatives have been shown to increase their member’s production and incomes.

The 2011 FAO report entitled ‘Dairy Development in Kenya’ shows how co-operative structures have been successfully employed in the Kenyan dairy industry. The country has close to 13,000 established co-operative units today, facilitating market access for more than 1.5 million dairy farmers. These co-operative structures have helped, and continue to assist farmers with access to loans and help address issues farmers may face with direct implications for milk production. The African Dairy Conference and Exhibition will be held in Nairobi, Kenya later this year, recognising the strength of the Kenyan dairy industry.

Co-operative structures can facilitate large-scale investment in small-scale agriculture, and ensure developing countries are able to take steps towards meeting their food security targets.

The need to attract funding also necessitates ensuring the investment climate supports both debt and equity support. A crucial factor influencing lenders’ ability to advance finance is the confidence they have in the security being taken. One way to instil this confidence in the agriculture and commodities sector is to ensure that secure warehouse facilities are available. When lending against the security of stored commodities, the availability of secure and reliable bulkstorage facilities is a key factor.

This can be illustrated through the role of the CBH Group in Australia. The CBH Group is a grain growers’ co-operative that handles, markets and processes grain from the wheat belt of Western Australia. Through developing secure and reliable bulk-storage facilities, additional financing has been made available to agricultural producers.

If these systems can be effectively introduced in developing nations, the more readily obtainable finance will allow small-scale producers the means to develop and, in turn, act to reduce food insecurity.

Where to from here

Following the United Nations Third International Conference on Financing for Development, which was held in Addis Ababa in July this year, the foundations have now been laid for implementing the Sustainable Development Goals – including the goal to eradicate hunger by 2030. World leaders are expected to adopt the proposed sustainable development agenda at the United Nations Summit in New York later this year.

As countries sign on to these international commitments, as well as more specific regional agreements such as the Zero Hunger Initiative for West Africa, there will be increased pressure for these nations to address food insecurity. Investment in agriculture therefore looks set to become an increasingly salient issue, and crucial to meeting food security targets in the medium to long term.


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