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Money in the pocket,
food on the table:
the economic case for
investing in agricultural
development
2
ACKNOWLEDGEMENTS
Author: Carol Thiessen, senior policy advisor at Canadian Foodgrains Bank
Designer: Courtney Klassen
Special thanks go to Canadian Foodgrains Bank staff who reviewed this report: Jim Cornelius, Paul Hagerman,
Anna-Marie Janzen, Jared Klassen and Stu Clark
Further thanks to external reviewers: Brian Tomlinson, Mark Fried and Richard Phillips
Canadian Foodgrains Bank is a partnership of 15 Canadian churches and church-based agencies working together
to end global hunger.
March 2015
1
ACRONYMS
CIDA: Canadian International Development Agency
DAC: Development Assistance Committee of the Organization for Economic Co-operation and Development
FAO: Food and Agriculture Organization of the United Nations
GDP: Gross domestic product
IFAD: International Fund for Agricultural Development (United Nations)
IFPRI: International Food Policy Research Institute
MDG: Millennium Development Goal
ODA: official development assistance
OECD: Organization for Economic Co-operation and Development
PSNP: Productive Safety Net Program (Ethiopia)
2
3
EXECUTIVE SUMMARY:
“Experience repeatedly shows that when smallholders are given the means and the incentives
to increase production, they can feed themselves and their communities, lead their nation’s
agricultural and economic growth, and contribute to food security” - Kanayo F. Nwanze,
president, International Fund for Agricultural Development
Agricultural development plays a prominent role in reducing poverty, contributing to sustainable national
economies and ensuring greater food security. Strong support for agriculture has been the economic foundation
for countries as diverse as Canada, Ghana and China. Increased, and well-targeted, public investment in
agricultural development is the key to meeting economic and development goals in some of the lowest income
countries in the world.
The Economic Case for Agricultural Development
The World Bank has found that GDP growth arising from agricultural development is at least twice as effective at
reducing poverty as GDP growth from other sectors.
Agricultural development can also lead to overall economic prosperity for agriculture-based countries. Growth in
agriculture is important for poverty reduction and economic growth because it increases farm incomes, creates
new on-farm employment, and benefits rural non-farm economies. This is especially true if smallholder farmers
are the source of the growth.
The Need for Investment in Agriculture
To achieve poverty reduction, food security and economic growth, more investment is needed in agriculture—
approximately US$50.2 billion in public resources by 2025 (or $5 billion per year).
Effective Agricultural Investments
For the most widespread and sustainable benefits from this investment, resources must target smallholder farmers,
especially women. Despite producing 80 percent of the food consumed in the developing world, at least 70 percent
of people who suffer from poverty and hunger are smallholder farmers. Small farms can be more productive than
larger farms in the same country due to careful resource use and labour intensity. Thus, agricultural development
that focuses on small farms has a great impact on poverty reduction, food security and the wider economy. When
smallholder farmers have money in their pockets and food on their tables the entire country benefits.
Agricultural investments should also focus on food crops and public goods, such as rural infrastructure and
extension services. As well, support should enable farmers to manage environmental, financial and land tenure
risks.
The Role of Aid
Budgetary support from developing countries will provide some of the increased spending, as will the private
sector, including farmers themselves. But countries with widespread poverty and food insecurity cannot raise
enough resources domestically to meet their needs. More support is needed from donors, including Canada.
Increasing aid for agriculture will help Canada achieve three of its key development goals: increasing food
security, strengthening maternal, newborn and child health and stimulating sustainable economic growth. Support
for agriculture can also improve the lives of women and promote environmental sustainability.
After strong support between 2008 and 2010, Canada’s aid for agriculture has decreased substantially in recent
years.
4
The farmers of the developing world are taking steps towards greater food security and independence. The needs
are large and many investors are needed to fuel positive change. Now is the time for Canada to substantially
increase its support for agriculture and help build a prosperous and food secure future for all.
BOX 1: The Asian Miracles
INTRODUCTION
The yellow fields of canola that blanket much of the prairies are
much more than pastoral calendar scenes. They are a made-inCanada success story.
Early Canadian research into improving the long cultivated
rapeseed was predominantly supported by public dollars.
In 1970, for instance, the federal government invested
approximately $3 million (or 83 percent of total canola
research dollars) on what would become canola.1 Those modest
early investments led to the first canola variety in 1974, and
contributed to an industry that is now worth $19.3 billion to
the Canadian economy. According to an independent study
commissioned by the Canola Council of Canada, canola
generates nearly 249,000 Canadian jobs and $12.5 billion in
wages each year.2
Around the world, investments in agricultural development3
have historically played a prominent role in reducing poverty
and building strong economies. Agricultural growth helped
catalyze industrial revolutions from England in the mid-18th
century to Japan more than a century later.4 More recently,
agricultural growth has helped economies flourish in countries
such as China and Vietnam (see Box 1).
These success stories are possible today in some of the lowest
income countries in the world. They require ongoing public and
private sector investments, including effective investments of
official development assistance (ODA).
This report will argue that increasing investment in agricultural
development, including from the Canadian government,
makes good economic and development sense. Agricultural
development can play a significant role in reducing poverty.
And that means more money in farmers’ pockets—money they
will spend buying food, employing farm labourers, paying
school fees, and purchasing other goods and services in the
local economy. Furthermore, investment in agriculture is a vital
building block towards strong, sustainable national economies.
This report will further argue that to be effective in bringing
financial benefits, as well as improved food security, to the most
people, agricultural investments should target smallholder
farmers, especially women. They should focus on staples and
other food crops, be directed towards public goods, and support
risk management, in particular, environmental, financial and
land tenure risks. For investments to have the most widespread
impact, public investments are crucial. Aid for agricultural
development is a vital component of these public investments.
China, Thailand, Korea and Vietnam have all
reduced poverty and built vibrant economies
by focussing early attention and resources
on agriculture. Though not all agricultural
development will, or should, follow their particular
paths, they illustrate the benefits that come from
investing in agriculture.
China cut the prevalence of under-nutrition in
half between 1990 and 2013, from roughly 23
percent to 11 percent. It emphasised agricultural
growth by improving incentives for smallholder
production and rural development, including decollectivization and pro-market reforms.1
Vietnam is also well on its way towards ending
hunger. The prevalence of undernourishment
fell from approximately 48 percent to 8 percent
between 1990 and 2013.2 The government has
focussed on agricultural growth, along with
targeted nutrition and health programs. Land use
certificates for 10 million households, representing
78 percent of Vietnam’s agricultural land, provided
much of the foundation for Vietnam’s ongoing
economic success.3
Land reform in Korea was also a key factor in its
economic progress. Programmes for investment
in agriculture, building rural infrastructure, such as
roads, and lending schemes for rural areas were
also established, helping to stimulate significant
agriculture growth rates.4
Thailand has all but eliminated hunger, reducing
undernourishment from approximately 43 percent
to 6 percent between 1990 and 2013. Agriculture
was the driving force for these impressive gains.
From the 1960s and 1970s, Thailand focused on
macroeconomic stability, secure land rights, and
strong public spending on rural infrastructure.
Since the 1990s, the focus has moved towards
market reforms and increased diversification,
supported by public investments in research.5
1 IFPRI (2014) 2013 Global Food Policy Report. Washington, D.C.: International Food Policy Research Institute
2 Ibid.
3 Spielman, D. J. & Pandya-Lorch, R. (2009) Highlights from Millions Fed:
Proven Successes in Agricultural Development. Washington, D.C.: International Food Policy Research Institute
4 FAO (2009) Rethinking Public Policy in Agriculture: Lessons from Distant
and Recent History, Rome: Food and Agriculture Organization
5 IFPRI (2014) 2013 Global Food Policy Report. Washington, D.C.: International Food Policy Research Institute
1 Gray, R. & Malla, S. (2007). “The Rate of Return to Agricultural Research in Canada.” CAIRN Policy Brief: 2.
2 Canola Council of Canada (2013) “Canada’s Canola Industry: Adding Billions to Canada’s Economy.” Retrieved January 2, 2015 from http://www.canolacouncil.org/media/545725/fact_sheet_
canadian_economic_impact2013.pdf
3 Agricultural development refers to initiatives to improve farming. It includes agricultural policy and planning, research and extension programmes for crops and livestock, support for agricultural co-ops, markets and financial services. Agricultural development does not include forestry, fishing, or rural infrastructure that supports agricultural development.
4 World Bank (2008) World Development Report: Agriculture for Development. Washington, D.C.: The World Bank
5
Other papers in this series will demonstrate the important role
that aid for agricultural development can play in increasing food
security, contributing to nutrition (including meeting maternal,
newborn and child health goals), improving the lives of women
and producing environmental benefits.
GLOBAL POVERTY AND FOOD INSECURITY
Over the last decades significant progress has been made in
combating global poverty. Africa, in particular, is increasingly
posting impressive rates of growth. Between 2003 and 2012,
GDP grew on average by 5 percent annually in Africa, and by 2.3
percent per capita.5 Currently six of the world’s 10 fastest growing
economies can be found in Africa.6
Worldwide, the number of people facing food insecurity is
also falling.7 By the United Nations Food and Agriculture
Organization’s (FAO) count, 805 million people continue to be
chronically undernourished globally.8 That number is down more
than 100 million over the last decade and 209 million from 1990. 9
Surji Parihim used to get only one crop a year off
her small field in eastern India, a few hours from
Kolkata. Then the community dug a new well, with
support from the Canadian Foodgrains Bank, and
Parihim began double-cropping. First she grows
paddy rice, followed by chickpeas. She sells the
chickpeas in local markets and uses the proceeds
to buy vegetables and rice for her family. She is
improving her food security, as well as that of her
husband and four children—and benefitting the
local economy.
For all the positive steps forward, there is still much work to be
done. In a world that continues to see at least modest economic
growth (approximately 3 percent per year over the past seven
years)10 it is unacceptable that so many are still hungry and
impoverished. At very conservative estimates, approximately one out of every nine people faces food insecurity
on a long-term basis.11 Despite posting some impressive economic growth numbers, Africa’s growth tends to be
focussed on a few commodities and extractive industries, and positive impacts are not reaching many of those in
dire poverty.12
Indeed, there has been little improvement in Africa’s food security in recent years. Africa has the highest
prevalence of hunger, with approximately 25 percent of people in sub-Saharan Africa still undernourished. Asia,
with its dense population, has the highest total number of undernourished people. Southern Asia, in particular,
lags behind the rest of Asia in addressing hunger.13
Food insecurity in much of the world shares close links with agriculture. At least 70 percent of all food insecure
people live in rural areas—and the vast majority of them are dependent on agriculture for their sustenance.14
Understanding Food Insecurity
There are two main reasons why people struggle with food insecurity. They cannot afford to purchase enough food
produced by others, or they are not growing enough food themselves to feed their families sufficiently.
5 International Food Policy Research Institute (IFPRI) (2014) 2013 Global Food Policy Report. Washington, D.C.: International Food Policy Research Institute
6 Heifer International (2014) State of the African Farmer
7 Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active
and healthy life.” (Source: World Food Summit, 1996)
8 Undernourishment: A state, lasting for at least one year, of inability to acquire enough food, defined as a level of food intake insufficient to meet dietary energy requirements (Source: FAO).
The FAO’s numbers have been criticized for painting an unduly positive picture on advances in global food security, including using a low threshold for food security—based on food availability
and the calories required only to lead a “sedentary lifestyle”, and “food insecurity” only triggered if undernourishment lasts more than one year. (Source: Moore Lappé, F & Clapp, J et al (2013)
Framing Hunger: Response to State of Food Security in the World 2012)
9 FAO (2014) The State of Food Insecurity in the World: Strengthening the Enabling Environment for Food Security and Nutrition. Rome: Food and Agriculture Organization
10 OECD (2014) OECD Economic Outlook: Volume 2014/2. OECD Publishing
11
FAO (2014) The State of Food Insecurity in the World: Strengthening the Enabling Environment for Food Security and Nutrition. Rome: Food and Agriculture Organization
12 African Development Bank Group (2012) Annual Development Effectiveness Review 2012: Growing African Economies Inclusively. Tunisia: African Development Bank Group
13 Ibid.
14 FAO (2005) The State of Food Insecurity in the World: Eradicating World Hunger—Key to Achieving the Millennium Development Goals. Rome: Food and Agriculture Organization
6
Figure 1: Cereal Yields
YIELDS, TONS PER HECTARE
5
4
3
EAST ASIA & PACIFIC
EUROPE & CENTRAL ASIA
LATIN AMERICA &
CARIBBEAN
MIDDLE EAST & NORTH
AFRICA
SOUTH ASIA
SUB-SAHARAN AFRICA
2
1
0
1960 1965
1970
1975
1980 1985
1990
1995 2000 2005
Source: FAO 2006, in World Bank (2008) World Development Report
Furthermore, there are two main reasons why farmers in Africa, in particular, struggle to grow enough food for
their families.
1. Farm size. Approximately 95 percent of African farmers cultivate plots of land less than five hectares in
size, and about half of these are working with less than 1.5 hectares of land. Many of these farms are actually
declining in size as parents divide their small plots to distribute amongst their children.15 A land survey
covering nine countries in sub-Saharan Africa found that farm sizes decreased by 11 percent between 2002 and
2008.16
2. Productivity per hectare. Across much of Africa farm yields are stagnant—or declining.17 Average grain yields
(1.1 to 1.5 metric tonnes per hectare) are less than half the world average.18 Low productivity results from a
number of factors including soil infertility and poor access to water, and lack of sustainable and efficient ways
to improve fertility and soil moisture.19
Low productivity, however, must be considered in a wider structural context including power imbalances, gender
inequalities, lack of infrastructure, and lack of control by farmers over the means of production.20 These larger
critical issues need to be addressed if solutions to poverty and chronic undernourishment are to be sustainable.
Nor is increased global food production a guarantee of ending hunger. There is already enough food in the world
for every person to eat close to 2900 dietary calories each day—sufficient to live a healthy life.21 What’s important is
who produces the food, who has access to the right technology, who has adequate knowledge to grow enough food,
and who has the purchasing power to acquire it at a fair return for the producer.22
This paper will return to these issues later when it explores how to invest aid dollars in agriculture to most
effectively raise incomes and improve food security, while also addressing production issues.
15 Heifer International (2014) State of the African Farmer
16 Andersson Djurfeldt, A. (2014) “Raising Productivity in African Agriculture,” a presentation made at the Overseas Development Institute (ODI). Retrieved November 4, 2014 from www.odi.
org/events/4030-raising-productivity-african-agriculture#report
17 Ibid.
18 African Progress Report (2014) Grain Fish Money—Financing Africa’s Green and Blue Revolutions. Geneva: African Progress Panel
19 Bunch, R. (2009) CRWRC’s Agriculture and Food Security Program: Evaluation Report (2000-2009)
20 Oxfam International (2013) The Future of Agriculture: Synthesis of an Online Debate. Oxford, Oxfam International
21 FAO (2014) Food and Nutrition in Numbers. Rome, Food and Agriculture Organization. In 2011, the available kilocalories per person per day was 2868. This mostly includes the main staple
grains, as well as meat and dairy products. It does not include non-food utilization, including exports, industrial use, animal feed, seed, wastage and changes in stocks.
22
7
Pretty, J.N., Noble A.D. et al (2006) “Resource-Conserving Agriculture Increases Yields In Developing Countries” in Environmental Science & Technology 40(2): 1114-1119.
THE ECONOMIC CASE FOR AGRICULTURAL DEVELOPMENT
Figure 3.2 In most countries, the vast majority of rural households participate in agriculture
PERCENT
100 countries. The vast majority of the world’s poorest
Agriculture is central to the economic well-being of low income
80
people depend on agriculture for their livelihoods. In the developing
world, 86 percent of rural people make
their living from agriculture. 23 In agriculture-based economies,60 agriculture generates 29 percent of the country’s
GDP on average, and employs 65 percent of the overall workforce.
Even in countries transitioning away from an
40
agricultural base, the industries and services connected to agriculture
often account for more than 30 percent of
20
GDP.24
N
e
gl pa
ad l 1
99
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6
Pa sh
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20
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1
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2
G
ha 00
na 4
19
98
0
B
an
N
Considering the importance of agriculture for the world’s poorest countries, growth in agriculture is critical for
reducing poverty and promoting economic prosperity.
SUB-SAHARAN
AFRICA
SOUTH
ASIA
EAST ASIA
& PACIFIC
EUROPE &
CENTRAL ASIA
LATIN AMERICA
& CARIBEAN
Figure 3: In most countries the vast majority of rural
households participate in agriculture
Figure 2: Rural participation in Agriculture
Figure 3.2 In most countries, the vast majority of rural households participate in agriculture
Figure 3.3 In most countries, the vast majority of rural households participate in agriculture
PERCENT
100
INCOME %
100
80
80
60
60
40
40
20
20
0
Onfarm income
Agricultural wage labor
VIETNAM 1998
3r
d
4t
h
he
st
R
ic
es
t
2n
d
or
Po
3r
d
4t
h
he
st
ic
R
GUATEMALA 2000
R
ic
3r
d
4t
h
he
st
Po
or
es
t
2n
d
es
t
2n
d
or
Po
3r
d
4t
h
he
st
ic
R
Po
or
es
t
2n
d
GHANA 1998
NEPAL 1996
B
an
gl
N
ep
ad al 1
99
e
6
Pa sh
ki 20
0
st
an 0
20
0
1
V
ie
In tna
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98
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3
4
98
19
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0
G
ha
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ia
aw
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al
ig
N
M
20
4
0
SUB-SAHARAN
AFRICA
SOUTH
ASIA
EAST ASIA
& PACIFIC
EUROPE &
CENTRAL ASIA
LATIN AMERICA
& CARIBEAN
Nonagricultural income
Transfers & other
Source: Davis and others 2007, in World Bank (2008) World Development Report
Figure 3.3 In most countries, the vast majority of rural households participate in agriculture
INCOME %
100
80
Agricultural
Development Leads to Poverty Reduction
60
3r
d
4t
ic h
he
st
3r
d
4t
ic h
he
st
Po
or
es
t
2n
d
3r
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4t
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or
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3r
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The World Bank’s 2008 World Development Report focused on the importance of agriculture for meeting
40
development
goals. It found that GDP growth stemming from agricultural development is at least twice as
20
effective
in reducing poverty as GDP growth originating from other industries. In China, this benefit rose to 3.5
0
times
the poverty-reducing capabilities.25
GHANA 1998
GUATEMALA 2000
Onfarm income
Agricultural wage labor
VIETNAM 1998
Nonagricultural income
R
R
R
R
This influential report prompted further studies into the impact of agriculture on poverty reduction, and an
emerging consensus of its importance.
NEPAL 1996
Transfers & other
A 2010 study examined six African countries—Ethiopia, Ghana, Kenya, Rwanda, Uganda and Zambia—using
economy-wide simulation models to determine the relative contribution of agriculture to poverty reduction. The
results showed agriculture beats industrial growth on this count. For example, a one percent annual increase in
Ethiopia’s GDP per capita originating from agricultural growth would lead to a 1.7 percent reduction in Ethiopia’s
poverty rate per year. That contrasted to 0.7 percent reduction in the poverty rate from non-agriculture related
growth.26
Considering this marked difference in poverty reduction outcomes, the study found that over time agricultureled growth would lift an additional 9.6 million people out of poverty in Ethiopia compared to growth from other
sectors, even if overall GDP was growing at the same rate under the two scenarios. These findings were consistent
across the six countries, although the positive impact of agricultural development varied in magnitude across
23
24
25
26
8
World Bank (2008) World Development Report: Agriculture for Development. Washington, D.C.: The World Bank
Ibid.
Ibid.
Diao, X, Hazell, P & Thurlow, J (2010) “The Role Of Agriculture In African Development” in World Development: 38(10): 1375-1383
countries. Even in Zambia, where agriculture represents a small
percentage of overall GDP, agriculture-led growth was still found
to have a significantly stronger capacity to alleviate poverty than
growth from other industries, including copper mining.27
“There is broad
agreement that growth
in agriculture usually
generates the greatest
improvements for
the poorest people—
particularly in poor,
agriculture-based
economies.”
Valdés and Foster, from Pontificia Universidad Catolica in Chile,
looked specifically at Latin America and found that agriculture is
at least 2.5 times better than other sectors at raising incomes of the
poorest in Latin America.28
Furthermore, for the world’s most impoverished people, agricultural
development is even more effective at reducing poverty. For those
living on $1 per day, agriculture-driven growth is up to 3.2 times
better at reducing poverty than growth from other sectors. This
advantage diminishes as countries become richer and as inequality
increases.29
- IFAD (2011) Rural
Poverty Report
Agricultural Development Spurs
Economy-wide Growth
The World Bank’s 2008 World Development Report
goes on to argue that not only does agricultural
growth reduce poverty more effectively than other
forms of growth, but it can also lead to overall
economic growth for an agriculture-based country.
Since many of these countries are dependent on
their own production for much of their food security,
especially staples, the productivity of agriculture is
important in determining the price of food. This in
turn helps determine wage costs and competiveness
of the tradable sectors.30
Many developing countries do not have suitable
investment climates for manufacturing. Their
economies are dependent on trade in processed
and unprocessed agricultural commodities. Growth
in both agricultural exports and non-tradable
agriculture production also leads to strong growth in
other sectors through multiplier effects. “That is why,
for many years to come, the growth strategy for most
agriculture-based economies has to be anchored on
getting agriculture moving,” the World Bank argues.31
Figure 4: GDP growth originating in agriculture benefits the
Figure
3 the
GDPpopulation
growth originating
in agriculture
poorest
half of
substantially
more benefits
the poorest half of the population substantially more
Expenditure gains induced by 1% GDP growth, %
8
AGRICULTURE
6
NONAGRICULTURE
4
2
0
-2
LOWEST 2
3
4
5
6
7
8
9 HIGHEST
Expenditure deciles
Source: Ligon and Sadoulet 2007.
Note: Based on data from 42 countries during the period
1981-2003. Gains are significantly different for the lower half
Note: Based
on data from
42 countries during the period 1981-2003.
of expenditure
deciles
Gains are significantly different for the lower half of expenditure deciles
Source: Ligon and Sadoulet 2007, in World Bank (2008) World
Development Report
World Bank economist Jean-Jacques Dethier and Alexandra Effenberger, from Brown University, reviewed
economic literature on agriculture in 2012 and came to the same conclusions. They found that agriculture
contributes to both income growth and poverty reduction in low-income countries by supporting rural livelihoods
and providing food at reasonable prices in urban areas. “Agriculture provides food, income and jobs, and hence
can be an engine of growth in agriculture-based developing countries and an effective tool to reduce poverty in
transforming countries,” they argue.32
27
28
29
30
31
32
9
Ibid.
Valdés, A. and Foster, W. (2010) “Reflections on the Role of Agriculture in Pro-Poor Growth” in World Development 38(10): 1362-1374
Christiaensen, L., Demery, L. & Kuhl, J. (2010) “The (Evolving) Role of Agriculture in Poverty Reduction: An Empirical Perspective” in Journal of Development Economics: 96: 239-254
World Bank (2008) World Development Report 2008: Agriculture for Development. Washington, D.C.: The World Bank
Ibid.
Dethier, J.J. & Effenberger, A. (2012) “Agriculture and development: A brief review of the literature” in Economic Systems 36: 175-205
Why Smallholder Agricultural Development Has Positive Economic Impacts
Figure 4 Public spending on agriculture is lowest in the agriculture-based countries, while their share of agriculture in GDP is highest
There are three main reasons why smallholder agriculture is particularly effective as a means to reduce poverty,
build vibrant rural economies and provide a foundation for country-wide economic growth.
Agricultural GDP/GDP
Public spending on agriculture/agricultural GDP
1. Farm incomes: For the poorest households, agriculture is a critical
income source. Agricultural development
PERCENT
PERCENT
that
leads
to
higher
farm
profits
will
have
a
direct
impact
on
poverty
reduction.33
35
35
2. On-farm
employment: Smallholder agriculture tends to be more labour-intensive than other sectors—
29 29
1980
2000
30
30
employing more workers per unit of output.
Thus,
improvements
to smallholder agriculture will have a 1980
direct
with increased on-farm employment, 25
and the positive economic impacts that stem
25 and positive correlation 24
from higher rural employment. There may also be an indirect impact on wages. If higher on-farm employment
20 causes a shortage of workers in rural areas, this may also drive20
up wages for off-farm employment.34
17
16
3.15 Rural non-farm economy: Increases in agricultural
outputs may
14
15 also lead to employment-intensive growth
11 true if
in the local non-farm sector as a response to higher
domestic
demands.
Again, this is especially
10
10
10 agricultural growth originates from smallholder farmers, who 10
spend a higher proportion of their income on
locally produced goods and services.35 These multiplier effects 5tend to be
smaller when the source of
4 much
4
5
36
agricultural growth is concentrated in a few large-scale farms.
0
12
0
Agriculture-based
Transforming
Urbanized
Agriculture-based
Transforming
Urbanized
THE NEED FOR INVESTMENT IN AGRICULTURE
To achieve positive economic impacts, more investment is needed in agriculture. The FAO estimates that
an additional US$50.2 billion in public resources are required to meet global food security needs by 2025.
Transitioning to more sustainable production systems, necessary for addressing environmental risk factors such
as climate change, will require even higher investment levels, especially in the early years.37
TABLE 8
Incremental annual public investment needed to eradicate hunger by 2025
PRIORITY AREA FOR INVESTMENT
INVESTMENT NEEDED
(Billion constant 2009 US$)
1. Expand rural infrastructure and market access
18.5
2. Develop and conserve natural resources
9.4
3. Research, development and extension
6.3
4. Rural institutions
5.6
5. Expenditures for safety nets
10.4
TOTAL INVESTMENT COSTS
50.2
Source: Schmidhuber and Bruinsma, 2011.
Source: Schmidhuber and Bruinsma, 2011, in FAO (2012) The State of Food and Agriculture
33 Ibid.
34 Wiggins, S., Kirsten, J. & Llambi, L. (2010) “The Future of Small Farms” in World Development 38(10): 1341-1348
35 Hazell, P. (2011) “Five Big Questions About Five Hundred Million Small Farms.” A paper presented at the IFAD Conference on New Directions for Smallholder Agriculture, Rome
36 Heifer International (2014) State of the African Farmer
37 FAO (2012) The State of Food and Agriculture, 2012: Investing in Agriculture for a Better Future. Rome: Food and Agriculture Organization
10
2000
Figure 4 Public spending on agriculture is lowest in the agriculture-based countries, while their share of agriculture in GDP is highest
Figure 5: Public spending on agriculture is lowest in agriculture-based countries, while their share of agriculture in GDP is highest
Agricultural GDP/GDP
Public spending on agriculture/agricultural GDP
PERCENT
PERCENT
35
30
35
29
29
1980
2000
24
25
30
1980
2000
25
20
20
16
15
14
10
10
17
15
5
5
0
10
10
4
11
12
4
0
Agriculture-based
Transforming
Urbanized
Agriculture-based
Transforming
Urbanized
Source: Fan, 2008 in World Bank (2008) World Development Report
Today, countries where hunger and extreme poverty are most rampant—predominantly South Asia and subSaharan Africa—also have the lowest agricultural spending per worker in agriculture.38
The experience of Mozambique, for example, provides a cautionary tale of the negative impact of failing to
adequately support agriculture, according to a 2012 analysis. Since the civil war ended in 1992, Mozambique has
notched impressive
economic growth and has attracted high levels of aid. GDP growth of more than 6 percent per
TABLE 8
year in the 2000s
was driven
by foreign
investment
in mineral
andhunger
energy
mega projects that had little impact on
Incremental
annual
public investment
needed
to eradicate
by 2025
local jobs and markets. Not surprisingly, this growth did not lead to poverty reduction, particularly in rural areas.
AREAwas
FORspending
INVESTMENT
Meanwhile, the PRIORITY
government
less than 10 percent of itsINVESTMENT
budget on NEEDED
agriculture, and only a small share
39
of international aid was directed towards agriculture.
(Billion constant 2009 US$)
1. Expand rural infrastructure and market access
18.5
4. Rural institutions
5.6
Since then, investment has risen substantially for agriculture, supported by outside investors such as China and
2. Develop and conserve natural resources
9.4
Brazil, with an emphasis on agribusiness approaches.40 Yet, poverty rates sit above 60 percent,41 suggesting that
3. Research, development and extension
6.3
investment that does not target smallholders will not be effective in reducing poverty.
Ghana, in contrast,
has experienced
significant economic growth over the last
5. Expenditures
for safety nets
10.4 20 years, with agricultural
development playing
an important
role in this success. Agriculture in Ghana
TOTAL INVESTMENT
COSTS
50.2accounts for more than 30 percent
of GDP, employs 60 percent of the labour force, and is growing at an annual rate of approximately 5.5 percent.42
Source: Schmidhuber and Bruinsma, 2011.
Ghana has nearly
met the African target to spend 10 percent of national budgets on agriculture.43
Ghana’s picture is not entirely rosy—much of the growth in agriculture is from land expansion and not from
productivity gains.44 But overall, the country is seeing impressive gains on both poverty reduction and food
security. Ghana was the first sub-Saharan African country to meet the MDG target of halving extreme poverty
by 2015, and is on track to meet at least two of the three child malnutrition goals.45 Overall, the proportion of
undernourished people in the population has dropped from 44 percent in 1990 to less than five percent by 20112013.46
38 Ibid.
39 Cunguara, B. & Hanlon, J. (2012) “Whose Wealth is it Anyway? Mozambique’s Outstanding Economic Growth with Worsening Rural Poverty” in Development and Change 43(3): 623-647
40 Chichava, S. & Duran, J. et al (2013) Brazil and China in Mozambican Agriculture: Emerging Insights from the field. In Scoones, I., Cabral, L. & Tugendha, H. (eds) China and Brazil in African
Agriculture (pp 101-115). Oxford, UK: International Development Studies Bulletin
41 African Progress Report (2014) Grain Fish Money—Financing Africa’s Green and Blue Revolutions. Geneva, African Progress Panel
42 Breisinger, C. & Diao, X. et al (2012) Ghana. In Diao, X. & Thurlow, J. et al. (eds) Strategies and Priorities for African Agriculture: Economywide Perspectives from Country Studies (pp 141164). Washington, D.C.: IFPRI
43 ONE and Forty Chances (2013) The Maputo Commitments and the 2014 African Year of Agriculture
44 Breisinger, C. & Diao, X. et al (2012) Ghana. In Diao, X. & Thurlow, J. et al. (eds) Strategies and Priorities for African Agriculture: Economywide Perspectives from Country Studies (pp 141164). Washington, D.C.: IFPRI
45 UNDP ( ) Ghana: Millennium Development Goals, accessed January 29, 2015 from http://www.gh.undp.org/content/ghana/en/home/mdgoverview/overview/mdg1/
46 FAO (2013) The State of Food Insecurity in the World: The Multiple Dimensions of Food Security. Rome: Food and Agriculture Organization
11
EFFECTIVE AGRICULTURAL INVESTMENTS
The development literature makes a strong case for the
importance of agricultural growth in developing economies.
It also demonstrates the need for increased investments in
agriculture to achieve this growth. But not every investment,
as the case of Mozambique attests, will increase incomes
and reduce poverty, improve food security and also stimulate
vibrant economies. For investments to reach the widest number
of people and have sustainable pro-poor impacts they should
focus on some key areas: smallholder farmers, staple crops,
public goods, and risk management.
Invest in smallholders, especially women
Globally, 72 percent of all farms are less than 1 hectare in size,
and 94 percent of farms cover no more than 5 hectares. Indeed,
only 1 percent of all farms are larger than 50 hectares, although
they control 65 percent of the world’s agricultural land.47 The
world’s approximately 1.5 billion smallholder farmers also
produce 80 percent of the food consumed in sub-Saharan Africa
and Asia.48
Concentration of land ownership into larger farms for a smaller
number of producers will not result in better outcomes for
poverty reduction and food security. The evidence suggests
that for the world to effectively tackle hunger and poverty,
resources must be directed towards smallholder farmers in lowincome countries.
Photo: Chris Woodring
Building a house, supporting rural economies
Sukoluhle Moyo has come a long way since
2007, when she experienced a “hunger season”
each year, and relied on food aid. Then, through
a Canadian Foodgrains Bank-supported
conservation agriculture project in western
Zimbabwe, she learned how to make better use of
low rainfall through conservation agriculture. She
more than doubled her harvest.
The donor investment in her training together with
Moyo’s hard work and initiative has paid dividends
for her family and her community. Higher
production meant more food for her family and
more cash in her pocket to buy livestock and build
a better house. “During this time life has changed,”
she says. “Now it’s OK. Everything is nice.”
Small farms can be more productive than larger farms in the
same country because they use resources more carefully and
labour more intensively. There are far more family members to work the small plots of land than on large-scale
farms—family members who are motivated to work hard.49 China’s 200 million smallholder farmers produce 20
percent of the world’s food on just 10 percent of global agricultural land—an indication of the productivity that
can be achieved on small plots of land.50 “In poor, labour-abundant economies, not only are small farms more
efficient, but because they also account for large shares of the rural poor, small farm development can be a ‘winwin’ proposition for growth and poverty reduction,” writes Peter Hazell, former director of development strategy
and governance at IFPRI.51
Smallholder farmers need more money in their pockets and more food on their tables. They benefit from low-cost
technologies and practices that increase productivity without increasing risk. A large-scale evaluation found that
mean yield increased by 79 percent when farmers implemented resource-conserving technologies and practices
(including integrated nutrient management, conservation tillage, agroforestry, water harvesting and livestock
integration).52
Smallholder farmers also benefit most from public dollars—and the support of aid for agriculture. The private
sector gravitates towards serving larger farms located near major roads, while smaller farmers are neglected
47 FAO (2014) The State of Food and Agriculture 2014: Innovation in Family Farming. Rome: Food and Agriculture Organization
48 FAO (2012) Smallholders and Family Farmers. Rome: Food and Agriculture Organization
49 Hazell, P. (2011) “Five Big Questions About Five Hundred Million Small Farms.” A paper presented at the IFAD Conference on New Directions for Smallholder Agriculture, Rome. Also: FAO
(2014) The State of Food and Agriculture 2014: Innovation in Family Farming. Rome: Food and Agriculture Organization. Also: FAO (2012) The State of Food and Agriculture 2012: Investing in
Agriculture for a better future. Rome: Food and Agriculture Organization
50 Committee on World Food Security (2013) Investing in Smallholder Agriculture for Food Security. Rome: CFS High Level Panel of Experts Report
51 Hazell, P. (2011) “Five Big Questions About Five Hundred Million Small Farms.” A paper presented at the IFAD Conference on New Directions for Smallholder Agriculture, Rome. Also: FAO
(2014) The State of Food and Agriculture. Rome, Food and Agriculture Organization, p. 1
52 J.N., Noble, A.D. et al (2006) “Resource-conserving Agriculture Increases Yields in Developing Countries” in Environmental Science & Technology 40(4):1114-1119
12
because they are more costly to serve or difficult to reach. 53
It is especially important that agricultural investments reach
women smallholders. In developing countries women farmers
make up 43 percent of the agricultural workforce and are major
contributors to agricultural economies. Yet they face massive
hurdles in accessing productive resources, including land,
water and credit. They struggle to acquire market information
and new farming knowledge.54 Worldwide, women farmers
receive only five percent of agricultural extension services.55
These barriers can only be fully addressed when power
imbalances and inequity in their homes, communities and
wider society are also tackled.
Research suggests that if women have access to the same
productive resources as men, they could increase yields on
their farms by 20-30 percent, lifting 100-150 million people out
of hunger, and having a huge impact on rural economies.56
Invest in Food Crops
Investments should give priority to food crops for local
consumption over export crops to have the most widespread
impact on poverty, food insecurity and economic growth.
Export crops may have more monetary value, but increasing
food crop production is more effective at spreading benefits to
people throughout the economy. Staple crops have a larger role
in national economies and are central to the livelihoods of the
lowest income farmers.57
BOX 2: Access to water sustains community for
generations
Coming upon the village of Billa, in the Hararghe
region of Ethiopia, feels like finding an oasis. The
village is alive with lemon, mango and orange
trees, coffee plants and other cash crops, all
standing in stark contrast to the surrounding
barren landscape.
The difference is a donor-supported water
diversion and irrigation scheme that brought life
and prosperity to this small community following
the horrific famine of 1983-85. By 1987, community
members had built two permanent water diversion
weirs and canals–enough to irrigate 150 hectares
of land. “This system is our life,” said Amin to
visitors in 2012. “We’ve experienced a very good
life due to the irrigation scheme.”
The community is now thriving; people who live
there no longer need food or other aid assistance.
Since taking over the management of the water
system so many years ago, the community has
not only maintained it, but also expanded it to
irrigate 612 hectares of land; an elected committee
oversees the maintenance of the water system,
and everyone who benefits pays to cover the
costs.
Today, merchants visit the small village to
purchase fruit and other crops. Members of the
community also regularly travel the 50 kilometers
to the nearest market to sell their goods.
An OECD Development Assistance Committee (DAC)
evaluation on improving food security found that interventions
that developed value chains were effective at increasing trade,
but the most vulnerable people did not benefit from this
approach.58
Another study found that growth in the staples sector has more
impact on economic growth than the export sector because of
the size of the former. Moreover, it also found growth in staple
food crops leads to stronger poverty reduction.59
While the most widespread impacts will come from investment
in staple crops, this does not mean there is no place for export
crops. Indeed, millions of smallholders grow most of the
world’s coffee and cocoa, as well as tea, sugar and bananas for export. What is needed is to ensure that better
food security and sustainable livelihoods result from this involvement.60 Furthermore, creating new opportunities
for non-staple food crops, such as legumes, fruits, vegetables, dairy and livestock, are also critical for food and
nutrition security, as well as economic growth.
53
Hazell, P. (2011) “Five Big Questions About Five Hundred Million Small Farms.” A paper presented at the IFAD Conference on New Directions for Smallholder Agriculture, Rome. Also: FAO
53. Hazell, P. (2011) “Five Big Questions About Five Hundred Million Small Farms.” A paper presented at the IFAD Conference on New Directions for Smallholder Agriculture, Rome. Also: FAO
(2014) The State of Food and Agriculture. Rome: Food and Agriculture Organization
54 FAO (2012) The State of Food and Agriculture, 2012: Investing in Agriculture for a Better Future. Rome: Food and Agriculture Organization
55 De Schutter, O. (2010) Agroecology and the Right to Food. A report by the UN Special Rapporteur on the Right to Food to the UN Human Rights Council
56 FAO (2012) Smallholders and Family Farmers. Rome: Food and Agriculture Organization
57 African Progress Report (2014) Grain Fish Money—Financing Africa’s Green and Blue Revolutions. Geneva: African Progress Panel
58 OECD DAC (2012) Evaluation Insights: Improving Food Security—Emerging Evaluation Lessons (5)
59 Diao, X, Hazell, P & Thurlow, J (2010) “The Role of Agriculture in African Development” in World Development: 38(10): 1375-1383
60 Burnett, K. & Murphy, S. (2013) “What Place for International Trade in Food Sovereignty” in Journal of Peasant Studies 41(6):1065-1084
13
Invest in Public Goods
Livestock and Livelihoods
The FAO points to five decades of evidence to argue that
investment in public goods results in much higher returns for
agricultural growth and more effective poverty reduction than
investments in such things as input subsidies.61 Input subsidy
programs, such as for fertilizers and irrigation, are costly and
generally benefit large-scale farmers much more than small
farmers.62
In Bangladesh, a donor-supported project is
helping women contribute, save and then loan
money to each other. Rashida Begum used a small
loan to buy herself a cow, which has since had a
calf. She milks the cow each day and gets about
1 litre of milk—half of which her family drinks, and
the other half which she sells.
Public goods include:
1.
Rural infrastructure: Support for local markets, rural
feeder roads, modern energy services, water and
post-harvest storage infrastructure are essential
public investments for sustainable smallholder
agriculture.63
Begum also mixes cow dung with rice husks and
wraps it around purchased jute sticks to make ‘fuel
sticks’. They can be used instead of firewood.
She has paid off her whole loan, increased her
savings, and has enough left over to purchase
food and household goods for her family.
“Sometimes I buy rice, lentils or chicken,” she said.
“Before this I was not able to buy fish. Now I can
eat fish.”
2. Knowledge: A substantial body of evidence shows
that public investment in research and development
relevant to smallholder agriculture has been one of the
most effective forms of public investment over four
decades. It drives technical change and productivity
growth in agriculture, while also raising farm incomes.
These positive impacts multiply as these incomes are
spread around local economies.64 Agricultural research
is also cumulative and long-term, and thus requires
long-term commitment. Yet, investment in agricultural
research in Africa lags far behind the support found
in other places, such as China and India.65 Indeed,
the vast majority of agriculture and food research
concentrates on food processing and retailing.66 To
be effective, investments in knowledge must involve
family farmers—both in shaping research agendas, but
also engaging them in farmer-led innovation, plant breeding and preservation of plant species.67
3. Extension services: Smallholder farmers need new knowledge delivered through efficient and effective
agriculture extension services. It is critical that these services engage women, ensuring access and
also targeted information to meet their particular needs and constraints. There is an important role for
participatory approaches such as farmer field schools and farmer-to-farmer exchanges.68
4. Farm organizations: These associations play a vital role in promoting smallholder farmer interests, and in
linking farmers to markets and other stakeholders along the value chain. Farm organizations can provide
a strong voice for individual farmers in negotiating better prices for crops, procuring extension services,
providing capital through savings and loans groups and engaging with government on policies.69
61 FAO (2012) The State of Food and Agriculture 2012: Investing in Agriculture for a Better Future. Rome: Food and Agriculture Organization. Also: FAO (2009) Rethinking Public Policy in
61 FAO (2012) The State of Food and Agriculture 2012: Investing in Agriculture for a Better Future. Rome: Food and Agriculture Organization. Also: FAO (2009) Rethinking Public Policy in
Agriculture: Lessons from Distant and Recent History. Rome: Food and Agriculture Organization
62 Dethier, J.J. & Effenberger, A. (2012) “Agriculture and Development: A Brief Review of the Literature” in Economic Systems 36: 175-205
63 ASFG (2013) Supporting Smallholder Farmers in Africa: A Framework for an Enabling Environment. London: African Smallholder Farmers Group. Also: Heifer International (2014) State of
the African Farmer. Also: De Schutter, O. (2010) Agroecology and the Right to Food. A report by the UN Special Rapporteur on the Right to Food to the UN Human Rights Council
64 FAO (2012) The State of Food and Agriculture 2012: Investing in Agriculture for a Better Future. Rome: Food and Agriculture Organization
65 World Bank (2008) World Development Report 2008: Agriculture for Development. Washington, D.C.: The World Bank
66 ETC Group (2009) Who Will Feed Us? Questions for The Food and Climate Crises
67 FAO (2014) The State of Food and Agriculture 2014: Innovation in Family Farming. Rome: Food and Agriculture Organization. Also: ETC Group (2009) Who will Feed Us? Questions for the
Food and Climate Crises. Also: Oxfam International (2013) The Future of Agriculture: Synthesis of an Online Debate. Oxford: Oxfam International
68 FAO (2014) The State of Food and Agriculture 2014: Innovation in Family Farming. Rome: Food and Agriculture Organization.
69 Oxfam International (2013) The Future of Agriculture: Synthesis of an Online Debate. Oxford: Oxfam International Also: Heifer International (2014) State of the African Farmer.
14
Invest in Risk Management
How farmers experience and manage risk has huge
implications for poverty reduction, food security and economic
prosperity. Many smallholder farmers move in and out of
poverty, with increases in poverty often linked to shocks such
as bad weather, poor health, conflict and unexpected social
expenses.70 Investments to strengthen risk management should
be directed towards three increasingly important risk factors:
1. Environmental Risks: Environmental conditions
and development are closely linked, and increasing
environmental risks, such as water shortages, soil
degradation, and especially climate change, put many of
the world’s development gains in jeopardy.71 Nowhere is
this more evident than with agricultural development,
especially in Africa where most agriculture is rain-fed, and
farmers are especially vulnerable to increases in extreme
weather, changes in seasonal patterns, and droughts. These
risks must be addressed through concerted global action
on climate change. At the same time, investments that
support farmers in adapting to climate change and other
environmental hazards are critical. Sustainable approaches
include adopting agroecological or climate smart practices
such as conservation agriculture, green manure/cover
crops, integrated pest management, diversified livelihoods
and agroforestry. These practices can increase production,
promote biodiversity, help in adaptation, and in many cases
mitigate climate change.72
BOX 3: Ethiopia’s Productive Safety Net Program:
Poverty Reduction in Action
Canada has been a significant and ongoing donor
to Ethiopia’s Productive Safety Net Program
(PSNP). Most recently it has committed $100
million between 2013 and 2017 to support this
national program that provides timely transfers
of food or cash, usually in exchange for labour
on community-based public works projects. The
program reaches approximately 8 million people
during food insecure times of year.1
Overall, Ethiopia has made huge strides in poverty
reduction, which has fallen from 44 percent in
2000 to 30 percent in 2011 (more than 13 million
people), led by agricultural growth.2
The PSNP has been widely shown to help prevent
the selling of productive assets, such as tools
and livestock, during crisis periods.3 It can also
reduce rural poverty. The World Bank found that
the PSNP has pushed 1.5 million people out of
poverty.4
This social safety net has made a real difference
in the lives of many beneficiaries. “I’m free of
debt (informal). Economically, I’m better off—I’m
starting to eat injera with wot [meat stew] rather
than with salt as we did before. I’ve increased my
assets. I now have additional two bee boxes, an ox
and a cow. I’m also renting more land so I will have
more food,” said Hailay, a PSNP participant.5
1 DFATD, Project profile: Productive Safety Net Program 2013-2017, downdownloaded on January 12, 2015 from http://www.acdi-cida.gc.ca/ci-
loaded on January 12, 2015 from http://www.acdi-cida.gc.ca/cidaweb/cpo.
2. Financial Risks: Smallholder producers are often reluctant
daweb/cpo.nsf/vWebCSAZEn/087551ED9821229E85257D6C0035D1ED
nsf/vWebCSAZEn/087551ED9821229E85257D6C0035D1ED
2 Hill, R. & Tsehaye, E. (2014) Ethiopia--Poverty Assessment. Washington,
DC: World Bank Group
to make important on-farm investments due to the financial
3 Slater, R. & McCord, A. (2013) “Learning from the PSNP: The Influence of
Ethiopia’s Social Protection Experience in sub-Saharan Africa and Beyond”
risk involved. Support for social protection and safety nets,
in Pankhurst, A., Rahmato, D. & van Uffelen, J-G. (eds) Food Security, Safety
Nets and Social Protection in Ethiopia (pp 39-65) Addis Ababa, Ethiopia:
such as Ethiopia’s Productive Safety Net Program (see
Forum for Social Studies
4 Hill, R. & Tsehaye, E. (2014) Ethiopia--Poverty Assessment. Washington,
Box 3); insurance services; or better access to effective
DC: World Bank Group
5 Sengupta, A. () Pathways out of the Productive Safety Net Programme:
73
rural finance will help reduce risk. Addressing financial
Lessons from Graduation Pilot in Ethiopia—working paper (BRAC Development Institute, in partnership with the Mastercard Foundation)
risks will, in turn, encourage innovation and investment
by smallholders. Africa is the region with the most need
for social protection, but currently has by far the lowest
coverage—only about 20 percent of Africans can access
some social protection. Social protection boosts inclusive
growth, unlocks investment, and helps protect and build productive assets and human capital. Plus there are
spillover effects: dollars transferred through safety net programs can stimulate local markets, boost demands,
and help build a more resilient local economy.74
3. Land Tenure Risks: Insecure land tenure on their farm lands is a major barrier for farmer innovation and
investment. This is an especially dire problem for women.75 Investments in agriculture that support efforts to
ensure secure land tenure will make a huge difference in the lives of farmers, especially women. An OECD
study on the impact of various development interventions on food security found that efforts to improve land
tenure will help protect farmers’ productive assets and encourage them to invest more in their farms.76
70 IFAD (2011) Rural Poverty Report. Rome: International Fund for Agricultural Development
71 OECD (2014) Development Co-operation Report 2014: Mobilising Resources for Sustainable Develpment. Paris: OECD Publishing
72 De Schutter, O. (2010) Agroecology and the Right to Food. A report by the UN Special Rapporteur on the Right to Food to the UN Human Rights Council
73 Heifer International (2014) State of the African Farmer
74 African Progress Report (2014) Grain Fish Money—Financing Africa’s Green and Blue Revolutions. Geneva: African Progress Panel
75 Committee on World Food Security (2013) Investing in smallholder agriculture for food security. Rome: CFS High Level Panel of Experts Report
76 OECD DAC (2012) Evaluation Insights: Improving Food Security—Emerging Evaluation Lessons (5)
15
THE NEED FOR INCREASED AID FOR AGRICULTURE
This report has demonstrated the importance of growth in agriculture to meet important development and
economic goals. It has argued for effective—and sizable—investments to drive this growth.
Public investment from developing countries can provide some of this increased spending, but countries with
widespread poverty cannot raise enough resources domestically to fully support agricultural development.77 More
than 370 million of the world’s poorest people live in countries where
government spending is less than the equivalent of $500/person/
year, and more than 100 million have governments that spend less
than $200/person/year. This compares to the major donor countries
that spend the equivalent of $15,025 per capita annually.78 Those
“Experience repeatedly
countries that need the most investment simply have too little money
shows that when
to spend.
The private sector can also play an important role. Indeed, farmers
are the largest private sector investors in their own farms.79 But
there are limitations to private sector investments by companies.
Smallholder farmers tend to be widely scattered and remote. They
don’t have much money to spend and time frames for profits are
long. As well, the private sector tends to focus on a limited number
of technologies that can easily generate profits, rather than a widerange of knowledge-intensive approaches.80 The countries with the
lowest domestic spending budgets also have the most difficulty
attracted international investments.81
smallholders are given the
means and the incentives
to increase production,
they can feed themselves
and their communities, lead
their nation’s agricultural
and economic growth, and
contribute to food security”
– Kanayo F. Nwanze,
president of IFAD
For many developing countries, increased support for agriculture
from donors, including Canada, can provide additional and much
needed tools for poverty reduction, food security, and economic
growth and prosperity.
A 2012 study looked specifically at aid for agriculture and found it has a positive impact on growth. Using data
from 66 countries spanning 1975-2004, the study found that per capita GDP growth of a country receiving
agricultural aid is higher than a country that receives no agricultural aid. Combining agricultural aid with other
forms of aid does even more for per capita GDP growth. The authors write: “The results suggest that reversing
this decline in emphasis on agriculture in aid-giving might improve the overall effectiveness of aid in producing
economic growth.”82
Official development assistance (ODA) for agricultural development has waxed and waned over the years. During
the 1960s and 1970s, donor countries gave strong support to agricultural development, but in the 1980s and 1990s
that support dwindled. Agriculture received only half as much donor funding in 2005 in real terms as it did in
1980. Its share of donor dollars fell from 17 percent in the early 1980s to 3 percent in 2005.83
The 2007-08 global food price crisis triggered a renewed commitment from donors towards agriculture. However,
donor levels still remain well below the 1980 levels, both in terms of the amount of ODA for agriculture and its
share in total ODA.84
The story is similar for Canada. In the years following the L’Aquila commitment (see Box 4), aid for Canada’s food
77 FAO, IFAD and WFP (2002) Reducing Poverty and Hunger: The Critical Role of Financing for Food, Agriculture and Rural Development. Rome.
78 Development Initiatives (2013) Investments to End Poverty: Real Money, Real Choices, Real Lives. Bristol, UK, retrieved January 2015 at http://devinit.org/wp-content/uploads/2013/09/
Investments_to_End_Poverty_full_report.pdf
79 FAO (2012) The State of Food and Agriculture 2012: Investing in Agriculture for a Better Future. Rome: Food and Agriculture Organization
80 Committee on World Food Security (2013) Investing in Smallholder Agriculture for Food Security, Rome: CFS High Level Panel of Experts Report
81 Development Initiatives (2013) Investments to End Poverty: Real Money, Real Choices, Real Lives, Bristol, UK, retrieved January 2015 at http://devinit.org/wp-content/uploads/2013/09/
Investments_to_End_Poverty_full_report.pdf
82 Kaya, O., Kaya, I. & Gunter, L. (2012) “Development Aid to Agriculture and Economic Growth” in Review of Development Economics 16(2): 230-242
83 Wiggins, S., Kirsten, K. & Llambi, L. (2010) “The Future of Small Farms” in World Development 38(10): 1341-1348
84 FAO (2012) The State of Food and Agriculture 2012: Investing in Agriculture for a Better Future. Rome: Food and Agriculture Organization
16
security, including agricultural development, was well funded
and well targeted. Canada fulfilled its promise of doubling
investment in agriculture, and was singled out among all aid
donors for giving the highest percentage of its aid to food
security from 2008 to 2010.
Research undertaken by a coalition of Canadian international
development organizations in 2012 compared work by CIDA
(as it was then known) in Ethiopia and Honduras with priorities
of smallholder farmers and their governments and found they
were well-aligned. Farmers consulted were positive about
Canada’s focus on smallholders, especially women, including
support for farm diversification, improved seeds, income
enhancement, infrastructure development, training and climate
change adaptation. CIDA also got high marks for helping local
governments improve their agricultural policies.85
OECD research on aid volumes for food and nutrition security
in the three years following the food price crisis of 2007 and
2008 found most ODA for food security was allocated to
agriculture. Canada was especially strong in its aid directed to
agricultural extension, agricultural education and research—
investments that have a very high rate of return.86
For Canada, aid for agricultural development closely aligns
with three of its chief development priorities: increasing food
security, strengthening maternal, newborn and child health,
and stimulating sustainable economic growth. Done well,
agricultural aid can also improve the lives of women, and
promote environmental sustainability.
But since 2011, Canada’s aid for agriculture has declined
substantially.
The farmers of the developing world continue to take steps
towards greater food security and independence, supported,
in many cases, by their governments. But increased aid from
Canada (and from other donor countries) will lend important
assistance to this process.
Figure 6 - Canada’s aid spending on food security
(agriculture, food assistance and nutrition) 2005-2013
Million $ Cdn per year
450
400
350
300
2005-2008
250
2008-2011
200
2011-2013
150
100
50
0
Nutrition
17
The L’Aquila Food Security Initiative emerged out
of the 2007-08 food price crisis. At L’Aquila, Italy
in July 2009, G8 governments (along with other
donor countries) pledged US$20 billion towards
aid for agriculture over the next three years. The
G20 in September 2009 increased those pledges
to US$22 billion.1
Canada’s L’Aquila commitment resulted in a
significant boost in aid for agriculture. Canadian
ODA for agriculture rose to an average of
approximately CDN$455 million per year between
2008-09 and 2010-11.2
The food crisis also prompted Canada to
name food security as one of its international
development priority themes—a priority that
remains today. The Food Security Strategy
divided Canada’s food security priority into three
pillars: food assistance and nutrition, sustainable
agricultural development, and research and
development.3
But since the end of the L’Aquila commitment,
Canada’s aid for agriculture has declined, while
support for the other two pillars has remained
stable. In the two years following the end of
the L’Aquila commitment (2011-12 and 2012-13)
agriculture spending averaged approximately
CDN$349 million—a decline of 23 percent from
the previous three years. This also represented a
significant fall (approximately 25 percent) in the
percentage of ODA devoted to agriculture.4
This decline in percentage of ODA devoted to
agricultural development must further be seen
within the context of a rapidly declining aid
budget. The Organization for Economic Cooperation and Development (OECD) reported that
Canada’s ODA was US$4.9 billion in 2013, a fall of
11.4 percent in real terms from 2012.5
1 FAO
FAO(2012)
(2012)The
TheState
Stateof
ofFood
Foodand
andAgriculture
Agriculture2012:
2012:Investing
Investingin
inagriculture
agriculture
a Better
Future,
Rome:
and Agriculture
Organization
for afor
Better
Future,
Rome:
FoodFood
and Agriculture
Organization
2 Data taken from DFATD Statistical Reports on International Assistance,
downloaded on January 12, 2015 from http://www.acdi-cida.gc.ca/acdi-cida/
acdi-cida.nsf/eng/ANN-31910443-KAL#review
3 DFATD, downloaded on January 12, 2015 from http://www.acdi-cida.gc.ca/
acdi-cida/acdi-cida.nsf/en/FRA-101515656-QEV
4 Data taken from DFATD Statistical Reports on International Assistance,
downloaded on January 12, 2015 from http://www.acdi-cida.gc.ca/acdi-cida/
acdi-cida.nsf/eng/ANN-31910443-KAL#review
5 OECD (2014) Development Co-operation Report 2014: Mobilising Resources
for Sustainable Development, Paris: OECD Publishing
500
85
86
Box 4: The L’Aquila Food Security Initiative
Food Assistance
Agriculture
Food Security Policy Group (2013) Fertile Ground? Assessing CIDA’s investments in food and farming.
Mowlds, S., Nicol, W. & Ó Cléirigh, E. (2012) Aid for Food and Nutrition Security. Paris: OECD Publishing
CONCLUSION
Investment in agriculture is an important key to
unlocking the future for many low income countries
today—just as agriculture has led the growth of countries
as diverse as Canada87 and China.88
The cost of food insecurity in lost lives, suffering and
reduced economic potential must not be tolerated—and
need not be.
Tools for increasing incomes and spurring economic
growth are close at hand.
They require a renewed commitment towards increasing
investment in agriculture. There is ample evidence that
investments done well can be pro-poor and pro-growth.
For benefits to accrue to those who need them most,
investments should:
Keke Phooko farms and trains other farmers as
part of a donor-supported project in Lesotho.
Her bountiful fields of cabbage, beans and maize
provide her with many openings to talk about
conservation agriculture. Now her profits are
enabling her to invest even more in her farm with
the purchase of irrigation equipment. One day
Phooko was riding on a bus, and she overheard
a conversation about an impressive farm the bus
was passing. And Phooko said: “Yes, that’s me.”
•Focus on smallholder farmers, especially women
•Prioritize staple crops
•Target public goods
•Support risk management
Developing country governments and private sector
investments, including those by farmers themselves, will
pave the way, but donor support, including from Canada,
will buttress these efforts. The needs are large and many
investors are needed to fuel positive change.
\
Canada understood this well in the years following the
food price crisis in 2007-08, with significant increases
in its support for agriculture. But that commitment has
fallen in recent years. Now is the time to renew those
efforts and help build a prosperous and food secure future
for all.
87
87 Canola
CanolaCouncil
Councilof
ofCanada
Canada(2013)
(2013)“Canada’s
“Canada’sCanola
CanolaIndustry:
Industry:Adding
AddingBillions
Billionsto
toCanada’s
Canada’s
Economy.”
Economy.” Retrieved
Retrieved January
January 2,
2, 2015
2015 from
from http://www.canolacouncil.org/media/545725/
http://www.canolacouncil.org/media/545725/
fact_sheet_canadian_economic_impact2013.pdf
fact_sheet_canadian_economic_impact2013.pdf
88 IFPRI (2014) 2013 Global Food Policy Report. Washington, D.C., International Food Policy
Research Institute
18
Elleman Mumba is growing maize, beans and
sorghum on his five hectare farm in Zambia.
With support from donor-funded extension
services, he’s using Faidherbia (winter thorn)
trees to naturally fertilize the soil. Mumba is
growing enough food for his family, even in the
driest years. Plus, he’s earning enough money to
pay school fees for his four children and put his
brother through university.