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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 e 6 Pa sh ki 20 0 st an 0 20 0 1 V ie t n In do am n e 19 98 si a 20 0 0 A lb an ia B 2 ul ga 00 5 ria 20 0 N 1 ic a G ra g ua ua te m 20 Ec ala 01 ua 20 0 d Pa or 0 na 19 98 m a 20 0 3 M al aw ig i 20 er 0 ia 4 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 do m ne 19 98 si a 20 0 0 A lb an ia B 2 ul ga 00 5 ria 20 0 N 1 ic a G rag ua ua te m 20 Ec ala 01 ua 20 0 d Pa or 0 na 19 98 m a 20 0 3 4 98 19 0 0 na 0 G ha i2 ia aw er 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 d 4t h he st Po or es t 2n d ic es t 2n d Po or ic 4t h he st d 3r d 2n Po or es t 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.