CAPE TOWN - He is the champion of millions of rural people across the developing world. As President of the UN’s Rome-based International Fund for Agricultural Development (IFAD), Gilbert F. Houngbo, the ex-prime minister of Togo, is under no illusion about their plight and the challenges ahead as countries build back and recover from the ravages of the Covid-19 pandemic.
Agriculture, especially small-scale rural farming, is a major sector in developing economies because it heavily involves SMEs and women and contributes to job creation and GDP.
The pandemic affected the sector badly. In addition, climate change, natural disasters including flooding, landslides, locust and other plagues, are the bane of many countries including Mozambique, Ethiopia, the Sahel and others in sub-Saharan Africa (SSA). According to Houngbo, globally, small-scale producers face a financing gap of some US$170 billion.
Rural SMEs in SSA including South Africa, where IFAD is very active, alone have an estimated financing gap of US$100 billion.
“Over the next three years,” he explained in an interview, “IFAD plans to help some 127 million rural people increase their production and raise their incomes through better market access, contributing to creating jobs and improving food security and nutrition for the world’s most vulnerable people. We have four thematic priorities: climate, gender, nutrition and youth, with 40 percent of our programme of loans and grants to be climate focused. We will place greater emphasis on social inclusion, especially in providing support to Indigenous Peoples and persons living with disabilities, as well as on biodiversity and innovation.”
SSA is a prime target for IFAD. “In 2022, IFAD will enter a new programme cycle in which it will devote 100 percent of its core resources to low and lower-middle-income countries, of which 50 percent will be spent in SSA,” Houngbo revealed. The fund invests in rural people, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, it has provided US$23.2 billion in grants and low-interest loans to projects that have reached an estimated 518 million people.
While Covid-19 has focused renewed attention on food security and agricultural supply chain disruption, Houngbo’s strategy embraces vaccine justice, climate justice and social justice, which he says are crucial “if we want to support developing countries to achieve the UN SDGs by 2030”.
His approach is unique for a UN multilateral, which recognises the importance of collaboration with donor and receiving governments, peer institutions, the private sector and NGOs. IFAD is the first UN fund to receive a public credit rating from Fitch and S&P, enabling it to catalyse additional financing to achieve the UN’s sustainable development goals (SDGs). “Meeting the needs of all our member states requires that IFAD develops a diversified, broader and more predictable funding base so that we can expand our financial offer for the benefit of our borrowing countries and maximise its impact,” explains Houngbo.
Last week, the agency adopted a new landmark 2022 investment policy to shift its treasury’s investments totalling US$1.35 billion at end September 2021 into ethical, environmental, social, and governance (ESG) and SRI products including green bonds, “with strongly entrenched human rights, environmental, social and anti-corruption principles”.
Climate action in agriculture is a core aim. “Ensuring that small-scale farmers receive adequate adaptation finance is crucial. Currently, small-scale farmers only receive 1.7 percent of tracked climate finance. Rural people in developing countries are already paying a huge price for the impacts of climate change and related disasters, so adaptation is crucial to securing their livelihoods and well-being. In 2020, extreme climate drove an estimated 30 million people from their homes. The most notable pledge to adaptation amounted to US$356 million to the UN Framework Convention on Climate Change Adaptation Fund – however the adaptation finance gap currently sits at US$180-300 billion per year until 2030,” he laments.
Capacity building is a centrepiece of IFAD projects as it enables rural people to continue to drive development, invest in their communities and build resilience. The Fund says it carries out impact assessments on 15 percent of its portfolio to provide evidence of the impact of its investments, to learn and scale-up successes, and promote systemic change.
Houngbo’s message is clear: “We have a significant portfolio of experience and knowledge to leverage in climate adaptation – which could be put to more effective use if governments mobilize to meet their commitment to deliver US$100bn per year and mobilize at least double adaptation finance in the wake of COP26. Failure to adapt to current and future impacts of climate change and to mitigate the rise in global temperatures will have severe and unpredictable impacts for the entire planet. Poor rural people will continue to suffer the most if we do not help to build their resilience and capacities to adapt.”
Some three billion people depend on small-scale agriculture for their livelihoods. Amongst this group are the world’s poorest, most food insecure and most vulnerable. In tropical countries, 1.2 billion people (30 percent of their population) are highly dependent on nature for basic human needs, including food, clean water and energy – and lack alternatives. “Failure to mitigate and adapt effectively,” he warns, “will lead to increased poverty, hunger, displacement, conflict and climate-related deaths, starting with the world’s poorest and most vulnerable populations, including small-scale farmers who produce a third of the world’s food. If we do not invest and act, there is a global food crisis waiting in the wings.”
Food systems are responsible for some 37% of greenhouse gas emissions and are vulnerable to a changing climate. Poor rural farmers lack the capacities and resources to adapt, and their circumstances can force them to rely on negative coping strategies such as crop stubble burnings. However, says Houngbo, “the cost of inaction is far greater than the cost of action. Investing in green, sustainable small-scale agriculture and food systems can alleviate national burdens of ill-health (from pollution), malnutrition (in terms of productivity), environmental degradation, loss of ecosystem services and recovery from disasters.”
In tandem with the G20 ‘Matera Declaration on Food Security, Nutrition and Food Systems’, IFAD launched its Private Sector Financing Programme to attract more investments. The current heightened uncertainty about donor funding and debt distress in developing countries, says Houngbo, requires the private sector to play a critical role. It is the main driver for enterprise development, employment and growth of private companies. The pandemic has resulted in significant cash-flow challenges to agri-SMEs and financial institutions that cater to the needs of small producers and poor rural households, which may pose substantial economic and social challenges on these groups.
The reality alas is that private sector investments in agriculture projects involving small-scale producers are historically low, largely due to the perceived high risk of the agriculture sector, low investment size and high transaction costs. South Africa here is no exception!
Parker is an economist and writer based in London
Cape Times