Food and agriculture
The food and agriculture sector is critical to the economies of the countries where we invest. For example, between 50 and 60 per cent of employment, direct or indirect, in these countries comes from the sector.
Development finance initiatives targeting the food and agriculture sector are two to four times more effective in raising incomes among the poorest compared with other sectors, according to the World Bank. Yet the sector remains chronically underdeveloped in Africa and South Asia. And with 40 per cent of global population growth taking place in these markets, there is a growing challenge to feed people – a pressure increased by the impact of climate change.
Often the sector is perceived to have a higher level of investment risk in our core markets due to low farm productivity, fragmented supply chains and commodity price volatility. However, with growing concerns around food security and increased levels of demand, investors are looking for opportunities, for example in technology-enabled solutions for food and agriculture. In the long-term, a number of sub-sectors are ripe for transformation in our core markets.
We have three long-term development impact objectives. We’re aiming to create economic opportunities, improve nutrition and food security, and improve environmental sustainability, objectives which contribute to at least nine of the Sustainable Development Goals.
To achieve these objectives, we have identified five priorities for our investments on the path to building an inclusive, productive, integrated and vibrant food and agriculture sector in our core markets.
The first is to build scale and enhance productivity. More than 80 per cent of food from Africa and South Asia is produced by smallholders leading to fragmented and inefficient operations. Larger producers can achieve economies of scale to increase productivity while ‘off-take’ agreements can benefit small-scale producers of more labour intensive, high-value crops.
A second priority is to support the development of integrated and inclusive food and agriculture value chains. Most of our markets have limited food processing capabilities and we are looking to inject growth capital into local food processing companies that link directly to primary agriculture. This will generate jobs, capture more value for the countries of origin, and help with domestic food needs. A current example is Zambeef, Zambia’s largest integrated agribusiness, in which we invested $65 million in 2016 to help it expand, in particular its cold chain food processing businesses, as well as its distribution and retailing platform. It employs more than 6,000 people and provides a market for over 10,000 small-scale farmers.
Third, we want to broaden access to safe and nutritious food products in our target markets where more than 800 million people suffer from undernourishment and two billion from micronutrient deficiency.
In all our activities we want to support climate resilient and sustainable business models. The impact of climate change continues to affect the countries where we invest disproportionately, placing a burden on farmers. At the same time, it is vital to reduce the environmental impact of food systems.
Finally, we are looking to take advantage of technology and innovation for systemic transformation over the long term. Our investees include two Indian agritech companies – CropIn, which offers precision agriculture techniques, and EcoZen, which makes solar powered water pumps and cold storage units for farmers. The agricultural sector is wide open for more such innovations.
Sector Strategist - Food and Agriculture
Director, Food and Agriculture team