The systemic nature of food security challenges in Africa
Food systems are complex and go beyond the production, processing and consumption of food. Economic, social, political and environmental issues are intrinsically linked to modern food systems and form a critical part of the ecosystem. Therefore, a systemic view of food security needs to account for multiple dimensions including availability, access, utilisation, and stability.
Food security in Africa is especially precarious. Chronic structural issues such as low production and yields, outdated tools, lack of crop diversification, lack of credit and investment in infrastructure, poor government policies, corruption, and colonial legacies (Bjornlund et al., 2022) have been exacerbated by the impacts of climate change, inflation and local conflict. Most recently, the war in Ukraine has threatened the supply of staple crops, and the availability of fertilizers. As a result, an estimated 140 million people in Africa face acute food insecurity (FSIN, 2022).
The pathway to an integrated DFI response
The complicated nature of food security problems requires a systemic set of responses that coordinates and mobilises resources from governments, international organisations, finance providers, corporates, supply chain actors, smallholder farmers, input suppliers and consumers.
A DFI response needs to follow these key steps:
1. Defining the ambition in terms of the reach (e.g., number of people impacted), systemic area addressed (e.g., shortage alleviated) or capital allocated. The scale of the ambition will define the resources required (both people and capital), the role of food security in the strategy and the stakeholder engagement required.
2. Crafting specific objectives and intervention areas where a DFI’s toolkit of capital, influence and technical assistance can have the greatest impact and relevance. These objectives need to be specific, and either directly measurable or justified by a theory of change.
3. Developing the plan to achieve the objectives. An effective plan to deliver against these objectives needs to consider these components:
- Systemic: Considering multiple parts of the food system from production, distribution and consumption to infrastructure, trade and health (even if not all areas are in focus)
- Coordinated: Coordinated across multiple products, capital instruments and sectors beyond agriculture
- Selective: Focussed on areas where the DFI’s tools and instruments would be best suited
- Multi-stakeholder: Engaging with other intervening actors, while ensuring that the voices of those affected are also heard
- Balanced: Considering financial returns alongside development, climate, gender and ESG impacts
A plan to address food security should also incorporate (i) supporting portfolio companies build strategies to address immediate and long-term challenges, (ii) building the investment pipeline to originate, source and support investments that promote food security while (iiii) creating partnerships to promote systemic, scalable, and cross-sector interventions that may also serve as a source of potential pipeline. Interventions must also reactively address urgent issues (e.g. fertiliser shortages), while rebuilding longer-term stability in food systems through systemic transitions to climate-resilient agriculture, integrated and productive value chains. Such interventions may require different combinations of commercial and concessional capital instruments (equity, trade and supply chain finance, debt, intermediated equity, blended finance etc.), alongside technical assistance.
Setting objectives for DFI capital
DFIs seeking guidance on setting objectives may look to the ‘International Financial Institution (IFI) Action Plan to Address Food Insecurity’. This work provides six objectives to promote food security: (i) supporting vulnerable people, (ii) promoting open trade; (iii) mitigating fertilizer shortages; (iv) supporting food production now; (v) investing in climate-resilient agriculture for the future; and (vi) coordinating for maximum impact. Of these, DFI’s can play an outsized role that leverages their capital strengths, ecosystems of influence and stakeholder mandates across three areas:
- Expand fertiliser production and access, increase the efficient use of fertiliser, and innovate for cleaner fertiliser: Fertiliser use in Africa is marred by significant structural issues, including low usage, challenging last mile delivery and distribution, and complex political dynamics, as well as environmental and affordability issues. To address these constraints, trade and supply chain finance provided by DFIs can be a critical solution to the bottlenecks. However, fertiliser production and use need to be environmentally conscious (e.g., organic) to provide a long-term solution.
- Facilitate the purchase of food and agricultural inputs with the accompanying logistics and rural infrastructure. This entails improving accessibility through trade finance and strengthening supply chains through investments in warehousing, transport & logistics and commodity exchanges.
- Increase investments in agricultural capacity, adaptation, smallholder farmers, food systems and climate-smart technologies to boost long-term production and resilience.
BII investments in action
Fertiliser production and access: BII provided unfunded risk participation to import ~160,000 tons of fertilizer into Malawi via SocGen, ABSA and EcoBank. In addition, BII provided ~$130 million of support to enable ~$300 million of fertiliser to be imported into Ethiopia, representing approximately 60% of Ethiopia’s total annual fertiliser imports through our partnership with the Eastern and Southern African Trade and Development Bank (TDB).
Long-term production and resilience: BII approved a $5 million contingent loan to Pula, a BII portfolio company focused on providing agricultural insurance to smallholder farmers in Africa. Pula delivers bundled digital insurance products (e.g., weather, livestock and area yield index insurance) and advisory services to farmers, providing insurance coverage for drought, floods, pests and diseases. The contingent loan will enable Pula to pilot a new pay-at-harvest insurance product to significantly increase smallholder uptake of agricultural insurance by addressing the cyclical affordability barriers facing these farmers. A successful pilot could crowd in more commercial capital and provide demonstration effects for the wider agricultural insurance market.
Effective investments in food security require DFIs to actively consider their objectives and develop a plan to address these objectives that accounts for the systemic nature of food systems, the needs of the multiple stakeholders involved and the balance between short-term and long-term interventions. Developing concrete and thoughtful action plans increases the likelihood of success in responding to Africa’s food insecurity.
Bjornlund, V., Bjornlund, H. and van Rooyen, A. Why food insecurity persists in sub-Saharan Africa: A review of existing evidence. Food Sec. 14, 845–864 (2022). https://doi.org/10.1007/s12571-022-01256-1
FSIN and Global Network Against Food Crises (2022). GRFC 2022 Mid-Year Update. Rome. file:///C:/Users/jshah/Downloads/GRFC%202022%20MYU%20Final.pdf
African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the International Fund for Agricultural Development, the International Monetary Fund, and the World Bank Group. International Financial Institution (IFI) Action Plan To Address Food Insecurity (2022). https://home.treasury.gov/system/files/136/IFI_Action_Plan.pdf
Beata Itin-Shwartz and Ayal Kimhi. The Effect of Warehouse Receipt Finance on Terms of Trade for Farmers (2022). Private Enterprise Development in Low-Income Countries ERG 8516. https://pedl.cepr.org/sites/default/files/RN%208516%20ItinShwartzKimhi.pdf
Anout the author
Jay Shah is an Executive in British International Investment’s cross-cutting Development Impact team. Jay has several years of experience in food system transformation in Africa through several multistakeholder platforms. The views in this essay are the author’s own sentiments and do not represent BII’s views.
The published essay represent the views of the authors alone, and do not reflect the opinions of either the EDFI Association or its member institutions.