Covid-19: the domino effect
The Covid-19 pandemic is already affecting the world on an unprecedented scale. Yet, the unfolding health crisis is only the most visible part of the iceberg. The impending global recession coming in its wake will likely be the most challenging event mankind has faced in recent history. Given the considerable difficulties experienced by developed nations in their struggle to contain Covid-19 and manage its impacts, one can easily imagine the potential for catastrophic scenarios in the developing world, and most critically on the sustainability of its food systems.
A risky dependence on food imports
Today, 80% of Africa’s agricultural production relies on smallholders. Their productivity is among the world’s lowest, capped at 30% of their potential due to lack of financing and market integration. To feed their rapidly increasing populations, sub-Saharan African countries thus have to rely on massive food imports, projected before the onset of the pandemic to grow from USD 35 billion (2017) to USD 110 billion (2030) .The Covid-19 crisis is already accelerating the prospect for a dramatic increase in Africa’s dependence on food imports for the following reasons:
- Assuming that national agricultural and agri-food industry workforces will be affected in proportions similar to those observed in the developed world, one can expect a brutal drop in Africa’s food production;
- Financial institutions have started contracting. Banks will increasingly turn towards less risky investments, significantly reducing agricultural lending, particularly to smallholder producers;
- The price of major food security commodities such as rice, wheat and maize will increase commensurate with spiking demand on world markets. This will severely constrain the financing of imports by countries that are already highly indebted.
Flatten the food insecurity curve
These extraordinary circumstances herald food crises of unique magnitude for the world’s most vulnerable nations, with direct implications on hunger, poverty, social unrest and stability. After the 2008 financial crisis, countries and financial systems adopted a reactive, demand-driven approach to provide the means to sustain the status quo, wages, purchasing power, etc. Such simple interventions cannot be afforded in the time of Covid-19, as the uncertainty grows as to where food will indeed be available at all. Ensuring the sustainability of supply itself will require marshalling a much more profound intervention on the world’s food systems.
The immediate emergency for appropriate curative and preventive solutions to Covid-19 should therefore not hide the concurrent imperative to prioritize and fast-track sustainable mitigation strategies to contain the massive emergent food insecurity brought about in vulnerable regions by the imminent global economic crisis. To avoid societal collapses and their many potential ripple effects on world security, we must act now to flatten the food insecurity curve in the same way flattening the Covid-19 infection curve will help preserve the integrity and function of national health systems.
Orchestrate food sovereignty
Food aid will obviously be critical to address symptoms of food insecurity, but not any more sufficient than ICU patient transfers to address symptoms of hospital saturation under Covid-19. We need a more transformative, orchestrated approach to food production, resulting in food systems that are both more integrative, more inclusive and hence more resilient.In Africa as elsewhere, Covid-19 presents us with the opportunity to accelerate agricultural transformation through orchestrated value chains that honorably promote (i) food sovereignty, traceability and quality and (ii) valuable participation on international markets, hence reducing trade balance deficits, improving food and nutritional security and reducing exposure to future shocks for individuals and entire societies alike.
The utmost priority is to immediately strengthen, in each target country, national support capacity for the next 2020 agricultural season with a triple trigger intervention that includes:
- A direct smallholders’ financing mechanism implemented through partner banks to (i) ensure accessibility and affordability of inputs to manage a minimum safety acreage allotment for food security purposes and (ii) provide technical backstopping to increase productivity by up to 60%;
- Simultaneously, direct support to agro-industries to enhance their capacity to absorb and transform the expected increase in smallholder throughput;
- Support to transactions between agricultural value chain stakeholders to help (i) aggregators and transformers purchase smallholders’ production and (ii) retailers purchase transformed food items for commercialization on the market.
The cost of securing one season
This initiative will target priority value chains considering (i) their contribution to national food security targets, such as cereals (rice, maize, millet, sorghum, wheat), pulses (groundnut, cowpea,…) and (ii) their importance for agricultural exports (cocoa, coffee, cotton, palm oil, cashew, horticultural crops, …).For countries of sub-Saharan Africa and assuming a safety acreage allotment of 3% of national arable land, this initiative requires an estimated financing of USD 3.2 billion to engage operations and transactions for the 2020 agricultural season, including a contribution from public development partners or/and private investors (the Fund) of USD 642.0 million to cover:
- USD 576.6 million worth of agricultural credit lines for smallholders on contract inside target value chains, positioned in local partner banks and financial institutions, to secure the financing of almost 1 million hectares for agricultural production;
- USD 30.0 million to upgrade the capacity of local agro-industries to transform the expected additional intake generated by the program.
- USD 5.8 million for technical, coordination and M&E support activities
Investing in smallholder value chains
Local partner banks and financial institutions which today finance food imports will commit through this mechanism to also finance local agricultural value chains, input supply and produce purchases therein, as well as the transformation and further commercialization (local and export) of this agricultural production.Such an investment must be thoroughly de-risked. The underlying infrastructures to secure and optimize this support will benefit from leveraging local agronomic expertise with digital technologies and proximal physical support networks. Phygital approaches that help thus orchestrate contractual smallholder agriculture and value chains in a transparent, traceable and honorable manner, such as agCelerant, will deliver the new business models to catalyze private sector intervention towards sustainable, inclusive and scalable value chain structuration.
Endowed with the financial capability to scale the deployment of inclusive agricultural credit mechanisms required to support of smallholder agricultural production, transformation and commercialization, Multilateral Development Banks as well as impact funds have here a crucial role to play in helping nations protect their agricultural productive assets. Beyond its somber outlook, Covid-19 also provides the opportunity to catalyze this transformative change.
 Only 11.32% of African smallholder producers have regular access to agricultural credit (source: Manobi Africa, 2019. Data from 15,850 smallholder farms of Ghana, Côte d’Ivoire, Nigeria and Senegal).
 Adesina A., 2017. Betting on Africa to feed the world. Norman Borlaug Lecture, World Food Day, Des Moines, IA, USA
 Given average production costs estimated at USD 600/ha in Africa (source: Manobi Africa, 2019)