Dr Manyewu Mutamba: Engaging the private sector in climate-smart agriculture investment

Dr Manyewu Mutamba © GENESIS Analytics, South Africa

A Southern Africa-wide study on unlocking share value through the engagement of the private sector in climate-smart agriculture (CSA) solutions was recently commissioned by CTA. Dr Manyewu Mutamba, senior study author and senior specialist on climate change at GENESIS Analytics, South Africa, spoke to our Spore correspondent about why the private sector is a smart partner in scaling out CSA initiatives at the CTA workshop on Scaling-Up Climate-Smart Agriculture Solutions for Cereals and Livestock Farmers in Southern Africa held during 13-16 September, 2016 in Johannesburg, South Africa.

In summary, what did your study find about the role of private sector in CSA?

The major finding was that the private sector can be and should be a key part of delivering climate-smart solutions for smallholder farmers. If the private sector is not part of the solutions we are delivering, then there is something fundamentally flawed in our approach. It is not optional that the private sector is involved because farming is a business and farming cannot happen successfully outside value chains. For any initiative to go to significant scale, or to achieve any level of sustainability as is envisaged with the CSA solutions, it needs to be part of the value chain that is driven by rational self-interest, and naturally the private sector is part of that chain.

So what should be done to increase private sector involvement?

A lot needs to be done at different levels; on the farmer side, with the private sector themselves, and with the governments and other important players such as development partners. The regulatory and policy environment need to recognize, promote and reward such partnerships, creating an environment where doing business with the smallholder farmers becomes the preferred way of doing business for the private sector. Generally, the environment within which the smallholder farmer operates is not conducive for sector players participation for various reasons. As such, the upfront costs of engaging with smallholder farmers are significant. Smallholder farmers are scattered over large areas and production per farmer is very low, meaning transaction costs are disproportionately high. I do not think there has been a serious effort from the governments to help create an environment which encourages private sector engagement by offsetting some of these high upfront costs. On the farmers’ side, they need to be supported to better organize themselves, increase productivity and better understand and manage commercial relationships.

But is the way of doing business normal between smallholder farmers and the private sector?

No. The levels of productivity are currently nowhere near what is required for most private sector players to be interested in dealing with smallholder farmers. Serious efforts are required to raise the levels of productivity in smallholder farming systems otherwise the private sector will remain uninterested. Significant investment is required, especially with respect to extension to elevate the level of smallholder competencies needed to increase both yields and quality of produce, compelling the private sector to get involved. Higher productivity is what creates the shared value that both farmers and the private sector partners can benefit from. Higher productivity is the glue that binds mutual interest between these partners.

How should the private sector get involved in CSA initiatives?

The private sector itself does not completely understand the smallholder farming setting. A lot of the private sector actors prefer to look from outside, only a minority have been daring enough to go into partnerships with smallholders because of perceived risks. Many believe the risks are too high risky compared to the potential returns. Their understanding of opportunities in smallholder settings is also very limited. Some pioneering private sector players now appreciate that they share many of the climate risks with farmers who are part of their value chains. They are now investing in approaches that tackle these risks jointly with those who also face them, the farmers. By investing in building the resilience of farmers, private businesses are also climate-proofing their own business interests, while unlocking shared value and opening up to new opportunities.

What more should be done?

CSA initiatives offer opportunities to refine approaches for private sector engagement with smallholder farmers in ways that improve outcomes for both parties through commercially viable partnerships. This challenge brings on board other partners such as governments, donors, and services providers who have an interest in supporting smallholder farmers. Crafting investments that build the resilience of both the private sector and farmers while creating shared value, is a key part of making CSA solutions a success. We need to demonstrate that it is possible to do this, not only to convince the majority of private sector players, but also governments and development partners who have a role in overcoming the barriers, which would otherwise be too daunting for the private sector to tackle by themselves.

Busani Bafana

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The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.