Article: Tackling the impacts of climate change in Africa can improve agricultural production and get more cash into the pockets of small-scale farmers

October 29, 2021

Mattu Dauda is a cocoa farmer in southern Sierra Leone. She has nine children; food and school fees are her biggest worry. In 2019 AgDevCo invested in organic cocoa exporter Tradin Sierra Leone (Tradin SL), and provided a grant to set up a farmer school in Dauda’s community. The goal was to improve traditional cocoa cultivation to boost climate resilience and profitability among local suppliers like Dauda. The school provided training on good agricultural practices, such as how far apart to plant new trees, when to weed, how to use organic compost, and how to dry the beans after harvest so they don’t rot. Tradin SL then helped Dauda get organic certification, which allowed them, through parent company Tradin Organic in the Netherlands, to offer a higher price for her cocoa. In between harvests, Tradin SL also pays Dauda a bonus to reward her for her loyalty to the company. 

Mattu Dauda

Mattu Dauda

The impact on Dauda’s life was immediate. ‘That bonus does a lot of things for me and my family,’ she says. ‘Before I would take a loan to pay my children's school fees, but now I have money left over from cocoa sales and my bonus comes just at the right time. I also use it to buy 50kg of rice to feed the house between harvests. My status now is higher than it used to be.’ 

As international demand for organic cocoa increases, Dauda’s market is secure - there are plenty of chocoholics out there ready to pay extra for a premium product, and Tradin SL is a link to those customers. But climate change poses a real risk. A recent study warns that by 2050 nearly a third of global cocoa imports will come from locations highly vulnerable to climate change. Heavier, more erratic rains and longer dry spells make cocoa cultivation more difficult and access to specialist agronomic support more essential.

The regenerative agriculture techniques Tradin SL has taught 36,000 suppliers like Dauda help them adapt to these changing conditions. Organic composting sequesters carbon and promotes better soil structure, which in turn enables greater water and nutrient retention. It is climate change adaptation and mitigation in one, and, most critically for Dauda, means more cash in her pocket. 

‘Climate resilience means poverty reduction,’ says Chris Isaac, AgDevCo’s Chief Investment Officer. ‘We need to get farmers technical support for better agricultural techniques. The private sector can be a highly effective mechanism for delivering that support - responsible companies whose own financial performance depends on improving the yields and quality of small-scale suppliers in a sustainable way.’

As a specialist impact investor, AgDevCo provides a combination of patient capital and targeted technical assistance to agribusinesses across sub-Saharan Africa. Linking farmers to international markets for premium products is a feature of their portfolio, but the majority of investees focus on rapidly growing domestic and regional markets. ‘Climate change is making it harder to grow staple foods like maize and rice, as well as traditional cash crops like sesame and cotton,’ says Isaac. ‘For communities to be resilient to weather shocks we need to strengthen these supply chains with better inputs, improved agricultural practices and greater access to finance. And we need to add value to commodity crops through locally-based processing.’

There is plenty of low-hanging fruit. Lowest of all are reductions in post-harvest losses. The FAO says 30 percent of all food grown never makes it to a consumer, in Africa that figure rises to as much as 50 percent. A highly effective solution is a Purdue Improved Crop Storage (PICS) bag: triple-layer, hermetic sacks, which protect grain and beans from insect damage without the need for chemicals. Food is protected, money is saved. In more than 250 interviews with Tanzanian smallholder farmers who have bought PICS bags, 90 percent said they have improved their quality of life. 60 percent said their incomes had increased and they were storing more crop.

For more farmers to access PICS bags, sustainable access to a supply of new bags is critical, and that means supporting local production. Last year AgDevCo made a long-term debt investment into Pee Pee Tanzania Limited, based in Tanga, northeast Tanzania. The company is licensed to manufacture and distribute PICS bags across the region and is opening a new production facility, which in addition to increasing supply will also create 300 quality jobs.

The FAO estimates that eliminating post-harvest loss, could eliminate hunger, but as global populations rise and more countries reach middle-income status, demand for food will soar beyond anything we can address through post-harvest loss reduction. Yield increases will be essential, but as Grant Taylor, co-founder and CEO of ECA (another AgDevCo investee) in central Mozambique, points out, this can only be achieved sustainably with long-term commitment from businesses who pay a fair price to local suppliers. ECA buys and processes maize and sorghum from 15,000 local smallholders, whom they support with input finance and extension services - training on best agricultural practices and support when pests or disease attack.

‘We have never made a promise to the local community that we haven’t kept,’ says Taylor. ‘We trust the farmers to repay their loans and our recovery rate is 98%. Our entire business is based on trust and integrity, we’re not going to pack up and leave after a couple of years.’

ECA

When ECA opened their doors ten years ago average yields among local small-scale farmers were half a tonne per hectare (t/ha)- just enough to feed a family for a year. That’s increased to 1.5t/ha among farmers who use the improved drought-resistant seed varieties ECA provides, and 4-5t/ha among farmers who are also adopting better agricultural practices. Farmers receive inputs on credit from ECA and are free to sell to other buyers – only 5 percent do. ECA’s modern maize mill and storage facility is the only one in the region, providing a steady supply of flour and bran that reduces seasonal price fluctuations and improves local food security. National and regional demand is growing, so a second mill is under construction, with a further US$ 600,000 investment from AgDevCo. ECA is also developing a new silo complex, to expand the business and reduce Mozambique’s reliance on imports. 

Diversification is another cornerstone of climate change resilience. The wider the range of food and income sources smallholders can access, the less vulnerable they will be to crop failure or animal disease. In 2017, AgDevCo invested US$ 4 million in Uzima Chicken Limited, Rwanda, which produces and distributes Sasso breed chickens through a network of self-employed agents. The Sasso breed is resistant to disease and can feed through scavenging in backyard environments with no more input than is required for traditional, less productive ‘village chicken' breeds. They give rural households a source of protein with a low carbon footprint, as well as regular income. 

In 2019 AgDevCo supported Uzima to expand into Uganda where they are rapidly scaling up operations. Grace Nabawanuka is a small-scale farmer in Bukomansimbi district of southwest Uganda. She supports a household of seven and says the low, unpredictable rainfall of recent years is her biggest worry. ‘The seasons are getting harder here,’ she says. ‘Last year the rains didn’t show so we had very poor yields of maize, beans and potatoes. If this goes on, food will become scarce. For us, changing seasons means famine and poverty.’

Grace Nabawanuka

Earlier this year Nabawanuka attended two Uzima training workshops and has reared three batches of Sasso chickens. An increasing proportion of Uzima's customers (51 percent), and sales agents (35 percent) are women.

‘The chickens are ready to sell after one month, compared to at least three months for crops,’ she says. ‘The cash flow gives us stability. It gives me peace at heart to know I will get money from sales at the end of every month. Before we ate beef but now we have the chickens, which are cheaper. I dry the chicken droppings to feed my pigs and use the leftover husks from the chicken feed as mulch on my tomato garden so it helps with my other activities. I’ve been saving part of the money so that I can purchase a 5,000 litre water tank, which will solve my water problem.’

AgDevCo’s portfolio is evidence that reducing poverty, adapting to and preventing climate change, and increasing commercial food production go hand in hand. With the right combination of patient capital and technical assistance, agribusinesses across Africa can deliver these win-wins, creating a sustainable future for both people and planet.