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Monday, May 5, 2014

Addressing risk: A condition for African farmers' investment and growth



In Africa, various risks such as climate change threaten the livelihoods of millions of rural producers. This presents major impediments to increasing productivity and investment in the agriculture sector and the entire agri-value chain.
Yet the origin of the risk management is recorded in African history. More than ten centuries BCE, Egypt, according to the Bible, was aware of the need to create public stocks to face starvation. This is even how Joseph, a Jewish slave turned administrator assured his power from Pharaoh and secured the domination of Egypt on the neighbouring peoples. In Sub-Saharan Africa, according some traditions, the village chiefs in the twentieth century were responsible for maintaining two years of consumption before successive droughts which undermined this principle of insurance.
The most exposed rural populations include pastoralists, smallholder farmers and female farm owners. People are more exposed to production hazards in arid and semi-arid areas. When there is a crisis, they are often forced to decapitalise their assets to weather the storm, after which they find themselves even more vulnerable to other shocks. Increasing occurrences of abnormal or unusual weather conditions attributed to the effects of climate change, along with market instability, exacerbate risks for populations.
Usually, risks in agriculture are categorized in climate shocks such as drought and floods which are increasing in frequency and intensity under climate change trends, and related pest outbreak and crop disease on one hand, all these factors affecting production; price volatility, market and institution failure on the other hand knowing that such risks have escalated since the 2007-2008 food crises.
Compared to any other industry, market prices in agriculture are too volatile to be predictable and ensure visibility on income expectations. This   leads to under-investment from part of the farmers. Financial institutions may find extending credit to farmers, grain and livestock traders and millers or processers a risky venture if prices are volatile, and may therefore increase substantially the cost of borrowing. Spiking and excessive volatile food prices also create speculation and stock retention, leading to artificial scarcity in urban areas or total market disruption in rural areas. Nevertheless there are different options which can be combined in managing price risks, among which warehouse receipt systems, commodity exchanges, contract farming, grain stock management and price and tariff policies to name a few.
All types of risks have discouraged agricultural investment and technology adoption for decades, and they legitimately become a major concern. Thus, over the recent years, the importance of adopting a risk management approach for building resilience is rapidly rising to the top of the international development agenda.
Guided by the Sustaining CAADP Results Framework 2014-2024 for the agricultural transformation for the next decade, the AU declared  2014 as the Year of Agriculture and Food Security. Five priority sub-themes were identified from which “Building resilience of Africa’s agriculture through integrated risk management” to place the foundation for building strong and resilient agri-food system..
Mainstreaming risk management tools and policy instruments in the implementation of CAADP is a long term strategy departing from short term humanitarian interventions which are usually undertaken to address agriculture and food crises. It intends to build resilience all along the agriculture value chain. FAO’s definition of resilience includes 3 components: 1) in the short term and at individual level, it questions the capacity to bounce back after a shock; 2) in the medium and long term and at individual and systemic level, it relates to the capacity to adapt to a changing environment; 3) at the policy level, it addresses the transformative capacity of an enabling institutional environment.
Cognizant of the importance of coordinated actions towards building resilience at household, community, national and regional level, various platforms have recently been initiated by Regional Economic Communities (RECs) and donor partners, among which the IGAD Regional Disaster Resilience and Sustainability Platform, the Global Alliance for Resilience for Sahel and West Africa (AGIR), the SADC Vulnerability Assessment and Analysis Programme, and the Africa Adaptation Knowledge Network, can be highlighted.  Even though these initiatives are providing valuable platforms to bring together partners and stakeholders including AU Member States, the AUC, NPCA, RECs and Development Partners in building resilience, it is of paramount importance that a voluntary common framework be agreed upon so that building resilience and capacity to reduce vulnerability to better withstand crises and shocks can be more effective.
The New Partnership for Africa’s Development, NEPAD Agency has developed an initiative for supporting regional economic communities and countries in managing risk in Agriculture. This initiative is aimed at mainstreaming risk management strategies into CAADP implementation. It consists of a holistic approach considering increased resilience of rural producers and processors as the appropriate avenue for addressing risk factors and allowing them to increase their level of productive investment in a continuous and sustainable manner. 
Once fully developed at the regional and national level, the initiative will provide to rural producers and processors, the appropriate tools for preventing, mitigating, and transferring risk. It will therefore allow building assets, strengthening livelihoods hence contributing to agriculture transformation.
The expected significant outcomes of the Joint Conference of Ministers of Agriculture, Rural Development, Fisheries and Aquaculture about risk management and resilience building is a renewed commitment on two specific points: 
That countries and Regions formulate and implement policies and regulations to enhance risk management tools effectiveness focusing on creating a more predictable market environment and insurance mechanisms that may be adopted in particular by smallholder farmers and address climate change and gender challenges; and
That NEPAD ensures deeper policy coherence by mainstreaming climate change adaptation and risk management strategies into National and Regional Agriculture and Food Security Investment Plans and promotes a Continental Framework on Integrated Risk Management in Agriculture.

*Contributed by Abiola Ajayi, communication officer with NEPAD
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1 comment:

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