Why food funding can't just focus on farming

By 2050, the world’s population is expected to hit nearly 10 billion people, raising major questions about how to sustainably feed them all. Africa is the great hope. Home to approximately 45% of the world’s remaining arable land, untapped water resources and a cheap and expanding labor force, the continent has massive untapped potential to meet the world’s growing food needs. But Africa is currently a net importer of food, paying to bring in $40 billion in 2022. It is also home to a third of all the people in the world affected by hunger — 278 million people, according to 2021 figures. To date, efforts to help Africa feed itself, and then the rest of the world, have tended to focus on the beginning of the food value chain — increasing productivity at the farm level. But experts say more funding is needed for the rest of the agri-food value chain — including aggregation, processing, packaging, and distribution to national and international markets. In particular, the processing stage — for example, milling wheat into flour or canning tomatoes — can bring huge benefits. But not enough is being done to build African-based processing companies. “The aid sector has been disproportionately focused on the first link, which is the farmer,” said Jeff Dykstra, CEO at Partners in Food Solutions, which works to strengthen domestic food processing by linking corporate volunteers to African food companies. “But a farmer without a market is a gardener and Africa still has too many gardeners. You have to have that downstream pull that’s creating that market and it’s food companies that can do that.” Too often, raw materials grown by African farmers are exported for processing, meaning that most of the cash goes out of the country. Take for example cocoa beans: Côte d'Ivoire produces 45% of the world’s cocoa beans but only receives about 4% of the chocolate industry’s estimated $100 billion in annual revenue. Or countries import high value processed foods, increasingly being demanded by the continent’s growing urban population, which could be supplied by domestic or regional markets instead. This would not only create jobs and wealth but could also diversify local supply chains and reduce food import dependency, making countries less vulnerable to global supply shocks, such as were seen during the COVID-19 pandemic. While highly processed foods are often associated with negative health effects, basic processing and packaging offers a range of benefits: consumer convenience, a more varied diet, and opportunities for improved nutrition through fortification. Processed foods can also help farmers and food companies by preserving perishable food and reducing post-harvest loss. Exporting high value processed foods can also drive economic development. By 2040, it is estimated that 79% of food consumed in Africa will be processed, up from 70% in 2010, according to the International Food Policy Research Institute, representing a huge opportunity for local processors. The development sector is beginning to take notice, according to Brent Wibberley, the director of food processing at TechnoServe. “In recent years, there’s been an increasing recognition from donors about the importance of local processors and agribusinesses, but there’s still much more to do,” he told Devex. He said the “optics” of working with well-off businesses as opposed to smallholder farmers was likely still putting some donors off — but donors need to see the bigger picture. “Processors are at the center of the food chain, they have significant multiplying effects and can positively affect incomes and livelihoods across the food ecosystem, providing a major intersect for nutrition, trade, food safety, employment, and farmer markets,” he said. The United States is the biggest donor in the processing space. In 2018, the U.S. Agency for International Development co-funded a $20 million public-private partnership between Partners in Food Solutions and TechnoServe to offer tailored support and sector-wide training programs to promising food processors in Ethiopia, Kenya, Malawi, Tanzania, and Zambia. This followed on from an earlier program with the same partners, Solutions for African Food Enterprises, which worked with more than 1,000 food processors across Africa who in turn source from over 800,000 smallholder farmers By improving local processing, the program hopes to increase the domestic supply of affordable, nutritious food while also creating a stable and profitable market for local farmers. For example, the partnership supported Wimssy Fresh Dairy, a milk processing plant in Kenya, to start producing long-life milk. This enabled the business to actually expand during the pandemic, when fresh milk consumption went down. Wimssy Fresh Dairy was able to expand its network of dairy farmers, increasing its direct farmer base from 500 to 1,537, Wibberley told Devex. Fortification The World Food Programme is also interested in food production, partly because of the economic benefits, but mainly because it allows the U.N. agency to source food from closer to where it is needed, reducing costs and waiting times. Saskia de Pee, WFP chief of analytics and science for food and nutrition, said processing offers several benefits: it adds nutritional value to staples such as rice and wheat, it enhances food safety and hygiene, and it applies controls and standards to products. While WFP mostly relies on international suppliers for the specialized nutritious foods, or SNF, it uses to prevent and treat malnutrition, the agency has been helping local food companies start producing the foods. WFP worked with two Ghanaian companies that manufacture fortified cereals to provide them with finance, technical assistance, and linkages to local suppliers. This allowed those companies to scale up production and improve quality. There are challenges. WFP requires products to meet high safety standards which means proper treatment and storage in order to avoid contamination. Aflatoxin, a toxin produced by fungus that clings onto crops when they are not dried and stored properly, is a major worry. As a result, sourcing internationally is often cheaper. But WFP plans to keep working with local processors, de Pee said. Bottlenecks But building capacity for processors is only part of the puzzle. What processors really need is access to finance, according to Kanini Mutooni, the managing director at the Draper Richards Kaplan Foundation. The benefits of processing means it makes sense for concessional, patient capital to support these companies, she said. “If I had a magic wand, I’d say we need capital for processors, and it needs to be flexible to reflect the reality of food production, which is up and down,” Mutooni told Devex by phone. Traditional bank financing, which is “expensive, doesn’t respect seasons, and needs to be collateralized,” is unlikely to do the job in the early days, she said. But once they become established and start to generate revenue, then they can look to more commercial capital. This means more agriculture-focused impact funds, she said. “I see it happening but not enough. We need more vehicles which are impact first and return second and domiciled in the countries where the companies they support are working so that they really understand context,” Mutooni said. Governments also need to help by creating incentives for local processors, such as lowering taxes on locally produced foods or making machinery needed for processing free of import tax. Territorial markets Processing is not the only step in the chain, however. Some groups argue for keeping the entire agri-food chain in Africa, severing ties with what they consider to be volatile and exploitative global food markets. Shalmali Guttal, executive director of Focus on the Global South and a member of the IPES-Food panel, agreed that local channels of processing and distributing produce have not received anywhere near enough support. But increased processing needs to meet the needs of local consumers and farmers first, and not just global markets, she said. She advocates the creation of “territorial markets,” — local and regional food economies — as a way of bringing quality food to local people. This can secure a living for farmers and workers and also build food security and local economies, she told Devex. Such an approach avoids farmers and processors “becoming trapped in the slot of being primary producers for a global market where their income is the lowest in the entire value chain,” such as growing maize for animal feed, Guttal explained. Instead, if farmers work along with local processors to access local markets, then the value stays in the territory and both have flexibility and agency in terms of setting prices and providing food and incomes at times of scarcity, she said. Systems approach Corinna Hawkes, director of the Food and Agriculture Organization’s division of food systems and food safety, told Devex that there has been a disproportionate focus on the farm relative to post-farm areas. What is really needed is a “systems approach” to the entire agri-food chain — which includes farmers but also small businesses and people working in the informal sector, especially women. A systems approach would also factor in health and the environment and how these intersect with the agri-food system. This requires a “different mindset and a different way of working,” Hawkes told Devex. “It’s about ensuring that the whole food chain, and the system around it, works in harmony towards the outcomes being sought. In practice it means, when making an investment in agriculture, or taking any action in the food chain, recognizing the interrelationships and interconnections involved,” she explained. What next? Technoserve’s Wibberley said the development sector could play a key role in growing the African agro-processing sector. “There's a need for the development sector to provide technical assistance to food processors. While there is often great opportunity for private-sector investment into the industry, agribusinesses need pre-investment technical assistance to address their core technical and business challenges, improve performance, and de-risk investments,” he told Devex. Wibberley also addressed a similar point to Hawkes, by discussing how development groups can help deliver a systems approach. This might include supporting processors to create products aimed at lower-income consumers, or helping processors develop inclusive business plans which would create better opportunities for smallholder farmers, women workers, and entrepreneurs. The aid sector should also help processors cover the additional costs associated with food fortification. “Large-scale food fortification has been a priority for development agencies for a long time, but the primary focus has typically been on regulations and governments' ability to enforce them,” Wibberley said. “That's very important, but it's also essential to work hand-in-hand with the food processors, who are the ones left with the responsibility of delivering this public good.”