How can global food companies contribute to rural development?

Last month the G8 brought some welcome focus to food security issues at their Camp David Summit. Among other pressing global issues, the Declaration committed the group to fulfill the pledges made at L’Aquila in partnership with the African Union and CAADP. More interesting was a new pledge to enable private capital to flow into African agriculture through the ”New Alliance for Food Security and Nutrition”.

This came alongside specific country strategies for Tanzania, Ethiopia and Ghana which contained, among other things, statements of specific investment commitments from private-sector entities ranging from global giants to medium-sized family farms.

In parallel, the world’s most important food and drinks businesses were reinforcing these commitments, telling the Financial Times of their partnerships with innovative NGOs such as Technoserve. Owners of drinks brands such as SAB Miller, FMCG firms such as Unilever and traders such as Olam and Cargill are increasingly looking to source agro-commodities from local producers including smallholder and SME farmers.

At the same time, AgDevCo and Cervejas de Moçambique (CDM), an SAB beer brand, announced an agreement to source local smallholder maize through Empreza de Comercialização Agricola (ECA) Lda.

Indeed, innovative impact investments in the sector, such as Mtanga Farms Limited in Southern Tanzania, have pioneered partnerships with the Syngenta Foundation and others to register new seed varieties for smallholder farmers. Agriculture SMEs like Mtanga provide an important link in rural economies between smallholders and agribusinesses. An important ingredient for their success has been seed funding from Lion’s Head and impact investors such as the Calvert Foundation, Nigerian investment firm Heirs Holdings and its philanthropic arm, The Tony Elumelu Foundation, and the African Enterprise Challenge Fund.

Despite the private-sector commitments and partnerships announced this Spring, there is still a need for venture capital investments in agriculture SMEs to enable them to grow, diversify and expand their impact in rural Africa.  While marketing agreements help with risk profile and cash-flow for such businesses, new sources of capital are needed for sustainable primary agriculture. Large public-private investments, such as Olam’s rice investments in Nigeria, are few and far between. At the other end of the spectrum, global initiatives such as GAFSP provide donor funds through governments.

The progress made so far in 2012 must not overshadow the pressing need to allocate greater funds to sustainable impact investments in African farming.