9. Key 3 - Pursue strategic investment in agriculture

Achieving a state of food security sustainable natural resource use will require innovative and strategic investment in order to sustain productivity gains and create new opportunities for water uses. Progress is being made with the application of technology to operational and managerial tasks to improve water use and scheme performance. These improvements are largely based on the principles of irrigator participation, financial autonomy, partial and progressive privatization and corresponding roll-back of direct government operation. The viability of future investments, destined to rehabilitate and upgrade existing schemes or to develop new ones, will continue be enhanced by the application of these principles.

The response of the private sector in generating finance for improved water control can be dynamic where it is not constrained by arbitrary limits or outdated legislation. The incentives for individuals and user groups to invest in water control will always be there when clear comparative advantage exists, both in servicing local markets in food staples and export markets in cash crops. In such cases, the financing mechanisms have to match the medium to long term nature of water control investment and also the sophistication of the market pull. In this respect a strategic mix of micro-credit for small holders, well regulated commercial credit for emergent and large-scale farmers and concessional finance for large scale public infrastructure needs to be aimed at. The inter-play between these types of investment in water control is vital in pulling the irrigated sub-sector out of its lacklustre performance. But it unwise to ignore one element at the expense of another. Equally it is also necessary to adjust these to investments to regional climate, hydrology and agricultural practice while also looking forward for a clearer identification of market opportunities and technology transfer.

The scope of policy intervention to improve agricultural water control and agricultural water use in general is broad. While globally, food production appears to have kept pace with demand (and shown an overall improvement) many problems of local food insecurity and vulnerability to drought persist. Overcoming these physical and socio-economic constraints and allowing the poor marginalized populations to break out of poverty will continue to require investment in both rainfed and irrigated agriculture. In particular, conservation agriculture, small-scale irrigation, rural infrastructure and market access will be vital in the fight against hunger and poverty.

Three areas of policy and investment intervention can be identified.

• At micro level, individual farmers and households need to be assured stable engagement with land and water resources. Systems of land tenure and water use rights need to be flexible to promote the realization of comparative advantage in food staples and cash crops. But they also need to be matched by access to rural credit and finance that suits specific agricultural systems and are not just linked to annual repayment or harvest production, but allow longer term finance of farm inputs. Such initiatives will have to be complemented by the dissemination of technology and good practice in water control and productivity gains.
• At irrigation scheme level, modernization, that includes rehabilitation and management transfer, offers tangible scope for extracting the full value out of sunk costs and reducing pressure on public funds. Such programmes are essential before longer term investments in new-build can be evaluated.
• At macro level, government policy and investments need to be aligned to allow local markets for agricultural produce to become more effective in meeting local demands. This will require investment in the key public goods such as roads and storage but will also involve a more progressive role for large scale private investment. Creating these conditions while also guaranteeing allocation of sovereign resources through negotiation of shared water resources, for instance, are key considerations.

It is important to look at all three areas in parallel and stage investments as demands grow and the existing asset base is realized. Public and private finance will be required to make these advances. Not only will public finance be required to target poorer rural communities but the enabling functions of governments at micro and macro levels will be crucial in maintaining flows of private finance from individual farmers and commercial investors.

In conclusion, food, agriculture and water policies need to be much more effectively “joined up” and backed up with high quality investment into marginalized populations who have the capacity to break out of poverty and into markets where there is comparative advantage.