IFADUNICEFWFPWHO

The State of Food Security and Nutrition in the World 2023

Chapter 5 POLICIES AND SOLUTIONS TO LEVERAGE AGRIFOOD SYSTEMS TRANSFORMATION FOR HEALTHY DIETS ACROSS THE RURAL–URBAN CONTINUUM

KEY MESSAGES
  • Actions, policies, new technologies, and consequently needed investments to overcome the challenges and seize the opportunities that urbanization creates require a clear understanding of the interaction between agrifood systems and the rural–urban continuum.
  • The policy approach needs to leverage the progressive connectivity between urban, peri-urban and rural areas through investments in infrastructure, public goods and enhanced capacities, in order to increase access to affordable healthy diets and achieve food security and nutrition for everyone across the continuum.
  • In the face of a gradual convergence in dietary patterns across the rural–urban continuum, including the consumption of highly processed foods, policies and legislation are needed to promote healthy food environments, both formal and informal, and to empower consumers to make nutritious food choices.
  • In intermediate and small cities and towns and their peri-urban and rural surroundings, the midstream activities of agrifood systems (i.e. logistics, processing and wholesale) can play an essential role in economic development, reducing the cost of nutritious foods and improving income opportunities. This is particularly the case for new investments that enable small and medium enterprises to expand.
  • The rural–urban continuum lens is critical to determine what and where support is most needed to address the insufficient worldwide availability of and access to nutritious foods, particularly fruits and vegetables. Improved access to production inputs and irrigation infrastructure are needed across the whole rural–urban continuum, but support should target especially smallholder farmers in rural areas and urban and peri-urban agriculture (UPA) elsewhere.
  • Public investment in research and development needs to be increased to develop technologies and innovations to create healthier food environments and increase the availability and affordability of nutritious foods. Technology can be particularly important to boost the capacity of UPA to supply nutritious foods in cities and towns.
  • To strengthen rural–urban continuum connectivity and linkages, agrifood systems governance mechanisms and institutions need to cross sectoral and administrative boundaries. Subnational and local governments must play a key role in designing and implementing policies beyond their administrative authority, engaging with agrifood systems stakeholders at all levels.
  • Evidence from multilevel and multisector governance mechanisms implementing school feeding, UPA and/or public procurement suggests these are potential entry points for making healthy diets available and accessible.

Patterns of urbanization, as well as the size and clustering of urban agglomerations and the surrounding rural areas, are transforming agrifood systems with implications for access to affordable healthy diets, as well as food security and nutrition (Chapter 3). The increased links across the rural–urban continuum, coupled with closer interactions between the components of agrifood systems, create a number of opportunities and challenges for the availability and affordability of healthy diets. This chapter argues that such interactions also create a number of policy and programme entry points to support agrifood systems transformation towards affordable healthy diets. However, a change of direction in policy is needed which considers both agrifood systems and spatial dynamics, and their interactions and interconnectedness. A systems approach is therefore better suited for effective solutions.1

Such an approach should also consider the increasing convergence in food demand and supply patterns across the rural–urban continuum (Chapter 4). The growing importance of food purchases, and of processed foods in dietary patterns, opens up the opportunity for leveraging midstream and downstream agrifood systems activities which link primary production to the final consumer. At the same time, the strong growth of small and intermediate cities and towns (SICTs), which, as shown in Figure 19B of Chapter 3, comprise almost one-third of the global population, needs to be considered in policy and planning. Scholars have called them the “hidden” and the “missing” middle, respectively.ae Therefore, policies, investments and legislation supporting the “hidden/missing middle” can leverage the increased interconnectedness driven by urbanization to facilitate the creation of scale economies for smallholder farmers and agrifood small and medium enterprises (SMEs), increase off-farm employment opportunities and rural household incomes, and reduce the cost of healthy diets.

The interaction between agrifood systems and the rural–urban continuum introduces the notion of a “territory” as a unit of analysis and policymaking for agrifood systems transformation towards improving food security and nutrition.4 A territory in this context includes one or more urban areas which are connected to each other and to the rural hinterland through a dense set of agrifood systems links. Those links can be leveraged to promote a place-based agrifood systems transformation for improved access to affordable healthy diets across the rural–urban continuum leading to win–win situations.af For instance, increased off-farm income opportunities in peri-urban and rural areas in midstream and downstream activities could increase economic access to healthy diets, while improved efficiency in the connectivity between producers in rural areas, midstream activities in peri-urban and urban areas, and consumers could reduce the cost of nutritious foods.ag

The policy approach should take into consideration the development and adoption of technologies and innovations as essential elements for transforming agrifood systems inclusively and sustainably towards improved access to affordable healthy diets.7, 8 Reinforcing the science–policy interface is fundamental to leverage transformative opportunities,8 and can be an essential complement for many policies, investments and legislations oriented to shift dietary preferences towards healthy diets, improve the efficiency of midstream activities and increase the supply of nutritious foods. Given the multiple entry points created by urbanization, however, there will be no “one-size-fits-all” technological or innovative solutions to address all the challenges and take advantage of the opportunities for current agrifood systems.

Finally, a policy approach which considers the territory is inherently intersectoral and involves different agrifood systems stakeholders: public, private and civil society. The success of this territory-oriented policy approach rests therefore on the coordination of several actors and stakeholders. Strong institutions and governance mechanisms are required to coherently implement policies, investments and legislation on one side, and leverage technology and innovation on the other, but they have to be oriented to enhance agrifood systems linkages through the growing rural–urban connectivity. In particular, subnational governments and local governance mechanisms are key factors for improving linkages across the rural–urban continuum.9 Figure 36 provides a visual summary of this approach to address the challenges and leverage the opportunities that urbanization creates in agrifood systems for ensuring access to affordable healthy diets across the rural–urban continuum.

FIGURE 36 Reinforcing agrifood systems linkages and rural–urban connectivity to make healthy diets affordable across the rural–urban continuum

SOURCE: Authors’ (FAO) own elaboration.
SOURCE: Authors’ (FAO) own elaboration.

This chapter first analyses different policy alternatives available among the components of agrifood systems, through a rural–urban continuum lens, to address the challenges and leverage the opportunities for access to affordable healthy diets identified in the previous chapters. As such, this chapter focuses on policies to promote healthy food environments; policies and investments to leverage the economic potential of the midstream of agrifood systems in SICTs, which can lead to reduced cost and improved affordability of healthy diets; and food production policies to increase the supply of nutritious foods. It then identifies technological and innovative solutions across the different agrifood systems components that show potential to support agrifood systems transformation towards affordable healthy diets, noting those that can particularly work. Finally, the chapter examines governance mechanisms deemed most appropriate to manage the proposed policy approach across administrative and sectoral boundaries, and highlights the role of subnational governments and local administrations in designing and implementing such mechanisms.

5.1 Policies and investments for healthy diets across the rural–urban continuum

Food environments and consumer behaviour policies

Households obtain foods through various sources, for example through own production, purchases or gifts. As has been noted previously, the majority of households across the rural–urban continuum acquire foods through purchases. In addition, processed foods are an important part of households’ food consumption, not only in big cities but also in small towns and rural areas.

Certain aspects of retail food environmentsah are becoming more similar across the rural–urban continuum, for example, the presence of food outlets and their role in making highly processed foods more available. However, there are also differences in the level of formality of food outlets (e.g. supermarkets or smaller food shops). Large and formal outlets are more common in urban settings and their surroundings, and less so in rural areas far from cities where informal vendors or “traditional” outlets (i.e. open-air or wet markets) are more prevalent.11, 12 Yet these informal vendors still play an important role in retail food environments even in large or intermediate cities, particularly in low-income neighbourhoods and slums.13 Influencing food environments through supportive nutrition policies is an important entry point to facilitate better access to safe, affordable and nutritious foods and reduce consumption of highly processed foods of high energy density and minimal nutritional value. For this, an understanding of the specificities of retail food environments across the rural–urban continuum will be key to identify common policies for the entire continuum but also differentiated policy entry points for key “nodes” across the continuum (e.g. food environments in small cities or towns versus food environments in large cities).

Regulation of food and beverage marketing can be important in a variety of settings across the continuum.ai Advertising of highly processed foods in rural settings is common and, depending on the country, sometimes even more widely used than in urban areas.11 Examples of local initiatives to create healthier retail food environments include restricting advertising of energy-dense foods high in fats, sugars and/or salt in the vicinity of schools15 in Mandurah (Australia), and on public transport in London.16, 17

Taxation of energy-dense foods and beverages high in fats, sugars and/or salt has been implemented in 85 (for sugar-sweetened beverages) and 29 (for foods high in fats, sugars and/or salt) countries18 and has shown clear evidence of providing disincentives for buying these foods,19 contributing to shifting the demand towards more nutritious foods.14 A recent systematic review in six countries (Australia, Canada, Mexico, South Africa, United Kingdom of Great Britain and Northern Ireland, and United States of America) found not only evidence of the impacts of such taxation on reducing the sales of energy-dense foods, but also that the health-related benefits largely exceed the possible health costs of not intervening.20 Taxation can also encourage product reformulation to reduce the content of the target component (e.g. sugars, salt, unhealthy fats), thus improving its nutrient profile.

Nutrition labelling, by providing information on the nutrition properties and the quality of foods to aid purchase and consumption decisions, has the potential to help rebalance a food retail environment currently skewed towards foods that undermine healthy diets.21 Marketing influences children’s food preferences, purchase requests and dietary intakes. Governments have a legal obligation to protect child rights, including those that are threatened by harmful marketing.22

Supporting healthier food outlets will be key for enabling access to healthy diets, as this has shown positive impacts on dietary quality.23 While small neighbourhood food shops are important for the food security of households, particularly for low- to middle-income ones, consumers are disproportionately exposed to energy-dense highly processed foods in these shops.10 This could be particularly important in rural areas, where food is increasingly purchased in these kinds of food outlets.11, 12 Policy incentives are necessary to encourage shops to stock and sell greater amounts of fresh and minimally processed foods, for instance, by improving their cold storage facilities.24 The availability of healthier food outlets in particular areas across the rural–urban continuum can be improved through land-use planning and zoning regulations; tax credits or exemptions; or licensing agreements.14 Although land-use planning tools are generally underutilized to support healthy diets, a combination of financial and zoning incentives has been used at the city level to increase the availability of healthy and affordable food options in shops in under-served areas.25 Measures in place to restrict outlets that predominantly sell energy-dense foods high in fats, sugars and/or salt include, for example, local authority zoning measures that limit the establishment of hot food takeaways or fastfood restaurants in or around schools26, 27, 28, 29 or in particular neighbourhoods.30

In rural areas, where food sources include purchased food and own production, some policies could have positive effects not only in shifting dietary patterns but also on the availability and accessibility of healthy diets. Nutrition education, while more common in urban settings, has proven vital to encourage more diverse and healthier dietary patterns at the household level. Several studies have found that in rural settings, nutrition education at home or in schools could increase dietary diversity in food consumption and, at the same time, incentivize diversification of food production, possibly improving the availability of nutritious foods at the community level.31, 32

Considering that income is a main determinant of the affordability of healthy diets, cash transfers are also important for poor households across the rural–urban continuum. In rural areas, these can contribute to improve dietary patterns and promote diversification of food production through the alleviation of liquidity constraints.33, 34 In addition, cash transfer programmes associated with nutrition education offer greater chances to improve child nutrition and health.35

Turning to urban and peri-urban settings, street food and food away from home businessesaj play a particularly important role in both employment provision and food security for the most vulnerable populations. Street foods are especially convenient for low-income workers and households who may not have the resources, facilities and/or time to prepare dishes at home.1 In some contexts, informal street vendors can also be a key source of both nutritious foods and livelihood; for example, in a peri-urban area of Dar es Salaam where 70 percent of vegetables were sold by informal vendors, often most of these vendors were women (i.e. for 95 percent of green leafy vegetables).36 However, street food does not always contribute to healthy diets among poor urban and peri-urban food consumers.37 A critical aspect is to ensure the safety and nutritional quality of street foods, considering both the high degree of informality of the street food sector and the fact that street foods are consumed by an estimated 2.5 billion people worldwide every day.38 Informal street vendors play a major role in providing food to the most vulnerable populations in low-income countries (LICs) of Africa and Asia, particularly in urban settings.1 There are multiple infrastructure and regulatory gaps along the street food supply chain and many street vendors have temporary structures with no running water or cold storage and sanitation facilities. Important food safety actions include ensuring a supply of water of acceptable quality for food preparation, clean places for preparation and consumption of food, sanitary facilities for workers in food outlets, training for street vendors and consumer education.38 Interventions at national and local government levels are also required to ensure nutritional quality for street foods in each local situation (see Box 7).

BOX 7Initiatives for more nutritious food away from home in South-eastern Asia

Ready-to-eat foods sold in restaurants, small-scale eateries or online, and also sold by food hawkers and street vendors, make up an important part of the diets of many urban populations in South-eastern Asia. Many people consume food away from home at least once a day, and sometimes for all three daily meals.41, 42 Food away from home is also of cultural and economic importance in the region, with many people relying on the informal food sector for their livelihood.

Singapore has implemented a comprehensive, multistakeholder approach, led by the Health Promotion Board, to improve the supply of healthier options in the food away from home sector, while also increasing demand for these options among consumers.

To improve the availability and accessibility of nutritious foods, the government provides research-based support to industry to produce healthier base ingredients such as wholegrain noodles with a high fibre content. The Healthier Dining Programme43 – building on the earlier Healthier Hawker Programme and the creation of hawker centres in the early 1970s to improve the safety of street foods44 – supports food outlets to incorporate healthy options through reformulation grants.33 These grants can, for example, help in covering the cost of buying healthier ingredients, paying for healthy cooking classes or funding research and development. Separate grants are available for promotion of healthier food and drink options.45

To help increase demand, awareness-raising campaigns have used simple messages to highlight healthy options. Food items endorsed by the Healthier Dining Programme are clearly labelled with “Healthier Choice” meal identifiers on menus/menu boards, counter tops, shelves and packaging. In addition, the Eat, Drink, Shop Healthy Challenge campaign46 promotes healthier options and offers rewards for selection of healthier choices through a smartphone app.

These elements are supported by a whole-of-government approach, including a commitment to use healthier ingredients in all catering services in government institutes including schools. This pledge was important for encouraging investment in product innovation and reformulation.

Finally, it is important to consider that gender plays an important role in accessing affordable healthy diets and, in turn, food security and nutrition. Improving women’s status and gender equality positively influence the nutritional status of women and their families. Therefore, eliminating structural gender inequalities and unleashing women’s potential can play a fundamental role in improving access to affordable healthy diets. For instance, evidence demonstrates that most transport systems are biased towards the travel needs of men.39 In Blantyre, Malawi, reduced transport options to peri-urban and rural informal markets, which are often more affordable than urban markets for poor people, have reduced access to affordable sources of food for female-headed households.40 This points to the need for multifaceted and targeted territorial planning to address gender-related challenges to access affordable healthy diets. Efficient transport systems can reduce the time between home and work, as can strategically locating city food outlets that supply nutritious, diverse food on the routes that women take in their daily lives.39

Midstream food supply chain policies: strengthening the role of the “hidden/missing middle” in making healthy diets affordable for all

As countries grow and transform, urban populations also grow but follow differential clustering patterns in different countries or contexts (Chapter 3). Structural transformation is accompanied by a rapid increase in large cities in some countries, while in others by the growth of SICTs reducing the space between large cities and the rural hinterland.47, 48 Differential patterns of population agglomerations have been found to be associated with different rates of economic growth and poverty reduction,3, 49 and have implications for agrifood systems and healthy diets and nutrition.

Food production, especially that of perishables (such as fruits and vegetables, which are important elements of healthy diets), tends to be located in the proximity of urban markets to minimize transactions and transport costs.50 However, as agrifood systems are transformed by urbanization, it is not physical distance but travel time that matters. Thus, food production located in areas far from urban centres but with better access to natural resources (e.g. high-quality soil, water) can be better suited for supplying these centres, provided the cost of transport is low and midstream activities such as processing, logistics and transport are available and efficient.

The key role of small and intermediate cities and towns in agrifood systems transformation

Chapter 3 indicated that one-fourth of the global population live in peri-urban areas of small and intermediate cities and towns. For poor populations seeking to increase their physical, economic and social mobility, SICTs serve as a “first step” towards migration to bigger cities (or abroad) but also as an end destination for permanent migration.3 Proximity of SICTs to rural areas allows agricultural and rural households to increase and diversify their incomes through daily commuting to nearby towns, seasonal or permanent migration, and remittances.

In general, the clustering of populations in only a few localities (i.e. urban concentration in metropolises) is associated with higher overall economic growth as a result of economies of scale and agglomeration when driven by structural transformation (Chapter 3). Nevertheless, low skill employment opportunities in non-farm economic activities generated in SICTs may be more readily accessible to the poor, who tend to be unskilled and semi-skilled.38, 39 Properly targeted public policies and investments in SICTs could attract private investments including in agrifood activities, thus creating employment, increasing demand for food from local agriculture, and enabling poor people in those locations to escape poverty and increase their access to healthy diets (Box 8). Investing in SICTs is likely to have a more significant impact on healthy diets both for their populations and for the populations of their catchment areas compared to the benefits that trickle down from growth in large cities.ak

BOX 8The role of urban proximity in agricultural intensification: case studies in Ethiopia and India

Evidence largely shows that agriculture practised in proximity to urban centres is more productive due to better input prices received, access to input markets and increased adoption of modern agricultural inputs. However, less is known about how patterns of urbanization and the size of urban centres affect agricultural production.

A study in Ethiopia shows that the proximity to cities of different sizes has differentiated implications for farmers’ agricultural intensification decisions: rural farmers living near a large city such as Addis Ababa use more modern inputs and achieve higher yields than farmers near small and intermediate cities and towns (SICTs). However, in the absence of SICTs, farmers excluded from the central market in a large city would most likely remain subsistence oriented. But when the population is partially distributed in SICTs, farmers who were initially located too far from a large city to produce for its market can meet urban demand for food from SICTs.51

A study focused on the large Indian city of Bangalore and its surroundings provides evidence that may confirm the essential role of SICTs in increasing the use of modern agricultural inputs in rural areas, by offering improved linkages with markets. In some cases, farmers located farther from Bangalore show a higher use of modern inputs due to the influence of the town of Doddaballapura.52 In addition, evidence of the potential of SICTs for improving rural livelihoods through non-agricultural jobs emerges in a later study in Ethiopia, which shows that the expansion of SICTs has a positive short-term effect on household welfare, driven by increased participation in the non-agriculture sector.53

Policy can strengthen intensification and increased productivity in farming close to SICTs, by improving connectivity between farms and input and output markets, thus reducing the cost of access to both domestic and international markets and fostering farmers’ access to and use of modern inputs.

However, in most cases, especially in lower-middle-income countries (LMICs), SICTs are constrained from delivering on their potential for catalysing inclusive agrifood systems transformation and improving access to affordable healthy diets. Urban expansion is unplanned and unregulated, while local governance is characterized by weak capacity to plan and execute programmes and insufficient resources (from national transfers or local revenue raising) to finance them. This translates into lack of basic infrastructures and services (road networks, ports, housing, access to markets, health, education and social protection), which in turn limits private investment in growth sectors and the potential for employment and income generation.54 For instance, absence of transport infrastructure connecting rural areas to nearby towns and intermediate cities has been shown to negatively affect agricultural productivity and nutrition.55, 56

Addressing some of the challenges faced by SICTs can allow agrifood systems to be the driver of inclusive rural development through the creation of on- and off-farm employment for rural households, as well as of increases in food production and productivity due to increased food demand, scale economies and expanded market outlets. This also creates opportunities for SMEs, which have an essential role to play in this development, as discussed below.

Supporting midstream small and medium enterprises to increase availability and affordability of nutritious foods

Small and medium enterprises (SMEs), especially in LMICs, play a key role in ensuring connectivity between primary producers and final consumers. From a spatial point of view, SMEs connect the rural hinterland to expanding urban and peri-urban agglomerations of all sizes. They include a constellation of midstream activities involving rural and urban traders and retailers, truckers, third-party logistics firms, storage service providers, processors and distribution networks.

For SMEs located in SICTs, many are taking advantage of, inter alia, the closeness to production areas. However, this is not always the case: the location of SMEs depends on a number of other factors including regular supply of agricultural products, perishability of raw materials, bulkiness and value of agricultural commodities vis-à-vis processed products, the state of infrastructure and transport networks, electrification, and access to water.57, 58, 59

Midstream SMEs can be fundamental for rural investment, off-farm employment, modernization of the agrifood sector, upgrading utilities such as water and energy, and linking small farms to expanding urban food markets.60 As such, they can support livelihoods for agricultural households and communities and for nearby populations.61 Strengthening their efficiency and expansion can also contribute to gains in the production and productivity of nutritious foods, and a possible parallel reduction in the cost of food for consumers. For example, in Kenya more than 95 percent of the fresh fruits and vegetables consumed are grown domestically, mainly by smallholders, and are supplied mainly by SMEs through informal supply chains.62

The presence of processed foods in household diets across the whole rural–urban continuum constitutes a driving force for expansion of the services provided by SMEs in processing and distribution, as these enterprises are involved in a wide range of processed foods (Box 9).63 By transforming perishable raw materials into palatable products with a long shelf-life, SMEs contribute to broadening options for consumers, helping offset seasonality and reducing food loss. Increased demand for agricultural inputs, and downstream processing and related services and logistics, constitute additional drivers for expansion.

BOX 9Supporting inclusive food value chains in Africa

Investing in agrifood processing creates opportunities for developing local entrepreneurship and generating employment and value addition in rural and peri-urban areas of Africa.65 While most processed agrifood products have traditionally been imported from outside Africa, local sourcing of these products is on the rise, including from cottage industries. This increase is largely in response to the growing peri-urban and rural market demand for processed foods.66, 67 If investments in domestic agrifood processing are not made in African countries, there will be a continued dependence on imports for these products.

Capitalizing on this potential requires channelling of substantial resources towards local agrifood processing in addition to lowering of barriers faced by local processors to entry in new and distant (including export) markets. This requires, inter alia, supportive financial and market linkage services to connect small-scale producers in rural areas with traders and aggregators in peri-urban and urban areas. However, there could be other approaches. Future research could focus on how a variety of measures – such as international transfers as well as trade and fiscal measures in high-income countries – might also help address the challenges to financing agrifood processing that African and other low- and middle-income countries face.14

There are already examples of investments in agrifood processing in peri-urban areas of Africa. For instance, in Ghana, the Rural Enterprises Programme works to improve the livelihood of rural small and medium enterprises by increasing profitability and generating growth and employment opportunities. The project has established sustainable district-level delivery systems for business development services in peri-urban centres; offered capacity building and training related to manufacturing processing equipment and testing prototypes; and facilitated linkages with participating financial institutions including rural and peri-urban banks. Total income, durable assets, and business income were, respectively, 50 percent, 55 percent and 25 percent higher for beneficiary households vis-à-vis non-beneficiary ones,68 and household dietary diversity increased by 10 percent. Furthermore, women were more likely to manage self-employment activities jointly with men and have higher decision-making power related to access to credit.

In the United Republic of Tanzania, the Marketing Infrastructure, Value Addition and Rural Finance Support Programme was created to, inter alia, provide support to small-scale producers to overcome the main barriers encountered along the agrifood value chain. Such barriers include limited access to credit and inputs, absence of functioning post-harvest storage facilities, difficult access to markets, and the dearth of skills to use available technology. The project rehabilitated rural roads, strengthened agrifood processing and agricultural market information systems, supported production and decision-making capacity of producers and traders regarding purchase and sale of inputs and outputs, and increased the capacity of rural and peri-urban financial institutions, for example by linking them to the formal banking sector. This resulted in significant increases in agricultural income, livestock assets and productive assets for beneficiary households representing 16 percent, 11 percent and 7 percent, respectively.69 Crop yields and crop revenues increased by 29 percent and 18 percent, respectively; household dietary diversity was also found to have increased by 4 percent. Moreover, women were more likely to hold decision-making power regarding crop revenues jointly with men, and were also more likely to be members of influential groups in their communities.

Small and medium enterprises can contribute to nutrition improvements in rural areas by enhancing smallholders’ access to markets and inputs. In addition, they can stimulate upgrading at the farm level by providing inputs and finance64 and offering differentiated pricing based on quality. For these reasons, SMEs have great potential to contribute to rural poverty reduction and access to healthy diets, by expanding employment opportunities in the SMEs themselves, boosting farming incomes and increasing the supply of nutritious foods.

However, a number of challenges prevent SMEs from fulfilling their potential and taking advantage of growth opportunities. These challenges are often neglected in research and national policy formulation aiming at agrifood systems transformation, inclusive rural development or urban planning.70, 71, 72 In LMICs, SMEs are often scattered, numerous, and small to very small in size; they are predominantly informal, and family owned. They face high transaction costs due to their size but also weak infrastructure, while their growth is limited by insufficient access to finance, lack of support for accessing improved technologies, and lack of policy initiatives targeting their growth. Because many of them depend on local sourcing rather than on a diversified base of commodity supplies, they face covariate risks with local farming. The existence of multiple constraints limits their potential to accumulate assets and expand operations, including as sources of employment and income diversification and as contributors to healthy diets.60 There is also public underinvestment in specific value chains that would contribute towards increased availability of nutritious foods: namely, a disproportionate amount of public investment is directed towards staple crop productivity.14

Furthermore, SMEs located in SICTs are at a competitive disadvantage vis-à-vis larger firms. Scattered evidence shows that economies of scale and scope feature more prominently when intermediaries serve an urban population concentrated in large cities, rather than one that is spread across many mid-sized cities, although more systematic research is needed on this aspect.70 Women are also heavily engaged in SMEs, both as workers and as entrepreneurs; however, they systematically face constraints to scaling up their business due to financial, mobility and empowerment gaps.73 In addition, many SMEs involved in midstream activities are informal, which may exclude them from public services and policies that are mostly oriented to formal agribusinesses.74

It is also important to note that unleashing the potential of SMEs does not come without trade-offs between growth and employment and healthy diet outcomes. Increasing the productivity and reducing the cost of unhealthy processed foods (e.g. sugary drinks, bleached flour, refined starches, oils and sugars) lowers the price of those foods, thereby creating a cost advantage vis-à-vis minimally processed or unprocessed items such as fruits and vegetables.6, 75

The growing middle class food markets in LICs can be leveraged to increase supplies of processed nutritious foods.76, 77 In this context, there are opportunities to invest in processing SMEs, through the identification of specific value chains and products that can both be nutritious and provide value-added livelihood opportunities for value chain participants. Examples of this are moringa (moringa powder) and a range of non-timber forest products.78

Policies and investments to leverage the potential of the “hidden/missing middle” to provide affordable healthy diets for all

Policies to enable the potential of SICTs for growth, poverty reduction and improved access to affordable healthy diets should facilitate the flow of people, products and resources between such cities and their rural catchment areas, but also expand the reach of local agriculture to more distant markets. These improvements in connectivity are also critical for SMEs. Better linkages between producers, agro-industrial processors,al agricultural and non-agricultural services, and other downstream segments of the agrifood value chain could provide more opportunities for SME development and, from a spatial perspective, could turn SICTs into crucial “food exchange” nodes.am, 5

Building rural infrastructure, including quality rural and feeder roads to connect remote farms and enterprises to main road networks, is essential for unlocking the productive potential of SICTs and their catchment areas.55, 56 There is ample evidence that rural roads lead to other investments that can improve nutrition, such as schools and health services,80 and have positive impacts on rural dietary diversity, productivity, incomes and food security outcomes.81 There is also evidence that as infrastructure and services develop, midstream activities (especially agrifood processing) tend to get relocated in SICTs.82

Public investments (in addition to roads) to support linkages between (mainly small) farms and SMEs could include warehousing, cold storage, dependable electrification, access to digital tools and water supply. Providing this infrastructure, which forms the basis for a diversified service industry, is a critical step towards more efficient functioning of SMEs (Box 10). Such investments build resilience and contribute to smoothing income shocks from seasonality, market volatility and weather variability.83 In order to attract private sector investment, these public investments need to be more targeted and part of more comprehensive national strategies for infrastructure development. For example, building “last-mile” infrastructure and logistics that enable delivery from a distribution centre or facility to the end user, opens up possibilities for producers to reach bigger markets and, in the process, creates conditions that foster agribusiness development.5, 84

BOX 10Strengthening capacities of small and medium enterprises TO OFFER SAFE AND NUTRITIOUS FOODS

Small and medium enterprises (SMEs) can play an important role in improving the availability of and access to healthy diets. However, they often face managerial and technical capacity gaps. These shortcomings are compounded by the lack of systematic support to value chains for producing nutritious foods, especially those in which the myriad of SMEs are involved.

To strengthen their role in the supply of safe and nutritious foods, SMEs’ capacities need to be improved across a range of skills such as business management, financial planning, marketing, technical aspects of sustainable agriculture, food quality and safety, processing, and nutrition. Ensuring food safety is one of the biggest challenges, as SMEs often operate in inadequate structures and/or unhealthy surroundings with no access to basic utilities, using rudimentary or obsolete technologies, and with limited application of updated productive, manufacturing and hygiene practices.85,86 Filling these gaps will not only facilitate access to more lucrative markets, it will also add value to public support programmes that invest in technologies suited to SMEs (e.g. low-cost cold storage or solar dryers, affordable packaging solutions, and labour-, water- and energy-saving processing technologies). For example, the demand for aquatic foods has led to the development of innovative practices to turn processed by-products (about 50 percent of processed fish with the greatest concentration of nutrients) and other underutilized aquatic foods such as seaweed into processed foods to include in local school feeding programmes.87, 88

Capacity development for SMEs needs to be integrated into broader programmes to strengthen value chains of nutritious foods, in order to overcome the rising production costs associated with unreliable access to raw materials within fragmented value chains and upgrade the inadequate storage, power and transport infrastructures.

Investment for improving access to markets is also important for hinterland communities that are far away from SICTs catchment areas, as is the case of some Indigenous Peoples. They often face great difficulty accessing markets, and thereby have to rely on traders and aggregators, which may leave them prey to rent extraction. Existing evidence indicates that improving market access of Indigenous producers in remote areas could lead to significant improvements in economic and livelihood outcomes. In Brazil, for example, a cooperative effort to improve market access among Indigenous Peoples’ communities so they could purchase larger boats, thereby allowing small-scale fishers to deliver fish directly to markets, contributed to a 27 percent increase in income,89 mainly as a result of fishers receiving higher prices for their fish. In the Philippines, a project aimed at improving the livelihoods of poor households in Indigenous Peoples’ communities by developing market access infrastructures and community watersheds, and providing financial capital and capacity-building training, improved small-scale producers’ market participation by 13 percentage points. As a result, total income was 32 percent higher in treatment households than in control households, and income sources became more diversified by 6 percent.90

Investments targeting the midstream may also address multiple constraints elsewhere in the agrifood value chain leading to win–win situations of greater economic development and increased production of nutritious foods. Combinations of investments in wholesale markets and feeder roads in China have had important effects on farming in the market catchment areas of SICTs by reducing transaction costs for farmers to reach local markets. This has increased adoption of vegetable farming and intensified production.91 In Bangladesh, the government has made extensive investments in fish wholesale markets in rural areas to serve as nodes for the formation of wholesale and logistics SME clusters across fish-farming areas, which has encouraged and facilitated commercialization, intensification, and species diversification in fish farming.92 In general, investments in connectivity between locations and components of agrifood systems in SICTs have spurred substantial development of and investments by SMEs and the creation of spontaneous clusters of wholesale and logistics SMEs. Such clusters, in turn, induce farmers to increase their crop variety and to use more inputs.91,93 In India, the confluence of factors such as increased demand from urban areas and improved roads and transport linkages from rural areas to SICTs, boosted the expansion of cold storage facilities for potato farmers in places like Agra and Bihar. The result was reduced seasonality of potato supply, a diminished role for traditional rural brokers and shorter supply chains between farmers and consumers.70

Moreover, recent studies have shown that investments in public goods such as roads or storage facilities can reduce trading costs, thus encouraging farmers to produce highly profitable foods such as fruits, instead of low-profitability staple foods for self-consumption.94, 95 Lower trading costs could provide the right incentives for smallholder farmers to shift their production to more nutritious foods which, considering their availability gap, could be key for making healthy diets more available and affordable for all. This is aligned with one of the main insights of the 2022 edition of this report, which indicated that repurposing and stepping up food and agriculture policy support towards general services support (which includes investments in roads and other public goods) could play a key role in the affordability of healthy diets.

Territorial food markets, including wholesale markets, constitute a key linkage between producers, intermediaries, retailers and consumers in Latin America and the Caribbean,96 South-eastern Asia, and Africa, and are often the most important marketing place for fruits and vegetables.97 Investing in improved and gender-sensitivean wholesale market infrastructure (e.g. in territorial food markets) could improve supply of fresh products and facilitate compliance with food safety and quality standards by smallholder producers (see Box 11),97 incentivize producers to supply higher-quality foods that could bring them better returns, and increase the quantity and variety of food supply through vertical and horizontal scaling.13

BOX 11Territorial food markets, food safety and healthy diets

Territorial* food markets are key retail outlets not only for fruits and vegetables, but also for animal source and staple foods, among others. From small villages to large metropolitan cities, they are an important food supply source of many products, and are also part of the social fabric of communities. These markets are a primary source of affordable, nutritious and fresh foods for many low- and middle-income groups, and an important source of livelihood for millions of urban, peri-urban and rural inhabitants worldwide.106

Territorial food markets are also critical sales outlets for local producers. In Africa’s food sector, for example, 80 percent of domestic food supplies are purchased in markets comprising primarily small and medium enterprises, while only 20 percent remain within farm households (for own consumption).107 Furthermore, these food markets are also crucial for providing employment opportunities to women, who make up a significant share of retailers. For example, in markets mapped in Malawi, Paraguay and the United Republic of Tanzania, women retailers represent a clear majority, between 57 and 81 percent.108

However, if not well managed, territorial food markets may represent a global public health risk, as shown by the major outbreaks of zoonotic foodborne diseases periodically occurring on every continent.109 The causes of such outbreaks are manifold, including human–animal interactions, poor infrastructure and deficient post-harvest handling practices leading to food contamination by viruses, bacteria, parasites, prions and chemicals (including toxins, pesticides, industrial chemicals, metals and persistent organic pollutants).110

Ensuring that nutritious foods are available, affordable, safe and desirable in territorial food markets can positively influence people’s dietary preferences and choices, and thus help to improve their nutritional status and health. To this end, appropriate regulation and investment in rehabilitation and renovation of territorial markets play an important role in promoting food safety and quality, improving health, enhancing food security, and strengthening the economy. These food markets are also ideal settings for engaging stakeholders (e.g. vendors and local authorities) and the public to inform consumers about outbreaks and promote general health (including information on nutrition).38 The latter is key to nudging consumers to purchase foods with higher nutritional quality (e.g. fruits, vegetables, legumes, nuts and fish).111

NOTES: * Territorial markets refer to markets that are directly linked to local, national and/or regional agrifood systems, and which are mostly organized horizontally among the various stakeholders. They have multiple functions (economic, social, cultural, etc.) in their respective territory beyond food supply, and are the most remunerative for smallholder farmers.112

The increased reliance on, and demand for, processed foods presented in Chapter 3 and Chapter 4 present both a challenge and an opportunity regarding healthy diets. Although food processing is often associated with highly processed foods high in fats, sugars and/or salt, it can also be used to improve food nutritional quality and reduce the cost of a healthy diet. For instance, improving the nutritional quality of processed foods and beverages through reformulation is essential across the rural–urban continuum:99 it can enhance diet quality, increasing nutrient content and reducing the intake of saturated and trans-fatty acids, sugars and/or salt in purchased foods.ao In many high-income countries (HICs), and increasingly in LMICs, a significant proportion of sodium in the diet comes from processed foods such as bread, cereal and grains, processed meats, and dairy products. Introducing maximum limits for sodium in such processed foods can promote reformulation and improve the nutritional quality of food available.101 To date, 65 countries have implemented policies to reformulate manufactured food to contain less sodium and almost half of the world’s population are covered by mandatory trans-fatty acid limits.101, 102, 103 While reformulation of processed foods can lead to products with a healthier profile, it does not eliminate the concern for high consumption levels of highly processed foods. For example, often free sugars are replaced by non-nutritive (or artificial) sweeteners, which alone does not improve diet quality. Instead, free sugars should be replaced with sources of naturally occurring sweetness, such as fruits, as well as minimally processed unsweetened foods and beverages.104 Similarly, fortification is the practice of deliberately increasing the content of one or more micronutrients (i.e. vitamins and minerals) in a food or condiment to improve the nutritional quality of the food supply and provide a public health benefit with minimal risk to health. Food vehicles for fortification range from basic commodities such as various types of flour, sugar and salt which can be ingredients of processed foods, to processed foods that are fortified at the point of manufacture or use.105

Food production policies

As has been indicated in Chapter 3, the availability of fruits and vegetables per capita per day is insufficient to meet the requirements of a healthy diet in most parts of the world. This makes it essential to boost the production of nutritious foods and, in general terms, support the diversification of food production, which has shown to have positive effects on food supply and food security.113 In addition, changing food expenditure patterns across the rural–urban continuum, as highlighted in Chapter 4, could send important signals for redesigning food production policies.ap

Access to inputs such as seeds is key for supporting production of fruits and vegetables,115 and this is true across the rural–urban continuum. Supporting smallholder farmers in diversifying their production will have positive effects not only on the overall supply of nutritious foods, but also on the accessibility of healthy diets in rural areas. For example, different kinds of input subsidies (direct distribution of inputs, vouchers or targeted preferential prices) have been shown to have positive impacts in improving access to diverse and more nutritious foods at the household level.116 In Ethiopia, a study found that rural vegetable producers earned more income and were more food secure than non-vegetable producers.118 Agricultural extension is also important in rural areas, and can have positive effects on dietary diversity and quality at household levels.81 However, currently extension programmes are often oriented towards staple crops rather than nutritious foods such as fruits and vegetables. Changing the focus of these programmes could be essential for increasing the availability of these foods.115

As mentioned in the previous section, investing in infrastructure is key for enhancing agrifood systems linkages across the rural–urban continuum. From a productive perspective, investing in irrigation is important for boosting fruit and vegetable production, to the point that in India, producers that have access to irrigation infrastructure show better dietary diversity outcomes.119 In cases in which the conditions and capabilities for producing diverse nutritious foods have yet to be developed, biofortification has shown to be a valid alternative method to improve the nutrient intake and dietary quality of rural populations.aq The adoption of biofortified crops by smallholder farmers can improve the supply of essential micronutrients not only via own consumption, but also through commercialization in local markets and inclusion in social protection programmes including in-kind food transfers and school meal programmes (the latter in all kinds of settings across the rural–urban continuum).120

It is important to highlight that many studies in rural settings have found that women’s empowerment is one of the most important pathways through which food production policies can have positive effects on access to nutritious foods and, in turn, on food security and nutrition outcomes, particularly in rural areas. Several studies have found positive associations between women’s empowerment and household dietary diversity,117, 121 making the closure of the gender gap in rural areas a key consideration for any food production policy oriented towards improving access to affordable healthy diets.

On the other hand, in cities and their surroundings, urban and peri-urban agriculture (UPA) has the potential to increase the availability of fruits and vegetables for urban dwellers.122 In fact, it has been found that households involved in urban agriculture improve their dietary diversity through own production, and in turn reduce their food expenditure.123, 124, 125 However, this evidence is limited compared to that for rural areas, as there is a gap in the analysis of direct policy instruments oriented towards food production in urban areas.ar Still, it has been observed that the inclusion of urban agriculture objectives in city planning and regulations, often in HICs, can create adequate conditions for the development of urban agriculture.as, 126

The development of UPA is closely linked to the adoption of productive technologies and innovations, which can lead to increased yields and reduced environmental impacts. Considering the scarcity in urban areas of natural resources such as land and water needed for the production of nutritious foods, technology could play an essential role in making urban agriculture a sustainable alternative for food supply.126 The next section provides a detailed analysis of these technological innovations, as well as other agrifood systems innovations that could boost the effects that the different kinds of policies analysed here could have in making healthy diets affordable across the rural–urban continuum.

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