1. Increasing water accessibility: Strategic investment and policy priorities in agricultural water By: WoldeabTeshome (PhD) SESSION 4: Panel session on Public Policy and Investment Tuesday 23, November 2010

2. Outline of the presentation Introduction Investment areas of agricultural water management and the pay-offs and trade-offs Operational feasibility of the investments in current political context; resources required and the role of private sector Policy context in the ACP region; policy changes needed to accompany proposed investment Linked investments needed in complementary sub-sectors to realize the benefits of increased investment Key drivers that will impact future water availability and use for agriculture; adaptive measures and strategies

3. 1. Introduction... More than 947 million people live in ACP countries An estimated seventy percent of the population depends on agriculture for full-time employment and many others rely on agriculture for part of their household income in Africa Two hundred million Africans live with food insecurity Caribbean economies share many of the characteristics of small States, with open and vulnerable economies, limited diversity in production, exports concentrated on a few products, thin markets, and high transportation costs.

4. 1. Introduction... Agricultural water management is at the crossroads between four areas of public policy for sustainable growth: water resource management agriculture rural development and the environment Agricultural water management also interacts closely with broader aspects of macroeconomic policy for growth (World Bank, 2006)

5. 1. Introduction... Key challenges facing agricultural water management include: the policy and institutional challenge, the economic and financial challenge, the problem of declining investment, the challenge of technology and water resources to supply growing demand, the poverty and rural incomes challenge, and environmental dimensions and the sustainability imperative.(World Bank 2005: 4)

6. 2. Investment areas of AWM in ACP countries and the payoffs and tradeoffs 2.1 Irrigation (World Bank) The future stresses and risks caused by rising food demand and intensification of irrigated agriculture: The strong demographic push to food demand is expected to continue. Intensified irrigated agriculture will provide more than half of the extra food. However, over 40 percent of the extra food will have to come from intensified rainfed farming in coming years, for which improved water management is essential.

7. 2. Investment areas of AWM... (irrigation) There is some potential for expansion of the irrigated area. FAO estimates that the irrigated area in developing countries could increase by almost 20 percent (40 million ha) in the period 1997–9 to 2030 Unfortunately, in Africa, only 7 percent of arable land is irrigated, with an even lower 4 percent in sub-Saharan Africa, compared to 38 percent in Asia. The continent only uses 4 percent of its water reserves (less than 3 percent in sub-Saharan Africa), against 20 percent in Asia

8. 2. Investment areas of AWM... (irrigation) That means that on 93 percent of Africa’s agricultural land, the population has to rely on rainfall to live or rather to survive; and rain is becoming increasingly unpredictable on account of climate change (World Bank 2004b) gives prominence to irrigation as the key producer of food and source of livelihood for the world’s poor, and as the largest user of water The bank emphasizes two imperatives: to expand investment in irrigation and to change the way irrigation is managed Calling for “principled and pragmatic reforms,” the strategy stresses the need to return to basic economic principles that incentives should reflect both the financial cost of supplying services and the opportunity cost of water

9. 2. Investment areas of AWM... (irrigation) Stephen N.Ngigiemphasises smallholderagricultural water management for a number of reasons. The performance of large public irrigation schemes in Africa is associated with poor governance insecure land tenure, leading to low farmer investment and exploitation by government agencies A key policy change would be to support increased investment in smallholder irrigation as opposed to large-scale irrigation projects

10. 2. Investment areas of AWM... (irrigation) Apart from the obvious lower start-up cost and high economic impact, smallholder irrigation systems often have strong local community governance, are relatively free of political intervention, and have lower operation and maintenance costs Large surface irrigation systems will need to incorporate improvements in water control and delivery, automation and measurement, and training of staff to better respond to farmers’ needs In regions that rely heavily on agriculture irrigation is likely to remain important in rural poverty reduction strategies.

11. 2. Investment areas of AWM... (irrigation) Ethiopia: The irrigated area in Ethiopia is only about 5% of the country’s irrigation potential. About 73.6 million hectares of the country’s land is potentially suitable for agricultural production. The surface water resource is about 122 billion cubic meter; ground water about 2.6 billion cubic meter. There is strong interest and commitment by the government of Ethiopia, donors, and NGOs for the development of and management of the irrigation sector. PASDEP (Plan for Accelerated and sustained Development to End Poverty) recognizes the importance of the development of small and medium scale irrigation.

12. 2. Investment areas of AWM...(Rainfed agriculture ) 2.2 RainfedAgriculture Facing the food and poverty crises in developing countries will require a new emphasis on small scale water management in rainfedagriculture Investments in rainfed agriculture have large payoffs in yield improvements and poverty alleviation through income generation and environmental sustainability IWMI’s Comprehensive Assessment of AWM shows that the potential for improving water productivity is particularly high in smallholder rainfed agriculture, with water savings of 15%–20% already possible over the coming decade The key challenge is to reduce water-related risks posed by high rainfall variability rather than coping with an absolute lack of water

13. 2. Investment areas of AWM...(groundwater) 2.3 Groundwater Intensive groundwater use in agriculture has become a dominant, yet under perceived aspect of contemporary water use Groundwater has contributed significantly to growth in global irrigated areas since the 1970s Given the existing trends, intensive use of groundwater cannot be sustained unless accompanied by far more intensive regimes of resource management than are currently deployed. (Algeria 60% and Libya 95 % depend)

14. 2. Investment areas of AWM...(groundwater) The dynamic impacts of intensive groundwater use are best understood by recognizing four types of groundwater- in-agriculture systems: - Arid agricultural systems, Industrial agricultural systems, smallholder farming systems and Groundwater-supported extensive pastoralism This intensive—but essentially unplanned—groundwater use faces several challenges Pumping costs are rising, and irrigation-supporting subsidies are compromising the viability of rural energy providers The long-term sustainability of groundwater systems is not easily determined. In the face of such growing concerns, groundwater use in agriculture is showing no sign of ebbing

15. 2. Investment areas of AWM... (waste water) 2.4 Waste Water (Marginal Quality Water) Millions of small-scale farmers around the world irrigate with marginal-quality water, often because they have no alternative Wastewater often contains a variety of pollutants: salts, metals, metalloids, pathogens, residual drugs, organic compounds, endocrine disruptor compounds, and active residues of personal care products Public agencies in several countries already implement policies on marginal-quality water. Egypt plans to increase its official reuse of marginal-quality water from 10% in 2000 to about 17% by 2017 (Egypt MWRI 2004) In Tunisia in 2003 about 43% of wastewater was used after treatment Wastewater use will increase in India, as the proportion of freshwater in agricultural deliveries declines from 85% today to 77% by 2025, reflecting rising demand for freshwater in cities (India CWC 2002).

16. 3. Operational feasibility of the investments in current political contexts In 2003, the New Partnership for Africa’s Development (NEPAD) and its Comprehensive Africa Agriculture Development Program (CAADP), were launched to accelerate agricultural growth in the region Also in 2003, African governments signed the Maputo Declaration committing to a minimum allocation of 10% of their national annual budgets to agriculture Recent political context confirmed the urgent need to secure and increase basic food staples (Sirte Conference on Water for Agriculture and Energy - December 2008)

17. 3. Operational feasibility of the investments... AU Summit (July 2009) on Investing in Agriculture for Economic Growth and Food Security Further, in July 2009 the G8 to pledge USD 20 billion over the next three years to increased food production and China has pledged USD10 billion in public-private-partnerships in agriculture to help attain the NEPAD-CAADP objectives The CAADP framework, which is already being implemented in most countries, will enable more efficient investments The CAADP has moved from strategy to implementation at the country level through the process of country roundtables and compacts.

18. 3. Operational feasibility of the investments... This process culminates in a CAADP Compact which guides country policy and investment responses to meet the 6% growth target and 10% budget allocation to agriculture Guided by the African Water Vision (AWV) 2025 and CAADP-Pillar I (Sustainable Land and Water Management), and in line with the African Food Crisis Response (AFCR - July 2008), the Bank has developed a Water Business Plan (BP) that aims to develop an area of up to 500,000 hectares The Bank will, therefore, channel its support to the following areas, (i) agricultural water development, (ii) increased water storage capacity, and (iii) institutional support and project preparation activities

19. 3. Operational feasibility of the investments... The Bank also aims to increase water storage capacity in Africa by at least 1 percent (additional storage of 8.5 billion cubic meters for multi-purpose uses, including irrigation domestic use, livestock watering, and fisheries) Recent estimates of financing for the agriculture sector in Africa foresee the need for US$8.1 billion or an additional US$4.9 billion annually An indicative pipeline of projects and programs amount to UA 3.4 billion over the period 2010- 2014

20. 3. Operational feasibility of the investments... Broadly speaking the implementation challenges for African countries has three principal areas: continuing to put in place water resources infrastructure for basic services and economic development through existing and new initiatives strengthening the institutional capacity and operational mechanisms in areas where low implementation capacity is a bottleneck to progress refining strategies and policies where these are needed

21. 4. Policy context in the ACP region and policy changes needed to accompany proposed investment The policy context: The African Union (AU) dedicated its June 2008 Summit in Sharm El-Sheik to water and sanitation where African Heads of State made important commitments for accelerating the achievement of the goals in Africa The MDGs, particularly the goals of eradicating extreme poverty and hunger and ensuring environmental sustainability, are central to the NEPAD program for African agriculture Comprehensive Africa Agriculture Development Program (CAADP) supported by the Africa Union (AU) and New Partnership for Africa’s Development (NEPAD) provide a framework for accelerating agricultural growth in Africa The African Water Vision (AWV) 2025

22. 4. Policy context in the ACP region... Policy changes Developing and integrating sector policies for AWM At the sectoral level, policies for water resources management, agriculture, rural development, and the environment need to mesh to support sustainable, market-driven growth in rural incomes based on improved AWM Policy for agricultural water management is vital: it must deal with managing scarcity, with water allocation, with food security, with poverty reduction, and with environmental risks

23. 4. Policy context in the ACP region... The policy reform agenda for agricultural water management is a difficult one, which includes: setting the legislative and regulatory framework establishing an incentive regime consistent with poverty reduction, rural development, and agricultural goals and with trade and macroeconomic policies matching investment and incentive policies in agricultural water management with broader agricultural policies on both the input and the output sides ensuring that agricultural water fits within an integrated, intersectoral water management framework

24. 4. Policy context in the ACP region... designing institutional models to separate bulk water delivery from distribution and to provide efficient least-cost water service; redefining the role of public and private sectors and of markets; and ensuring an enabling environment for private investment. The Trade-offs Although policies cannot be uniform, successful reforms generally limit the role of government, decentralize responsibility to local authorities and agencies, and to water users, promote market-based solutions and private investment, and emphasize market-led growth policies with domestic and global trade reform.

25. 4. Policy context in the ACP region... Tradeoffs between food self-sufficiency goals and efficiency goals will be increasingly on the policy agenda Many water management reforms have high political transaction costs. These can be absorbed at least in part by investing in participatory processes of ownership building. Adjustment lending may also help Typically, reform is likely to take a long time, requiring stamina and consistency both from the nation and from external partners such as the Bank. Understanding the political economy of reform is essential Irrigation with wastewater is risky. Public agencies should consider wastewater and saline or sodic water when evaluating national water management strategies to optimize the use of limited water resources.

26. 5. Linked investments needed in complementary sub-sectors to realize the benefits of increased investment Government’s role is best undertaken in partnership with the private sector In addition, strategic investment to promote markets and create market and transport infrastructure can be critical to the development of irrigated agriculture Development of markets and roads in the Nigerian fadama combined with access to groundwater boosted profitability by three times and more In Ethiopia, access to all-weather road decreased poverty by 6.9% and increased food consumption by nearly 17% Mobile phone and ICT technology have reduced the cost of information provision on markets and prices. (World Development Report, 2008)

29. 6. Key drivers that will impact future water availability... Climate change creates greater risks and uncertainties, which should be dealt with by a risk management approach Despite their best efforts, governments of Caribbean SIDS face considerable challenges exacerbated by a series of external shocks, including the global financial crisis, energy price shocks, fluctuating commodity prices, the rising cost of external credit and the dismantling of preferential market arrangements for traditional agricultural commodities The growing debt burden of many Caribbean countries is also generating considerable concern Seven Caribbean countries are included among the ten most indebted countries in the world.

30. 6. Key drivers that will impact future water availability... Caribbean countries must also contend with declining FDI and ODA. Between 2006 and 2008, FDI inflows had decreased considerably in all the countries except Cuba, the Dominican Republic, and Trinidad and Tobago The economic growth prospects of the Caribbean region are also constrained by a variety of natural factors, including adverse physiographic conditions in many countries Despite the progress in Caribbean functional cooperation, integration, and trading arrangements, there remain many challenges Economic disparity is often cited as one of the impediments to deeper regional integration, especially of CARICOM member States.

31. Sources of information IWMI (2007 ) Water for food water for life. A Comprehensive Assessment of Water Management in Agriculture Edited by David Molden. World Bank (2005) Shaping the Future of Water for Agriculture A Sourcebook for Investment in Agricultural Water Management Stephen N. Ngigi (2009) Climate Change Adaptation Strategies Options for Smallholder Farmers in SSA Reengaging in Agricultural Water Management Challenges and Options (World Bank, 2006) ADB (2010)Agriculture Sector Strategy 2010 – 2014) AFRICA REGIONAL PAPER African Development Bank Group (2009) Africa Regional Paper. Bridging Divides in Africa’s Water Security: An Agenda to Implement Existing Political Commitments Confronting the realities of wastewater use in agriculture. Water Policy Briefings, Issue 9)

32. Sources of information... ECA (2007)Africa Review Report on Agriculture and Rural Development (summary) REPORT OF THE SEVENTH ORDINARY SESSION OF THE AFRICAN MINISTERS’ COUNCIL ON WATER (AMCOW) JOHANNESBURG, REPUBLIC OF SOUTH AFRICA 13 NOVEMBER 2009 CARIBBEAN REGIONAL REPORT FOR THE FIVE-YEAR REVIEW OF THE MAURITIUS STRATEGY FOR THE FURTHER IMPLEMENTATION OF THE BARBADOS PROGRAMME OF ACTION FOR THE SUSTAINABLE DEVELOPMENT OF SMALL ISLAND DEVELOPING STATES, 2010 Investment in Agricultural Water for Poverty Reduction and Economic Growth in Sub-Saharan Africa SYNTHESIS REPORT, 2007