Irrigation Scheme Operation and Expansion for Commercial Farmers
Business Model Description
Operate and expand irrigation schemes with agro-processing capacity on existing land of commercial farmers for import substitution and enhanced export activities.
Expected Impact
Enhance Namibia's agro-processing capacity to improve food security in the country and promote export of produce to Southern African Development Community (SADC) markets.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Namibia: ǁKaras Region
- Namibia: Zambezi Region
- Namibia: Oshikoto Region
Sector Classification
Food and Beverage
Development need
25% of Namibia's population is food insecure (II), including due to persistent drought situations (IV) and the country's farmers facing challenges to access affordable financing (V). SDG 2 on Zero Hunger is "stagnating" and faces "major challenges" in Namibia (I).
Policy priority
As captured in Namibia's 5th National Development Plan (NDP5), the Government seeks to transition from a provider of live animals to exporting value-added agricultural goods, and increase food and livestock production by 30% and 10% in 2022 (II). Although the agriculture sector only contributes 3-5% to GDP, it is a Government priority as it employs 23% of its population (III).
Gender inequalities and marginalization issues
The majority of the 167,242 jobs in Namibia's agriculture sector are within rural areas of the country. Only 21.1% of the workforce is female (III), signaling a major opportunity to provide additional income generation opportunities for women.
Investment opportunities introduction
Agriculture, among others, generates significant multipliers: an increase in final demand of NAD 1 million (USD 72,000) for traditional agriculture is likely to generate an output twice that value as well as GDP and income for roughly the same value (VI). This is expected to lead to the development of Namibia's economy and result in poverty alleviation (V).
Food and Agriculture
Policy priority
Namibia's Government focuses its efforts for greater food security on developing the agro-processing industries by utilizing local produce and strengthening regional value chains, as well as increasing the agricultural production for cereals, horticulture and livestock (II).
Gender inequalities and marginalization issues
An increase in final demand for traditional agriculture is expected to generate the highest impact among low-income households in Namibia, benefitting marginalised communities and women, among others (VI).
Agricultural Products
Pipeline Opportunity
Irrigation Scheme Operation and Expansion for Commercial Farmers
Operate and expand irrigation schemes with agro-processing capacity on existing land of commercial farmers for import substitution and enhanced export activities.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
15,500 hectares of farm land require irrigation in Namibia.
15,500 hectares of farm land require irrigation infrastructure, which the Government of Namibia is planning to implement over the next 13 years at a cost of USD 385.7 million (17).
Of a combined horticulture vegetable market of USD 31.28 million, Namibia imports an estimated USD 14.85 million (47%). Of a combined horticulture fruit market of USD 15.64 million, Namibia imports an estimated USD 14.93 million (95%) (23,175 tonnes) (28).
Namibia imports approximately USD 11.92 million worth of potatoes annually, which constitutes 65% of the potato market in country (28).
Indicative Return
10% - 15%
The IRR for irrigation projects, using systems like center pivots, sprinklers and drip irrigation, ranges from 12-15% due to high setup costs especially for center pivot irrigation.
Green Scheme irrigation projects like the Sikondo and Ndonga Linena Farms were developed with an expected IRR of 14.5% and 15%, respectively (14).
Small scale horticultural projects that use cheaper irrigation systems yield returns as high as 21%, such as the SMF Farm in Katima Mulilo (15).
Investment Timeframe
Long Term (10+ years)
A 10-20 years investment timeframe is expected based on the benchmark project Namibia Green Scheme with public-private partnerships between the Ministry of Agriculture and service providers (29).
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
Namibia is an arid country with an annual rainfall between 20 and 600 mm. Only 8% of the country receives more than 500 mm annually, which combined with poor soils are obstacles to optimum agriculture production. The lack of arable land remains the major obstacle to agricultural productivity (0).
428,000 Namibians (17% of the population) face high levels of acute food insecurity, including around 14,000 people in emergency. The regions of Kunene, Erongo, Khomas, Ohangwena, Kavango West, Omaheke and Zambezi are "in crisis", as per the Integrated Food Security Phase Classification (0.1).
Only 11,500 hectares of Namibia's farm land is under irrigation, leaving 15,500 hectares without irrigation under the Green Scheme programme (17).
Gender & Marginalisation
Namibia's smallholder farmers have limited access to nutritious food due to recurrent droughts and floods, low productivity and limited access to land (0.2).
Most of Namibia's low earners spend 57% of their incomes on food (0.3), leaving little for productive activities.
Expected Development Outcome
Improved national food security situation, and higher overall agricultural production.
Increased value addition to local horticulture produce, and increased export revenue from agricultural products.
Gender & Marginalisation
Remote parts of Namibia have improved food security and livelihood situations, including greater income generation opportunities for women on irrigated farmers.
Primary SDGs addressed
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
2.4.1 Proportion of agricultural area under productive and sustainable agriculture
2.a.1 The agriculture orientation index for government expenditures
9.2.1 Manufacturing value added as a proportion of GDP and per capita
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Indirectly impacted stakeholders
Gender inequality and/or marginalization
Corporates
Outcome Risks
Irrigation systems can negatively impact the environment, if not pursued with a sustainability approach, and lead for example to ground water depletion.
The use of irrigation systems can lead to automation and hence reduce the need for labour, which can result in lower employment opportunities.
Impact Risks
Irrigation systems necessitate investments like water utilisation structures. Unless these investments are realised at scale, the impact of the opportunity might not be significant.
Impact Classification
What
The outcome is likely to be positive, important and intended because irrigation schemes enhance the agro-processing capacity and support the servicing of national and regional markets.
Who
Commercial farmers in the agri-food sector making productivity gains and consumers in Namibia and abroad benefitting from access to high quality and affordable produce.
Risk
While irrigation technology is well established and the model proven, the opportunity can be disrupted by environmental risks as Namibia is prone to droughts.
Impact Thesis
Enhance Namibia's agro-processing capacity to improve food security in the country and promote export of produce to Southern African Development Community (SADC) markets.
Enabling Environment
Policy Environment
Industrial Policy, 2013: Introduces initiatives that establish small-scale value adding processing for vegetable and fruit products for the domestic and regional markets. The projects will be linked to the Green Scheme and Fresh Produce Hubs (9).
Agricultural Policy, 2015: Creates a conducive environment for increased and sustained agriculture production and productivity, to accelerate the agriculture sector contribution to the national Growth Domestic Product, and to promote development of national agriculture sector (18).
Agriculture Marketing and Trade Policy and Strategy, 2011: Contributes to the achievement of the agriculture sector’s objectives as reflected in Vision 2030, the NDPs and the National Agriculture Policy in concert with other policies and strategies across the agricultural value chain (10).
National Policy on Sub-Division and Consolidation of Agricultural Land, 2018: Serves to safeguard the sustainable existence of agriculture by preventing subdivision and fencing that leads to ecologically and economically non-viable farming units (12).
Growth at Home Strategy, 2012: Parallels the industrial policy outlining the small-scale value adding process (canning/ bottling) for vegetable and fruit products for the domestic and regional markets (19).
Financial Environment
Financial incentives: Agribank, as a state-owned financial institution and mandated by the Agribank Act (2003), advances money to persons or financial intermediaries to promote agriculture and activities related to agriculture (22).
Fiscal incentives: Farmers can deduct capital expenditure in full in the year in which the expenditure is incurred, limited to the farming taxable income for the year. This includes a deduction of capital expenditure relating to power supply (13).
Other incentives: FNB's Agri Medium-Term Loan product can be used for the establishment of production capacity, such as the purchase of livestock, establishing orchards and farm buildings, and other projects that take time to generate an income (23).
Regulatory Environment
Agronomic Industry Act, 1992: Provides for the establishment of a Board for the Agronomic Industry in Namibia, to regulate its powers and functions and to provide for matters incidental thereto (24).
Agricultural Produce Export Ordinance Act, 1928: Provides for the inspection and grading of agricultural produce which is to be exported from South West Africa for purposes of sale, for the charging of special fees in respect of such inspection and grading, for the inspection of premises used for the slaughter of animals for such export or for the preparation and manufacture of articles derived from such produce (25).
Marketing Act, 1968: Consolidates the laws providing for the regulation of the production and sale of agricultural products, for the establishment of certain boards in connection therewith, for the establishment of a national mark, and for the grading and standardization of agricultural products (26).
Marketplace Participants
Private Sector
Investors such as Agribank Namibia, Musa Capital Namibia (Mid-Cap Fund), EOS Capital (Euphrates Agriculture Fund), FNB Namibia and Spitz Capital. Existing projects such as the Naute and Neckartal dams and Green Scheme projects like Sikondo, Ndonga Linena and SMF Farms.
Government
Ministry of Agriculture, Water and Land Reform, Namibia Agronomic Board (NAB).
Multilaterals
The Environmental Investment Fund (EIF) is the local partner for the Green Climate Fund (GCF), which provides funding for the development and implementation of environmentally sustainable development projects, including irrigation schemes (27).
Target Locations
Namibia: ǁKaras Region
Namibia: Zambezi Region
Namibia: Oshikoto Region
References
- (I) SDG Center for Africa and Sustainable Development Solutions Network, 2019, Africa SDG Index and Dashboards Report 2019, Kigali and New York: SDG Center for Africa and Sustainable Development Solutions Network, https://sdgcafrica.org/we-content/uploads/2019/06/SDGS_INDEX_REPORT_2019WEB.pdf. II) Republic of Namibia, National Planning Commission, 2017, Namibia's 5th National Development Plan (NDP5), https://www.npc.gov.na/?wpfb_dl=294. III) Martha Nangolo & Ndapwa Alweendo for Institute for Public Policy Research (IPPR), 2020, Democracy Report. Agriculture in Namibia: An Overview, https://ippr.org.na/wp-content/uploads/2020/02/Agriculture-in-Namibia-An-Overview.docx-10.pdf. IV) Republic of Namibia, National Planning Commission, 2018, Implementation of Sustainable Development Goals, Voluntary National Review, https://sustainabledevelopment.un.org/content/documents/19880New_Version_Full_Voluntary_National_Review_2018_single_1_Report.pdf. V) Republic of Namibia, National Planning Commission, 2018, Is Agricultural Productivity an engine for growth, https://www.npc.gov.na/?wpfb_dl=357. VI) DNA Economics, 2021, SAM Multiplier Analysis for the SDG study in Namibia, Six Capitals.
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- (0.1) Integrated Food Security Phase Classification, 2020, IPC Acute Food Insecurity Analysis Namibia, July 2020 – March 2021, https://reliefweb.int/sites/reliefweb.int/files/resources/IPC_Namibia_AcuteFoodInsecurity_2020JulyMarch2021_Report.pdf.
- (0.2) WFP, 2021, Namibia, https://www.wfp.org/operations/na01-namibia-country-strategic-plan-2017-2022.
- (0.3) WFP, 2017, Namibia Country Strategic Plan (2017–2022), https://documents.wfp.org/stellent/groups/public/documents/eb/wfp291597.pdf?_ga=2.178426727.297177160.1621597913-166023273.1621597913.
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- (2) EU, 2020. Namibia: Acute Food Insecurity Situation October 2019 - March 2020 and Projection for April - September 2020, https://knowledge4policy.ec.europa.eu/publication/namibia-acute-food-insecurity-situation-october-2019-march-2020-projection-april_en.
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- (10) Ministry of Agriculture, Water and Forestry, 2011, Namibian Agriculture Marketing and Trade Policy and Strategy, http://extwprlegs1.fao.org/docs/pdf/nam188595.pdf.
- (11) Namibia Agronomic Board, 2018, 2017/18 Annual Report, https://www.nab.com.na/wp-content/uploads/2019/09/Annual-Report-02.pdf.
- (12) Ministry of Agriculture, Water and Forestry, 2018, National Policy on Sub-Division and Consolidation of Agricultural Land, http://extwprlegs1.fao.org/docs/pdf/nam181018.pdf.
- (13) PWC, 2021, Namibia Tax Reference and Rate card 2021, https://www.pwc.com/na/en/assets/pdf/namibia-tax-reference-and-rate-card-2021.pdf.
- (14) Turnaround Strategy for the Ndonga Linena green scheme on behalf of Passage Investments by Dr. Loneson Mondo (MBA, DBA), 2011, Available on request from Loneson Mondo (lonesonmondo@gmail.com).
- (15) Feasibility study undertaken for Silverster Majakube's SFM Farm irrigation project in Katima Mulilo by Dr. Loneson Mondo (MBA, DBA), 2020, Available on request from Loneson Mondo (lonesonmondo@gmail.com).
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- (19) Growth at Home Strategy, 2012, Republic of Naminbia, https://www.atf.org.na/cms_documents/0c8-growthathomeinitiative.pdf.
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- (21) Namibia Agronomic Board, Horticulture Market Share Promotion, https://www.nab.com.na/horticulture/market-share-price/
- (22) Agribank, Republic of Namibia, https://agribank.com.na.
- (23) FNB, Agri Medium Term Loan, https://www.fnbnamibia.com.na/for-my-business/industry-expertise/agriculture/lending-solutions/agriMediumTermLoan.html.
- (24) Agronomic Industry Act, 1992, https://laws.parliament.na/annotated-laws-regulations/law-regulation.php?id=2.
- (25) Agricultural Produce Export Ordinance Act, 1928, https://laws.parliament.na/annotated-laws-regulations/law-regulation.php?id=13.
- (26) Marketing Act, 1968, https://laws.parliament.na/annotated-laws-regulations/law-regulation.php?id=9.
- (27) Environmental Investment Fund (EIF), https://www.greenclimate.fund/ae/eif.
- (28) Mulonda, G. 2020, Agronomy and Horticulture Industry Overview. Presentation: Namibian Agronomic Board (NAB), Available on request from NAB.
- (29) Monasa / UNDP interview, 2020, based on Mashare Berries project case study available via https://www.internationalblueberry.org/2020/10/21/namibia-is-exporting-tons-of-blueberries-for-the-first-time-ever.
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- (32) Statement by the Governor of the Zambezi Regional Governor Lawrence Sampofu reported on 12/10/2015 and 27/02/2020, https://neweralive.na/posts/zambezi-land-availed-green-schemesand https://www.namibian.com.na/198493/archive-read/Zambezi-needs-N$1-billion-for-green-schemes.
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