Wide angle view of gravel road next to a huge irrigated grape field and desert mountains on the right side near the town of Aussenkehr in southern Namibia near the South African border. Fenced fields.

Irrigation Scheme Operation and Expansion for Commercial Farmers

Photo by Juergen_Wallstabe / Shutterstock

Irrigation Scheme Operation and Expansion for Commercial Farmers

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Beverage
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Agriculture
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
10% - 15% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Long Term (10+ years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
USD 50 million - USD 100 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Zero Hunger (SDG 2) Industry, Innovation and Infrastructure (SDG 9)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Life on Land (SDG 15) Responsible Consumption and Production (SDG 12) Decent Work and Economic Growth (SDG 8)

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

Explore the country and target locations of the investment opportunity.
Country
Region
  • Namibia: ǁKaras Region
  • Namibia: Zambezi Region
  • Namibia: Oshikoto Region
Learn more

Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

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).

Sub Sector

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).

Industry

Agricultural Products

Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Irrigation Scheme Operation and Expansion for Commercial Farmers

Business Model

Operate and expand irrigation schemes with agro-processing capacity on existing land of commercial farmers for import substitution and enhanced export activities.

Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

USD 50 million - USD 100 million

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

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

IRR
Describes an expected annual rate of growth of the IOA investment.

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

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

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

Challenges to access key crop inputs due to limited availability and high production costs.

Capital - Limited Investor Interest

Lack of access to affordable finance for crop production.

Impact Case

Read about impact metrics and social and environmental risks of the investment opportunity.

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

Zero Hunger (SDG 2)
2 - Zero Hunger

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

Industry, Innovation and Infrastructure (SDG 9)
9 - Industry, Innovation and Infrastructure

9.2.1 Manufacturing value added as a proportion of GDP and per capita

Secondary SDGs addressed

Life on Land (SDG 15)
15 - Life on Land
Responsible Consumption and Production (SDG 12)
12 - Responsible Consumption and Production
Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth

Directly impacted stakeholders

People

The population at large benefitting from high quality and stable supply of produce at affordable prices.

Planet

Environment thanks to effective usage of resources.

Corporates

Commercial farmers enjoying greater productivity and increased incomes; retailers benefit from high quality and stable supply of produce at affordable prices.

Indirectly impacted stakeholders

Gender inequality and/or marginalization

Marginalised communities in farming areas, including women, benefit from additional income generation opportunities thanks to additional jobs.

Corporates

Commercial farmers benefitting from increased feedlot capacity and fodder production in the areas South of the Veterinary Cordon Fence (SVCF).

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

B—Benefit Stakeholders

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

Explore policy, regulatory and financial factors relevant for the investment opportunity.

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

Discover examples of public and private stakeholders active in this investment opportunity that were identified through secondary research and consultations.

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

See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
country static map
rural

Namibia: ǁKaras Region

Naute Dam in the Keetmanshoop Region is the most underutilized dam with existing irrigation capacity in Namibia, often filling up to capacity due to non-utilisation (30). The Neckartal Dam in the same region has the capacity to support 5,000 hectares of land under irrigation (31).
rural

Namibia: Zambezi Region

The Zambezi Region features potential Green Scheme projects, including Muyako (1,000 ha), Kongola (1,000 ha), Singalamwe (5,000 ha) and Mazungu (2000 ha) (32).
rural

Namibia: Oshikoto Region

The Northern Communal Area, which includes the Oshikoto Region among others, provides opportunities for livestock and stock feed production: Expansion of Uvhungu-Vhungu irrigation scheme, expansion of Etundai irrigation scheme, and development of Liselo irrigation project (33).

References

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