irrigation system in the Castilla y Leon cereal estates in Spain

Irrigation Systems for Smallholder Farmers

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Irrigation Systems for Smallholder 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).
5% - 10% (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.
Medium Term (5–10 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.
93,220 ha of irrigation potential with only 53% utilized
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
> USD 10 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
No Poverty (SDG 1) Zero Hunger (SDG 2) Reduced Inequalities (SDG 10)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Decent Work and Economic Growth (SDG 8) Good health and well-being (SDG 3) Life on Land (SDG 15)

Business Model Description

Manufacture and distribute water and energy efficient irrigation equipment, including main conveyance, distribution network and on-farm infrastructure of precision irrigation techniques, micro-drip irrigation and solar-powered water pumps.

Expected Impact

Sustainably increase agricultural productivity, reduce food insecurity and support farmer livelihoods.

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
  • Eswatini: Lubombo
  • Eswatini: Shiselweni
  • Eswatini: Manzini
  • Eswatini: Hhohho
Learn more

Sector Classification

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

Food and Beverage

Development need
Eswatini is a food-deficit country, depending on imports for domestic demand (1). Total food imports reached 291,529 metric tons in 2020-21, declining by 20% due to interruptions in cross-border trade (43). 30% of the population is food insecure, with 70% involved in agriculture (3). Poor farming practices contribute to a 30-40% loss of annual produce (11).

Policy priority
Agriculture is identified as one of the five key growth sectors in the government's Strategic Roadmap (33). The key targets include eliminating hunger, halving poverty, strengthening value chains and developing a smallholder-led food economy (5), as well as import substitution and improved irrigation and infrastructure (3).

Gender inequalities and marginalization issues
Smallholder agriculture remains the backbone of rural livelihoods in Eswatini, with over 70% of the country’s people, 60% of whom are women, relying on subsistence and small-scale farming to support their livelihoods (6). Investments in agriculture are key to driving poverty alleviation and empower youth and women in rural areas (7).

Investment opportunities introduction
The government has proposed 21 projects worth E 5.362 billion (USD 352.7 million) for the agriculture sector in the Post Covid-19 Economic Recovery plan (3). Opportunities include improving water resource management, climate-smart agriculture, diversifying agricultural production, investing in pre- and post-harvest infrastructure and strengthening value chains.

Key bottlenecks introduction
Recurring droughts and flooding which is exacerbated by dependency on rainfed agriculture (3). A land tenure system that reduces security of smallholder farmers as a result of no land rights and encroachment of settlements and a lack of appropriate financing for smallholder farmers to afford basic inputs (6).

Sub Sector

Food and Agriculture

Development need
Agricultural productivity has decreased contributing to only 9% of GDP (2) due to dependency on rainfed agriculture and restricted access to technology and financing (5,8). Majority of infrastructure is owned by large scale farmers limiting access to value chains and infrastructure for smallholder farmers (4, 6, 7).

Policy priority
The Swaziland National Agricultural Investment Plan (SNAIP) prioritizes investments to enhance agricultural productivity and climate resilience (4). Diversifying agricultural production for advancing sustainable livelihoods is also emphasized by the Zero Hunger Strategic Review and the Strategy for Sustainable Development and Inclusive Growth (SSDIG) (7, 8).

Gender inequalities and marginalization issues
Despite women making up 70% of agriculture labor force in Eswatini, gender inequality persists with women lacking access to land ownership, financing, inputs and means of production (6, 4). Agriculture development could reduce poverty as many rural households depend on it to support their livelihoods.

Investment opportunities introduction
Projects listed in the Covid-19 recovery plan include investing in climate-smart agriculture techniques and infrastructure and diversifying agriculture to include more high value- and drought tolerant crops (11). Investing in agro-processing and strengthening the value chain can minimize waste and develop smallholder farmers (4).

Key bottlenecks introduction
Persistent and recurring droughts prevent rain-fed farmers from producing sufficiently. High cost of agricultural inputs and a lack of financing opportunities restrict smallholder farmers from upscaling their operations, access to markets and diversification of value chains.

Industry

Agricultural Products

Pipeline Opportunity

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

Irrigation Systems for Smallholder Farmers

Business Model

Manufacture and distribute water and energy efficient irrigation equipment, including main conveyance, distribution network and on-farm infrastructure of precision irrigation techniques, micro-drip irrigation and solar-powered water pumps.

Business Case

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

Market Size and Environment

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

93,220 ha of irrigation potential with only 53% utilized

The irrigation potential of Eswatini was estimated in 2012 at 93,220 ha with 49,843 ha equipped for irrigation, thus only 53% of irrigation potential utilized (16).

Solar powered irrigation projects in the sugarcane sector are valued at USD 13 million alone (27).

Indicative Return

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

5% - 10%

ROI
Describes an expected return from the IOA investment over its lifetime.

5% - 10%

Against an in investment of E 4.6 billion for the two projects Lower Usuthu Smallholder Irrigation Project (LUSIP) and the Komati Downstream Development Project (KDDP), Eswatini Water and Agricultural Development Enterprise' (ESWADE) ESWADE’s return on investment amounts to 3.7 billion, producing a return on investment of 8% (17).

According to AfDB's evaluation report for phase 1 of the Lower Usuthu Smallholders Irrigation Project (LUSIP), an IRR of 8.4%-12.6% was estimated for investments in irrigation development based on 9,000 ha of sugar cane, 1,500 ha of cassava and 1,000 ha of vegetables (42).

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.

Medium Term (5–10 years)

Based on the 7 year financial returns of Komati Downstream Development Project and phase 1 of Lower Usuthu Smallholder Irrigation Project (LUSIP investments in irrigation are expected to pay back in medium run (17). This corresponds to findings from irrigation IOAs from other SDG Investor Maps in the region.

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

> USD 10 million

Market Risks & Scale Obstacles

Capital - Limited Investor Interest

Most investments in irrigation infrastructure are geared toward large scale sugarcane farms on Title Deed Lands (TDL) (16). Low productivity and profitability of smallholder farmers defer private sector investments on smaller farms where impact is most needed (12).

Capital - Requires Subsidy

Smallholder farmers are dependent on government subsidies for agricultural inputs and infrastructure. Current investments geared towards irrigation development are driven by government expenditure and loans from multilateral development organizations, such as the European Union (EU) and African Development Bank (AfDB) (20).

Business - Supply Chain Constraints

Most irrigation infrastructure is imported from South Africa with minimal domestic suppliers. Domestic suppliers have limited capacity to deliver and operate on large scale and are dependent on imports for stock (19).

Impact Case

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

Sustainable Development Need

Agricultural productivity and profitability, particularly amongst smallholder farmers, has decreased as a result of droughts; lack of financing and access to markets; and poor infrastructure and technology (16).

The majority of smallholder farmers depend on rainfed agriculture in a drought-prone country. This has adverse impact on their productivity and also prevents them from growing all year round (16), rendering Eswatini import-dependent for food security, with food forming 20.4% of total imports (36).

27% of Eswatini’s population are facing high levels of acute food insecurity (IPC Phase 3 or above) (26) as a result of low levels of productivity, droughts and poor farming practices.

Gender & Marginalisation

78% of the country’s rural population, 60% of whom are women, depend on agriculture to support their livelihoods. The majority of rural households live below the poverty line, which is why investments in irrigation could therefore play an important role in reducing inequality (30).

Expected Development Outcome

Improved irrigation systems will boost resilience, productivity and income of rural and smallholder farmers and will increase domestic food supply.

Efficient and modernized irrigation systems like drip irrigation and solar water pumps will decrease the burden of agriculture on limited water resources.

Irrigation systems will create employment opportunities both within agricultural production and industries with linkages, such as in transportation and hospitality.

Gender & Marginalisation

Empowering women through agricultural investments, improved infrastructure, inclusive value chains and climate smart-agriculture practices, including irrigation systems, will have significant multiplier effects for rural areas in terms of poverty alleviation and food security (4, 10, 11).

Increased productivity resulting from irrigation systems will benefit livelihoods of poor rural farmers and especially women, who make up 60% of farmers in rural areas, and reduce food insecurity (30).

Increased productivity resulting from irrigation systems will increase availability of affordable domestically produced food, enabling rural households to redirect disposable income for other essential goods.

Primary SDGs addressed

No Poverty (SDG 1)
1 - No Poverty

1.1.1 Proportion of the population living below the international poverty line by sex, age, employment status and geographic location (urban/rural)

Current Value

58.9% of population live below the international poverty line (27).

Target Value

The Government seeks to eradicate extreme poverty by 2030 (27).

Zero Hunger (SDG 2)
2 - Zero Hunger

2.3.2 Average income of small-scale food producers, by sex and indigenous status

2.1.1 Prevalence of undernourishment

Current Value

N/A

27% of population are severely food insecure (IPC phase 3 and above) (26).

Target Value

The Government aims to double agricultural productivity and income of small-scale farmers by 2030 (26).

The Government seeks to end hunger by 2030 (21).

Reduced Inequalities (SDG 10)
10 - Reduced Inequalities

10.4.1 Labour share of GDP

Current Value

39.6% (2017) (38).

Target Value

N/A

Secondary SDGs addressed

Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth
Good health and well-being (SDG 3)
3 - Good Health and Well-Being
Life on Land (SDG 15)
15 - Life on Land

Directly impacted stakeholders

People

Irrigation systems advance productivity of rural smallholder farmers. Increased agricultural activities in rural areas include socio-economic benefits for communities at large by increasing the general economic activity and promoting agri-business and other income generating activities.

Gender inequality and/or marginalization

Rural women, who make up majority of smallholder farmers, and rural inhabitants in general, are impacted by irrigation systems by being able to grow crops and sell produce for longer periods of the year and to have more locally produced food available in food constrained communities.

Planet

Irrigation systems reduce water usage in several water scarce and drought-prone areas, benefitting the planet at large.

Corporates

Improved harvest coming from rural areas, through irrigation systems, strengthens agricultural value chains as well as agro-processing and value addition opportunities for various involved businesses.

Public sector

Irrigation systems compliment the government's key strategic aims of eradicating food insecurity and poverty as well as supporting rural livelihoods.

Indirectly impacted stakeholders

People

Irrigation systems enhance food security levels of rural inhabitants and benefit other stakeholders in the food value chain. Reduced strain on water resources by agriculture will also increase availability of water for household use.

Planet

Reduced food imports resulting from increased domestic production translates to a reduction of GHG emissions resulting from transportation as well as reduced strain on water resources.

Corporates

Food retailers have access to more domestically produced produce with lower transportation cost.

Outcome Risks

Irrigation systems may benefit large-scale farms while excluding smallholder farmers who require productivity support the most, further deepening existing inequalities (16).

If irrigation systems are purely targeted towards title deed land (TDL), women farmers may be excluded from benefits, further deepening existing inequalities (31).

If not managed sustainably, increased uptake of irrigation systems may further deplete the already restricted water resources in Eswatini and reduce the availability of water for other sectors and human consumption (16). They may have adverse effects on downstream communities that depend on water from rivers, especially during the dry seasons (31).

Impact Risks

The purchase, maintenance and upkeep of irrigation systems may be too costly for smallholder farmers, which may exclude them from the benefits and limit the expected impact.

Specifically, most of Eswatini's irrigation infrastructure is imported from South Africa. Domestic suppliers have limited capacity to deliver and operate on large scale and are dependent on imports for stock, which may hinder access of smallholder farmers' to the irrigation systems and hence limit the expected impact (19).

Insufficient high quality data may exist on what impact irrigation systems would have on the livelihoods of smallholder farmers and the environment in drought-prone areas.

If irrigation systems are not adequately maintained or droughts persist, their impact may not deliver the expected impact.

Impact Classification

C—Contribute to Solutions

What

Irrigation systems increase level of agricultural resilience and reduce food insecurity by improving yields, productivity and revenues.

Who

Farmers, particularly smallholder farmers, and actors throughout the agri-business value chain benefit from improved yields, and the planet enjoys greater resource efficiency.

Risk

While the model of irrigation systems is proven, access and affordability for smallholder farmers as well as data availability and infrastructure maintenance require consideration.

How Much

Irrigation systems for smallholder farmers help to meet the country's irrigation potential standing at 93,220 ha (16) as well as achieve the goal of doubling agricultural productivity and income of small-scale farmers by 2030 (26).

Impact Thesis

Sustainably increase agricultural productivity, reduce food insecurity and support farmer livelihoods.

Enabling Environment

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Policy Environment

Swaziland National Agricultural Investment Plan (SNAIP), 2015: The important role of irrigation and water infrastructure in closing the yield gaps is reflected in the planned investment of approximately USD 1.084 billion, representing 54% of planned agricultural investments over a 10 year period (18).

Investing in Economic Recovery, Prosperity and Sustainable Development: an Implementation Master Plan, 2021: The construction of dams, improved irrigation and access to water is identified as a key strategy for advancing agricultural development and achieving the SDGs (34).

The Strategy for Sustainable Development and Inclusive Growth (SSDIG), 2017: Enhancing water harvesting mechanisms and down-stream irrigation development and establishing research programme on irrigation system design highlighted as key strategies for agricultural development (32).

Ministry Of Agriculture Strategic Plan (2018-2023): The Ministry aims to support a variety of agricultural projects ranging from smallholder production to large scale horticulture projects through investments in irrigation infrastructure development (35).

The Eswatini Zero Hunger Strategic Review 2020: Improved irrigation infrastructure is a key aspect of pillar 1 in the Zero Hunger Strategic review for enhancing the capacity of smallholder farmers to produce food all year round and end hunger by 2030 (7).

Ministry of Natural Resources and Energy, National Water Policy 2018: Indicates that the National Water Agency will develop guidelines on the benefits of transitioning from irrigation systems that are water inefficient to systems that are more water efficient, and incentives (tariffs and levies) will be incorporated for efficient irrigation practices (40).

National Irrigation Policy, 2005: Aims to ensure that irrigated agriculture contributes to economic growth and poverty reduction, optimize the productivity of water and establish an institutional framework for irrigation that is strong and transparent while promoting new public and private investment opportunities (41).

Financial Environment

Financial incentives: Government projects in the Post Covid-19 Economic Recovery Plan entail an investment of E 1.2 billion (USD 76.7 million) to the LUSIP II, and a planned investment of E 1.3 billion (USD 83.12 million) to the Mkhondvo/Ngwavuma Water and Irrigation Development project (3).

Fiscal incentives: Incentives for pastoral, agricultural, plantation or other farming operations of special deductions not to exceed 5% of taxpayer's taxable income include dams, water-furrows, irrigation schemes and wells (39).

Other incentives: Eswatini Electricity Company charges reduced tariffs for smallholder irrigation (44).

Regulatory Environment

Eswatini Water Act, 2003: Allows for the use of water for irrigation purposes through the establishment of Irrigation Districts, a Water Authority, an interim Water Apportionment Board and River Basin Authorities together with Irrigation Districts and Water User Associations (37).

The Swazi Nation Land Commercialization Bill, 2015 (undergoing development): Provides for the designation, demarcation and allocation of Swazi Nation Land for agri-business, registration of land use-rights, establishment of Chiefdom land allocation Committee and the Appeals Tribunal (20).

Constitution of the Kingdom of Eswatini, 2005: Article 210 declares water as a national resource vesting responsibility for its protection in the State; article 215 rules out any private ownership of water resources: and other articles give the Parliament the right to enact laws related to water (40).

Legal Notice No. 324 the Public Procurement Act of 2011, 2020: Regulates the procurement of goods, works and services by procuring entities to ensure transparency, accountability and promote diverse private sector participation in public procurements, including for irrigation systems (34).

Marketplace Participants

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Private Sector

Tibiyo Taka Ngwane (Inyonyi Yami Eswatini Irrigation Scheme (IYSIS)), Sekunjalo Irrigation, Lusutfu Services Limited, Swaziland International Irrigation, Irricon, Dabulamanzi Civil Works and Irrigation, Aqua-Flo Engineering.

Government

Ministry of Agriculture, Eswatini Water and Agricultural Development Enterprise (ESWADE), National Agricultural Marketing Board (NAMBoard).

Multilaterals

African Development Bank (AfDB), International Fund for Agriculture (IFAD), European Union (EU), World Food Programme (WFP), Southern African Development Community (SADC), Food and Agriculture Organization (FAO), European Investment Bank (EIB).

Non-Profit

COSPE Eswatini, World Vision International, Eswatini National Agricultural Union (ENAU), Eswatini Sugar Association, Woman Farmer Foundation.

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

Eswatini: Lubombo

Lubombo is a rural area where rain-fed smallholder agriculture is commonly practiced in conditions that are also vulnerable to drought, but with potential water resources available (16).
rural

Eswatini: Shiselweni

Shiselweni is a rural area with extensive rain-fed smallholder agriculture and potential water resources; the region also exhibits high levels of food insecurity (13, 21).
urban

Eswatini: Manzini

The majority of irrigation system companies and suppliers, as well as the Eswatini Water and Agricultural Development Enterprise (ESWADE) head offices, are situated in Manzini region (31). There are also smallholder farmers operational in this region (20).
urban

Eswatini: Hhohho

Several irrigation system suppliers are situated in Hhohho region with administrative head offices of government and implementing institutions (20). There are also smallholder farmers operational in this region (20).

References

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