Global food demand is expected to increase by anywhere between 59% and 98% by 2050. However, global freshwater resources are already overstretched. In recent years climate-induced water shortages in urban areas have brought water scarcity to the forefront of public debate, as major cities such as São Paulo, Cape Town and Barcelona have found themselves on the brink of major water crises. In response, policymakers have started to scrutinise and reform existing agricultural practices, which on average consume 70% of fresh water supplies around the world.
In the world’s most water-scarce regions, climate change-induced disruptions to the earth’s hydrological cycle have driven unprecedented periods of low rainfall. In fact, 14 of the world’s 20 mega-cities are now experiencing water scarcity or drought. On top of that, the challenges of growing populations and decreased rainfall are expected to worsen over time. Some 52% of the world’s projected 9.7bn population will live in water-stressed regions by 2050, according to a study by MIT.
With the amount of water consumed through farming expected to increase by 20% globally by 2050, more efficient use is required to help developing countries avoid significant economic impacts. According to a study by the European Institute of the Mediterranean, climate change and associated changes to temperature and rainfall patterns could cost economies in the Eastern Mediterranean and North Africa up to 2% of their GDP by 2050. Of great concern in North Africa is the impact on agriculture, which is estimated to account for 77% of economic losses associated with climate change.
According to the UN Food and Agriculture Organisation, around 20% of cultivated land worldwide is irrigated, yet it contributes to approximately 40% of total food output. In many parts of the world, farmers are still heavily reliant on increasingly inconsistent and reduced rainfall patterns, which continues to drive food insecurity. In addition, there are regional differences in the prevalence of severe food insecurity. In 2016 about 27% of the population in sub-Saharan Africa was classified as severely food insecure, which is almost four times as high as any other region, and by 2017 this figure had risen to 34%.
Another underlying problem concerns crop yields and agricultural practices. Africa has one of the lowest crop yields across the globe, as approximately 6% of cultivated land is irrigated, compared to 14% in Latin America and 37% in Asia. Of the irrigated land in Africa, more than two-thirds is concentrated in just five countries – Egypt, Algeria, Morocco, South Africa and Sudan – each of which has more than 1m ha of irrigated land.
Expanded irrigation is one solution. In a study published in December 2018, the Malabo Montpellier Panel, a group of international agriculture experts and policymakers, suggested that African countries have the potential to irrigate a further 47m ha of land to boost agricultural productivity. Among developing economies on the continent, the Moroccan government’s large-scale expansion of irrigation through infrastructure investment, training programmes, subsidies and tax exemptions has set the precedent for other countries to follow. As of 2018 Morocco had equipped around 20% of its land for irrigation, which is one of the highest rates in Africa. This was achieved through well-planned policies that are part of a programme that launched in 2008 called the Green Morocco Plan (Plan Maroc Vert, PMV), which aims to expand and modernise irrigation techniques in order to save 1.4bn cu metres of water annually.
In Kenya the government is also focusing on expanding its irrigation infrastructure. Currently, only around 150,570 ha, or 2.6%, of Kenya’s arable land is equipped for irrigation. The government wants to increase this by 32,000 ha per year and is targeting 704,000 ha of new irrigated areas by 2030.
Regional governments are increasingly pursuing irrigation plans, especially given the rise of new technology. Drip irrigation, for instance, can reduce water use by 30-70% and raise crop yields by 20-90%, according to a World Bank study. Through the PMV in Morocco, the amount of acreage under drip irrigation has risen from 163,000 ha in 2008 to 450,000 ha in 2014 and 500,000 ha in 2018. The goal is to reach 550,000 ha in 2020 and 700,000 ha in 2022. Whereas 20% of Morocco’s land was drip irrigated in 2018, achieving the target of 700,000 acres by 2022 would rise this to 50%. Out of the PMV’s overall aim to save 1.4bn cu metres of water per year, 800m cu metres had been saved annually by 2019.
In Algeria, where per capita water availability is less than 300 cu metres per year, which is well below the 500 cu metres threshold for the UN definition of absolute water scarcity, areas irrigated by water-saving methods grew from 90,000 ha in 2000 to 600,000 ha in 2018, representing 50% of total irrigated land. Algeria’s government has achieved this by investing around $18bn in improving water security in the 2015-19 period.
Mexico is also on a nationwide water-saving drive through the rehabilitation and modernisation of its irrigation systems. In Guanajuato state, the local government increased funding for irrigation modernisation programmes, which saw public investment in drip, gravity and sprinkling irrigation systems increase from $1.7m in 2017 to $3.2m in 2018.
In addition to drip irrigation, some governments have begun implementing other precision farming applications, such as solar-powered pumps that transport well water to drip irrigation systems, and soil and crop monitoring by drones. According to the European Committee of Associations of Manufacturers of Agricultural Machinery, precision farming expanded rapidly between 2007 and 2017, and in 2019, 70-80% of new farming equipment used globally contained precision agriculture components.
In Tunisia, for example, local firm Chahbani Technologies has been manufacturing and selling buried diffusers, a system based on early injection and water storage in underground layers of trees, vegetables and container plants since 2014. The technology uses less water than drip irrigation, raises crop yields and decreases production costs for farmers by up to 30%.
Substituting & Diversifying Crops
Governments elsewhere are having to make difficult and sometimes unpopular decisions to pursue water-saving policies. Egypt, for example, suffers from an annual water deficit of 30bn cu metres. Therefore, water security is currently a major policy priority for the government, particularly during the ongoing construction of the Grand Ethiopian Renaissance Dam, which could have a negative impact on Egypt’s Nile water share. Additionally, while it is a major export, rice consumes a significant portion of the agriculture sector’s water allocation. In 2018 Egypt’s Parliament voted to cut the amount of land allocated for cultivating rice by more than half. While the move to greatly reduce rice cultivation is expected to save billions of cu metres of water, there have been concerns regarding its impact on local rice farmers and rising food prices more broadly.
Similar to Egypt’s approach, Thailand’s government has had to enact measures relating to rice cultivation. In response to limited water resources, the Royal Irrigation Department banned off-season rice cultivation in late 2015 in order to prioritise water supplies for household consumption. While these restrictions have been unpopular with many farmers, the government has started offering alternative income sources. In October 2018 the Ministry of Agriculture and Cooperatives unveiled a corn-growing promotion scheme, which offers loans, insurance and price guarantees to farmers who are willing to move away from off-season rice production. The government’s overall goal was to switch around 320,000 ha from rice to corn in 2019.
In Myanmar, farmers are hoping that investment in irrigation systems will allow them to diversify their production base. In 2014-15 about 3m ha of agricultural land in Myanmar was linked to public irrigation systems, which accounted for 15% of the crop area. This is far lower than in Indonesia and Thailand (30% each), China (50%) and Vietnam (70%). According to Thadoe Hein, CEO of Myanmar agricultural technology firm Awba, the private sector could play a role in aiding the country’s irrigation expansion plans. “There is a big opportunity for foreign investors to bring drip irrigation and sprinkler systems into Myanmar,” he told OBG. “These systems cost around $2000 per acre and will present a significant change to farmers across the country.”
While water conservation efforts can go a long way in ensuring resilience, these proactive efforts will more than likely not be enough for arid Gulf and North African countries, where groundwater resources are fast running out. In these areas, governments are constructing costly and energy-intensive desalination plants to ensure water resilience, which presents sizable opportunities for private sector players. MENA countries produce over 40% of global desalinated water, and across the region ongoing projects amount to more than $5.25bn, of which Saudi Arabia accounts for $1.52bn, followed by the UAE ($1.28bn), Oman ($501m), Egypt ($498m) and Morocco ($354m).
According to the “Global Water Desalination Market” report published in 2018 by consultancy Adroit Market Research, the global desalination market is likely to expand at a compound annual growth rate of 7.8% from 2018 to 2025. Saudi Arabia’s government is a big spender in this regard and has committed to investing $80bn in desalination plants by 2025 through public-private partnerships (PPPs) with local and foreign firms. In early 2019 it announced several projects located on the Red Sea coast, worth a total of over $600m.
Beyond desalination plants, there are a number of opportunities for private sector involvement in global water resilience efforts in the Middle East, North Africa and sub-Saharan Africa. PPPs for irrigation expansion and modernisation initiatives are being offered across many developing countries, and the global drip irrigation market is expected to be worth $7bn by 2024. Further investment opportunities are expected to emerge as more governments adopt so-called blue future water resilience policies.
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