Global food demand is expected to increase by between 59% and 98% by 2050. However, global freshwater resources are already overstretched due to climate change and soaring population growth, and it is unclear how agriculture will keep up with these challenges. 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 find 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. These reforms are part of wider ongoing efforts to conserve water resources. Many governments are now gradually enacting water-saving policies and partnering with private stakeholders to roll out climate-resilient agricultural practices and forward-thinking infrastructure projects.
In the world’s most waterscarce regions, such as the Eastern Mediterranean, the Middle East, North Africa and sub-Saharan Africa, 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 waterstressed regions by 2050, according to a study by MIT. Rising water scarcity not only poses a major threat to urban populations, but also presents a potentially significant barrier to economic development for many low- and middle-income economies, especially those that are reliant on agriculture for both domestic consumption and export revenue.
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 impacts 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 negative impact on agricultural activity, 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 watering practices. Africa has one of the lowest crop yields across the globe, as some 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. There is considerable opportunity to expand the amount of irrigated land, although lower-income countries often lack the capital to do so.
Expanded irrigation is one solution to the global challenge of decreasing rainfall and increasing food consumption. 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 and accelerate economic growth. 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 benchmark 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. The PMV has so far been a resounding success. For example, the area of land equipped with drip irrigation reached 450,000 ha by 2014. The overall aim is to increase this figure to around 550,000 ha by 2020.
Elsewhere, in Kenya the government is also focusing on expanding its irrigation infrastructure through centralised planning and implementation of national water strategies. 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 irrigation areas by 2030. To meet this goal, the government issued the Irrigation Bill at the end of 2017 with the goal of setting up a National Irrigation Development Authority. The authority will be responsible for developing and improving irrigation infrastructure, providing irrigation services to private farming companies and smallholders, and offering technical advisory services during the rollout of irrigation technology. In June 2019 the bill underwent a mediation process in the National Assembly to try to craft a version of the stalled legislation that both houses would pass.
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. In Morocco, the authorities are aiming to equip 700,000 ha – or 50% of total irrigated land in the country – with drip technology by 2022, up from 500,000 ha in 2018 and 163,000 ha in 2008. The drip technology that has already been implemented up to 2019 saves the country approximately 800m cu metres of water each year.
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 through investing around $18bn in improving water security in the 2015-19 period alone. By introducing new water-efficient technology across farmlands, the government’s medium-term goal to achieve a 20% decrease in current water consumption levels in the agricultural sector is becoming much more feasible, and would free up resources to irrigate a further 200,000 ha in the country.
Mexico is also on a nationwide water-saving drive through rehabilitating and modernising irrigation systems. In Guanajuato state, one of the most important agricultural regions, the local government has been investing in modernisation programmes to boost crop yields and reduce water usage. As part of its State Development Plan 2035, Guanajuato’s government has increased funding for irrigation modernisation programmes, which saw public investment in drip, gravity and sprinkling irrigation systems rise 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 systems monitored 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.
Tunisian entrepreneurs and companies are at the forefront of developing and piloting this kind of technology. For example, since 2014 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. The technology uses less water than drip irrigation, raises crop yields and decreases production costs for farmers by up to 30%.
Switching & Diversifying Crops
Governments elsewhere are having to make difficult and sometimes unpopular water policy decisions in the face of climate change and rapid population growth. 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 (GERD), which could have a negative impact on Egypt’s Nile water share. The Nile River provides about 85% of Egypt’s water, and, when completed, GERD could see Egypt’s water supply reduced by around 60bn cu metres over a 10-year period, potentially resulting in economic losses of approximately $2bn per year, Khaled AbuZeid, secretary-general of the Egyptian Water Partnership, an NGO established in 2003, told local media in October 2018.
Additionally, while it is a major export, rice consumes a significant portion of the Egyptian agriculture sector’s water allocation and is coming under government scrutiny. Facing concerns about a growing population and GERD’s potential impact on the country’s water resources, 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 raised regarding its impact on local rice farmers and food prices in the country. Plans to increase rice imports from nations such as Gabon are set to fill this gap, and the Egyptian government is also actively promoting the cultivation of more water-efficient alternative crops like quinoa.
Similarly to Egypt’s approach, Thailand’s government has had to enact difficult and unpopular measures relating to rice cultivation in times of drought. In response to limited water resources in recent years, 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 this group 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 is to switch around 320,000 ha in the country from rice to corn in 2019.
While the Myanmar government is not switching crops as in Thailand, farmers in the country are hoping that investment in irrigation systems will allow them to diversify their production base. Despite having comparable land utilisation and acreages to neighbouring countries such as Vietnam and Thailand, Myanmar’s farmers produce much less than their regional counterparts do. One of the reasons behind these low production rates is the limited number of crops that farmers are able to grow, precisely because of poor irrigation systems. 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 U Thadoe Hein, CEO of Myanmar agricultural technology company Awba, the private sector could play a significant role in supporting the country’s irrigation expansion plans. “There is a big opportunity for foreign investors to bring drip irrigation and sprinklers systems into Myanmar,” he told OBG. “These systems cost around $2000 per acre and will present a significant improvement 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 makes up over 40% of global desalinated water output, and across the region ongoing desalination 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 business analytics and consulting firm Adroit Market Research, the global desalination market is likely to expand at a compound annual growth rate of 7.8% from 2018 to 2025, and the pipeline for future projects is strong. Saudi Arabia’s government is a big spender in this regard and has committed to investing $80bn in desalination plants by 2025 to be executed through public-private partnerships (PPPs) with local and foreign firms. In early 2019 it announced several desalination projects located on the Red Sea coast, worth a total of over $600m.
Climate change, rising populations and associated water constraints are challenges that require both policy changes and innovative private sector solutions. 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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