Global food demand is expected to increase from anywhere between 59% to 98% by 2050. However, global freshwater resources are already overstretched due to climate change and soaring population growth, and it is unclear how agricultural production 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, Barcelona and others 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 approximately 70% of fresh water supplies around the world. These reforms are part of wider ongoing efforts to conserve water resources, as many governments are now gradually enacting water-saving policies and are partnering with private stakeholders to roll out climate-resilient agricultural practices and forward-thinking infrastructure projects.
In the world’s most water-scarce 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. With rising populations and decreased rainfall, these conditions will only worsen. Additionally, some 52% of the world’s projected 9.7bn population will live in water-stressed regions by 2050, according to an MIT study. Therefore, increasing water scarcity does not only pose a major threat to urban populations, but it also presents a potentially significant barrier to economic development for many low and middle-income economies, especially those which are reliant on agriculture for both domestic consumption and export revenue.
With water consumption of farms expected to increase by around 20% globally by 2050, more efficient water use is required, otherwise developing countries will face potentially 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. Agriculture would be affected most, accounting for around 77% of economic losses associated with climate change in North Africa.
According to the UN Food and Agriculture Organisation, only around 20% of cultivated land worldwide is irrigated and this contributes to approximately 40% of total food output. In many parts of the world, however, farmers are still reliant on increasingly inconsistent and lower rainfall patterns, which continues to drive food insecurity. In addition, there continue to be regional differences in the prevalence of severe food insecurity as well. For example, as of 2016 approximately 27% of the population in sub-Saharan Africa is classified as severely food insecure, which is almost four times as high as any other region.
Another underlying problem concerns crop yields and agricultural practices. Africa has one of the lowest crop yields in the world, as only 6% of cultivated land is irrigated, compared to 14% in Latin America and 37% in Asia. Of the irrigated land in Africa, more than twothirds 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 required capital to do so.
Expanded irrigation is one solution to the global challenge of decreased 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 in the continent, the Moroccan government’s large-scale expansion of irrigation through infrastructure investments, 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, one of the highest rates in Africa. The government has achieved this through well-planned policies that are part of a 2008 programme called Green Morocco Plan (Plan Maroc Vert, PMV), which has the aim of expanding and modernising irrigation techniques in order to save 1.4bn cu metres of water annually. The PMV has so far been a resounding success, as, for example, areas of land that are equipped with drip irrigation reached 450,000 ha by 2014. The overall aim is to increase this figure to 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 (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 Kenyan government issued the Irrigation Bill at the end of 2017, with the intent to set up the National Irrigation Development Authority. The authority will be responsible for developing and improving irrigation infrastructure, providing irrigation services to private farming companies and smallholder schemes, and for technical advisory services during the rollout of irrigation technology. As of February 2019 the bill was still under committee review, however it is expected to be fast-tracked during 2019.
Peru’s government is also focusing on expanded irrigation schemes to keep pace with its growing agriculture sector and to better respond to extreme weather events. Agriculture is a major employment driver in the country, providing work for 25% of the active workforce. According to the World Bank, it contributes as much as 11.3% of GDP and agricultural exports increased by 13% in 2018 to reach $7bn, according to data provided by the Ministry of Agriculture (Ministerio de Agricultura y Riego, MINAGRI). However, Peru’s agricultural sector remains highly susceptible to extreme types of weather. One particular example is the El Niño phenomenon, which has caused periodic flooding and extensive infrastructure damage in the past.
Most recently, in 2017 El Niño flooding in coastal areas caused an estimated $12bn in damage and shaved almost a full percentage point off GDP. And, only months before the rains hit, the government had been preparing for a drought in agricultural heartlands located in the drier southern and northern areas. With its agricultural sector at risk from periodic weather extremes, the Peruvian government and private sector are directly mitigating the challenge through resilience-focused policies. In 2019 MINAGRI is aiming to increase the total area of irrigated land under its administration by 132.1% from 25,725 ha to 59,734 ha. Funding for irrigation projects across the country makes up 54% of MINAGRI’s $835.6m budget for 2019, and efforts are currently focused on both the expansion and modernisation of existing infrastructure.
Peru also has great potential to roll out modern technology and expand its irrigated land by an additional 12m ha. In conversations with OBG, Gabriel Amaro, executive director of the Association of Agricultural Producers Guild of Peru, noted that, “Peru has one of the largest fresh water reserves in the world but most of it flows to the Atlantic, although the government is actively investing infrastructure profits to also divert that water to the Pacific Coast,” he continued. “Modern agricultural fruit and vegetable growing techniques are only used on 4.4% of the current 4.2m ha of cultivated agricultural land in the country.” Government projects like Chavimochic in the north-western region of La Libertad, which is expected to add 60,000 ha of irrigated land by the end of 2021, are converting previously arid areas into fertile farm lands by employing modern techniques such as drip irrigation.
Regional governments are pursuing irrigation plans, especially given the rise of new technology. Drip irrigation technology for instance can reduce water use by 30-70% and raise crop yields by 20-90%, according to a World Bank study. The government of Morocco is aiming to equip 700,000 ha or 50% of the total irrigated land in the country with drip technology by 2022, up from approximately 500,000 ha in 2018 and 163,000 ha in 2008. The conversion to drip irrigation already saves the country an estimated 800m cu metres annually.
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 the rehabilitation and modernisation of irrigation systems. In Guanajuato state, one of the country’s 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.
Some governments have also started 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, among other innovations. According to the European Committee of Associations of Manufacturers of Agricultural Machinery, precision farming has expanded rapidly between 2007 and 2017, and today around 70-80% of new farming equipment used globally contains precision agriculture components. The technology is revolutionary because it utilises less water than drip irrigation, raises crop yields and decreases production costs for farmers by up to 30%. It is already being used to irrigate trees such as olive, date palm, fig, citrus, pistachio, almond, peach and grapes, as well as vegetables in Tunisia, Algeria, Morocco, Qatar, the UAE, Greece, the US and France. In February 2019 Chahbani announced that 20,000 of its buried diffusers had been bought in Morocco and were to be piloted in agricultural projects to help farmers deal with difficult drought conditions.
Switching & Diverisfying Crops
Governments elsewhere are having to make difficult and sometimes unpopular water policy decisions in the face of climate change and rapid population growth. For example, as of March 2018 Egypt is suffering 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.
Nile River waters provide about 85% of Egypt’s water, and when completed GERD could see supply reduced by around 60bn over a 10-year period, potentially resulting in economic losses of about $2bn a year, Khaled AbuZeid, secretary-general of the Egyptian Water Partnership, a non-governmental organisation, told local media. In addition, rice, while a major export for the economy, consumes a significant chunk of the agriculture sector’s water allocation and is also 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 reduce the amount of land allocated for cultivating rice by more than half. While the move to 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 on food prices in the country. Plans to increase rice imports are set to fill this gap and the Egyptian government is also actively promoting cultivation of more water-efficient alternative crops like quinoa.
Thailand’s government has also had to enact difficult and unpopular measures relating to rice cultivation in times of drought. In response to limited water resources Thailand’s Royal Irrigation Department had to ban off-season rice cultivation in late 2015 in order to prioritise water supplies for household use. While these restrictions have been unpopular with many farmers, the government has started offering alternative income sources. In October 2018 Thailand’s Ministry of Agriculture 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 from rice to corn in 2019.
While the Myanmar government is not switching crops, 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 like Vietnam and Thailand, Myanmar’s farmers produce much less than their regional counterparts. One of the reasons behind these low production rates is the limited number of crops that farmers can grow because of poor irrigation systems. In 2015 only about 3m ha of agricultural land in Myanmar links to public irrigation systems, which makes up approximately 15% of the crop area. This is far lower than in Indonesia and Thailand (approximately 30%), China (50%), and Vietnam (70%). According to Thadoe Hein, CEO of Myanmar agricultural technology company Awba, the private sector plays a significant role in aiding irrigation expansion plans. “There is a big opportunity for foreign investors to bring drip irrigation and sprinklers systems into Myanmar,” he told OBG, adding that “these systems cost around $2000 per acre and will present a significant change to farmers across the country.”
While water conservation efforts related to agricultural practices can go a long way to ensuring resilience, these efforts will 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. The Middle East and North Africa make 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 “2018 Global Water Desalination Market” report published 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 through public-private partnerships (PPPs) with local and foreign firms. In 2018 and early 2019 alone it announced several desalination projects located on the Red Sea coast, which are worth over $600m.
Climate change, rising populations and associated water constraints are challenges that require both government policy changes and innovative private sector technological solutions. Beyond desalination plants, there is opportunity for private sector involvement in water resilience efforts not only in the Middle East, but also North Africa and sub-Saharan Africa. For one, the drip irrigation market is expected to be worth $7bn by 2024 and PPPs for irrigation expansion and modernisation schemes are being offered across many developing countries. Further investment opportunities are likely to arise as more governments adopt so-called Blue Future water resilience policies.