The Idea of Inclusive Agribusiness

Do we need the idea of “inclusive agribusiness”, or is it just another bit of development mumbo jumbo to bamboozle people?

The concept of inclusive business in general has gained much traction –  the promise of a win win through profitable business activity that also meets the needs of the poor and helps to lift them out of poverty. Its appealing for businesses who see market opportunities with the bottom billions and who want to build a socially responsible brand. It’s appealing for donors and development organisations who are seeking to be catalytic with limited resources and want to engage with the private sector to find market solutions to poverty.

The logic of applying inclusive business ideas to agriculture is hard to fault.  Agriculture is largely a private sector activity (poor small-scale farmers are a business), most poor people still live in rural areas and largely depend on agriculture for their income.  Growth in demand for food is creating substantial new market opportunities. Ultimately, the livelihoods of 3-4 billion people at the bottom of the economic pyramid depends on the business of farming by the world’s 500 million small-scale farmers.

But the devil is in the detail.

What does “inclusive” really mean for the agriculture sector? Who really benefits? Is the win win for real? What levels of public funding and types of public policy are needed to push inclusive business down the economic pyramid? Are there alternatives? And what is the long term vision for a sustainable food system and the economic transformation of small-scale agriculture? These are not simply technical questions, they are deeply political and often approached with strong ideological positions.

Putting a marker in the sand – the concept of inclusive agribusiness is of value precisely because it can lead to such questions.

However, inclusive agribusiness is not a universally accepted term. Much of what could be called inclusive agribusiness might also be labelled as sustainable value chains and visa versa.  Certainly many businesses working with small-scale farmers or embedding socially responsible practices into their operations would not necessarily call this inclusive. There are also big overlaps with other related ideas such as bottom of the pyramid, social entrepreneurship, making markets work for the poor (M4P)/market systems, responsible investment, shared value and mutuality.

What is going on that could be called Inclusive Agribusiness?

Taking inclusive agribusiness as a broad idea there is a vast amount going on – see the mind map (To view the details use this link. Please note:this is illustrative and not comprehensive).  There are thousands of value chain and market development projects that have inclusive elements. Many agribusiness firms have initiated inclusive practices. There are active business platforms, such as the World Economic Forum with its Grow Africa and Grow Asia initiatives, the World Business Council for Sustainable Development, the Sustainable Agriculture Initiative (SAI) Platform or the various commodity round tables (palm oil, soy, sugar, cotton, fisheries etc). National political leaders are talking up the importance of agriculture for inclusive growth and the need for new forms of partnership with business.  Behind all this is much bilateral donor, multi-lateral agency, development bank and philanthropic support with a very diverse range of funding mechanisms and strategies. There are multi-donor supported initiatives such as private sector window of the Global Agriculture and Food Security Program (GAFSP), the African Enterprise Challenge Fund, the New Alliance and the Sustainable Trade Initiative (IDH). A range of innovative financing approaches are emerging.  And, there is also a formative network of learning, knowledge sharing and research platforms.

The level of investment in all this is hard to quantify. However, my educated guess puts donor and philanthropic investments alone at over the USD 4 billion mark.

Where is the evidence of impact?

Yet despite all this effort and investment there is scant evidence about the impact. Nobody really knows the depth and scale to which poor people are benefiting or the degree to which being inclusive really is good for business. There is little data to help answer the questions raised above.

There is of course considerable anecdotal evidence from examples, case studies and practitioners own experience of specific projects.   But there is very little meta-analysis that can give insight into the bigger picture or throw light on the validity of the underlying assumptions of the inclusive agribusiness agenda. This makes it rather easy for people to cherry pick examples of success or failure to justify either the upside or downside of inclusive agribusiness.

Investment for going to scale

Within the field there is a great deal of discussion from both business and development players about the need to go to scale.  Which of course suggests that those in the middle of all this are themselves not yet convinced of the scale of impact for the poor or for the private sector.  But going to scale will cost money that in turn requires investment. Getting investment into the agriculture sector, whether public or private is notoriously difficult, especially for small-scale farmers and small and medium sized enterprises. The lack of evidence is a significant constraint in being able to make the case for greater investment in inclusive agribusiness related ventures and more supportive policy.  (Putting aside for the moment the far from direct link between evidence and decision making.)  The diagram below illustrates critical investment building blocks.

Clarifying the Concept

Gathering evidence of impact requires clarity about what the impact should be and the underlying assumptions of how change might happen.  Inclusive agribusiness runs the risk of meaning very different things to different people.   For some, and particularly the critics, inclusive agribusiness is equated narrowly with just the actions of large multi-national firms. This risks a backlash against the entire endeavour. Recently for example, the European Parliament called for a halt to EU funding for the New Alliance and a 2013 Report Oxfam referred to Grow Africa as a moral hazard.  The concerns come from fears over land grabbing, the displacement of small-scale farmers and benefits not flowing to those most in need.

Against this background let me suggest five clarifications that are needed for the concept to be meaningful and provide a foundation for better evidence gathering.

1)     Inclusive agribusiness is not just about the big end of town and global markets –  it involves the interactions of micro, small, medium and large scale business operating across domestic, regional and global markets.

2)     Inclusive agribusiness is not just about what business does –  it is about how business, government and civil society collaborate and partner to develop innovative inclusive business models, create an enabling policy environment, improve financing and establish regimes of transparency and accountability.

3)     Inclusive agribusiness has public and private good outcomes that require public and private investment – understanding the interface between public and private interests needs to be at the core of the concept.

4)     Inclusive agribusiness needs to focus on a triple win of overall inclusive growth, creating direct benefits for poor and marginalised groups and contributing to global food and nutrition security.

5)      Inclusive agribusiness provides a wider sector perspective on the role of agriculture in the inclusive economy agenda for realising the SDGs – which takes it beyond a focus on single value chains.

Avoiding Moral Hazards

Partnering with business is always going to be a contentious issue for donors and NGOs. On the other side, for business demonstrating the results from their stated commitments to responsible, inclusive and sustainable practices is important for their brands and for a social licence to operate.

Inclusive agribusiness does have its risks or what Oxfam has called moral hazards.  These potentially include creating a veil for exploitive practices; debate and policy influence being dominated by powerful interests; problems in the global food system being reduced to technical focus while ignoring deeper political economic issues; the critical voice of development organisations being co-opted due to partnerships with business; or development efforts being side-tracked away from where they can have the most benefit for the most in need.

Recognising and avoiding these hazards is essential to gain broad stakeholder support for innovative partnerships between the public and private sectors. Especially in an era where the boundaries between public and private goods are increasingly overlapping.  Ways of doing this include having a clearer vision of the role and transformation of small-scale agriculture; clarifying public and private good aspects; investing in transparency and accountability mechanisms; encouraging a strong civil society voice; and ensuring open and effective processes of multi-stakeholder engagement.

What Next

Much rests on creating inclusive and sustainable economic opportunities in rural areas, underpinned by a vibrant and innovative agrifood sector – tackling poverty and inequality, ensuring food security, reducing pressures on ballooning urban centres and stemming migration.

Quite simply such a transformation can never be driven or paid for by the public purse alone, be it through countries’ own financing or that of the development community.  The only viable option is to find innovative inclusive business models. The big challenge for governments and donors is to work out how to be most catalytic with the limited resources they do have.  In part this leads down the path of innovative blended financing options, helping to underwrite risk and ensuring that core public goods are in place.

Wise decisions for the future on inclusive agribusiness and a willingness to invest will require a much better evidence base and synthesising of the lessons learned to-date.  This needs to be coupled with country and regional-led dialogue on creating the right enabling policy conditions.  All of which could be greatly facilitated through an effectively coordinated and adequately funded global learning alliance on inclusive agribusiness.

This blog is part of the July 2016 series from the Practitioner Hub and Seas of Change on Inclusive Agribusiness. For more insight, updates and opinion view the pdf of the whole series.