Sustainable investments in African agriculture

Background

More than 50 per cent of Africa’s population lives in rural areas, which hold considerable potential for economic growth and livelihoods. However, rural areas are also characterized by severe decent work challenges: high rates of unemployment and underemployment, high levels of temporary or casual employment, limited social protection, prevalence of child labour especially in agriculture, low levels of unionization and general poor working conditions. Furthermore, rural areas are chronically underserved by financial service providers, which is a limiting factor for economic development. Even where financial services are accessible, evidence shows that social concerns are often not fully incorporated in funding decisions and delivery of services.

Purpose

Striving to unleash the potential of agriculture on a sustainable basis, the German government, together with its development bank KfW, set up the Africa Agriculture and Trade Investment Fund (AATIF) in 2011. This innovative public-private partnership aims to provide food security and create employment and income for farmers, entrepreneurs and workers by investing patiently and responsibly in efficient local value chains.

Since 2012, the ILO has been collaborating with the AATIF to improve the social impact of agricultural investments. In 2013, the UN Environment Programme (UNEP) joined the collaboration, adding expertise on environmental matters.

Activities

Developing sustainable investment assessment tools

In the initial stages of the collaboration, the ILO developed an assessment methodology for social and environmental risks and impacts of agricultural investments. The ILO tested the methodology on 15 partner institutions across 11 African countries and fine-tuned the process. In addition, the ILO and UNEP advised the AATIF in updating its social and environmental safeguard guidelines and establishing a monitoring and evaluation framework. Realizing that many partner institutions applying for AATIF funding lacked social and environmental management capacity, the ILO started offering small-scale technical assistance to enable partner institutions to improve social and environmental management.

Establishing impact and building capacity for sustainable investing

The subsequent phases of the collaboration expanded the assessment tools and added a monitoring dimension. In addition, all collaboration partners stepped up their efforts to implement the evaluation framework through rapid appraisals, social and environmental studies and an impact evaluation. The ILO was responsible for technically backstopping all studies to establish the development impact of a blended finance instrument like the AATIF. The ILO also developed a capacity building strategy with related training materials on social and environmental risk and impact management for agricultural finance.

Sustainability management

During the current phase of the collaboration, the ILO and UNEP are Sustainability Advisor to the AATIF. Building on the outputs and lessons from the earlier phases, we aim to increase outreach within the financial industry and along the agricultural value chain by building their capacity to create positive social, environmental and development impact. For this purpose, the ILO and UNEP i) review sustainability-related AATIF policies, ii) expand the sustainability assessment methodology, iii) establish the impact created through AATIF’s impact investments, iv) provide small-scale technical assistance to improve sustainability management of partner institutions, v) build sustainability management capacity of the project partner AATIF and its partner institutions, and vi) communicate and disseminating project outcomes. In 2024, the AATIF partner institutions employed more than 32,000 people (40% women) and reached out to more than 380,000 smallholder farmers across Africa.

AATIF portfolio

The table below summarizes the main characteristics of the AATIF’s portfolio companies and their activities and value chains in 2024: