2030 Water Resources Group (WRG) co-convened the 4^th Farmer-led Irrigation Multi-Stakeholder Dialogue on 14 October 2021 at the Capital Hotel in Addis Ababa, Ethiopia, together with the International Water Management Institute, through The Feed the Future Innovation Laboratory for Small Scale Irrigation funded by USAID, the Agriculture Water Management Task Force, and the Ministry of Agriculture. The hybrid event, which focused on the role of offtake markets in unlocking small scale irrigation (SSI) investments, brought together virtual and in-person stakeholders including off-takers, financiers, and farmers’ cooperatives to learn about best practices catalyzing farmer-led irrigation.

In Ethiopia, increased demand for irrigated crops is driving up the importance of SSI. However, various factors are limiting small scale farmers’ access to markets, both domestic and international. This makes it challenging to create incentives for farmers and producers to invest in irrigation technologies and water-saving practices and tools.

The workshop, the fourth in a series of dialogues on value chain and market system approaches to facilitate SSI in Ethiopia, identified opportunities and challenges to the uptake of SSI in the context of offtake markets and investigated avenues for strengthening the enabling environment for investment.

Three key take-aways emerged from the morning’s rich discussions:

Understanding marketing channels in the irrigated fruit and vegetable market: Input market actors, producers and output/offtake market actors are key players in the irrigated fruit and vegetable (IFV) market in Ethiopia, which can be grouped into three main channels. The lead-firm channel sees products channeled in a formal way to processors and exporters, mainly targeting the global and high ending markets. The more recent modern channel’s products are channeled through supermarket chains and institutional consumers. In both cases transactions between actors are formalized through a contract or agreement. By contrast, the traditional market channel, which accounts for over 70 percent of fruit and vegetable production across the country, is characterized by low transparency, informal processes, and spot market relationships.

Opportunities and challenges: Favorable agro-ecology, climate, water, and soil conditions for growing a range of fruits and vegetables across the country, and sustained market demand are conducive to the uptake of SSI. Moreover, the irrigation of high-value crops is creating tangible economic benefits for farmers by enabling them to farm more cycles per year, helping to demonstrate the value of SSI. Finally, increasing donor interest in SSI development is creating opportunities for smallholders to access services and technologies and de-risks investment for the various actors involved.

Challenges hindering investment in SSI emerge from a variety of factors. Firstly, the nature of the market system which is dominated by informal processes, price fluctuations, low transparency and unbalanced decision-making power between actors is inherently risky. Meanwhile, limitations in accessing inputs, technology, facilities such as cold storage, financial services and markets make it difficult to ensure a return on investment. Lastly, several policy and institutional barriers exist to do with tax and duty exemption process for irrigation technologies, packaging material regulations, and financial regulations on mobile money transactions.

Roles of offtake market actors in SSI marketing and investment: Offtake market actors have multiple roles in unlocking investments in SSI. Key among them: facilitating access to inputs such as labor, land, seeds, agro-chemicals, and diesel for irrigation pumps; providing loans and other credit services to help finance irrigation technologies; as well as providing technical support and other facilities such as cool chain logistics. Government organizations can help strengthen the enabling environment by enhancing the policy and institutional environment, improving land and sea logistics for exporting perishable products, and by encouraging the development and use of appropriate business models, innovations, and technologies to support off-takers.

The fifth dialogue will take place in early 2022.