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Role of digital platforms in strengthening Food Security in the GCC countries

- Dr. Azam Pasha, CEO & Co-Founder, Maalexi


Background

We are moving towards an apocalyptic scenario, where on the one hand food demand is raging uncontrollably driven by global population which is expected to hit 10 billion consumers by 2050, while on the other, the number of producers continues to decline due to low agricultural incomes and movement of younger populations to urban centres, the agricultural output is stagnating because of aggravating climate change, geopolitical upheavals, and economic instability across most food producing countries. In 2021, the Global Report on Food Crises (GRFC) reported that close to ‘193 million people are acutely food insecure and in need of urgent assistance across 53 countries/territories’, this is highest ever number of people in hunger and starvation (World Food Programme 2022). The recent report on Food Security and Nutrition mentions that the number of people ‘unable to afford a healthy diet around the world rose by 112 million to almost 3.1 billion, reflecting the impacts of rising consumer food prices’ (FAO, IFAD, UNICEF, WFP and WHO 2022).


Figure 1: FAO Food Price Index illustrates rising and uncontrollable food inflation


FAO Food Price Index has shot by 50 per cent over in just the last 24 months, exhibiting dire and unpredictable impact of geopolitical, economic, environmental, demographic and technological factors on food price inflation in a matter of months – making the food supply chains highly prone to disruption. Volatility in both fundamental and technical parameters is making it all the more gruelling to predict supply chain risks, and their impact on food prices and supplier performance.


The Gulf Co-operation Council (‘GCC’) and Food Security

Geographically, there are regions that have been endowed with natural resources to support food production, while others have been deprived of these sources. The GCC region is climatically unsuitable for agricultural production, hence 85 per cent of what it produces needs to be imported, resulting in some of the key food security challenges for the region. Firstly, due to significant reliance on imports there is intrinsic ‘supply risk’ for the countries in this region which seem to have heightened during major geo-political or economic instability events such as Russia-Ukraine conflict and COVID19. These events also resulted in ‘national food protectionism’ which manifested itself in the form of an export ban on basic food commodities e.g. rice and wheat, affecting the local availability and prices of these food commodities across the GCC. Secondly, heavy dependency on imports creates a situation whereby local ‘food inflation’ of the producer country, which is driven by these countries’ local political and economic situation, is migrated to purchasing countries resulting in ‘food inflation risk’. Inflationary pressure which pushed the prices of food and fuel in the last two years is a reason of major unrest in several countries, in the vicinity of GCC region, making food availability and pricing a matter of ‘national security’. Realising the criticality of food supply and to tame food prices, GCC has done substantial investments to build farms, acquire and develop land and companies in other countries, but to achieve sustainable food production ability in the region will require significant technological advancements and higher infrastructure investments.


Figure 2: Agricultural capacity and dependence on trade for a domestic food supply (Kearney 2022)


Strategically in the short- to medium-term, the best ways to build food security in this region are to streamline in-bound food supply chain through digital, informational and financial interventions, and enhance the logistical infrastructure that allows efficient food storage and distribution.


Digital platforms and their relevance to Food Security

‘Digital technology can improve the operation of key supply chains in the food system by boosting production, improving business practices, promoting traceability and increasing access to finance’ (IFC 2021) . Compelling improvements have been attained to enhance food security by technological innovations, but these have been primarily done considering the agricultural input and output aspects of the food supply chain. The aspects related to product traceability, access to international markets, and financial inclusion have seen disconcerted applications, with low commercial adoption. Bain & Co mentions that ‘while platforms are beginning to emerge for individual products like salmon and coffee, unified platforms covering many different products are unavailable. Such platforms could provide food authentication through new secure technology, lower the danger of unsafe food, make food recalls faster and more efficient, and foster trust between consumers and retailers, resulting in systems with better food sustainability’ (World Economic Forum 2022). There is now a need of food and agri specialised platforms that have deep domain expertise in food supply chains, which can allow aggregation of demand of diverse food products, and support services (including financial services) to happen at one place, allowing the food supply chain to be visible (by deploying technologies like IoT based supply chain solutions) and secure (through Blockchain or Distributed Ledger based technologies) from the producer to the retailer or the consumer; this ecosystem can allow powerful de-risking, and channelisation of financing, which is detrimental to create scalability, and increase participation of sellers and buyers, thereby building vibrant networks that strengthen food security. The GCC has seen several platforms that have digitalised the local supplies but a very few digital platforms that have ventured in providing cross-border flows to the GCC. Unfortunately, most cross-border platforms have been limited by producer country(ies), product(s) or service(s) constraints. To address the food security challenge for GCC it is required to have a powerful full-stack solution that mitigates key supply risks to provide consistent, diverse, and high-quality food supply from multiple producer countries or origins to the GCC based buyers.


Conclusion

The utilisation of digital platforms needs to be driven deeper downstream, into the food procurement by manufacturers, distributors and supermarkets in the GCC, to provide supply continuity and price stability along with helping smaller-sized producers in different producer countries to participate and derive and deliver more value. IFC under the World Bank Group’s $30 billion initiative ‘to reduce food insecurity’ (IFC 2022), has rolled-out their global food security platform to collaborate with public and private companies, to provide solutions that can help stabilise food prices, and strengthen food supply chains; identify and deploy disruptive technologies that can allow greater market access; help in financial inclusion; building food logistics infrastructure; helping reduce emissions in production; and, transportation of food across their supply chain. A similar type of government funding under the Food Security Authorities to directly fund digital cross-border platforms for more inclusive digital integration into global food supply chain, is required to be undertaken by countries in the GCC. A mix of tools for supply chain digitalisation, increased participation of buyers and sellers to create vibrant network effects, secure supply chain infrastructure, trade incentivisation, and availability of embedded finance, will be integral for this region to build resilience, and sustainability in its food supply chain.


Citations

IFC. 2021. "Microsoft 4Afrika, IFC Partner to Promote Digital Transformation in Africa’s Agri-Food Sector." https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=26546 . Accessed Dec, 2022.

World Food Programme. 2022. Global Report on Food Crises. Joint Analysis for Better Decisions. Food Security Information Network.

World Economic Forum. 2022. Sustainable Impact Meetings. https://www.weforum.org/agenda/2022/09/how-digital-technology-can-accelerate-food-sustainability/.

IFC. 2022. Feeding the Future: IFC’s Global Food Security Platform Confronts Multiple, Overlapping Crises. https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/global-food-security-platform.

FAO, IFAD, UNICEF, WFP and WHO. 2022. "The State of Food Security and Nutrition in the World 2022. Repurposing food and agricultural policies to make healthy diets more affordable. ." Rome.

Kearney. 2022. "Navigating the future of global food ecosystems: strategic imperatives for the GCC." https://www.kearney.com/public-sector/article/-/insights/navigating-the-future-of-global-food-ecosystems-strategic-imperatives-for-the-gcc.

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