Lesotho Climate-Smart Agriculture Investment Plan Opportunities for transitioning to more productive, climate-resilient, and low carbon agriculture Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Copyright Statement: The material in this publication is copyrighted. 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Lesotho Climate-Smart Agriculture Investment Plan Lesotho Climate-Smart Agriculture Investment Plan Opportunities for transitioning to more productive, climate-resilient, and low carbon agriculture Foreword L esotho’s agricultural system faces a growing number of climate-related vulnerabilities with drought, floods, pests, and extreme temperatures occurring more frequently. In response, the Government of Lesotho is collaborating with the World Bank to integrate climate change into the country’s agriculture policy agenda through the Lesotho Climate-Smart Agriculture Investment Plan (CSAIP). The Lesotho CSAIP aims to identify climate-smart agriculture (CSA) investments that offer the greatest potential to transform Lesotho’s agriculture into a more productive, resilient, and low-emissions sector. CSA is an approach for transforming and reorienting agricultural systems to support food security under the new realities of climate change. CSA comprises three pillars: increasing productivity, enhancing resilience and adaptation, and reducing greenhouse gas emissions from the agriculture sector compared to past trends. This report provides evidence that shows that the adoption of CSA offers multiple wins: increased productivity and incomes; enhanced food security and dietary diversity; reduced impacts of climate change on agricultural produce; and improved commercialization, employment opportunities, and rural livelihoods. The report shows that CSA can also reduce soil erosion, generate carbon sequestration, conserve biodiversity, and provide other public goods that accrue to society—well beyond the farmers engaged in market transactions alone. Lesotho’s CSAIP is the outcome of a partnership between the Government of Lesotho and the World Bank. The CSAIP represents a commitment by the World Bank’s Food and Agriculture Global Practice under the Eighteenth Replenishment of the International Development Association (IDA18) to support the development of country-level CSA strategies and investment plans. The CSAIP builds on existing strategy documents, including Lesotho’s Second National Strategic Development Plan (NSDP II), and Lesotho’s international climate commitments articulated in its Nationally Determined Contribution (NDC). Through a process that combines several modeling approaches, and consultations with stakeholders in the public and private sectors, civil society, and farmer groups, the report evaluates context-specific opportunities for scaling up CSA in Lesotho. The current agricultural production pathway in Lesotho focuses on extensive animal grazing and expansion of cropland to keep pace with food demand for the population. The pathway is characterized by agricultural support for a monoculture cropping system dominated by maize. This pathway is largely unsustainable and depletes the land resources on which production relies over time. The CSAIP offers two alternative pathways for scaling up CSA in Lesotho. The first is the commercialization pathway, which entails focusing on commodities for which the country has distinct comparative advantage, such as horticulture, potatoes, and aquaculture; developing the country’s irrigation to its full potential; and developing linkages that connect smallholders to export and domestic markets. The second pathway is the resilient landscape pathway which combines modern scientific knowledge with the Machobane farming system (MFS) that is highly adapted and resilient to climate change. The MFS is a traditional farming system that combines the use of crop rotation, relay cropping, and intercropping practices with the application of manure and plant ash to conserve soil moisture and replenish soil fertility. The resilient landscape pathway primarily focuses on investing in sustainable landscape and integrated catchment management that is combined management of land and water resources, and strengthening local institutions to enhance landscape resilience; that is, the ability of a landscape to sustain desired ecological functions, native biodiversity, and critical landscape processes over time in the face of changing conditions and multiple stressors. The commercialization pathway is more profitable, requires larger farm sizes (greater than 2.5 hectares), takes up less land per unit of production, creates more jobs, produces more food calories, and offers Lesotho the potential to export horticulture, potato, fish, and vegetables. However, it requires strong market-oriented agricultural policies to be successful, and would require developing Lesotho’s agricultural value chains and ensuring the proper functioning of land markets. On the other hand, the resilient landscape pathway produces higher yields, and is more effective in controlling land degradation and delivers about ten times more carbon benefits per hectare compared to the commercialization pathway. Climate-Smart Agriculture Investment Plan for Lesotho V Thus, compared to the commercialization pathway, the resilient landscape pathway could potentially benefit more from climate finance which can come from a variety of sources including the United Nations Framework Convention on Climate Change (UNFCCC) funding mechanisms, multilateral and bilateral funds, national and regional climate funds, and private- sector investment. The resilient landscape pathway is costlier for the public sector, but is also easier to implement. It is more tailored toward locally adapted technologies that the average smallholder farmer in Lesotho can practice. Commercialization can be prioritized largely in the lowlands and foothills—the fertile and most productive parts of Lesotho that are suitable for potatoes, orchards, and vegetables, while resilient landscape can be emphasized largely in the highlands more prone to soil erosion, suitable for afforestation and farmer-managed natural regeneration of vegetation, and where less fertile land would benefit from restoration and replenishment. The effective scaling up of CSA in the country will require addressing a number of adoption barriers, including limited implementation capacity, insufficient access to inputs and credits, and insufficient agricultural research. Some of the policy actions to support effective scaling up of CSA identified in the study include: Realigning agricultural support to promote CSA. It is vital that government policies and investments address the demand and supply sides of agricultural inputs required for CSA by building sustainable, private sector-led input markets. Market- smart subsidies, that is, time-bound interventions implemented as part of a comprehensive, long-term input promotion strategy that encourage market development and private investment in fertilizer and other agricultural inputs, are vital. An example is the electronic input voucher system that local microfinance institutions or agricultural credit cooperatives can use to qualify farmers for loans and issue cash or credit vouchers that can be used to redeem inputs such as seeds or fertilizers. Strengthening agricultural research and extension. There is a need to strengthen research and establish partnerships with international research institutes to develop high-yielding, stress-tolerant, climate-ready varieties. Agricultural extension services should be upgraded to catalyze the agricultural innovation process; improve CSA knowledge; facilitate access to information, knowledge, and expertise; and provide technical advice to farmers. Building capacity to access climate finance. Lesotho faces a financing gap in the agriculture sector with low capacity to access climate finance. Critical areas that need capacity development include identifying funding gaps and needs; assessing public and private financing options; developing payment for ecosystem services programs that offer incentives to farmers in exchange for sustainably managing the land to provide some sort of ecological services such as carbon sequestration; developing bankable investment plans, a project pipeline, and financing propositions; and developing financially viable opportunities for effective private sector engagement. Our hope is that the CSA strategies and delivery methods outlined in this report will bring about sustainable improvement in the lives and livelihoods of Lesotho’s smallholder farmers. Protecting smallholder farmers from falling into poverty in the event of climatic shocks and giving them the tools to thrive are important objectives in the partnership between the Government of Lesotho and the World Bank. Hon. Lits’oane Lits’oane Hon. Tlohelang Aumane Hon. Moeketsi Majoro Minister Minister Minister Ministry of Agric. and Food Security Ministry of Development Planning Ministry of Finance Lesotho Lesotho Lesotho Simeon Ehui Marie-Francoise Marie-Nelly Director Country Director Sustainable Development, Africa Lesotho The World Bank Group The World Bank Group VI Climate-Smart Agriculture Investment Plan for Lesotho Acknowledgments T his report was prepared by a World Bank team led by Ademola Braimoh, Senior Natural Resources Management Specialist, and consisting of Giacomo Branca, Agricultural and Natural Resources Economist, Yuxuan Zhao, Economist (World Bank) and Annette Huber-Lee, Senior Scientist and Agricultural Systems Modeler; Brian Joyce, Senior Hydrologist and Decision Support Specialist; and David Yates, Senior Climate Modeler (Stockholm Environment Institute). Guidance and support for the report was provided by Paul Noumba Um, former Country Director; Emmanuel Noubissie Ngankam, Country Program Coordinator; Janet K. Entwistle, Country Representative; Mark E. Cackler, former Practice Manager; and Erwin De Nys, Program Leader. The work benefitted from insights from several World Bank Colleagues: Holger Kray, Practice Manager; Tahira Syed, Senior Rural Development Specialist; Meeta Sehgal, Senior Agricultural Specialist; Bobojon Yatimov, Senior Agricultural Specialist; Asa Giertz, Senior Agriculture Economist; Tobias Baedeker, Agriculture Economist; Sébastien Dessus, Lead Economist; Zivanemoyo Chinzara, Economist; Rex Ukaejiofo, Consultant Agriculture Specialist; Alemayehu Zeleke, Consultant Agriculture Economist; and Anna Reva, Private Sector Development Specialist. We also acknowledge the advice provided by peer reviewers: Erick Fernandes, Lead Agriculture Specialist; Ana Bucher, Senior Climate Change Specialist; Teklu Tesfaye, Senior Agriculture Economist; Stephen D’Alessandro, Senior Agriculture Economist; Christine Heumesser, Economist; and Flore Martinant de Preneuf, Senior Communications Officer. Sincere thanks also go to Ntaoleng Mochaba, Environmental Specialist; Palesa Mokorosi, Water Resources Management Specialist; Moipone Ndlovu, Social Development Specialist; Edmund Motseki, Operations Officer; Keneuoe Mofolo, Program Assistant; Relebohile Mohlakoana, Team Assistant; Masekeleme Sekeleme, Program Assistant; Seitebatso Tsemane, Team Assistant; and Elita Banda, Communications Officer. The team gratefully acknowledges the support to this work by the Lesotho Ministry of Agriculture and Food Security. Sincere thanks to Hon. Mahala Molapo, former Minister, Ministry of Agriculture and Food Security, Hon. Lits’oane Lits’oane, current Minister of Agriculture and Food Security, and Principal Secretary Mr. Malefetsane Nchaka, staff of the Department for Policy and Planning and the Department of Agricultural Research for their support. We thank the following colleagues from the Ministry of Agriculture and Food Security: Mathoriso Molumeli, former Director, Department of Planning and Policy Analysis, Lucia Phakisi, Acting Director, Department of Planning and Policy Analysis; Lefu Lebelesa, Director, Department of Agricultural Research; Maoala Khesa, Senior Economic Planner (Monitoring and Evaluation), Monica Lephole, Chief Research Officer - Food and Nutrition, Department of Agricultural Research; Selebalo Ramakhanna, Senior Research Officer, Soil and Water Conservation, Department of Agricultural Research; Bataung Kuenene, Chief Research Officer, Crops Division, Department of Agricultural Research. We also thank Letete Maluke (NSDP Coordinator), Mary Njoroge, Country Director, WFP; Peter Kimotho, Purchase for Progress Coordinator, WFP; Mokitinyane Nthimo, Assistant Representative, FAO; David Mwesigwa, Emergency and Resilience Coordinator, FAO; Khotso Mathafeng, National Geographical Information System (GIS) Expert, FAO; and Malintle Kheleli (Geography and Environmental Movement) for their support. We also thank Puseletso Likoetla, Motselisi Ratii and Mpho Liphoto (National University of Lesotho) for help with data collection at various stages of the report preparation. Finally, we thank staff of all the organizations that participated in the stakeholder consultations for their contributions in making this report a success. Climate-Smart Agriculture Investment Plan for Lesotho VII Acronyms and Abbreviations ACSE Agriculture Clusters Service Enterprise AF Adaptation Fund AfDB African Development Bank AI Artificial Insemination APPSA Agriculture Productivity Project for Southern Africa APS Agricultural Production Survey ASAP Adaptation for Smallholder Agriculture Programme Bio-CF BioCarbon Fund BMG Bill and Melinda Gates Foundation CA Conservation Agriculture CAGR Compound Annual Growth Rate CAMP Catchment Area Management Plan CBA Cost-­­benefit Analysis CDM Clean Development Mechanism CIF Cost, Insurance, and Freight CIMMYT International Maize and Wheat Improvement Center COMACO Community Market for Conservation CPF Country Partnership Framework CSA Climate-­­smart Agriculture CSAIP Climate-­­smart Agriculture Investment Plan CSIRO Commonwealth Scientific and Industrial Research Organization CT Current Trends CV Coefficient of Variation CZ Commercialization DFID Department for International Development EIRR Economic Internal Rate of Return ENSO El Niño-Southern Oscillation EX-ACT Ex-Ante Carbon Balance Tool FAO Food and Agriculture Organization of the United Nations FAOSTAT Food and Agriculture Organization Corporate Statistical Database FCPF Forest Carbon Partnership Facility FFS Farmer Field School FIRR Financial Internal Rate of Return FOB Free on Board GCF Green Climate Fund GCM Global Circulation Model GDP Gross Domestic Product GEF Global Environment Facility GFDRR Global Facility for Disaster Reduction and Recovery GHG Greenhouse Gas GIS Geographical Information System GoL Government of Lesotho HIV/AIDS Human Immunodeficiency Virus Infection and Acquired Immune Deficiency Syndrome HSP High Shadow Price of Carbon ICT Information and Communication Technology IDA International Development Association VIII Climate-Smart Agriculture Investment Plan for Lesotho IFAD International Fund for Agricultural Development IFC International Finance Corporation IK Indigenous Knowledge INDC Intended Nationally Determined Contribution IPCC Inter-­­governmental Panel on Climate Change IPM Integrated Pest Management IRR Internal Rate of Return ISFM Integrated Soil Fertility Management KfW German Development Bank LDCF Least Developed Countries Fund LENAFU Lesotho National Farmers Union LesAgMod Lesotho Agricultural Sector Model LMS Lesotho Meteorological Services LNFP Lesotho National Forestry Policy LNNPS Lesotho National Nutrition Policy and Strategy LP Linear Programming LSP Low Shadow Price of Carbon LSU Livestock Unit LZHSR Lesotho Zero Hunger Strategic Review MAFS Ministry of Agriculture and Food Security MCC Millennium Challenge Corporation MFD Maximizing Finance for Development MFS Machobane Farming System MGF Matching Grant Facility MHE Market Hub Enterprise MKS Market-­­smart Subsidy MSMEs Micro, Small, and Medium Enterprises NAIP National Agricultural Investment Plan NCF National Climate Fund NCCP National Climate Change Policy NDC Nationally Determined Contribution NGO Nongovernmental Organization NPV Net Present Value NRM Natural Resource Management NSDP National Strategic Development Plan NSP National Seed Policy NTFP Non-Timber Forest Product OER Official Exchange Rate PPP Public Private Partnership PSCED Private Sector Competitiveness and Economic Diversification Project RBF Results-Based Finance RCF Regional Climate Fund RISDP Regional Indicative Strategic Development Plan RL Resilient Landscapes RSA Republic of South Africa RUSLE Revised Universal Soil Loss Equation SACU Southern African Customs Union SADC Southern African Development Community SADP Smallholder Agricultural Development Project SCD Systematic Country Diagnostic SCF Standard Conversion Factor Climate-Smart Agriculture Investment Plan for Lesotho IX SCCF Special Climate Change Fund SDG Sustainable Development Goal SER Shadow Exchange Rate SLM Sustainable Land Management SSP Shared Socioeconomic Pathway TCAF Transformative Carbon Asset Facility UN United Nations UNCCD United Nations Convention to Combat Desertification UNDP United Nations Development Programme UNEP United Nations Environment Programme UNFCCC United Nations Framework Convention on Climate Change UN-REDD United Nations Programme on Reducing Emissions from Deforestation and Forest Degradation USAID United States Agency for International Development VAT Value Added Tax VCM Voluntary Carbon Markets WEAP Water Evaluation and Planning WFP World Food Program WHO World Health Organization WTP Willingness to Pay Exchange rate used in this report: U$1 is equivalent to LSL 13.66 X Climate-Smart Agriculture Investment Plan for Lesotho Contents Executive Summary XVIII Climate Change and Agricultural Vulnerability XVIII Climate Smart Agriculture Investment Plan (CSAIP) Analytical Approach XIX CSA Impacts at Sector and Household Levels XXI Crop Yield XXI Cropland Expansion under Climate Change XXIII Food Production XXIII Food Availability and Trade XXIV Profitability of CSA XXVI Carbon Balance XXVI Prospect of Meeting Lesotho’s CSA Targets XXVIII Barriers to CSA Implementation XXIX CSA Investment Needs XXXI Prioritization of Scenarios and Investment Decision XXXVI Financing the Investment Plan XXXVIII Policy Recommendations XXXIX CSA and the World Bank Agenda in Lesotho XLI I. Introduction 1 II. Methodology 9 III. CSA Impacts at the Household Level 25 IV. CSA Impacts at the Sector Level 33 4.1 Crop Prices for the Scenarios 33 4.2 Planted Areas under No Climate Change 34 4.3 Livestock Units 35 4.4 Climate Projections 36 4.5 Crop Yields 40 4.6 Production 41 4.6.1  Area under Cultivation for the Narrative Scenarios 41 4.6.2 Crop Production for the Narrative Scenarios under Climate Change 43 4.6.3 Livestock Production 44 4.7 Food Availability and Trade 44 4.8 Soil Erosion 46 Climate-Smart Agriculture Investment Plan for Lesotho XI 4.9  Pest Infestation under Climate Change 48 4.10 GHG Emissions 49 4.11 Impact of CSA Adoption on Job Creation 52 4.12 Linkages between SDGs and NDC in Lesotho 53 4.13 Potential for Meeting Lesotho CSAIP Targets 55 V. CSA Investment Needs 59 5.1 CSA Adoption Constraints 65 5.2 Improving the Enabling Environment for CSA Implementation 66 5.3 Financing the Investment Plan 78 References 87 Annex 1: Major Stakeholders Consulted During the CSAIP Process 90 Use Scenarios Assumptions Annex 2: Land-­ 92 Annex 3: Approach for the CBA 94 Assumptions and Computation of the Overall Direct Benefits 95 Annex 4: LesAgMod Use and Limitations 99 Model Objectives 99 Interpretation of Model Results 99 Computational Method 99 Some Model Limitations 100 Annex 5: Land Suitability Evaluation for Lesotho 101 Annex 6: Critical Investments for Lesotho’s Agricultural Transformation 106 Annex 7: Estimation of GHG Balance 113 List of Boxes ES.1 Brief Description of the Lesotho CSAIP Components XXXIII 1.1 Key Findings from Lesotho CSA Profile 6 5.1 Brief Description of the Lesotho CSAIP Components 61 5.2 Carbon Payment Supports CSA Adoption in Zambia 80 5.3 Best Practices in Designing Payment for Ecosystem Services 85 A6.1 CSA Options Articulated in Lesotho’s NDC 106 XII Climate-Smart Agriculture Investment Plan for Lesotho List of Figures ES.1 Positioning of Scenarios on the Axes of Drivers of Agricultural Land Change XX ES.2 Change in Crop Yields Due to Climate Change XXII ES.3 Ratio of Crop Yields under Climate Change Versus Historical by 2050 XXIII ES.4 Ratio of Cropland Extent under Climate Change Versus Historical by 2050 XXIII ES.5 Livestock Production (tons) for the Narrative Scenarios Averaged for All the Future Climate Projections XXIV ES.6 Ratios of Calories Potentially Derived from National Food Production by 2050 under Climate Change for the CZ Scenario Versus Calories from Historical (2000–2010) National Production XXV ES.7 Relationship Between Economic and Financial Benefits of CSA at the Farm Level XXVI ES.8 Relationship Between CSA Benefits and Climate Smartness of Technologies XXXII ES.9 Net Present Value and Internal Rate of Return of Lesotho CSAIP Delivery Mechanisms XXXVI ES.10 Lesotho Agricultural Versatility Map XXXVII ES.11 Cumulative Annual Proportion of Funds under Existing Agricultural Projects and CSAIP Financing GAP XXXVIII ES.12 Sources of Finance for CSA Implementation XXXIX 1.1 Sector-­Wise Percentage Contribution to Lesotho GDP 2 1.2 Lesotho Food and Agriculture Trade Balance (US$, Millions) 3 1.3 Lesotho Agriculture GHP Emissions Sources (100% = 1.224 Million tCO2eq) 4 2.1 The CSAIP Development Process 10 2.2 Positioning of Scenarios on the Axes of Drivers of Agricultural Land Change 15 2.3 Projected Distribution of National Land Cover by 2050 (Ha) 17 2.4 Schematic Representation of Lesotho Agricultural Sector Model 21 2.5 Illustrative Example of Water-­Saving Potential of CSA Practices 22 3.1 Relationship between Economic and Financial Benefits from CSA Farm Budgets 28 4.1 Historical Commodity Prices (Blue) and the Estimated Prices by 2050 to Achieve Production Levels Envisioned under the Narrative Scenarios 33 4.2 Historic Average Annual Temperature and Total Annual Precipitation over Lesotho 37 4.3 Summary of Temperature and Precipitation Change for the 30-­Year Averaging Period of 1980–2010 Relative to the 30-­Year Averaging Period of 2035–2065 for 121 Climate Projections 38 Climate-Smart Agriculture Investment Plan for Lesotho XIII 4.4 Projected Mid-­ Century (2035 to 2065) Average Temperature and Precipitation Change 39 4.5 Average Change in Crop Yields Due to Climate Change 40 4.6 Ratio of Crop Yields under Climate Change Versus Historical by 2050 41 4.7 Ratio of Cropland Extent under Climate Change Versus Historical by 2050 42 4.8 Cropland Extent for the Narrative Scenarios Averaged for All the Future Climate Projections 42 4.9 Ratios of Crop Production by 2050 under Climate Change for Three Scenarios Versus Historical Crop Production 43 4.10 Livestock Production (tons) for the Narrative Scenarios Averaged for All the Future Climate Projections 45 4.11 Ratios of Calories Potentially Derived from National Food Production by 2050 under Climate Change for the CZ Scenario Versus Calories from Historical (2000–2010) National Production 45 4.12 Lesotho Crop Yield Gap 46 4.13 Predicted Soil Loss under Climate Change for the Scenarios for Lesotho’s Sub-­ Catchments (Thousand tons per Year) 47 4.14 Cumulative Frequency Distribution of Average Erosion Rates Across Sub-­Catchments for the Scenarios 48 4.15 Predicted Probabilities of African Armyworm Infestation under no Climate Change (Left) and Climate Change (Right) 49 4.16 GHG Mitigation Options in Livestock 51 4.17 Agricultural Value Chain Ecosystem 53 5.1 Relationship Between CSA Benefits and Climate Smartness of Technologies 59 5.2 Impact of Factors on the Adoption of CSA Practices 69 5.3 Net Present Value and Internal Rate of Return of Lesotho CSAIP Delivery Mechanisms 75 5.4 Lesotho Agricultural Versatility Map 76 5.5 Cumulative Annual Proportion of Funds under Existing Agricultural Projects and CSAIP Financing Gap 78 5.6 Sources of Finance for CSA 79 B5.3.1 Land Managed Primarily for Agricultural Production Versus Land Managed to Provide Multiple Ecosystem Services under a PES Scheme 85 B5.3.2 The Role of Environmental, Socioeconomic and Political Contexts on PES Design and Outcomes 86 A5.1 Land Suitability and Versatility Maps 102 XIV Climate-Smart Agriculture Investment Plan for Lesotho List of Tables ES.1 Lesotho CSA Targets XIX ES.2 Strategies for Achieving Lesotho CSA Goals XX ES.3 Projected Impacts of Climate Change on Crop Yields (%) XXII ES.4 Crop Production and their Proportions for the Scenarios Under Climate Change XXIV ES.5 Average Historic Imports, Exports, and Nationally Produced Crop Subsector Commodities and the Kcal per Capita per Day Provided by Each of Those Commodities for 2000–2010 XXV ES.6 Carbon Balance from CSA Practices under Rl and CZ Scenarios XXVII ES.7 GHG Emission Intensities for Crops and Livestock (tCO2eq per Ton Product) XXVII ES.8 Estimated Number of Farming Jobs Created Under Climate Change Over a 5-Year Investment Period XXVIII ES.9 Potential of Meeting Lesotho’s CSA Targets XXIX ES.10 Relative Importance of Factors for Adoption of CSA Practices in Lesotho XXX ES.11 CSAIP Investment Costs (US$, Thousands per Year) XXXIII ES.12 Role of Delivery Mechanism in Addressing Constraints to CSA Adoption XXXIV ES.13 Comparison of Indicators under the Two Scenarios XXXVII ES.14 Potential Sources of Funding for CSAIP Delivery Mechanisms XXXIX ES.15 Lesotho CSA Policy Measures and Time Frame for Implementation XLII 1.1 The Mainstreaming of Climate Change within Agriculture-­Related Policies in Lesotho 5 2.1 Normative Vision for CSA in Lesotho 11 2.2 CSA Goals for Lesotho 11 2.3 Lesotho CSA Targets 12 2.4 Strategies for Achieving Lesotho CSA Goals 12 2.5 Outcome Indicators of the CBA 19 2.6 LesAgMod Outcome Indicators 23 3.1 Income from Crop Production for the Representative Household and Farmer Group 25 3.2 Income Benefits from Adoption of CSA Practices 26 3.3 Income Benefits from Adoption of Improved Feeding and Breeding Management Practices for Livestock 27 3.4 Benefits from Aquaculture Production 29 3.5 Costs of SLM Options 30 Climate-Smart Agriculture Investment Plan for Lesotho XV 4.1 Ratio of the Commodity Prices for the Alternative Scenarios Relative to the Historical Prices by 2050 34 4.2 Distribution of Crops under the Scenarios by 2050 35 4.3 Annual Livestock Growth Rates (Percent) 35 4.4 Target Livestock Numbers and Livestock Units for Each Narrative Scenario 35 4.5 Dry and Wet Spell Attributes of the Historic and Climate Projections 38 4.6 Projected Impacts of Climate Change on Crop Yields (%) 40 4.7 Crop Production and their Proportions for the Scenarios Under Climate Change 43 4.8 Average Historic Imports, Exports, and Nationally Produced Crop Subsector Commodities and the Kcal per Capita per Day Provided by Each of Those Commodities for 2000–2010 44 4.9 Erosion Rates by Land Cover (Ton per Ha per Year) 48 4.10 Estimates of Erosion-­ Induced Carbon Emissions under Climate Change 49 4.11 Lesotho Land Area under Different Predicted Probability of Pest Infestation 49 4.12 Annual GHG Emissions (tCO2eq) under the Scenarios 50 4.13 Climate-­Smart Options for Livestock Production and Their Contribution to the CSA Pillars 50 4.14 GHG Emission Intensities for Crops and Livestock (tCO2eq per Ton Product) 52 4.15 Estimated Number of Farming Jobs Created Under Climate Change 52 4.16 Pathways to Agricultural Jobs in Lesotho 54 4.17 SDGs–NDCs Linkages in Lesotho 54 4.18 Potential of Meeting Lesotho’s CSA Targets 56 5.1 CSAIP Investment Costs (US$, Thousands per Year) 61 5.2 Flow of Economic Benefits (US$, Thousands per Year) of the CSAIP under the RL Scenario 62 5.3 Flow of Economic Benefits (US$, Thousands per Year) of the CSAIP under the CZ Scenario 63 5.4 CSAIP Profitability Indicators without Carbon Benefits 63 5.5 Sensitivity Analysis 64 5.6 Economic Evaluation of the CSAIP Mitigation Impact Using the Shadow Prices of Carbon 65 5.7 CSAIP Profitability Indicators Incorporating Carbon Benefits 66 5.8 Relative Impact of Factors for Adoption of CSA Practices in Lesotho 67 5.9 Role of Delivery Mechanisms in Addressing Constraints to CSA Adoption 71 5.10 CSAIP Delivery Mechanisms 74 5.11 Comparison of Indicators under the Two Scenarios 75 5.12 Recommended Climate-Smart Agriculture Practices for Lesotho’s Agroecological Zones 77 5.13 Examples of Upfront and Result-­Based Climate Finance 79 XVI Climate-Smart Agriculture Investment Plan for Lesotho 5.14 Agriculture Projects with CSA-­Related Expenditure 81 5.15 Potential Sources of Funding for CSAIP Delivery Mechanisms 81 5.16 Lesotho CSA Policy Measures and Time Frame for Implementation 83 A2.1 Land Cover Extent for the Scenarios (Ha) by 2050 92 A2.2 Cropland Proportions under Each Scenario (Percent) 93 A2.3 Irrigation Land under the Scenarios (Ha) 93 A3.1 Computation of SER and SCF 95 A3.2 Distribution of Farm Sizes in Lesotho 95 A3.3 Import Parity Price for Key Importable Inputs 96 A3.4 Export Parity Price for Exported Output 97 A3.5 Benefits from Climate Information Services, Land Administration, and Erosion Control 97 A6.1 Lesotho CSA Investment Activities 110 A7.1 Estimated Carbon Balance for the RL Scenario 113 A7.2 Estimated Carbon Balance for the CZ Scenario 114 Climate-Smart Agriculture Investment Plan for Lesotho XVII Executive Summary 1. The objective of this report is to fill knowledge gaps and identify investments to transform Lesotho’s agriculture to a productive, resilient, and low-­­ emissions sector. The report identifies climate-­­ smart agriculture (CSA) strategies to mitigate and adapt to climate vulnerability and evaluates the costs and benefits of investments to implement the strategies. CSA is an approach for transforming and reorienting agricultural systems to support food security under the new realities of climate change. CSA comprises three pillars: increasing productivity, enhancing resilience and adaptation, and reducing greenhouse gas emissions from the agriculture sector compared to past trends. A CSA strategy refers to a plan of actions to achieve CSA goals and targets for a country. Apart from climate change, Lesotho’s agriculture sector is confronted with several endogenous and exogenous risk factors that make the country heavily dependent on food imports to meet domestic consumption needs. 2. Lesotho’s agricultural productivity challenges include small landholding of less than 1 ha for most households, outdated farm technologies and farm management practices, limited technical expertise, suboptimal use of inputs by most farmers, lack of an adequate irrigation and drainage system, weak rural infrastructure, a rudimentary rural advisory system, and limited access to credit and investment capital. In addition, severe land degradation and climate variability with regular cycles of drought and intense rainfall have contributed to massive soil erosion, loss of scarce agricultural land, and rural poverty. Climate change and agricultural vulnerability 3. Climate is a major determinant of crop yield variability in Lesotho. Very dry conditions can suppress yields, leading to low productivity. The variability of yield and thus production from year to year can be extreme and are primarily due to rainfall deficits leading to soil moisture stress and reduced rangeland productivity. The El Niño- Southern Oscillation (ENSO) phenomenon particularly affects climate variation in Lesotho. High intraseasonal and XVIII Climate-Smart Agriculture Investment Plan for Lesotho interannual rainfall variability, with frequent droughts, has often resulted in delayed planting or farmers not planting at all, reduced seed germination due to hardened soil and lack of water, crop failures, deterioration of rangelands and pastures, water scarcity for livestock, and increased food prices. 4. Increasing agricultural productivity, enhancing its resilience to climate change, and reducing the emissions that come from the agricultural sector are, therefore, triple imperatives that require alternative sets of practices. CSA seeks to increase productivity in an environmentally and socially sustainable way, strengthen farmers’ resilience to climate change, and reduce agriculture’s contribution to climate change by reducing greenhouse gas (GHG) emissions and sequestering carbon.1 Climate smart agriculture investment plan (CSAIP) analytical approach 5. The CSAIP analytical approach began with a stakeholder process that identified the vision and goals for Lesotho’s agriculture sector. Five CSA targets were developed that focus on increasing agricultural productivity, enhancing resilience, and reducing emissions. All five targets address productivity, the central goal of most agricultural policies, while two targets each focus on enhancing climate resilience and mitigation (table ES.1). A number of strategies were identified for achieving the specified targets. A CSA strategy refers to a plan of actions to achieve CSA goals and targets for the country. A CSA strategy typically includes techniques to managing climate risks, understanding and planning for adaptive transitions that may be needed for example into new farming systems or livelihoods, and exploiting opportunities for reducing GHG emissions. The strategies are clustered into three groups: climate resilience and nutrition security, commercialization, and capacity development strategies (table ES.2). 6. The CSAIP analytical approach also includes scenario development that helps define specific pathways to achieve the proposed targets. It was also a stakeholder-­­driven process to test the plausibility of identified agriculture sector goals and served as a “reality check” to the outcomes given future uncertainties and other constraints. Two major drivers that may influence agricultural development in Lesotho—­­agricultural trade and sustainable landscape management—­­ were used to formulate land-­­use scenarios for 2010 to 2050. The scenarios developed were Current Trends, Commercialization, and Resilient Landscape (figure ES.1). 7. The Current Trends (CT) scenario generally follows the current development pathway and ongoing tendency of market liberalization but with relatively low ambition toward sustainable landscape management. A general TABLE ES.1: LESOTHO CSA TARGETS No. Targets for long-­­term vision CSA pillars addressed 1 Increase yields of major staples by a factor of 2.5. P 2 Double income of smallholder farmers. P, R 3 Increase agricultural exports by a factor of 2.5. P, R 4 Reduce agricultural GHG emissions by 25%. P, M 5 Reduce livestock emissions intensity by 25%. P, M Source: Authors based on stakeholder workshops Note: P = productivity; R = resilience; and M = mitigation 1 Adaptation refers to adjustments in social and ecological systems, in response to actual or expected disturbances such as climatic impacts. Resilience on the other hand is the ability of social and ecological systems to absorb such disturbances while retaining the same basic structure and ways of functioning, the capacity of self-organization, and the capacity to adapt to stress and change. Adaptation is the key factor for understanding how the resilience of social and ecological system changes over time. For simplicity, both terminologies are assumed to be synonyms in this report. Climate-Smart Agriculture Investment Plan for Lesotho XIX TABLE ES.2: STRATEGIES FOR ACHIEVING LESOTHO CSA GOALS Climate resilience and nutrition security Commercialization Capacity development Crop diversification Agricultural value chain Agricultural research and extension tolerant crop and livestock breeds Stress-­­ Commodity standards Knowledge development Biofortified crops Warehouse receipt system Integrated weather and market advisories using Big Data and information and communication technology (ICT) CSA practices at the farm level2 Greenhouse agriculture — Landscape approaches 3 Market infrastructure development — Cost-­­effective irrigation — — Source: Authors based on stakeholder workshops FIGURE ES.1: POSITIONING OF SCENARIOS ON THE AXES OF DRIVERS OF AGRICULTURAL LAND CHANGE High agricultural exports CZ Low emphasis on sustainable High emphasis on sustainable landscape management landscape management RL CT Low agricultural exports Source: Authors assumption under the CT scenario is for agricultural land under cultivation to grow through extensification and for production to keep pace with the current population growth rate. The CT scenario implies continued agricultural support for the dominant, unsustainable historical monoculture cropping system generally characterized by maize. To achieve this outcome, price support and subsidy must increase, implying an increasing social cost. In this scenario, maize, wheat, sorghum, and beans continue to be the primary crops, while sheep and goat production for wool and fed cereal production and extensive mohair remains vital. Agriculture continues to be dominated by small-­­scale rain-­­ animal grazing. 2 This includes integrated soil fertility management, conservation agriculture, agroforestry, improved feeding practices for livestock, animal health, and herd management. 3 This includes rangeland rehabilitation and afforestation, terracing, soil erosion control, and flood management. XX Climate-Smart Agriculture Investment Plan for Lesotho 8. The Commercialization (CZ) scenario prioritizes a high degree of market liberalization following trends in neighboring Republic of South Africa and takes into consideration agricultural commodities for which Lesotho has distinct comparative advantage. The scenario assumes high ambitions for international cooperation, market liberalization, and increased agricultural exports as a main strategy to graduate from the United Nations (UN) ranking of least developed countries. The scenario implies a reduction in price support for field crops, notably maize, where deficits are assumed to be met by imports, supported through climate-smart agriculture investments in more profitable commodities, most notably potato, vegetables, and orchard products on the crops side and animal products on the livestock side of agriculture. 9. The Resilient Landscape (RL) scenario assumes a lower priority to market liberalization but prioritizes a land management system that empowers smallholders with ambitions toward sustainability, socioeconomic resilience, and low ecological impact from economic growth. The RL scenario focuses on integrating climate- smart, modern scientific knowledge like use of improved crop varieties and climate advisory services with the Machobane Farming System (MFS), a traditional farming practice that combines the use of crop rotation, relay cropping, and intercropping practices with the application of manure and plant ash to conserve soil moisture and replenish soil fertility. A main strategy to graduate from the least developed country status under the RL scenario is supporting smallholders, investing in sustainable landscape management, and building institutions to enhance landscape resilience. 10. To determine the impacts of CSA at sector and household levels, the CSAIP approach combined quantitative analysis and qualitative assessment. Two innovative quantitative techniques were employed for the assessment. At the sector level, the Lesotho Agricultural Sector Model (LesAgMod) computer tool was purposefully developed to explore alternative agricultural pathways and investment priorities for Lesotho. The agricultural planning tool couples use practices and climate change scenarios to assess key vulnerabilities agricultural, water, soil nutrients, and land-­­ of the agricultural sector and employs a profit maximization approach to estimate changes in land-­­use and cropping patterns over time. Each narrative scenario was run for a set of 10 future climate projections, resulting in 30 unique simulations. The climate projections are assumed to be an exogenous factor that has an influence on crop and livestock productivity. 11. The second CSAIP quantitative technique includes a financial and economic analysis to determine the profitability of adopting CSA at the household and sector levels. The analysis provided answers to two key questions: 1) What is the financial viability of CSA practices for a household? 2) How do the anticipated costs needed to scale up CSA compare to the anticipated economic benefits? 12. While the first question helps in determining the incentive requirements for an average Lesotho household to adopt CSA, the second question assesses the economic and societal benefits of adopting CSA and establishes the economic rationale for the public sector to support farmers’ adoption and scaling up of CSA. For the Cost- Benefit Analyses, the CT scenario characterized by conventional farming practices was assumed to be the “without CSA investment scenario” or baseline scenario while the RL and CZ scenarios are the “with CSA investment scenarios.” CSA impacts at sector and household levels Crop yield 13. The projected changes in yield under climate change are summarized in figure ES.2 and table ES.3. The minimum projected impact of climate change on yield is negative for wheat (15 percent decrease), maize (6 percent decrease), orchards (5 percent decrease), and beans (2 percent decrease). On average, potato has the largest positive Climate-Smart Agriculture Investment Plan for Lesotho XXI FIGURE ES.2: CHANGE IN CROP YIELDS DUE TO CLIMATE CHANGE 20 Percent change 10 0 –10 Beans Maize Orchards Potato Sorgham Wheat Vegetables TABLE ES.3: PROJECTED IMPACTS OF CLIMATE CHANGE ON CROP YIELDS (%) Crops Minimum First quartile Median Third quartile Maximum Beans –2 5 9 13 21 Maize –6 –2 3 12 15 Orchards –5 –2 0 6 9 Potato 4 8 15 21 25 Sorghum 3 6 10 14 20 Wheat –14 –11 –7 –4 4 Vegetables 2 6 12 15 18 Negative Positive Source: Authors impact with 15 percent increase in yield, followed by vegetables (12 percent increase), sorghum (10 percent increase), and beans (9 percent increase), suggesting that crops would generally benefit from global warming in Lesotho. The warmer temperatures extend the growing season supported by mostly adequate moisture regimes. By extending the growing season, the period of successful pollination and initiation of kernel development in cereals that ends with physiological maturity of the kernels is maximized that may otherwise have been curtailed by cooler temperatures. Wheat is the exception, which shows a general decline, with reduced winter and spring soil moisture that results in suppressed yields. The maximum projected positive impact of climate change on yield ranges from 4 percent for wheat to 25 percent for potato. 14. The RL and the CZ scenarios show the influence of CSA practices on yield, with the RL scenario resulting in higher yields compared with the CZ scenario. Figure ES.3 indicates an increase in yield relative to historical for all scenarios under climate change. Relative to the CT scenario, the overall benefit of the CSA practices on yield under climate change is substantial. The variability of yields is primarily due to soil moisture deficits and heat stress. Potato and vegetables show the greatest increase in yield overall, benefiting from CSA practices, including the increase in application of nitrogen fertilizers. XXII Climate-Smart Agriculture Investment Plan for Lesotho FIGURE ES.3: RATIO OF CROP YIELDS UNDER CLIMATE CHANGE VERSUS HISTORICAL BY 2050 2 1.8 1.6 1.4 1.2 CT 1 CZ 0.8 RL 0.6 0.4 0.2 0 Beans Maize Orchards Potato Sorghum Wheat Vegetables All crops Source: Authors. Ratios above 1 show that relative to historical, crop yields will increase. On the other hand, ratios below 1 indicate that crop yields will decrease relative to historical. Cropland expansion under climate change smart is increasing land-­­ 15. A major key to making agriculture climate-­­ use efficiency through higher productivity, thereby reducing the need for clearing more land for agricultural production. Relative to historical land use patterns, adoption of CSA leads to a reduction in the estimated cropland requirement by 20  percent for the RL scenario and 30 percent for the CZ scenario. On the other hand, the CT scenario shows cropland expansion by 50 percent (figure ES.4). FIGURE ES.4: RATIO OF CROPLAND EXTENT UNDER CLIMATE CHANGE VERSUS HISTORICAL BY 2050 3.5 3.0 2.5 2.0 CT 1.5 CZ 1.0 RL 0.5 0 Beans Maize Orchards Potato Sorghum Wheat Vegetables Total Source: Authors. Ratios above 1 show that relative to historical, cropland extent will increase. On the other hand, ratios below 1 indicate that cropland extent will decrease relative to historical. Food production 16. The estimated total production under climate change is 496,000 tons for CT, 590,000 tons for RL, and 742,000 tons for CZ. Due to difference in cropping strategies under the scenarios described in paragraphs 7 to 9, the proportion of maize production decreases from 30 percent for CT to 3 percent for CZ. Potato is the most dominant crop accounting for 43 percent under CT, 54 percent under RL, and 62 percent under CZ scenario. The production of orchards under CZ doubles that of the CT scenario (table ES.4). 17. While modeling results suggest steady increases of livestock over time, these changes are occasionally moderated by variability in climate and water supply (figure ES.5). However, these effects are modest. The effects of climate and water supply reliability are more pronounced when looking at net production of livestock, because stresses caused by heat and scarcities of food and water have a larger influence on reducing the productivity of livestock than on increasing mortality. Climate-Smart Agriculture Investment Plan for Lesotho XXIII  ROP PRODUCTION AND THEIR PROPORTIONS FOR THE TABLE ES.4: C SCENARIOS UNDER CLIMATE CHANGE CT CZ RL ton % ton % ton % Beans 10,075 2 10,169 1 12,020 2 Maize 146,770 30 24,536 3 51,172 9 Orchards 17,555 4 57,692 8 40,000 7 Potato 214,100 43 461,743 62 320,493 54 Sorghum 18,015 4 19,098 3 26,631 5 Wheat 18,418 4 21,160 3 32,125 5 Vegetables 70,881 14 147,415 20 107,993 18 Total 495,815 100 741,813 100 590,433 100 Source: Authors FIGURE ES.5: LIVESTOCK PRODUCTION (TONS) FOR THE NARRATIVE SCENARIOS AVERAGED FOR ALL THE FUTURE CLIMATE PROJECTIONS Cattle Chickens Cows Goats Pigs Sheep 30,000 25,000 20,000 15,000 10,000 5,000 0 2010 CT 2030 CT 2050 CZ 2030 CZ 2050 RL 2030 RL 2050 Source: Authors 18. The potential for aquaculture development has recently increased and could represent an interesting investment for the private sector. Aquaculture helps to diversify food production, increase nutrition security, and enhance resilience. The aquaculture model developed in the report refers to the most consolidated production system, that is, warm-water fish farming in the lowlands, where temperatures are relatively high. The model includes common carp production (trout), the main species being produced, and assesses the benefits to the individual fish farmer who has access to abundant water and exploit this for fish farming. Over a 5-year investment period, scaling up aquaculture to yield economic benefits of $8.2 million for the Resilient Landscape Scenario and $24.7 million for Commercialization Scenario. Food availability and trade 19. Food calorie intake in Lesotho is about 2,450 kcal per capita per day, implying a calorie deficit of 11 percent compared to the recommended average of about 2,750 kcal per capita per day. National food production contributes only 34 percent of Lesotho’s per capita calorie intake (table ES.5) with more than half of per capita food calories derived from maize. While imports are 30 percent more than total national production, only about 2 percent of national production is exported. Per capita food rates have been modestly low and would benefit from increased production. Within the context of the CZ scenario, some nationally produced agricultural commodities—­­ such as vegetables, orchards, and potato—­­could serve Lesotho’s export market. Assuming population will grow to 3 million XXIV Climate-Smart Agriculture Investment Plan for Lesotho AVERAGE HISTORIC IMPORTS, EXPORTS, AND NATIONALLY PRODUCED CROP SUBSECTOR TABLE ES.5:  COMMODITIES AND THE KCAL PER CAPITA PER DAY PROVIDED BY EACH OF THOSE COMMODITIES FOR 2000–2010 National Import Export Net Calorie intake National production Calorie (kcal per production (ton) (ton) (ton) (kcal per capita as proportion of capita per day) from (ton) per day) consumption (%) national production Beans 17,000 83,000 2,000 98,000 370 17 64 Maize 96,000 213,000 2,000 307,000 1,350 31 422 Orchards 16,000 5,000 0 21,000 20 76 15 Potato 100,000 8,000 0 108,000 95 93 88 Sorghum 22,000 7,000 0 29,000 100 76 76 Wheat 17,000 83,000 2,000 98,000 370 17 64 Vegetables 26,000 17,000 0 43,000 12 60 7 Livestock 27,000 8,000 0 35,000 130 77 100 Total 321,000 424,000 6,000 739,000 2,447 836 Source: Based on FAOSTAT. Food items were converted to calories using Lesotho food composition table. FIGURE ES.6: RATIOS OF CALORIES POTENTIALLY DERIVED FROM NATIONAL FOOD PRODUCTION BY 2050 UNDER CLIMATE CHANGE FOR THE CZ SCENARIO VERSUS CALORIES FROM HISTORICAL (2000–2010) NATIONAL PRODUCTION 11 10 9 8 7 6 5 4 3 2 1 0 Beans Maize Orchards Potato Sorghum Wheat Vegetables Livestock Source: Authors. Orchards, potato, and vegetables can be prioritized for export. Ratios above 1 show that relative to historical, calories derived from national production will increase. On the other hand, ratios below 1 indicate that calories derived from national production will decrease relative to historical. by 2050 and current food calorie shortfalls will be met through national production, figure ES.6 indicates that calories potentially derived from national production by 2050 could increase by a factor ranging from 3.6 for potato to 10.2 for vegetables. 20. Potato production would grow to 462,000 tons by 2050, and Lesotho could target 200,000 tons for national consumption, doubling the historical requirement of 100,000 tons. Thus, more than 260,000 tons could be available for export. Likewise, vegetable and orchard production are shown to grow at rates exceeding population growth rates and could also be used for exports, in addition to making food calorie intake grow to more acceptable standards of around 2,750 kcal per capita per day. To improve nutritional quality, Lesotho could also step up its biofortification efforts to cover beans, maize, wheat, and sorghum. Biofortification, a technique that uses conventional Climate-Smart Agriculture Investment Plan for Lesotho XXV breeding methods to produce more nutritious crops—­­ with a higher content of vitamin A, zinc, iron, or other micronutrients than standard crop varieties—­­could contribute to healthier diets in Lesotho. Profitability of CSA smart crop and livestock production are more profitable than 21. Farm budget analyses reveal that climate-­­ conventional practices. The annual net income of the representative farming household is about three times higher under the RL scenario, and about five times higher for the CZ scenario. Higher profitability of commercial farming value crops: potato, results from increase in farm size, intensification of cereals production, and expansion of high-­­ vegetables, and fruits crops. Switching from a conventional to a commercial farming system is more profitable but requires more private investments, while switching from conventional to climate-­­ resilient farming practices is less profitable but will be more affordable for the smallholders. smart crop production are higher than private benefits derived by individual 22. Societal benefits of climate-­­ farmers. For every US$100 the farmer profits from CSA adoption, the society benefits an additional US$26 through transfer payments to producers (figure ES.7). CSA can also reduce soil erosion, generate carbon sequestration, conserve biodiversity, and provide other public goods that accrue to society but not to the farmers engaged in market transactions alone. FIGURE ES.7: RELATIONSHIP BETWEEN ECONOMIC AND FINANCIAL BENEFITS OF CSA AT THE FARM LEVEL 140,000 y = 1.26x + 1207.5 120,000 R² = 0.99 Economic benefits (US$) 100,000 80,000 60,000 40,000 20,000 0 0 20,000 40,000 60,000 80,000 100,000 120,000 Financial benefits (US$) Source: Authors Carbon balance 23. Table ES.6 indicates that relative to Current Trends, the RL scenario will generate a net carbon sink (that is, absorbs more carbon than it releases as carbon dioxide into the atmosphere) of 26 million tCO2-­­eq, equivalent to 0.87 million tCO2-­­eq per year, or 1.5 tCO2-­­eq per ha per year. Livestock activity is the major carbon emitter with eq, followed by inorganic fertilizers (1.9 million tCO2-­­ 6 million tCO2-­­ eq). However, improved grassland management helps to reduce most of these emissions with carbon sequestration of 21 million tCO2-­­eq. Afforestation, switching from annuals to orchards, rangeland improvement, forest rehabilitation, and improved crop production all sequesters about 13.5 million tCO2-­­eq. GHG dynamics for the CZ scenario are similar but generate considerably lower carbon sink of 2.5 million tCO2-­­eq, equivalent to 84,000 tCO2-­­eq per year, or 0.2 tCO2-­­eq per ha per year. Livestock activity is also a XXVI Climate-Smart Agriculture Investment Plan for Lesotho TABLE ES.6: CARBON BALANCE FROM CSA PRACTICES UNDER RL AND CZ SCENARIOS Project activities RL Scenario CZ Scenario Over the economic Annual average Over the economic Annual average project lifetime of (tCO2-­­eq per year) project lifetime of (tCO2-­­eq per year) 30 years (tCO2-­­eq) 30 years (tCO2-­­eq) Net GHG emissions Afforestation −6,517,278 −217,243 −2,281,062 −76,035 Annual crops to orchards −18,223 −607 −174,423 −5,814 Rangeland improvement −2,498,661 −83,289 −3,358,130 −111,938 Improved annual crop production −1,954,768 −65,159 −1,213,410 −40,447 Improved orchards practices −149,243 −4,975 −1,413,030 −47,101 Grassland management −20,741,663 −691,389 −6,102,907 −203,430 Livestock management 6,236,615 207,887 7,055,693 235,190 Forest rehabilitation −2,504,146 −83,472 – – Fertilizers and pesticides application 1,900,070 63,336 4,890,078 163,003 Aquaculture 18,804 627 75,215 2,507 Total −26,228,494 −874,283 −2,521,976 −84,066 Per hectare −46 −1.5 −5 −0.2 Source: Authors. The CT was assumed to be the “without project” scenario.  HG EMISSION INTENSITIES FOR CROPS AND LIVESTOCK TABLE ES.7: G (tCO2eq PER TON PRODUCT) Conventional CSA Difference Crops Maize 2.2 −11.7 −13.8 Maize - CA −8.2 −8.2 Other cereals 1.3 −6.1 −7.4 Legumes: beans and peas 8.4 −11.9 −20.4 Potato and vegetables 0.4 −0.7 −1.1 Livestock Dairy cattle 115.38 78.54 −32 Other cattle 316.61 245.57 −22 Sheep 3.38 3.34 −1 Pigs 0.18 0.12 −32 Goats 2.32 2.29 −1 Poultry 0.07 0.04 −37 Source: Authors Climate-Smart Agriculture Investment Plan for Lesotho XXVII major carbon emitter (7 million tCO2-­­eq), while application of fertilizers and pesticides emits about 4.9 million tCO2-­ ­eq. Grassland management, conversion of annuals to orchards, afforestation, rangeland improvement, and improved practices in orchards are estimated to sequester about 8.4 million tCO2-­­eq. 24. Emissions intensity, defined as the quantity of GHG emitted per unit of produce declines following the implementation of CSA practices, therefore positively contributing to climate change mitigation. For crops, the decline in emission intensity ranges from 1.1 tCO2eq per ton of product for potato and vegetables to 20.4 tCO2eq per ton of product for legumes. Switching to climate-­­smart livestock practices leads to a decline in livestock emission intensity, ranging from 1 percent for sheep and goats to 37 percent for poultry. The average decrease in livestock emissions intensity, estimated at 21 percent, is lower than the 25 percent CSA target for the country. 25. In addition, CSA adoption could create jobs that will stimulate Lesotho’s rural economy. Shifting from low-­ intensive and higher value-­­ value grain production to more labor-­­ added crops like potato, orchards, and vegetables could generate 4,600 to 16,600 stable jobs (table ES.8). The CZ scenario will generate about 40 to 60 percent more jobs generated by the other two scenarios. However, unlocking the job creation potential of potato and horticulture subsectors will require Lesotho to strategically exploit its comparative advantage in the production of these commodities. The country can leverage research knowledge, export infrastructure, and market intelligence from private partnership could be useful to take its proximity to the Republic of South Africa (RSA). In addition, public-­­ advantage of the abundant water resources required for commercial agriculture (World Bank Group 2018b).  STIMATED NUMBER OF FARMING JOBS CREATED UNDER TABLE ES.8: E CLIMATE CHANGE OVER A 5-YEAR INVESTMENT PERIOD Coefficient CT RL CZ (jobs/ha) Beans 0.02 609 475 472 Maize 0.01 1,859 438 235 Orchards 1.30 6,658 10,643 16,599 Potato 0.30 3,194 3,060 4,614 Sorghum 0.05 2,013 1,956 1,486 Wheat 0.05 992 1,077 779 Vegetables 1.30 10,484 10,033 15,193 Total 25,809 27,682 39,378 Source: Data on number of jobs per ha for different cropping systems are modified from World Bank (2011, 2018a). Prospect of meeting Lesotho’s CSA targets 26. The probability of Lesotho meeting its CSA targets vary from low for increasing productivity and agricultural exports to high for reducing agricultural emissions and livestock emissions intensity (table ES.9). There are interdependencies in the prospect of meeting the targets; for instance, increasing agricultural productivity (target 1) is a prerequisite to doubling farmers’ income (target 2), increasing exports (target 3), and to a lesser extent reducing agricultural emissions and livestock emissions intensity (targets 4 and 5). Thus, it is crucial that the CSAIP identifies an integrated solution that will address the potential constraints to meeting the targets, while synergistically delivering productivity and climate benefits to farmers. XXVIII Climate-Smart Agriculture Investment Plan for Lesotho TABLE ES.9: POTENTIAL OF MEETING LESOTHO’S CSA TARGETS No. Targets Probability of Remarks meeting the target 1 Increase yields of Low Yield gap must be narrowed by introducing climate-­­ ready, stress-­­tolerant major staples by a species and cultivars adapted to Lesotho’s context. Other constraints factor of 2.5. that must be addressed to effectively close the yield gap include weather- induced yield variability, soil fertility constraints, pest infestation, and market accessibility. 2 Double income of Medium Famers’ income more than doubles for most CSA practices, but cost of smallholder farmers. adoption may be a barrier to meeting this target. 3 Increase agricultural Low The target can be met if Lesotho is able to narrow yield gap, prioritize exports by a factor of horticulture and potato for exports, and create the enabling environment 2.5. for higher levels of CSA adoption. 4 Reduce agricultural High smart livestock Target can be met following the adoption of climate-­­ GHG emissions by 25%. practices under the RL scenario. Integrated catchment management will help reduce soil erosion and the associated loss of soil carbon. Better rangeland management will also help sequester carbon. Sustainable crop intensification will help reduce cropland expansion, and the associated carbon emission. 5 Reduce livestock High This target has high probability of being met by stepping up the adoption emissions intensity of climate-­­ smart livestock practices. More efforts are particularly required by 25%. in lowering emission intensities from goat and sheep. Source: Authors Barriers to CSA implementation 27. Even though CSA technologies can generate private and public benefits, their adoption faces many socioeconomic and institutional barriers. Ranking of adoption constraints against CSA practices reveals that inadequate implementation capacity (75 percent) and access to inputs or finance (71 percent) are the most critical adoption barriers for all groups of CSA practices (table ES.10). Within crop management, the adoption of improved crop varieties (68 percent), postharvest management (68 percent), and Integrated Pest Management (65 percent) are influenced by the adoption factors the most. For climate-­­ smart livestock management, animal health control (75 percent), grassland reseeding (73 percent), and improved animal breeds (73 percent) suffer from the adoption constraints the most. For integrated catchment management, afforestation/reforestation (69 percent), small-­­scale irrigation (69 percent), and gully control (63 percent) are mostly influenced by the adoption factors. Among CSA practice groups, livestock and grassland management are influenced the most, scoring highest across most of the adoption factors. 28. Land tenure most influences agroforestry and fodder production (70 percent), terracing (73 percent), rotational grazing and grassland rehabilitation (78 percent), grassland reseeding (80 percent), and afforestation (88 percent). Secure land tenure is critical to the sustainability of land use and CSA implementation. If land tenure cannot be protected effectively, farmers and commercial investors will be unwilling to invest, term investments on farmland entirely. Inadequate research impacts post-­­ or will even give up long-­­ harvest management (83 percent) and the adoption of climate-­­ smart livestock practices the most, with stakeholders scoring improved animal breeds and feeding practices as the most critically impacted (85 and 80 percent, respectively). Climate-Smart Agriculture Investment Plan for Lesotho XXIX TABLE ES.10: RELATIVE IMPORTANCE OF FACTORS FOR ADOPTION OF CSA PRACTICES IN LESOTHO Inadequate Inadequate Limited Land Research Inadequate Public Average access to access to implementation tenure access to policy finance markets capacity issues infrastructure including (awareness, (roads, storage inputs and skill, training, facilities, credits and education) and ICT) Crop management Minimum soil disturbance, residue 48 40 80 50 65 35 60 54 retention Crop rotation 58 50 60 53 58 38 55 53 Agroforestry 73 48 73 70 63 43 68 62 Judicious fertilizer 73 48 60 35 55 35 55 51 application Organic fertilization 58 45 60 28 58 43 53 49 Inorganic fertilizer 73 58 58 35 55 43 48 53 Improved crop varieties 80 80 70 48 73 63 60 68 Integrated Pest Management 75 55 73 53 73 50 75 65 Postharvest management 75 75 88 35 83 60 58 68 68 55 69 45 64 45 59 58 Livestock and grassland management Rotational grazing 60 45 70 78 63 43 80 63 Fire management 50 25 68 53 55 28 78 51 Grassland reseeding 85 63 80 80 78 43 80 73 Fodder production 88 70 78 70 75 43 55 68 Livestock diversification 75 70 85 50 73 55 55 66 Improved animal breeds 88 75 85 45 85 68 68 73 Animal and herd 68 50 68 68 63 53 68 62 management Animal diseases and 88 80 80 55 75 70 78 75 health control Improved feeding 70 63 78 50 80 60 63 66 practices Manure management 58 40 70 38 60 58 60 55 73 58 76 59 71 52 68 65 (continued ) XXX Climate-Smart Agriculture Investment Plan for Lesotho TABLE ES.10: (Continued) Inadequate Inadequate Limited Land Research Inadequate Public Average access to access to implementation tenure access to policy finance markets capacity issues infrastructure including (awareness, (roads, storage inputs and skill, training, facilities, credits and education) and ICT) Integrated catchment management Small-scale irrigation 83 63 73 68 70 65 60 69 Rainwater harvesting 65 38 65 40 38 50 53 50 Terracing 40 20 83 73 58 48 53 53 Gully control 78 35 88 65 53 60 60 63 Flood control 68 25 73 60 50 63 60 57 Check dams 65 28 73 63 53 65 65 59 A orestation/reforestation 73 40 88 88 60 68 70 69 Grassland rehabilitation 80 35 73 78 50 55 65 62 69 35 77 67 54 59 61 60 Aquaculture Improved stocks 80 78 78 40 75 63 63 68 Production intensification 78 70 83 53 73 60 60 68 Better feeding practices 78 75 85 38 65 60 63 66 Improved water use e iciency and pond 75 65 85 45 70 78 68 69 management Diseases control 85 78 83 38 78 55 68 69 79 73 83 43 72 63 64 68 Average 71 54 75 54 65 54 63 Low High Source: Based on stakeholders’ ranking. Note: ICT = information and communication technology; IPM = integrated pest management. Importance of factors for adoption was first rated as 1 = Very low; 2 = Low; 3 = Moderate; 4 = High; and 5 = Very high. Thereafter, scores for each factor were averaged over the number of respondents and expressed as a percentage. Higher scores indicate that it is more critical and urgent to address a factor (or enabling condition) for effective CSA implementation in Lesotho. CSA investment needs 29. To determine Lesotho’s CSA investment needs, emphasis was placed on integrating proven CSA technologies that will minimize trade-­­ offs and capitalize on synergies between CSA pillars as exemplified in figure ES.8 where successive addition of CSA technologies leads to an overall increase in productivity and climate benefits derived from the agricultural system. Climate modeling indicates that yield variability is primarily due resistant, higher yielding crop varieties, and greater cropping to rainfall deficits, implying that there is need for stress-­­ intensity to meet food demand. Increasing cropping intensity implies that expanding efficient irrigation and agricultural water management technologies is a key part of the CSAIP in Lesotho. In addition to improved water use efficiency, strengthening the adaptive capacity of smallholder farmers to adjust and modify their production systems Climate-Smart Agriculture Investment Plan for Lesotho XXXI FIGURE ES.8: RELATIONSHIP BETWEEN CSA BENEFITS AND CLIMATE SMARTNESS OF TECHNOLOGIES Adapted technologies + Productivity and climate benefits Adapted Climate- technologies specific + management Climate- + Adapted specific Seasonal technologies management agroweather + + forecasts and Climate- Seasonal advisories Adapted specific agroweather + technologies management forecasts and Integrated + + advisories catchment Adapted Climate- Seasonal + management technologies specific agroweather Integrated + + management forecasts and catchment Efficient Climate- + advisories management resource use Adapted specific Seasonal + + + technologies management agroweather Integrated Efficient Enabling Baseline forecasts and catchment resource use environment advisories management Climate smartness Source: Modified from CCAFS (2014). This figure builds on the premise that CSA technologies are context-specific. Adapted technologies refer to those that are proven to be suitable to the local context. Climate-specific management comprises a set of practices that address the climate vulnerability of farming in the locality. to minimize the potential future impacts from climate variability will require solutions that improve soil health, and increase farm productivity. Regional demand for fruit and vegetables is likely to increase as urban populations grow, incomes rise, and the popularity of healthy diets increases. Higher production and sales of high value crops would also deepen domestic agricultural markets, generate rural employment and improve nutrition. Lastly, implementation of sustainable landscape management encompassing interventions from the micro-­­ catchment scale4 managed largely by communities, to wider development among multiple sectors concerned with productive and nonproductive land uses will help optimize ecosystem functions and services. 30. Given the above consideration, four thematic areas have been identified and validated with stakeholders as priority areas for the CSAIP investments (box ES.1). They are: • Improve water management in rainfed and irrigated agriculture; • Scale up CSA technologies for crops, livestock, and aquaculture; • Promote market access for farmers; and • Support sustainable landscape and integrated catchment management. year investment 31. Total CSAIP financial costs for the RL scenario amount to about US$268 million over a 5-­­ period, corresponding to investment costs of about US$54 million per year. For the CZ scenario, the total CSAIP costs are about US$208 million over the same period, or about US$42 million per year (table ES.11). The Internal Rate 4 The within-field systems of water harvesting are called micro-catchment systems. A micro-catchment consists of small structures such as pits, holes, basins, and bunds formed for surface runoff water collection from within the cropped area. XXXII Climate-Smart Agriculture Investment Plan for Lesotho BOX ES.1: BRIEF DESCRIPTION OF THE LESOTHO CSAIP COMPONENTS Component 1: Improve Water Management in rainfed and irrigated agriculture. Enhanced and efficient water management is a key factor for adaptation and increasing the efficiency of other CSA measures. The CSAIP will promote off- and on-­­farm investments in hydraulic infrastructure to restore and improve water distribution and reduce losses, improve water use efficiency, and increase and regulate water access management and governance for household consumption and agriculture production, particularly in areas of high agricultural potential. The CSAIP investment activities will include: sustainable water management practices such as micro-irrigation, water harvesting; modernization of hydraulic infrastructures, and strengthening institutions for effective agricultural water management. Component 2: Scale up CSA technologies for crops, livestock, and aquaculture. This CSAIP component will promote integrated soil fertility management; agroforestry; and conservation agriculture. For livestock, the CSAIP will finance three key interventions: improving access to better livestock breeds, improving animal nutrition, and improving access to animal health services. For aquaculture, the CSAIP will focus on improved stocks, production intensification, better feeding practices, and improved water use efficiency in the ponds. Component 3: Promote market access for farmers. Activities to be supported under this component include: development of Agriculture Clusters Service Enterprises; development of Market Hub Enterprises; aggregation of smallholder farmers into upgraded commodity value chains; piloting weather index insurance to manage risks; and promoting food quality standards. The component will also support the development of integrated climate information services through public private partnership. Component 4: Support sustainable landscape and integrated catchment management. This component will finance structural and vegetative measures of sustainable landscape management. The structural measures include terracing; gully control; flood control; and a check dam, a small, temporary dam constructed across waterways to reduce erosion by decreasing water flow velocity. The vegetative measures include afforestation/ reforestation; and grassland rehabilitation. In addition, the component will finance the modernization of land administration through digital land registry and titling, spatial data infrastructure development, and capacity building for land administration. TABLE ES.11: CSAIP INVESTMENT COSTS (US$, THOUSANDS PER YEAR) Components RL CZ 1. Improve water management in rainfed and irrigated agriculture 14,944 18,382 2. Scale up CSA technologies for crops, livestock, and aquaculture 15,473 9,793 3. Promote market access for farmers 5,882 4,272 4. Support sustainable landscape and integrated catchment management 17,207 9,210 Total amount per year 53,505 41,658 Total over the complete investment period (5 years) 267,525 208,288 Source: Authors Climate-Smart Agriculture Investment Plan for Lesotho XXXIII of Return (IRR) for the RL scenario is 13 percent, increasing to 73 percent when carbon benefits are factored into the investment. For the CZ scenario, the investment rate of return is 32 percent but increases marginally to 34 percent with the inclusion of carbon benefits. 32. Appropriate delivery methods are required for the CSAIP investment to support adoption and generate the desired benefits. Six delivery methods that were considered with respect to the investment components and their roles in breaking key adoption barriers are indicated in table ES.12. All the delivery mechanisms focus on addressing implementation capacity which is the most critical CSA adoption barrier in the country. Except for agricultural research and innovation, the delivery mechanisms also address farmers’ access to finance and TABLE ES.12: ROLE OF DELIVERY MECHANISM IN ADDRESSING CONSTRAINTS TO CSA ADOPTION Delivery Implementation Access to finance Inadequate Infrastructure Land tenure mechanisms capacity and markets research Efficient Establishment Higher and better Investment irrigation of irrigation agricultural in irrigation technologies institutions and produce from infrastructure and strengthening their irrigation help to will increase institutions capacity through deepen agricultural productivity and technical assistance markets market access. This and training will, in turn, attract private investment, enhance job creation and stimulate growth. Pluralistic Increase the Farmer aggregators Feedback from extension knowledge and and other service extension and services and skills of farmers, providers can help FFS can stimulate FFS farmer aggregators, connect farmers to further research agro-­­processors, relevant markets. and ameliorate agro-­­dealers, and yield-­­limiting national and district constraints. level extension staff in proven CSA technologies. Market Horizontal Improved legal Public investment Public-private linkages alliance helps to and regulatory can be used to partnership can shift smallholder framework for leverage private help address thinking from commercial investment in underinvestment, subsistence farming agriculture helps agricultural poor infrastructure, to agribusiness by improve access to research including deficient services, training farmers market. developing low visibility, and to identify crops improved seeds insufficient funding. with potential for and seedlings, commercialization, and IPM measures grow them tailored to local profitably, and conditions. establish relations with market agents. (continued ) XXXIV Climate-Smart Agriculture Investment Plan for Lesotho TABLE ES.12: (Continued) Delivery Implementation Access to finance Inadequate Infrastructure Land tenure mechanisms capacity and markets research SLM through Participatory Large mitigation The delivery participatory element of SLM benefits from method includes approaches and landscape landscape modernizing approaches restoration land titling and facilitates could open up administration that knowledge opportunities from helps to improve exchange carbon finance. tenure security between farmers and proper land and community market functioning. members. Secure land tenure incentivizes CSA adoption. Agricultural Combining Improved crop and research and agricultural livestock breeding, innovation research innovation increased yields, with extension disease resistance, will help enhance abiotic stress farmers’ capacity tolerance, and to implement nutrition. integrated CSA solutions. Digital ICT-­­based ICT tools can Digitizing and solutions agroweather, facilitate buyer— documenting land and services agronomic, and seller matching and rights in ways that market advisories market transactions are supported by can be used to for agricultural local stakeholders facilitate learning commodities. ICT enhances through feedback also promotes transparency and (bidirectional financial inclusion. provides incentives information flow) Market information for CSA adoption, between farmers systems will help sustainable and advisories reduce information land use, and providers. costs. intensification. Source: Authors Note: CSA = climate-­­smart agriculture; FFS = Farmer Field School; ICT = information and communication technology; SLM = sustainable land management. markets. The application of digital technology can facilitate learning, market access, and regularization of land rights that will encourage CSA adoption. 33. Figure ES.9 indicates that Net Present Values (NPVs) of the delivery methods are positive, suggesting that they all generate positive cashflow ranging from $24 million for agricultural research and innovation to $166 million for Participatory Sustainable Landscape Management. This confirms the financial viability of investing in the delivery mechanisms. The costs of the delivery mechanisms are covered by the benefits, and there is an excess. The IRRs are above the discount rate of 10 percent, ranging from 12 percent for agricultural research and innovation to 66 percent for market linkages. The IRRs further provide confidence in the profitability of the delivery mechanisms. Climate-Smart Agriculture Investment Plan for Lesotho XXXV FIGURE ES.9: NET PRESENT VALUE AND INTERNAL RATE OF RETURN OF LESOTHO CSAIP DELIVERY MECHANISMS 180,000 70% 66% 160,000 60% 140,000 50% 50% 120,000 100,000 40% 80,000 30% 60,000 25% 22% 20% 14% 40,000 12% 10% 20,000 0 0% Efficient Pluralistic Market linkages Participatory Agricultural Digital solutions irrigation extension sustainable research and and services technologies services landscape innovation and institutions and farmer management field school NPV @ 10%, $'000 FIRR Source: Authors Prioritization of scenarios and investment decision 34. Prioritizing CSA practices that are adapted to a country’s context is a key step toward optimizing the productivity and climate benefits of the practices. Table ES.13 demonstrates that comparison over 13 indicators shows that the RL scenario performs better on 6 indicators (46 percent), while CZ performs better on 7 indicators (54 percent). Six important lessons emerge for effective scaling up of CSA in the country: size, • Though commercialization is more profitable, it requires larger farm size. It is more appropriate for medium-­­ emerging farmers and requires strong market-­­oriented agricultural policies for it to be successful. • Furthermore, commercialization would require more private initiative and resources, for instance in developing functioning land markets. This could constitute a serious barrier given the agricultural value chain and well-­­ Lesotho’s nascent private sector. • Commercial agriculture generates more stable jobs but will also require a transformational shift in the farming systems and may be challenging given the current level of implementation capacity. resilient agriculture delivers 10 times carbon benefits as commercial agriculture. • Though less profitable, climate-­­ resilient agriculture could potentially benefit from climate finance. Climate-­­ Thus, climate-­­ resilient agriculture is also more effective in controlling soil erosion. resilient agriculture is 30 percent costlier for the public sector but is easier to implement and not • Climate-­­ affordable for small farmers. It is more tailored toward adapted technologies, landscape resilience and sustainable agricultural intensification that the average smallholder farmer can practice. resilient farming seems more feasible given the above considerations. Alternatively, Lesotho may opt 35. Climate-­­ for climate-­­resilient farming and sustainable landscape management in zones more prone to soil erosion, suitable for afforestation and farmer-­­ managed natural regeneration of vegetation, and where less fertile land needs restoration and replenishment. Commercial agriculture can be practiced in more fertile areas that are suitable for potato, orchards, and vegetables. Aquaculture development is more suitable to the lowlands due to warmer temperatures. In figure ES.10, the most productive lands in Lesotho are the versatile and the highly versatile land classes that can be preferentially allocated to commercial agriculture. XXXVI Climate-Smart Agriculture Investment Plan for Lesotho TABLE ES.13: COMPARISON OF INDICATORS UNDER THE TWO SCENARIOS Commercialization Resilient Landscape Net household income US$ per year 1,233 698 Increase in crop yields over historical (%) 60 70 Cropland area (ha) 132,247 153,482 Livestock production (ton) 38,849 45,765 Erosion control: gross erosion (Mt per year) 39 35 Food availability5 (kcal/capita/day) 675 649 Export potential moderate none GHG mitigation: carbon balance tCO2-­­eq −2,521,976 −26,228,494 Job creation 39,378 27,862 Economic internal rate of return (EIRR) % 32 13 Carbon benefits (US$ million) 2–17 36–282 EIRR % with carbon benefits 32–34 16–73 Financial cost (US$ million) 208 268 Source: Authors. Green color indicates that a scenario performs better; orange color indicates otherwise. FIGURE ES.10: LESOTHO AGRICULTURAL VERSATILITY MAP Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hoek Quthing Agricultural versatility index Least versatile Moderately versatile Versatile Highly versatile Source: Authors 5 This measures food calories from national production. Climate-Smart Agriculture Investment Plan for Lesotho XXXVII Financing the investment plan 36. Assuming Lesotho pursues the RL pathway, the cumulative financing gap amounts to US$34 million in year 1, increasing to US$211.5 million by year 5 (figure ES.11). In estimating the CSAIP financing gap, the report considered existing agricultural projects with CSA-­­related expenditures and the duration of such projects.6 The annual financing gap was then estimated as the difference between annual cost of CSAIP and available funds supporting CSA-­­related expenditures. FIGURE ES.11: CUMULATIVE ANNUAL PROPORTION OF FUNDS UNDER EXISTING AGRICULTURAL PROJECTS AND CSAIP FINANCING GAP Available fund Financing gap 350 300 250 $ million 200 150 100 50 0 Year 1 Year 2 Year 3 Year 4 Year 5 Source: Authors 37. Lesotho can benefit from climate finance given its vulnerability to climate risks. Climate finance refers to all financial flows that help achieve climate change adaptation and mitigation objectives. It can be instrumental in supporting Lesotho’s agriculture sector in three main ways. The first way is meeting the gap in financing or increasing the attractiveness of an investment to leverage financing from other sources. The second way is reducing risks associated with an agriculture project either by reducing the overall financing requirement or through providing climate finance in the form of risk mitigation instruments, such as guarantees. The third way climate finance could support Lesotho’s agriculture sector is using it to finance interventions that systematically reduce the transaction cost associated with CSA at the sector level. The sources of climate finance can be public, multilateral, bilateral or private (figure ES.12), but for climate finance to be effective in achieving its goals, strengthening the link between financial institutions and farmers is important. 38. Lesotho CSAIP may benefit from the use of blended finance, that is, the use of public sector finance to crowd in or scale up private investment for the CSAIP (table ES.14). Blended finance can be particularly effective in catalyzing investments in sectors where perceived risk is higher than actual risk, which is especially true for new sectors and projects with which investors are unfamiliar. Blended finance can also help deliver enhanced development impacts. In the case of the six delivery mechanisms, the following financing strategies are proposed. 6 The total cost of existing projects is $142 million with about 42 percent funded by the World Bank. XXXVIII Climate-Smart Agriculture Investment Plan for Lesotho FIGURE ES.12: SOURCES OF FINANCE FOR CSA IMPLEMENTATION Potential sources of financing for CSA UNFCCC National and Multilateral Market-based financial Bilateral funding regional climate funding funding mechanism funds German Global National Climate Development Bank Clean Development Environment World Bank Funds (NCFs) and (KfW)–International Mechanism (CDM) Facility (GEF) Regional Climate Climate Initiative Funds (RCFs) are mechanisms that support countries to Japan’s Fast- Voluntary carbon manage their GCF IFAD-ASAP Start Finance markets (VCM) engagement with climate finance by facilitating the collection, blending, Least Developed and coordination of, Millennium Countries Fund and accounting for, UN-REDD Challenge (LDCF) and Special climate finance. Corporation Climate Change Fund (SCCF) AfDB AF Source: Adapted from http://csa.guide. Note: AF = Adaptation Fund; AfDB = African Development Bank; ASAP = Adaptation of Smallholder Agriculture Program; IFAD = International Fund for Agricultural Development; UNFCCC= United Nations Framework Convention on Climate Change; UN-REDD = United Nations Programme on Reducing Emissions from Deforestation and Forest Degradation. TABLE ES.14: POTENTIAL SOURCES OF FUNDING FOR CSAIP DELIVERY MECHANISMS Delivery mechanisms Possible sources of finance Efficient irrigation technologies and institutions IFAD, IFC, IDA, set up PPPs with assistance of development partners Pluralistic extension services and FFS IFAD, AfDB Market linkages IFC, MCC, set up PPPs with assistance of development partners, GCF, other climate funds Participatory SLM NDC Partnership, GEF, UNCCD, European Commission, GCF, UNDP Agricultural research and innovation BMG, AfDB, IDA Digital solutions and services GFDRR, IDA, set up PPPs with assistance of development partners Source: Authors Policy recommendations 39. Scaling up CSA in Lesotho will require changes in policy and environment. Policy actions to support effective delivery of CSA in Lesotho are outlined below. 1) Establish nationally owned CSA Program Climate-Smart Agriculture Investment Plan for Lesotho XXXIX 40. CSA requires judicious policy management: proper coordination between agencies across different sectors at central and local levels. CSA needs to shift beyond development practitioners to involve government agencies more often. Nationally owned climate-­­ smart agricultural policies and action frameworks tend to increase the adoption of CSA technologies. Lesotho’s national CSA program should also incorporate sustainable landscape management approaches for better management of agricultural production and ecosystem services. This will involve multidisciplinary teams from agriculture, forestry, soil conservation, water, and rangeland management. 2) Improve knowledge management systems smart technologies are knowledge-­­intensive, and promoting their adoption will require well-­ 41. Several climate-­­ designed, inclusive, and innovative knowledge management systems. The priorities are to strengthen farmers’ knowledge of CSA practices, facilitate sharing the techniques, and provide the greatest support to local and indigenous knowledge systems, such as the Machobane Farming System. This will result in more robust knowledge systems and led approaches. The use of co-­­ farmer-­­ management strategies involving scientists and farmers is a learning and co-­­ way to do this. Scientific experts and farmers working closely together will, in turn, lead to mutual accountability. 3) Foster equitable access to land smart agriculture, providing incentives for local communities to 42. Secure land rights are necessary for climate-­­ manage land more sustainably. Customary land rights and gender equality need to be recognized. Fast, effective, cost approaches involving the use of satellite images, global position systems, and computerized data and low-­­ management technologies to access, register, and administer land rights are needed. Improving land governance— can be the missing link between land availability and sustainable the way land rights are defined and administered—­­ agricultural development. 4) Establish Strategic Food Reserve Agency 43. Lesotho could establish a Food Reserve Agency to support food security policies and social safety net mechanisms. The Food Reserve Agency would help ensure a reliable supply and meet local shortfalls in the supply of agricultural commodities critical to food security. The Agency can also help the country meet food emergencies caused by drought, floods, hail, or any other natural disasters, manage food storage facilities, stabilize food prices, and provide relevant market information and agricultural credit facilities to small-­­scale farmers. 5) Realign agricultural support to promote CSA 44. There is a need to realign agricultural support to break adoption barriers and promote CSA. It is vital that government policies and investments address the demand and supply sides of agricultural input use. Reversing land degradation and improving soil health in Lesotho will require increased but targeted use of fertilizers and led input markets. However, progress in other inputs. This, in turn, will require building sustainable private sector-­­ improving input distribution systems is likely to be unsustainable without strong, effective demand for the inputs. Effective demand can only be assured if farmers have access to reliable markets to sell their products at a profit. Thus, both demand- and supply-­­ side interventions are needed to strategically break the adoption barriers associated with climate-­­smart practices. Examples of demand-­­ side interventions are improving farmers’ ability to purchase inputs and providing them with risk management tools. Examples of supply-­­ side interventions include improving road and rural infrastructure to lower transport costs and developing market information system to reduce information cost. 6) Strengthen agricultural research and extension smart agriculture cannot be met without policies and initiatives that encourage 45. The goals of climate-­­ agricultural innovations and research, and establish stronger linkages between farmers, climate-­­ smart supply chains, and markets. There is need to strengthen research and establish partnership with CGIAR and other yielding, stress-­­ international research institutes to develop high-­­ ready varieties that are adapted tolerant, climate-­­ to Lesotho’s environment. Development of heat-­­ tolerant varieties is of importance given the projected increase in XL Climate-Smart Agriculture Investment Plan for Lesotho warming for Lesotho. Agricultural extension services should be upgraded to catalyze the agricultural innovation process and bring the actors together, coordinate and create networks, facilitate access to information, knowledge and expertise, and provide technical backstopping. 7) Create enabling environment for private sector 46. Introducing policies and incentives that provide an enabling environment for private sector investment can increase overall investment. Public investment can be used to leverage private investment in research and development, establish agroforestry, promote afforestation, and develop improved seeds and seedlings. Bundling agricultural credit and insurance together and providing different forms of risk management—­­ such as climate based weather insurance, or weather derivatives—­­ information services, index-­­ are areas of private investment that can be encouraged through public policy and public-­­private partnerships. 8) Build capacity to access climate finance 47. Lesotho faces a financing gap in the agriculture sector with low capacity to access climate finance. Critical areas that need capacity development include identifying funding gaps and needs; assessing public and private financing options; developing payment for ecosystem services programs; developing bankable investment plans, project pipeline, and financing propositions; and developing financially viable opportunities for effective private sector engagement. Table ES.15 provides information on specific measures under each policy option, responsible authorities, and time frame for implementing the measures. CSA and the World Bank agenda in Lesotho 48. Scaling up CSA has been a focus of the World Bank’s work throughout much of the developing world, and many of the lessons gleaned from one region apply to others. It is an integral part of development partners’ larger agriculture work program in the country. This larger work program includes the Smallholder Agriculture Development Project (SADP) supported by the World Bank and the International Fund for Agricultural Development (IFAD) which is designed to enhance climate resilience and promote commercialization and nutrition diversity. SADP is also supporting the development of an irrigation master plan to assist the government in its efforts to define strategic priorities for improving the irrigation subsector. The Master Plan will identify a pipeline of high priority irrigation investments for support from government, private sector, and other development partners. The World Bank is also supporting the Agriculture Productivity Project for Southern Africa (APPSA) that seeks to increase the availability of CSA technologies to farmers in Lesotho in addition to establishing the Center of Excellence in horticulture in Southern Africa. IFAD is financing the Wool and Mohair Promotion Project (WAMPP) with the goal of boosting the economic and climate resilience of poor, smallholder wool and mohair producers to adverse effects of climate change in the Mountain and Foothill Regions of Lesotho. The European Union recently produced a set of reports for Integrated Catchment Management in Lesotho. The reports covered catchment development plans, institutional settings, and legal issues for effective catchment management. The Millennium Challenge Corporation (MCC) is also supporting Lesotho to build institutional capacity in the use, uptake and customization of data to enhance effective policy planning, coordination, and execution in different sectors including transport, irrigated agriculture, climate change, integrated catchment management, water, and health. The activities aim to build capacity in Lesotho’s government agencies in cooperation with research centers, private sector and civil society organizations. The Private Sector Competitiveness and Economic Diversification Project (PSCED) supported by the World Bank is assisting Lesotho in building an enabling business environment, leveraging private investment support, providing access to finance to increase productivity, and increasing market opportunities in Lesotho’s horticulture subsector. In addition, the World Bank has supported analytical work to identify strategies to unlock the potential of Lesotho’s private sector in creating jobs and improving the competitiveness the horticulture subsector as well as another analytical work that specifically deals with linking smallholder vegetable farmers to markets. Another aspect of World Bank’s work program is the Lesotho Climate-Smart Agriculture Investment Plan for Lesotho XLI TABLE ES.15: LESOTHO CSA POLICY MEASURES AND TIME FRAME FOR IMPLEMENTATION Time frame Responsible authorities Establish nationally owned CSA Program (i) Establish Lesotho CSA Program to guide Short Department of Planning and Policy Analysis of the Ministry implementation of CSA and landscape approaches, of Agriculture and Food Security; Ministry of Development strategies, practices and technologies Planning; Ministry of Forestry, Range, and Soil Conservation (ii) Update irrigation policy and support policy Medium Department of Planning and Policy Analysis of the planning for mainstreaming CSA Ministry of Agriculture and Food Security (iii) Introduce evidence-based policies and Short– Department of Planning and Policy Analysis of the institutional strengthening for CSA Medium Ministry of Agriculture and Food Security Develop knowledge management system (i) Establish CSA Knowledge Portal Medium– Department of Agricultural Research; Department of Crop Long term Services; Department of Livestock all of the Ministry of Agriculture and Food Security; Lesotho Meteorological Services; National University of Lesotho (ii) Promote inclusive Climate Information Services Medium– Department of Field Services; Lesotho Meteorological and Advisories Dissemination Platform Long term Services; Ministry of Science and Communications; ICT Service Providers (iii) Document MFS practices and integrate with Short Department of Field Services; Department of Agricultural modern science Research; Machobane Agricultural Development Foundation; National University of Lesotho Foster equitable access to land (i) Develop cost-effective approaches for managing Medium Land Administration Authority land rights (ii) Document different types of land rights supported Medium Land Administration Authority by stakeholders (iii) Identify opportunities for commercial farming Short Land Administration Authority; Department of Soil and Water Conservation; Lesotho National Development Corporation (iv) Link land rights to land suitability, soil carbon Medium Land Administration Authority; Department of Soil and and other key parameters of land use using satellite Water Conservation imageries Establish Strategic Food Reserve Agency (i) Set up Food Reserve Agency and define functions: Medium Ministry of Agriculture and Food Security; Ministry of administer the strategic food reserves, facilitate Development Planning; Ministry of Finance; National market development, and manage warehouse/ Disaster Management Authority storage facilities (ii) Awareness building on the role of the Agency Short Ministry of Agriculture and Food Security; Ministry of Development Planning; Ministry of Finance; National Disaster Management Authority (iii) Build and manage warehouses and storage Medium– Ministry of Agriculture and Food Security; National facilities for national seed and grain reserve Long Disaster Management Authority (iv) Subsidize seed and grain storage for qualifying Long Ministry of Agriculture and Food Security; Ministry of farmers Development Planning; Ministry of Finance; National Disaster Management Authority (continued ) XLII Climate-Smart Agriculture Investment Plan for Lesotho TABLE ES.15: (Continued) Time frame Responsible authorities Realign agricultural support to promote CSA (i) Policy reform to align agricultural support to Short Ministry of Agriculture and Food Security; Ministry of promote CSA Planning; Ministry of Finance (ii) Establish inputs e-voucher system Short– Ministry of Agriculture and Food Security; Ministry of Medium Planning; Ministry of Finance (iii) Develop market information systems to reduce Short– Department of Field Services of the Ministry of information costs Medium Agriculture and Food Security; Ministry of Small Business Cooperatives and Marketing; Basotho Enterprise Development Corporation Strengthen agricultural research and extension (i) Establish partnership with international research Long term Department of Agricultural Research, Department of Field institutes and develop high-yielding, stress-tolerant, Services, all of the Ministry of Agriculture and Food Security; climate-ready varieties Lesotho Agricultural College, Ministry of Agriculture and Food Security; National University of Lesotho (ii) Upgrade agricultural extension services to Short– Department of Field Services, Department of Agricultural facilitate access to information and improved Medium Research, Ministry of Agriculture and Food Security technical backstopping Create enabling environment for private sector (i) Introduce policies and incentives that provide an Short Ministry of Agriculture and Food Security; Lesotho enabling environment for private sector investment National Development Corporation; Ministry of Small Business Cooperatives and Marketing; Basotho Enterprise Development Corporation (ii) Encourage private financial service providers to Medium Ministry of Agriculture and Food Security; Lesotho tailor instruments that enable farmers who adopt National Development Corporation; Ministry of Small CSA practices to overcome adoption barriers Business Cooperatives and Marketing; Basotho Enterprise Development Corporation (iii) Promote PPP and design innovative risk Medium– Ministry of Agriculture and Food Security; Lesotho management products (bundling credit and weather Long term National Development Corporation; Ministry of Small index insurance) Business Cooperatives and Marketing; Basotho Enterprise Development Corporation Build Capacity to Access Climate Finance (i) Build capacity to identify funding gaps and needs; Long term Ministry of Agriculture and Food Security; Ministry of assess public and private financing options Finance; Ministry of Development Planning (ii) Develop financially viable opportunities for Long term Ministry of Agriculture and Food Security; Ministry of effective private sector engagement Finance; Ministry of Development Planning (iii) Develop results-based financing/payment for Long term Ministry of Agriculture and Food Security; Ministry of ecosystem services programs Finance; Ministry of Development Planning Source: Authors Note: Short term = 1–2 years; Medium term = 2–5 years; Long term = greater than 5 years Agriculture Public Expenditure Review designed to identify measures to improve the quality of public expenditures in agriculture. CSA through agroforestry, integrated soil fertility management, and conservation agriculture (CA) is a focus of an important World Bank partnership with the International Center for Tropical Agriculture (CIAT) and other partners to support the incorporation of CSA into national planning through the Lesotho CSA Profile. These together are part of the larger context of this work on the CSAIP in Lesotho. Climate-Smart Agriculture Investment Plan for Lesotho XLIII I. Introduction 49. The Kingdom of Lesotho is a small, mountainous, growth and private sector-­led employment creation. landlocked country in Southern Africa with a The Government of Lesotho (GoL) has identified population of 2.2 million. It is one of the poorest four productive sectors, namely agriculture, countries in Southern Africa, with high levels manufacturing, tourism and creative industries, and of poverty and inequality. Income inequality in technology and innovation as potential sectors for Lesotho is among the 20 percent highest in the world job creation and inclusive economic growth under a (World Bank, 2019). An estimated 49.7  percent of new growth path led by the private sector. the  population lives below the national poverty line, and 24.1 percent fall below the extreme poverty line 51. Agriculture plays a significant role in Lesotho’s (Government of Lesotho, 2019). Rural areas, heavily economy. Over 70  percent of the country’s dependent on subsistence and semi-­ subsistence population lives in rural areas and depends, directly agriculture, account for 66  percent of the population or indirectly, on agriculture for employment and and 80 percent of all people living below the poverty livelihood. The sector has potential to increase food line (World Bank 2019). A wide (22 percent) poverty security, reduce rural poverty, and generate both gap, high rates of unemployment, wide prevalence on- and off-­ farm employment opportunities. Main of human immunodeficiency virus infection and crops include maize, sorghum, and wheat which are acquired immune deficiency syndrome (HIV/AIDS), planted as monocrops on 85 percent of the country’s and climate vulnerability further constrain the arable land which comprises 10 percent of Lesotho’s scope for inclusive growth and improvements in total land area. Livestock contributes 75  percent of living standards. Gross domestic product (GDP) per the total agricultural output, including semi-­intensive capita is estimated at US$1,181 (2017) and when and intensive production of pigs and poultry, as well adjusted by purchasing power parity is equivalent as extensive (free range) production of goats and to 16  percent of the world’s average. The country sheep on rangelands in the foothills and highland is an open economy, traditionally centered on areas. Sheep and goats, which dominate the livestock trade, with textiles, water, and diamonds as its sector, are reared mainly for wool and mohair. main exports. Lesotho is a member of the Southern African Customs Union (SACU), the Southern 52. Lesotho’s agricultural output is one of the African Development Community (SADC), and the lowest in Southern Africa, hampered by Common Monetary Area all of which create strong underperforming yield, limited arable land, opportunities for regional trade. As a member of the and suboptimal input use. Average maize yield in Common Monetary Area, its currency is pegged to Lesotho is about 0.7 ton per ha, less than 20 percent the South African rand. of the Southern African average of 4.2  ton per ha. Lesotho’s agricultural sector suffers from low levels 50. Lesotho has prioritized agriculture as one of of productivity and commercialization which has the key pillars for economic growth. Realizing made the country heavily dependent on food the inherent unsustainability of its economic imports to meet domestic consumption needs. model, Lesotho has endorsed a new template for Despite 70  percent of the rural population being development. The recently completed National engaged in some form of agricultural activity, the Strategic Development Plan (NSDP) II 2018/19– sector contributes only 6  percent to the national 2022/23 seeks to pursue inclusive, sustainable GDP. The farming system is characterized by limited Climate-Smart Agriculture Investment Plan for Lesotho 1 diversification7 (primarily cereal production) and 53. Lesotho is traditionally a net importer of food extensive livestock grazing. Productivity challenges and agriculture products. The country is highly in the sector include limited size of arable land8 with reliant on food imports from neighboring South land holding less than 1.0  ha for several farming Africa, and only wool and mohair make a significant households, outdated farm technologies and farm contribution to exports and national incomes. management practices, limited technical expertise, Between 2009 and 2013, wool contributed about and suboptimal use of inputs. About 32 percent 55  percent to the total agricultural exports on of farming households use inorganic fertilizers, average, wheat flour 25  percent, and maize flour while the application of insecticides is even lower 11 percent. The value of total agricultural exports for (8  percent). Less than 2 percent of the country’s crops and livestock on average over 2009–2013 was arable land is irrigated, implying strong reliance US$6.6 million. From 2012 to 2016, imports of food on rainfed crop production that limits the growing and agriculture products increased at a compound season and yields. Weak rural infrastructure, a annual growth rate (CAGR) of 14.7  percent, from rudimentary rural advisory system, and limited US$220  million to US$380  million. During this access to credit and investment capital further period, exports increased at a CAGR of 77.9 percent, compound agricultural productivity. from US$4  million to US$38  million. Although growth of exports outpaced imports over the same The 2018 Household Budget Survey/ Continuous period, in terms of absolute value, imports were Monitoring Survey (HBS/CMS) shows that only 10  times larger than exports. Given this trend, the 5 percent of farming households took loans for food and agriculture products trade balance has agricultural activities such as purchase of inputs or also increased, recording a CAGR of 12.2  percent equipments, with neighbors (47 percent), money from 2012 to 2016. Lesotho’s negative food trade lenders (21 percent), and relatives (11 percent) as balance as of 2016 was US$342 million. the predominant sources of loans for the farming households. Commercial banks provided the 54. Climate change poses major challenges to the highest average amount of loan for farming activities development of Lesotho’s agricultural sector. (US$2650), followed by insurance companies (US$875), governmental Panel on Climate Change The Inter-­ and money lenders and microfinance institutions that (IPCC) categorizes Lesotho as one of the countries each provide an average loan of US$465. highly vulnerable to the impacts of climate WISE PERCENTAGE CONTRIBUTION TO LESOTHO GDP FIGURE 1.1: SECTOR-­ 4.0% 5.8% 4.9% 1.2% Information and communication 11.5% Mining and quarrying Accomodation and food services 12.0% Other goods and services Manufacturing Wholesale and retail 60.5% Agriculture, forestry, fishing Source: National Accounts of Lesotho 2007–2016 (No 31:2017) 7 Diversification typically refers to strategies and techniques to produce different agricultural products (horizontal diversification), engage in multiple value-­ added activities (vertical diversification), or exit the agricultural sector and engage in nonfarm activities. 8 While the agricultural land area of 2.36 million ha accounts for 78 percent of the total land area, only 357,000 ha (12 percent) is suitable for crop production. Most agricultural land is mountain pasture, suited for extensive livestock production—­ which accounts for 75 percent of the total value of agricultural output (Food and Agriculture Organization Corporate Statistical Database [FAOSTAT]). 2 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 1.2: LESOTHO FOOD AND AGRICULTURE TRADE BALANCE (US$, MILLIONS) Import value Export value Balance 500 400 300 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 –100 Trade deficit increased by –200 58.3% from 2012 to 2016. –300 –400 –500 Source: FAOSTAT change. The country has a temperate climate with cowpeas) increases vulnerability to climatic shocks. subalpine characteristics and experiences regular The crop production system also makes limited droughts, floods, frosts, snow, hailstorms, and use of climate-­ smart agriculture (CSA) technologies strong winds. The El Niño-Southern Oscillation such as new varieties, conservation agriculture (CA), (ENSO) phenomenon particularly affects the intercropping, integrated pest management (IPM), climate variation in Lesotho (World Bank Group and water harvesting technologies, all of which limit 2016). High intraseasonal and interannual productivity. rainfall variability, with frequent droughts, has often resulted in delayed planting or farmers not 56. Lesotho is also a hotspot of severe land planting at all, reduced seed germination due degradation. The annual cost of land degradation to hardened soil and lack of water, crop failures, in Lesotho is estimated at US$57 million, equivalent deterioration of rangelands and pastures, water to 3.6  percent of the country’s GDP.9 Massive soil scarcity for livestock, and increased food prices erosion  and loss of scarce agricultural land have of staple grains such as maize (CIAT and World resulted in extremely low agricultural productivity Bank Group 2018). Chronic droughts have also levels: average sales of agricultural output are negatively affected the livestock sector, resulting US$195 while average profits are US$132 per in rangeland degradation and limiting the carrying growing season. Cereal yields average less than capacity of pastoral land. 1  ton per ha, failing to meet the SADC Regional Indicative Strategic Development Plan (RISDP) 55. Drought, severe frost, excessive rainfall, and pests target of achieving at least 2,000 kg per ha (ReSAKSS and disease outbreaks are key production risks 2016). Consequently, marketable surplus remains leading to average annual losses of US$28 million, low. The 2018 Household Budget Survey/Continuous corresponding to 2  percent of Lesotho’s GDP. Monitoring Survey (HBS/CMS) shows that only Production shocks have considerable impacts on 1  percent of farming households in the poorest household and national food security and an overall quintile produce primarily for sale compared to destabilizing effect of the economy. The drought of 5 percent in the wealthiest quintile. Urban farmers are the 2015–16 growing season was the most severe twice as likely to produce for sale compared to rural on record putting over 534,000 people at risk of food dwellers, indicating the importance of proximity to insecurity. The current rain-­fed crop production system markets and access to credit in farmers’ commercial with its focus on maize at the expense of diversification orientation. Furthermore, literacy level markedly to more drought-­tolerant crops (sorghum, millet, and influence farmers’ commercial orientation with only 9 https://www.unccd.int/sites/default/files/inline-­files/Lesotho.pdf. Climate-Smart Agriculture Investment Plan for Lesotho 3 2 percent of farming households without formal 58. Lesotho is undertaking critical measures education producing primarily for sale compared to to build a commercial and climate-­ resilient 9 percent for farming households with a university agricultural sector. Recognizing the significant role education. Low private sector development further of agriculture in its overall economic growth agenda, constrains commercialization. Private sector activity NSDP II (2018/19–2022/23), which prioritizes the in Lesotho is dominated by microenterprises, development of the agricultural sector, identifies with a marked absence of the small and medium three broad areas of strategic action: (a) sustainable enterprises that drive economic growth and job commercialization and diversification of agriculture, creation in most countries.10 The erratic and severe (b)  a well-­ functioning agri-­ food system, and weather patterns and land degradation reinforce the (c)  rehabilitation of rangelands and wet lands. need to mainstream climate resilience in Lesotho’s Priorities for action within these areas include (a) agricultural sector. improved technology and infrastructure (including irrigation and CSA), (b) increased production of 57. The agricultural sector is the second largest high-­value crop and livestock products, (c) the greenhouse gas (GHG) emitter in the country development of institutional frameworks for accounting for 35 percent of national emissions, producer and industry organizations, (d) building while energy (64  percent of national emissions) the capacity of farmers to benefit from these is the largest emitter. The total annual GHG institutions, and (e) the development of value for Lesotho, including emissions from land use, chains and agricultural markets. The NSDP II also land-­use change, and forestry is 1.2  million tons calls for scaling up current nutrition systems toward of CO2 equivalent (tCO2eq) (figure  1.3). Within strengthening human capital and expanding the the agricultural sector, livestock overwhelmingly use of water harvesting for irrigation. Gender and accounts for most emissions at 93.9  percent of climate change are indicated as critical cross-­ agricultural emissions with cropping accounting for cutting issues. just 6.1 percent of agricultural emissions. Within the livestock subsector, enteric fermentation (53 percent 59. Several policies and strategies, including Vision of agricultural emissions) and manure left on 2020, National Climate Change Policy (2017), pastures (40 percent) are key GHG emitters, while in Lesotho Food and Nutrition Policy (2016), and the crop subsector, savannah burning for agricultural Lesotho Zero Hunger Strategic Review (LZHSR) purposes (3 percent) is the largest emitter. smart accord high priority to scaling up climate-­ FIGURE 1.3: LESOTHO AGRICULTURE GHG EMISSIONS SOURCES (100% = 1.224 MILLION tCO2eq) 1% 3%3% Enteric fermentation Manure left on pasture Manure management (including 40% 53% soil application) Burning - Savanna Crop residues (including burning) Source: FAOSTAT. 10 A survey of registered business enterprises in 2015 shows that of the 9,625 registered business enterprises, 75.6 percent were microenterprises (1–4 employees) and 37.5 percent had a turnover of less than LSL 1 million (approximately US$70,000). Only 15 percent of the enterprises surveyed were small to medium (5–50 employees), and only 4.3 percent had a gross revenue of LSL 1–5 million (US$70,000–350,000). This pattern is even more evident in processing and agribusiness. Five large enterprises dominate the food and beverage sector, with few medium-­ agro-­ size enterprises or microenterprises. 4 Climate-Smart Agriculture Investment Plan for Lesotho practices and actions to promote agricultural building an enabling business environment, lever- adaptation and increased food security, achieving aging private investment support, providing access zero hunger by 2030, ensuring access to adequate to finance to increase productivity, and increasing food and healthy diets all year round, ending market opportunities in Lesotho’s horticulture sub- malnutrition, doubling smallholder productivity sector. IFAD is financing the Wool and Mohair Pro- and incomes, and eliminating food loss and waste motion Project (WAMPP) with the goal of boosting (table 1.1). the economic and climate resilience of poor, small- holder wool and mohair producers to adverse effects 60. The World Bank and other development partners of climate change in the Mountain and Foothill have provided substantial support to the devel- Regions of Lesotho. The World Bank is also support- opment of Lesotho’s agriculture sector over the ing the Agriculture Productivity Project for Southern past decade. Through the first phase of the Small- Africa (APPSA) that seeks to increase the availability holder Agricultural Development Project (SADP) of CSA technologies to farmers in Lesotho. In addi- co-financed with IFAD, as well as Private Sector tion, the World Bank has supported analytical work Competitiveness and Economic Diversification Proj- to unlock the potential of Lesotho’s private sector in ect (PSCED), the World Bank has provided financial creating jobs and improving the competitiveness the and technical assistance to improve commercializa- horticulture subsector (World Bank Group 2018b), tion and competitiveness. SADP is providing train- as well as another analytical work that specifically ing and competitive grants to smallholder farmers deals with linking smallholder vegetable farmers to for improving marketable surplus in several value markets (Reva 2019). Another analytical review is chains, including horticulture (fruit and vegetable the Lesotho Agriculture Public Expenditure Review production), poultry, piggery, and dairy. The project designed to identify measures to improve the qual- is also supporting the development of an irrigation ity of public expenditures in agriculture (Giertz et al. master plan to assist the government in its efforts 2019). The World Bank is also working with several to define strategic priorities for improving the irriga- development partners in the agricultural sector. The tion subsector in terms of alignment with agriculture European Union recently produced a set of reports growth potential and economic and environmental for Integrated Catchment Management in Lesotho. sustainability objectives. The PSCED is assisting in The reports covered catchment development plans, THE MAINSTREAMING OF CLIMATE CHANGE WITHIN AGRICULTURE-­ TABLE 1.1:  RELATED POLICIES IN LESOTHO Climate Change Productivity Resilience Mitigation CSA Vision 2020 (2000) ✓ ✓ ✓ ✓ Lesotho National Forestry Policy (LNFP) (2008) ✓ ✓ ✓ NSDP (2012) ✓ ✓ National Agricultural Investment Plan (NAIP) (2014) ✓ ✓ ✓ ✓ ✓ Lesotho’s Intended Nationally Determined ✓ ✓ Contributions (INDC) (2015) Lesotho National Nutrition Policy and Strategy ✓ ✓ ✓ (LNNPS) (2016) National Seed Policy (NSP) (2016) ✓ ✓ ✓ National Climate Change Policy (NCCP) (2017) ✓ ✓ ✓ ✓ ✓ Nationally Determined Contributions (NDC) (2017) ✓ ✓ ✓ ✓ ✓ LZHSR (2018) ✓ ✓ ✓ ✓ NSDP II (2019) ✓ ✓ ✓ ✓ ✓ Source: Based on synthesis of various Lesotho government documents. Climate-Smart Agriculture Investment Plan for Lesotho 5 institutional settings, and legal issues for effective imperatives of CSA prioritization and planning in catchment management. The Millennium Challenge the country. Corporation (MCC) is also supporting Lesotho to build institutional capacity in the use, uptake and 62. This report builds on the CSA Profile by developing customization of data to enhance effective policy a CSAIP that can assist the Government of Lesotho planning, coordination, and execution in different (GoL) in filling knowledge gaps and identifying sectors including transport, irrigated agriculture, cli- critical investments to transform Lesotho’s mate change, integrated catchment management, agriculture to a productive, resilient, and low-­ water, and health. The activities aim to build capac- emissions sector. The main audience of the report ity in Lesotho’s government agencies in cooperation is agricultural policy makers and the technical staff with research centers, private sector and civil society working on agriculture and food security and other organizations. related programs in the Ministry of Agriculture and Food Security (MAFS) and the Ministry of 61. The World Bank has also supported the Forestry, Range and Soil Conservation. In addition, preparation of the Lesotho CSA Profile, which the report can serve as an important reference recommends country-­ specific CSA practices document for the Ministry of Development and that can help the country adapt to and mitigate Planning, the Ministry of Finance, and development climate change. The Lesotho CSA Profile partners. An earlier version of this report has documents Lesotho’s agricultural context, climate significantly supported the preparation of SADP change vulnerabilities and impacts, promising CSA II whose development objective is to support the technologies and their current level of adoption, increased adoption of CSA technologies, enhanced finance mechanisms for scaling up the technologies, commercialization, and improved dietary diversity and institutional and policy entry points for effective in Lesotho. The remainder of the report is organized delivery of CSA investments. The CSA Profile is the as follows. Chapter 2 describes the approach used primary document for policy discussions and for in preparing the CSAIP, including the methodology initiating dialogue with the government on the applied at the household and agricultural sector BOX 1.1: KEY FINDINGS FROM LESOTHO CSA PROFILE Conservation agriculture (CA) is the most widely promoted climate-­ smart agriculture (CSA) practice, although scale irrigation, organic manure application and the use of tunnels other practices such as keyhole gardens, small-­ (greenhouses) are common. Traditional practices that are adapted to local conditions—­ such as Machobane—­ also exist and have potential to be integrated into modern CSA practices, hence improving acceptability among rural households. There is a need to scale up agroforestry in meeting the country’s goals related to improving forest cover, while at the same time enhancing the food security, nutrition, and resilience of households. The integration of stone fruits (peaches and nectarines) and other fruit trees into existing cropping systems could be an option. For livestock production, the main climate-­ smart practices include fodder production, as well as rangeland rehabilitation and management, but these are practiced at very limited scale. Given the country’s energy needs, particularly in off grid rural communities, biogas energy development using livestock manure could be an option. The adoption of improved (including both heat- and cold-­ tolerant) breeds of cattle, goats and merino sheep will also be important for improving the resilience and productivity of the local production of meat, milk, wool and mohair, while reducing greenhouse gas emissions per unit of produce. At present, the country imports most of its meat and support to a low carbon, more productive and highly resilient meat industry in Lesotho is required. Animal health management and improved veterinary services will also be crucial to improve production quality and enhance resilience of the livestock sector. 6 Climate-Smart Agriculture Investment Plan for Lesotho levels. Chapter 3 presents the results of an analysis CSA goals. Chapters  3 and 4  are the building blocks of the financial and economic viability of adopting upon which the investment plan described in CSA practices at the household/farm level, while chapter 5 is formulated. Chapter 5 also assesses CSA chapter  4 presents the impact of CSA adoption at adoption constraints and highlights strategies to the sector level and evaluates the extent to which break the adoption barriers. The chapter concludes CSA implementation could help achieve Lesotho’s with possible sources of financing for the investment. Climate-Smart Agriculture Investment Plan for Lesotho 7 II. Methodology 63. The CSAIP approach is an integrative framework Lesotho National Farmers Union (LENAFU) and for supporting a country’s agriculture and farmer members, the private sector and civil society climate change goals. It comprises in-­ depth organization (Annex 1). The process built on the literature review, stakeholder engagement, expert Lesotho CSA Profile that was also based on detailed and key informant interviews, and quantitative consultation across Lesotho’s agriculture sector modeling, which are encapsulated in four key stakeholders and developed a ‘normative vision’ of steps tailored to the country’s context. As shown in the sector factoring in national development plans figure  2.1, Step 1 is the identification of agriculture and targets. Working backward from this normative sector goals and strategies through a process of vision, sector targets and priority strategies were stakeholder engagement and review of key policy identified that connected the normative vision with documents. This is followed by Step 2 that entails the present situation of Lesotho’s agricultural sector the development of scenarios through stakeholder (table 2.1). consultation, including the identification of critical factors that can interfere with the achievement of 65. The unique environment of Lesotho necessitates goals identified in Step 1. In Step 3, quantitative and agricultural methods and practices that consider qualitative analyses are conducted based on the the realities of the relatively dry, high-­ altitude inputs from Steps 1 and 2. Results of the analyses environment of the country. Despite the current in Step 3  are used to assess the extent to which low agricultural productivity and high influx of Lesotho’s CSA goals articulated in Step 1 could be food imports into Lesotho, stakeholders felt that achieved. The final Step 4 evaluates and prioritizes the situation could be reversed if policy makers CSA strategies to the specific country’s context. The and farmers could commit to diversify production implementation steps are described below. and prioritize commercialization of the agricultural sector. The future of maize production received Step 1: Identify agriculture sector goals, targets, and considerable attention from participants. While strategies fertilizer subsidy contributes 15  percent to maize production, much of Lesotho’s agroecology has been 64. A collaborative, stakeholder-­ driven process found to be unsuitable to produce maize (annex 4). took place in Maseru in May and October 2018 Thus, the cost of maize production in the country to identify visions, goals, and strategies and is significantly higher than the cost of importation to prioritize a handful of promising climate-­ from South Africa. Therefore, diversification from smart technologies and strategies for Lesotho’s maize to other commodities was among the goals agriculture sector. The stakeholders included staff cited by all stakeholders. With proper policies and from the Ministry of Agriculture and Food Security, enough investment in key value chains for which Department of Agricultural Research, Ministry of the country has a distinct competitive advantage, Forestry, Range and Soil Conservation, Ministry the stakeholders felt that Lesotho could be a net of Water, Ministry of Planning, National University exporter of some agricultural products. of Lesotho, Lesotho Agricultural College, Lesotho Meteorological Services, Disaster Management 66. The CSA goals articulated by the stakeholders Authority, Food and Agricultural Organization of the reveal that the roles of agriculture as a source of United Nations (FAO), World Food Program (WFP), food security and as a source of environmental Climate-Smart Agriculture Investment Plan for Lesotho 9 FIGURE 2.1: THE CSAIP DEVELOPMENT PROCESS I. Sector Goals and Strategies Stakeholder consultation and review of policy documents used to identify agriculture sector vision, targets, and strategies Present 2050 Milestone 2030 Milestone Which CSA strategies are “Normative” vision of the Indicators, milestones needed today? future in target year II. Scenario Development Stakeholder consultation to identify agricultural development pathways and key uncertainties which can impede the achievement of sector goals Scenario Scenario A B Scenario Scenario C D III. Quantitative and Qualitative Analyses Quantitative analysis: Design Lesotho Agriculture Sector Literature review and expert consultation: To assess Model (LesAgMod) and determine impacts of CSA on the enabling environment and innovative delivery sector goals and indicators: mechanisms needed to support CSA adoption • LesAgMod analysis with no climate change and with climate projections • Outcome Indicators include crop areas, livestock units, yield, production, food availability and trade, soil erosion, pest infestation, GHG emissions, and job creation Quantitative analysis: CBA to assess effects of CSA on Expert consultation to validate assessments household-level indicators (gross margins, net margins and net incremental benefits) IV. Prioritization and Evaluation CSA strategies are evaluated according to key indicators including sector and household level impacts. CSA investment needs: • Scaling up CSA and assessing economic costs and benefits; carbon valuation • CSA adoption constraints • Improving the enabling environment for CSA implementation • Financing the investment plan Source: World Bank 10 Climate-Smart Agriculture Investment Plan for Lesotho TABLE 2.1: NORMATIVE VISION FOR CSA IN LESOTHO focus on increasing agricultural productivity, enhancing resilience, and reducing emissions CSA Pillar Vision (table 2.3). All five targets focus on productivity, the Productivity By 2050, increase yields and profits central goal of most agricultural policies, while two by a factor of 2.5 by diversifying from targets each focus on enhancing climate mitigation maize production to other agricultural and resilience. In reality, most CSA technologies can commodities, while enhancing food and generate substantial resilience and mitigation co-­ nutrition security. benefits if production is well managed (World Bank Resilience By 2050, have a resilient and diversified Group 2018a). A number of strategies were identified agricultural sector with improved and as vital to achieving the specified targets. These are sustainable capacity to respond to climate clustered into three groups: climate resilience and variability and land degradation. nutrition security, commercialization, and capacity Mitigation By 2050, increase agricultural productivity, development strategies (table 2.4). while simultaneously maintaining low GHG footprint. 68. These strategies were incorporated in the design Source: Stakeholders consultation workshop. and are key project activities of the second phase of SADP. They include proven solutions that services converge in fundamental ways (table 2.2). increase farm productivity and crop diversification Productivity can be increased through the adoption through the adoption of climate-­ resilient seed of climate-­smart practices that sequester carbon.11 varieties (short maturity and drought-, heat-, and The carbon that is removed from the atmosphere resistant species), and market-oriented crops pest-­ and captured in soils and plant biomass is the same with a clear potential for income security derived carbon that makes agricultural soils more fertile, and from the integration of smallholders to value chains. that leads to higher profit margins for producers. The strategies also include agronomic practices that Higher carbon content enables the soil to make enhance climate resilience at the farm and catchment more water and nutrients available to support crop levels and measures to improve soil health through growth and increases the resilience of farmland, the adoption of climate-­ smart practices to improve reducing both the need for fertilizer applications and soil fertility and soil nutrient management and susceptibility to land degradation. promote soil carbon sequestration. In addition, the strategies focus on enhancing water security 67. The CSA targets that were developed with at the farm level through cost-­ effective irrigation stakeholders and evaluated in this report technologies that foster a more productive and TABLE 2.2: CSA GOALS FOR LESOTHO Productivity Resilience Mitigation Increase yields of major staples by tolerant 70% of arable land are planted to stress-­ Reduce livestock emissions intensity a factor of 2.5. smart. crops; 70% of livestock breeds are climate-­ by 25% compared to business as usual. Increase land area devoted to 60% of cropland is under CA and agroforestry; CSA practices are adopted by 70% of biofortified crops by 60%. 60% of rangeland is rehabilitated or under farmers. improved management system. Reduce losses across agricultural Increase forest cover to 10% to total land area. Increase investment in agricultural value chains including postharvest research and extension to 10% of losses to less than 5%. agricultural budget. Increase agricultural exports by a Increase land under irrigation to 70% of irrigation — factor of 2.5. potential. Source: Stakeholders consultation workshop. 11 Carbon sequestration, the process by which atmospheric carbon dioxide is taken up by plants through photosynthesis and stored as carbon in biomass and soils, can help reverse soil fertility loss, limit GHG concentrations in the atmosphere, and reduce the impact of climate change on agricultural ecosystems and people. Climate-Smart Agriculture Investment Plan for Lesotho 11 TABLE 2.3: LESOTHO CSA TARGETS No. Targets for long-­term vision Policies to which targets CSA pillars addressed most closely align 1 Increase yields of major staples by a factor of 2.5. NAIP (2014); LZHSR (2018) P 2 Double income of smallholder farmers. LZHSR (2018) P, R 3 Increase agricultural exports by a factor of 2.5. NAIP (2014) P, R 4 Reduce agricultural GHG emissions by 25%. INDC (2015, 2017) P, M 5 Reduce livestock emissions intensity by 25%. INDC (2015, 2017) P, M Source: Stakeholders consultation workshop. Note: P = Productivity; R = Resilience; and M = Mitigation. TABLE 2.4: STRATEGIES FOR ACHIEVING LESOTHO CSA GOALS Climate resilience and Commercialization Capacity development nutrition security Crop diversification Agricultural value chain Agricultural research and extension Stress-­tolerant crop and Commodity standards Knowledge development livestock breeds Biofortified crops Warehouse receipt system Integrated weather and market advisories using Big Data and information and communication technology (ICT) CSA practices at the farm level Greenhouse agriculture — Landscape approaches Market infrastructure development — Cost-­effective irrigation — — Source: Stakeholders consultation workshop. 12 Climate-Smart Agriculture Investment Plan for Lesotho efficient use of water for agriculture, reducing the no longer operational, and existing headworks risks associated with intra- and inter-­ seasonal and reservoirs have silted up. On-­ farm irrigation climate variability. Biofortification was mentioned systems have also deteriorated due to ill-­ defined as an effective and economical strategy to enhance property rights over infrastructure and weak local nutrition security by boosting the content of essential capacity for management. There are few effective nutrients in crops, particularly staples that sustain community-­based irrigation management systems Lesotho’s population. and poor links between the existing institutions and the local public institutions responsible for 69. Stakeholders acknowledged the need for policy water management. This combination of limited makers and resource managers to manage budgetary resources and an inadequate policy trade-­offs across space, time, and sectors when and institutional framework hamper the ability addressing challenges related to poverty, food to maintain the existing infrastructure as well security, environmental degradation, and as expand irrigation. Combating the effects of climate change. The multiple services provided by climate change and increasing productivity toward land interact in complex ways, leading to positive food security and commercialization will require and negative impacts as the production of one sustained efforts to provide adequate, reliable, ecosystem service increases.12 Synergy results when and timely delivery of irrigation to Lesotho’s crop the production of more of an ecosystem service leads and livestock farmers. to more of another, whereas trade-­ offs, the more frequent outcomes, occur when the production 71. Diversifying from cereals monocropping to of one ecosystem service decreases the supply of cereal-­legume intercropping and higher-­ another. Conversion to agricultural land presents value horticulture can enhance incomes and a trade-­off to society because the same land that climate resilience. Development of high-­ value is used for providing essential food, feed, fiber, and cash crops—­ such as fruits and vegetables and biofuels could store large amounts of carbon in soils potato, and dairy and small-­ scale pig and poultry and biomass in its natural state and thus mitigate production—­ offer opportunities for moving climate change. Globally, the expansion of croplands from uncompetitive maize monocropping to a to satisfy the needs of a growing population with more diversified production base, which is more changing diets is causing a costly loss in carbon responsive to climatic risks. Lesotho’s higher stocks in natural vegetation and soils (West et  al. altitude, potential for early season production, and 2010). access to cheap water and labor combine to create favorable conditions and comparative advantage 70. Agriculture in Lesotho has suffered major for the production and export of vegetables, fruits, setbacks due to overreliance on rainfall, which and seed potato. Regional demand for fruits and is insufficient in most areas. Provision of irrigation vegetables is increasing as urban populations grow, is critical for addressing climatic risks in Lesotho’s incomes rise, and the popularity of healthy diets agriculture; however, the subsector is beset with also increases. Higher production and sales of these challenges. Despite the ready availability of water high-­value crops would also deepen domestic from the mountains, only 2,600 ha of arable land have agricultural markets, generate rural employment, been developed for irrigation. Poor management and improve nutrition. However, as commercial and inadequate maintenance have reduced the area vegetable production currently ranges from 100 ha under irrigation, with only an estimated 1,200  ha to 600 ha (depending upon rainfall) and commercial currently under irrigation. The modernization of potato production is less than 500  ha, achieving national water resource management policies diversification and commercialization will need a and institutions has been slow, and physical much broader base. Government support, private infrastructure has deteriorated due to lack of public investment, and external financing will be critical funds for maintenance. Many pump stations are for diversification and commercialization. 12 Ecosystem services refer to the benefits we derive from nature and functioning ecosystems. They are grouped into four broad categories: provisioning, such as the production of food and water; regulating, such as the control of climate and disease; supporting, such as nutrient cycles and oxygen production; and cultural, such as spiritual and recreational benefits (http://www.millenniumassessment.org/documents/document.356.aspx.pdf). Climate-Smart Agriculture Investment Plan for Lesotho 13 72. A more diversified production base, with horizontal and vertical alliances that would result in greater emphasis on horticulture and livestock the integration of a greater number of smallholder production, also offers a means to increase producers in potentially remunerative agricultural dietary diversity and reduce child malnutrition. value chains, incentivize contract farming, build Lesotho’s high rates of child malnutrition are mutually rewarding partnerships between farmers attributed to poverty, low dietary diversity, and and private agri-­businesses, and drive enterprise inadequate consumption of fruits and vegetables. operations toward more lucrative domestic and Limited dietary diversity affects all children—­ export markets. only 23  percent of children have minimum dietary diversity and 11  percent have a minimum Step 2: Scenario development acceptable diet. Fruit and vegetable availability were estimated at 128 g in 2013, compared with the 74. Scenario development helps define specific World Health Organization (WHO) recommended pathways to achieve the proposed vision and daily intake of 400  g. Increased horticulture and goals, evaluate those outcomes considering livestock production would contribute to improved future uncertainties, and then determine resilient nutrition by (a) increasing the availability of fruits and robust outcomes. It is a stakeholder-­ driven and vegetables as well as protein-­ rich foods and process to test the plausibility of identified agriculture (b) improving incomes and thereby resources for sector goals and serves as a “reality check” to the increased access to a more diverse diet (World Bank outcomes given future uncertainties and other Group 2019). constraints. For instance, the process might ask what a diversified agricultural production system should 73. Complementing diversification is the need to look like, what types of resources would be needed improve market access to smallholder farmers. to achieve CSA goals, and how might climate change Smallholder farmers in Lesotho have limited access and other external factors hinder or support those to profitable, value-­added markets, and in the development pathways. absence of critical supporting functions, such as infrastructure and service provision, they struggle to 75. Scenarios are useful tools to explore uncertain shift from subsistence farming to more productive futures in socioecological systems, such as the forms of exchange. There is need to support agricultural sector, that typically faces high levels 14 Climate-Smart Agriculture Investment Plan for Lesotho of risks and uncertainties. Scenarios differ from stakeholder workshops. The scenarios’ definitions predictions, forecasts, and projections in that they were also supported with official statistics and describe alternative futures under different sets information available from Food and Agriculture of assumptions given our current understanding Organization of the United Nations (FAO) databases. of the way drivers of land use interact to affect the Narratives are built along two axes of agricultural agricultural system. A crucial element of scenarios trade and sustainable landscape development: the is the ability to capture both qualitative and first axis represents emphasis on exports versus quantitative elements that define future conditions. national food self-­ sufficiency (and hence low Environmental scenarios typically use narratives exports), while the second axis depicts short-­ term to represent qualitative scenario elements. Such economic growth orientation with low emphasis on narratives provide voice to the qualitative factors sustainable landscape management versus long-­ that shape development, such as values, behaviors, term economic growth orientation with strong focus and the role of institutions, while modeling (Step 3 of on landscape sustainability. Lesotho is surrounded the CSAIP process) offers empirically based insights by the Republic of South Africa (RSA), which provides into the subset of socioeconomic and biophysical the main context of Lesotho’s agricultural sector. factors that are amenable to quantification (Raskin Thus, RSA’s agriculture and trade policies de facto 2005). Combining both qualitative and quantitative become Lesotho’s policies. South Africa has an scenario components, in the form of narratives open economy with fully liberalized agriculture and empirical modeling results, has become a markets. Due to international market integration, common approach in global environmental change RSA’s commercial agriculture sector produces high-­ assessments (Alcamo 2008). quality and relatively cheap goods, which present stiff competition for Lesotho’s own products. Any 76. Two major drivers that may influence agricultural development of Lesotho’s agriculture sector will development in Lesotho are agricultural trade therefore need to be closely aligned with conditions and sustainable landscape management. The and developments in RSA (GoL 2014). report developed three land-­ use scenarios for 2010 to 2050 that consider these main drivers and 77. The CT scenario generally follows the current trends for agricultural land-­ use change identified development pathway and ongoing tendency during the Lesotho CSA Profile development and of market liberalization but with relatively FIGURE 2.2: POSITIONING OF SCENARIOS ON THE AXES OF DRIVERS OF AGRICULTURAL LAND CHANGE High agricultural exports CZ Low emphasis on sustainable High emphasis on sustainable landscape management landscape management RL CT Low agricultural exports Source: Authors based on stakeholders consultation workshop. Climate-Smart Agriculture Investment Plan for Lesotho 15 low ambition toward sustainable landscape neighboring RSA and taking into consideration management. A general assumption under the CT agricultural commodities for which Lesotho has scenario is for agricultural land under cultivation distinct comparative advantage. The proximity to to grow through agricultural extensification and for RSA provides a great market opportunity for Lesotho, production to keep pace with the current annual as RSA is the source of foreign direct investment while population growth rate of about 1.3  percent. The also providing access to modern technology and total planted area would grow throughout the study markets. Furthermore, the free trade environment horizon to keep pace with population growth through within SACU—­ the biggest market in Africa—­ makes 2050, with a similar crop and livestock portfolio that Lesotho relatively attractive to regional and global is generally observed currently. Such magnitude companies seeking access to regional markets. The of agricultural production has been observed in scenario assumes high ambitions for international Lesotho in past years and is thus a reasonable cooperation, market liberalization, and increased target for the CT scenario. The CT is characterized by agricultural exports as a main strategy to graduate rainfed subsistence farming, cereals monocropping, from the United Nations (UN) ranking of least extensive livestock grazing, and suboptimal use of developed countries. modern inputs. 80. A main strategy under the CZ scenario is to 78. The CT scenario implies continued support enhance regional integration. Closer regional for the dominant, historical cropping system integration with SADC members should help generally characterized by maize monoculture, Lesotho remove some supply-­ side constraints by where there is an assumption that the land enlarging markets, generating economies of scale under crop production has an increasing trend in agriculture research and policy development and to keep up with population growth. To achieve public good provision, and facilitating greater trade this outcome, price support and subsidy must integration with the global economy (NSDP 2012). increase, and this implies an increasing social The scenario implies a reduction in price support cost. In this scenario, maize, wheat, sorghum, and for field crops, notably maize, where deficits are beans continue to be the primary crops, while assumed to be met by imports, supported through sheep and goat production for wool and mohair investments in more profitable commodities, most remain vital. Agriculture continues to be dominated notably potato, vegetables, and orchard products on by small-­ scale rain-­fed cereal production and the crops side and animal products on the livestock extensive animal grazing. The contribution of the side of agriculture. Given the high production costs animal sector remains about double that of the of these more commercially viable commodities crop subsector. Despite the prevalence of these (potato, orchards, and vegetables), the expansive agricultural practices, it is generally considered use of land for growing grain crops—­ most notably unsustainable and insufficient to feed the country’s maize—­is put in check. population, implying a high social cost. Vegetable production continues to be mostly subsistence, 81. In contrast, the RL scenario assumes a with home gardening of rural households estimated lower priority to market liberalization but at more than 70  percent. Most home gardens are prioritizes a land management system that rain-­ fed but supplemented with irrigation from empowers smallholders with ambitions toward household or community domestic water supplies. sustainability, socioeconomic resilience, and Total cropped area increases from about 195,000 ha low ecological impact from economic growth. in 2010 to about 210,000 ha by 2050. Food imports Improvements in agricultural productivity will not continue to be important to meet consumer be possible unless stern efforts are made to reduce demands, and improved food self-­ sufficiency land degradation and associated loss of natural targets are mostly unmet. Two other scenarios resources. Indigenous knowledge (IK) is increasingly deviate from the CT scenario and are referred to as recognized as important in developing mitigation the CZ and RL scenarios. and adaptation strategies for climate change. Thus, the RL scenario focuses on integrating scientific 79. The CZ scenario even prioritizes a high degree knowledge with Machobane Farming System (MFS), of market liberalization following trends in a traditional farming practice with high adaptability 16 Climate-Smart Agriculture Investment Plan for Lesotho and resilience to climate change. MFS is an intensive local practices and incorporates modern scientific cropping system, using crop rotation, relay cropping, knowledge to adapt and improve the practices to and intercropping practices with the application meet new and emerging challenges under climate of manure and plant ash to conserve soil moisture change. RL scenario implies more balanced cereal and replenish soil fertility (Mekbib et al., 2011). MFS production, with maize still grown, but with an is based on five technical principles that are rooted emphasis also on the drought-­ tolerant attributes in sustainable ecological intensification: perennial of sorghum. Winter wheat still is important, but vegetation cover, cropping pattern adapted to the there is more balance with other crops such as varying climate, use of organic fertilizers, natural potato, vegetables, and orchards. This scenario, pest control, and relay intercropping that allows too, implies a drastic reduction in cropland area for staggered harvesting of crops throughout the with more emphasis on sustainable intensification year. Production practices that conserve soil while of agriculture. improving its structure and fertility are prioritized. High yielding, pest resistant varieties are introduced. 83. Within the context of Shared Socioeconomic Similarly, incentives are provided that enable Pathways (SSPs),13 the CT scenario corresponds livestock owners to adopt climate-­ smart livestock to SSP2, a “middle of the road” pathway where technologies and rangeland management practices. trends broadly follow their historical patterns; Complementing rangeland resources management the RL scenario parallels SSP1, a “taking the with improved fodder production helps relieve green road” pathway of sustainability—­ focused pressure from overstocked and overgrazed growth and equality; and CZ resembles SSP5, rangelands under the RL scenario. a “taking the highway” pathway of rapid and unconstrained growth in economic output and 82. A main strategy to graduate from the least energy use. The scenario narratives have been developed country status under the RL translated into demand for land use and land cover scenario is supporting smallholders, investing based on a variety of data, including statistical in sustainable landscape management, and information from the Lesotho Bureau of Statistics, building institutions to enhance landscape information from various agricultural plans from resilience. The scenario identifies and builds upon government ministries, stakeholder consultation, FIGURE 2.3: PROJECTED DISTRIBUTION OF NATIONAL LAND COVER BY 2050 (HA) 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Built-up Cropland Grassland Shrubland Forest Water Barren areas land Current Trends Commercialization Resilient landscapes Source: Authors 13 SSPs were formulated by global environmental change researchers to capture a set of plausible potential future socioeconomic developments that could shape the future in the absence of climate change and climate policies (O’Neil et al. 2017). These socioeconomic developments are used to explore how societal choices will affect GHG emissions and, therefore, how well the goals of the Paris Agreement could be met. Climate-Smart Agriculture Investment Plan for Lesotho 17 and peer-­ reviewed literature. The demand for with qualitative assessment of CSA adoption factors built-­up area was based on UN projections of in the country. average annual urbanization rate of 2.85 percent for all scenarios. Water and barren land were kept static CBAs for assessing the financial and economic for all the scenarios. Grassland is projected to decline profitability of CSA under the CZ scenario but occupy the same extent under the CT and RL scenarios. The management 85. The CBA includes a financial and economic regime under the latter will however be improved analysis to determine the profitability of adopting with climate-­ smart practices. The overall impact CSA at the household and sectoral levels. The of land management is expected to lead to an analysis provides answers to two key questions: increase in forest cover to 2.5  percent of total land 1) What is the financial viability of CSA practices area under the CZ scenario and 5  percent under for a household? the RL scenario. Currently, maize monocropping is a prevalent system but is unsustainable and 2) How do the anticipated costs needed to scale insufficient to feed the country’s population. Thus, up CSA compare to the anticipated economic productive diversification from maize to other crops benefits? and livestock is an important strategy under both the CZ and RL scenarios. Despite an increase in available 86. A financial analysis was undertaken to determine cropland for the CZ scenario, the shift away from financial viability and incentives for an average land-­intensive production of maize as a smaller share household to adopt CSA. This was done by assessing of total planted area means that degraded rangeland the net incremental benefits accruing to a household can be restored and perhaps can accommodate following the adoption of CSA practices compared other production systems, such as silviculture to maintaining the conventional farming practices. and agroforestry. The full sets of assumptions for Second, an economic analysis was used to assess the computing the land covers under the scenarios are economic and societal benefits of adopting CSA and presented in annex  2. The proportions of cropland to establish the economic rationale for the public occupied by major crops grown in Lesotho are sector to support farmers’ adoption and scaling dictated by the objectives highlighted in the narrative up of CSA. Indicators for the CBAs are presented in scenario. The relative proportion of crops is assumed table 2.5. to remain as current under the CT scenario but deviates substantially for the CZ and RL scenarios 87. Additional analyses were carried out to assess due to diversification from maize. the economic benefits for households adopting CSA, public good benefits accruing from climate Step 3: Quantitative and qualitative modeling mitigation, and the expected public sector investments to effectively scale up CSA in Lesotho. 84. Quantitative modeling was performed to assess For the economic analysis, households’ financial net the productivity and climate benefits of CSA at incremental benefits were evaluated at economic household and sectoral levels under a changing prices and aggregated across the projected number climate. This step combined two quantitative of CSA adopters. To assess the public good benefits, approaches—­ benefit analyses (CBAs), a cost-­ EX-ACT was used to evaluate the climate mitigation bottom-­up, farm-­level perspective that assesses the potential of CSA technologies. EX-ACT enables desirability of CSA technologies and practices at the calculation of the net carbon balance, that is, the household and farm levels, and the development of difference between gross GHG emissions under the Lesotho Agricultural Sector Model (LesAgMod) conventional practices and gross emissions under that takes a countrywide, spatial perspective to CSA practices. The net carbon balance was then assess the potential impacts of CSA technologies valued at low and high shadow prices of carbon on the achievement of agriculture sector goals. The (LSP and HASP, respectively) to express climate quantitative modeling was further supplemented mitigation in monetary terms.14 The shadow price 14 http://globalpractices.worldbank.org/climate/SitePages/Greenhouse%20Gas%20Accounting%20-%20Shadow%20Price%20of%20Carbon.aspx. 18 Climate-Smart Agriculture Investment Plan for Lesotho TABLE 2.5: OUTCOME INDICATORS OF THE CBA Indicator Definition Financial analysis Gross margins Gross margins represent total revenues from crop production minus total production or variable costs excluding labor. Net margins Net margins are calculated as the gross margins, but factor labor costs into total production costs. Net incremental benefits of adoption This represents the expected financial returns for households generated by the adoption of CSA activities as compared to conventional farming methods. Economic analysis Net carbon balance The net carbon balance is the difference between GHG gross fluxes under CSA adoption and under conventional farming practices. Results are given in tCO2eq. Positive numbers represent sources of CO2e emission while negative numbers represent carbon sinks. This is valued at a shadow price of carbon and included in the economic analysis as public good benefits. The value is assessed with the Ex-Ante Carbon Balance Tool (EX-ACT). Net present value (NPV) The NPV is the difference between the present (discounted) value of cash inflows and the present value of cash outflows over a period. Economic internal rate of return (EIRR) The EIRR is the discount rate at which the calculated NPV equals zero. A high EIRR provides confidence in the profitability of an investment. of carbon indicates the carbon price consistent with capable of competing with weeds, and resistant achieving the core objective of the Paris Agreement to pests and diseases; of keeping temperature rise below 2°C. To assess the • Improved use of fertilizer through integrated soil public expenditure needed to support CSA adoption fertility management combining inorganic and at the sectoral level, information was sourced from organic fertilization with adapted varieties; previous investment projects in Lesotho, literature and information sourced by government institutions, • Improved water use efficiency due to access to independent research entities and nongovernmental efficient small-­ cost-­ scale irrigation systems; organizations (NGOs), and international institutions. • Focused intensification of livestock production based on improved feeding (for example, more 88. The CBA was based on the comparison between concentrates, adding certain oils or oilseeds to “with” and “without” CSA investments scenarios. the diet, improving pasture quality) and breeding The “without CSA investments” scenario is consistent management practices (for example, increasing with the CT scenario, while the “with CSA investments” productivity through breeding and better scenarios consider the implementation of the management practices): increasingly adopted for following CSA options consistent with the RL and cattle (including dairy) and sheep; CZ scenario narratives. The “with CSA investments” scenarios are based on the hypothesis that farming • Some households will be able to engage in households will adopt a combination of CSA-­ related aquaculture production due to the improved practices, namely: water management activities promoted under the CSAIP. Cultivation of medicinal plants • Crop diversification (for example, inclusion (Rosa canina) and mushroom production will of different crops in the rotations and in the be introduced on communal land subject to farming systems, expansion of vegetable and fruit reforestation and forest regeneration activities. production and expansion of livestock-­ related Last, the use of horses and donkeys as animal activities); draft power sources and transport means will • Adoption of improved crop varieties that are more generate an extra source of income at household productive, are drought- and stress-­ tolerant, level; and Climate-Smart Agriculture Investment Plan for Lesotho 19 • Soil conservation technologies, such as CA and explicit, monthly time step model designed to its three pillars (rotation with legumes, minimum reflect the current water and agricultural systems tillage, and mulching), aimed at improving soil of Lesotho (figure  2.4). It was used to explore structure and fertility, thus reducing erosion and alternative agricultural pathways and investment overall land degradation and increasing crop priorities within the context of the CSA normative yields. vision and scenario-­building processes. The model couples agricultural, water, soil nutrients, and land-­ 89. The CBA adopts an interdisciplinary approach, use practices and climate change scenarios to considering agronomic, economic and assess key vulnerabilities of the agricultural sector environmental aspects associated with CSA and employs a profit maximization approach to implementation. Different data sources have estimate changes in land-­use and cropping patterns therefore been used. Raw data from the Agriculture over time. Production Survey (APS) 2016-7 (and 2015-6 for data not available in 2016-7; for example, yields 92. LesAgMod enables stakeholders to better of selected crops) have been used to determine understand how changing climate patterns and quantities and costs of the inputs used in crop other factors may affect agriculture within Lesotho and livestock management. Cropland area and and explore the implications of alternative crop yields have also been derived from Food strategies that seek to reduce vulnerabilities and and Agriculture Organization Corporate Statistical create opportunities, particularly for the rural Database (FAOSTAT). Such information refers to poor. The model assesses the sensitivity of water and “conventional” farm management (that is, business agricultural management to changes in natural and as usual). Yields reported therefore represent the managed landscapes. The model was developed actual yields. The attainable yields were sourced at a spatial scale appropriate to simulate major from the Department of Agricultural Research and hydrologic flows; represent major demographic, have been used to calibrate the yields under the land-­use, and cropping trends; and evaluate the CSA-­improved management options. Additional effects of water and land management. The model data sources include: household level Census runs on a monthly time step to simulate hydrological 2009 dataset, previous investment programs in the process, crop growth, consumptive water demand, agriculture sector of Lesotho (or in the Region), and and water allocation decisions. available literature. Information about the proposed components of the CSAIP (discussed in chapter  5) 93. LesAgMod took as its starting point a water have been validated with the Lesotho stakeholders. resources assessment tool that was developed under the Lesotho Water Security and Climate 90. The robustness of the economic benefits was Change Assessment Project (World Bank Group determined through a sensitivity analysis 2016) using the Water Evaluation and Planning incorporating variations of key variables. The (WEAP) decision support system. This legacy sensitivity analysis considers the performance of model included agricultural crop production the investment options under different scenarios, measured as potential yield based solely on soil including changes in the flow of benefits and costs, moisture deficits. Land-­use, land cover, and cropping changes in the adoption rate, and changes in crop patterns were based on historic data and only varied yields. Detailed assumptions for the CBA are provided based on external or exogenous assumptions of in annex 3. future conditions. Livestock were not included in the revenue maximization but are modeled statically The LesAgMod approach for assessing agricultural in terms of herd size and product output. In this sector goals report, LesAgMod was modified for CSAIP to better represent and evaluate Lesotho’s agricultural sector. 91. LesAgMod was purposefully designed to assess This included refining the model to include factors the potential impacts of CSA technologies on of production beyond soil moisture that affect Lesotho’s agricultural sector under changing agriculture output such as nutrient availability, soil climate conditions. LesAgMod is a spatially properties, and input costs. The model includes 20 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 2.4: SCHEMATIC REPRESENTATION OF LESOTHO AGRICULTURAL SECTOR MODEL LesAgMod Input data Endogenous factors Yield Profit Crop suitability Max crop area Land cover/use Soil type Max attainable Topographic factor yield Climate Fertilizer Annual profit = Catchment hydrology Area (Crop yield * Unit price – Soil moisture Unit cost) Crop yield Climate (P&T) Reservoir storage Soil properties Each climate Update prices Streamflow until target areas projection read Soil erosion individually Crop calendar are archieved Soil properties Water availability Livestock Initial animal stock Food Annual profit = Climate (T) availability Stock * Offtake * Stress factors: (Livestock yield * Water, Food, Heat Unit price – Livestock yield Offtake rate Unit cost) Dressed weight Change in stock Source: Authors Climate-Smart Agriculture Investment Plan for Lesotho 21 fertilizer application, soil organic content, and nitrate reduced to 45  percent. LesAgMod calculates crop content to estimate yield as well as input costs and yields, changes in livestock populations, and commodity prices to calculate revenue maximization. GHG emissions on an annual basis. The model is LesAgMod was also updated to include livestock formulated as a maximization of net profit (that production, their derived products, and their factors is, revenue minus cost) for the producer, which of production. assumes that farmers respond to a price signal in terms of their planting and livestock decisions. Price 94. From a modeling perspective, the practical remains an exogenous variable, but area planted implementation of CSA includes improvements becomes endogenous and can thus vary over in soil water efficiency and enhanced soil time in response to an external price signal and/or health allowing cropping pattern substitutions constraint to production, such as land and water and prioritizing crop production in regions availability, changes in the costs of production, where land characteristics and soil properties and so on. Production and market value change are most favorable. An example of how CSA over time as a function of changes in planted area improves yield is contrasting more traditional, deep and yield. In this study, the agricultural economic tillage approaches to CA that include minimum analysis was conducted over a 40-­ year period from soil disturbance (deep tillage) for weed control, 2010 to 2050. mulching, and intercropping of maize and beans. Under the traditional practice, total evaporative 95. The narrative scenarios prescribe the adoption loss is much higher compared with CA practices levels for the various CSA practices that include that include residue retention, mulching, and CA, fertilizer application rate, irrigation, and minimum tillage, with soil water column loss improved crop varieties. CA is a set of management practices that is characterized by minimum soil FIGURE 2.5: ILLUSTRATIVE EXAMPLE OF WATER-­ disturbance and permanent soil organic cover (either SAVING POTENTIAL OF CSA PRACTICES crop residues or cover crops). CA has been shown to enhance soil physical properties, including increased Example of water saving potential infiltration, soil water retention, and organic 100% content, which in turn lead to improved yields. The 90% LesAgMod captures these effects directly through 27 its hydrologic and crop yield routines that consider 80% these input parameters. For example, minimizing soil 55 70% disturbance and managing crop residue and tilling practices results in higher soil organic matter and 60% reduction in sheet flow and soil erosion. In LesAgMod, 50% these soil treatments result in increasing soil water 40% 65 holding capacity, higher soil organic content, and less overall field runoff, enhancing soil moisture and 30% increasing crop yield. For each of the scenarios, we 44 20% have assumed a rate of adoption of these practices, which are assumed to be adopted linearly over the 10% period of the analysis (2010 through 2050). Each 8 1 0% narrative scenario was run for a set of future climate Deep tillage Mulch and minimum tillage projections. The climate projections are assumed to be an exogenous (external) factor that has an Available water influence on crop and livestock productivity. Thus, Evaporation loss each of the selected climate change projections was Runoff loss run for each of the narrative scenarios, resulting in Source: Lininger et al. 2011 30 unique simulations. 22 Climate-Smart Agriculture Investment Plan for Lesotho TABLE 2.6: LESAGMOD OUTCOME INDICATORS Indicators Definition Cropped area, yield, Crop production is determined for each of the 74 sub-­catchments as the product of the yield estimate and production within the sub-­catchment and the estimated cropped area, which in turn is dependent on the crop suitability and management practices, market prices which reflect demand, and the conditions and cost associated with land conversion to agricultural purposes to expand production. Livestock production LesAgMod estimates livestock production as a function of the number of heads of each commodity (cattle, chicken, dairy cows, goats, pigs, and sheep), annual offtake rate for each commodity, and their average yield measured in kg per animal. Food availability Crop products for food, livestock feed, bioenergy, and fiber are used as indicators for food security of a growing population. The analysis uses kilogram availability per capita to measure food security. Export potential Export potential of agricultural commodities targeted for commercial development is estimated in terms of their output quantity. The model assesses imports or exports as a share of domestic consumption, which is assumed to be proportional to historic production and population. GHG emissions LesAgMod accounts for GHG emissions from crops and livestock as CO2 equivalent, including fertilizer use and emissions from livestock, including enteric and manure for livestock and fertilizer for crops; emissions from biomass removal from conversion of forest and natural land to cropland or below-­ ground carbon sequestration, which might occur with no tillage and agroforestry practices; or emissions from burning of biomass. Soil erosion High precipitation intensity on poorly managed soils can lead to the loss of soil organic content. (ton per ha per year) The impact on cropped agriculture is the reduction in water holding capacity of soils and loss of soil fertility leading to reduced yields. Where soil erosion is mitigated, soil fertility improves leading to higher soil moisture content and less water stress on crops. Source: Authors 96. The outcome indicators from LesAgMod Step 4: Prioritize CSA strategies and determine application are presented in table 2.6. Production investments and market value change over time as a function of changes in planted area and yield.15 Due to 97. The final step synthesizes results from the variability in climate and biophysical features, such previous steps and evaluates CSA strategies and as soil properties and slope gradient, some areas of the investments necessary to scale up CSA in the country are more suitable, and therefore more the country. It also analyzes the potential barriers profitable, for growing certain crops than other areas. to implementing CSA and how the investment plan The difference in land suitability leads LesAgMod to could potentially help in breaking the barriers. It preferentially allocate crops to different parts of focuses on proven delivery mechanisms tailored the landscape (annex 5). For this reason, the model to different aspects of the CSAIP and their strategic tends to substitute crops by removing production in importance in addressing the constraints associated some parts of the landscape and concentrating their with CSA adoption. Step 4 also includes policy production in parts that are more favorable to their recommendations to support effective delivery of growth. CSA in Lesotho. 15 For each of the narrative scenarios, the LesAgMod was run iteratively, where prices for each commodity were adjusted to determine the level of price that would be necessary to meet the objective of the narrative scenario. Additionally, these prices were estimated under the assumption of the historic climate of 1948 through 1988 repeating itself for 2010 through 2050, where there is assumed to be no anthropogenically attributed climate change. The estimated future prices were used to infer the level of investment and/or the cost to society to achieve the outcome of each scenario. As an example, in 2010, the market price of maize was about US$0.40 per kg. Meanwhile, maize yields have been historically low, and despite these low yields, maize still represents more than 60 percent of the planted area and total production year after year in Lesotho. This implies a high cost in absolute terms and a high cost to society in general. Most maize production has traditionally been from small landholders with few economies of scale to boost production. Production costs from a social perspective are thus quite high. Arguably, it makes more sense for Lesotho to focus its agricultural production on those commodities for which it has a comparative advantage, import maize on the open market, and forgo some portion of its domestic production. Since LesAgMod is set up to maximize revenue, for Lesotho to maintain historic levels of maize production in the future, the implied price of maize must be higher than the historic value to reflect the higher social cost of its production. If real prices are used for the full period of analysis from 2010 through 2050, then LesAgMod will gradually take maize out of production by planting less area, since from a revenue maximization perspective, it is not profitable to grow maize. Climate-Smart Agriculture Investment Plan for Lesotho 23 III. CSA Impacts at the Household Level 98. This chapter evaluates the benefits of CSA require more private investments; switching from CT adoption relative to conventional farming to RL farming system will be less profitable but will be practices at the household level. The results more affordable for the smallholders. indicate that climate-­ smart crop and livestock production are more profitable than conventional 100. Crop and livestock production under CSA are practices. The results also show that societal benefits several times more profitable than conventional of climate-­ smart crop production are higher than the practices. The annual net income of the private benefits derived by individual farmers. Even representative household is about thrice higher though improved land management technologies under the RL scenario and about five times higher generate private and public benefits, their adoption under the CZ scenario.16 Potato is 28  percent more faces many barriers. These barriers must be effectively profitable, wheat 2.5  times more profitable, peas addressed through the CSAIP interventions. 3  times more profitable, and maize and sorghum 4 times more profitable under CSA than conventional 99. Net margins gained under the CSA adoption are practices (table  3.2). Compared to agroforestry, CA systematically higher than those obtained under is estimated to generate about 2.5  times private conventional farming. Favorable net margins benefits to farmers, while the private benefits of suggest that the households will have the capacity mushroom and Rosa canina (Rosehip, a medicinal to cover the costs of adopting CSA practices. Overall, plant) are about the same. Climate-­ smart livestock household incomes will increase because of the production is also more profitable than conventional CSAIP interventions. The increase is much higher techniques by a factor ranging from 1.3 for goat and under the CZ scenario compared to the RL scenario sheep to about 2 for dairy and poultry, and about 4 (table  3.1) due to the increase in average farm for pig (table 3.3). size from 0.5  ha to 2.5  ha, intensification of cereals production, and the expansion of high-­ value crops 101. Societal benefits of climate-­ smart crop (potato, vegetables, and fruits). Switching from CT production are higher than the private benefits to CZ farming system will be more profitable but will derived by individual farmers. For every US$100 INCOME FROM CROP PRODUCTION FOR THE REPRESENTATIVE TABLE 3.1:  HOUSEHOLD AND FARMER GROUP Without CSA With CSA investments investments, CT CZ RL US$ per year Gross income 424 7,524 842 Net income (after labor) 251 6,167 698 Source: Authors Note: It is assumed that in the RL scenario, households will have 0.5 ha available for farming, while in the CZ scenario, they will become more commercially oriented and will be able to expand their cropland to 2.5 ha, for instance, through farmer aggregation (farmer groups) promoted under the scenario. 16 For the CZ comparison, the gross income was prorated by dividing by 5 since farm size under CZ is 5 times that of RL. Climate-Smart Agriculture Investment Plan for Lesotho 25 TABLE 3.2: INCOME BENEFITS FROM ADOPTION OF CSA PRACTICES Financial Crops Conventional management CSA-­improved practices Gross margin Net margin Production Gross margin Net margin Production costs costs (including (including labor) labor) LSL US$ LSL US$ LSL US$ LSL US$ LSL US$ LSL US$ per per per per per per per ha per per ha per per per ha ha ha ha ha ha ha ha ha ha Maize 4,256 312 2,006 147 3,090 226 14,092 1,032 8,348 611 8,802 644 Maize (CA) — — — — — — 11,367 832 6,225 456 7,343 538 Maize (Agroforestry) — — — — — — 9,504 696 2,562 188 10,393 761 Sorghum 5,826 426 1,295 95 5,455 399 9,704 710 5,182 379 7,568 554 Wheat 5,139 376 988 72 5,204 381 10,283 753 2,438 178 11,962 876 Peas 5,739 420 1,839 135 5,131 376 13,466 986 6,112 447 10,888 797 Green Beans — — — — — — 70,258 5,143 26,577 1,946 53,423 3,911 Tomato — — — — — — 116,767 8,548 97,427 7,132 67,573 4,947 Potato 57,171 4,185 53,422 3,911 30,426 2,227 73,963 5,415 68,300 5,000 51,200 3,748 Rosa canina — — — — — — 12,762 934 2,650 194 26,656 1,951 Mushrooms — — — — — — 2,843.97 208.97 2,832 207 47,799 3,499 Apples — — — — — — 35,025 2,564 29,085 2,129 17,392 1,273 Peaches — — — — — — 17,320 1,268 11,380 833 14,845 1,087 Economic Conventional management CSA-­improved practices Gross margin Net margin Production Gross margin Net margin Production costs costs Cereals & (including (including legumes labor) labor) LSL US$ LSL US$ LSL US$ LSL US$ LSL US$ LSL US$ per per per per per per per ha per per ha per per per ha ha ha ha ha ha ha ha ha ha Maize 4,560 334 2,872 210 2,623 192 14,600 1,069 10,292 753 8,202 600 Maize (CA) — — — — — — 12,023 880 8,167 598 6,464 473 Maize (Agroforestry) — — — — — — 11,176 818 5,557 407 8,413 616 Sorghum 6,208 454 2,810 206 4,469 327 9,322 682 5,930 434 7,819 572 Wheat 5,557 407 2,443 179 4,234 310 9,821 719 3,937 288 11,591 849 Peas 6,111 447 3,186 233 4,330 317 14,642 1,072 9,126 668 9,206 674 Green Beans — — — — — — 77,193 5,651 44,432 3,253 41,836 3,063 Tomato — — — — — — 138,061 10,107 123,556 9,045 54,372 3,980 Potato — — — — — — 88,792 6,500 84,545 6,189 44,318 3,244 Rosa Canina 67,328 4,929 64,516 4,723 25,901 1,896 18,596 1,361 11,012 806 21,057 1,541 Mushrooms — — — — — — 3,065 224 3,057 224 49 4 Apples — — — — — — 40,422 2,959 35,967 2,633 14,151 1,036 Peaches — — — — — — 20,568 1,506 16,113 1,180 12,166 891 Source: Authors INCOME BENEFITS FROM ADOPTION OF IMPROVED FEEDING AND BREEDING TABLE 3.3:  MANAGEMENT PRACTICES FOR LIVESTOCK Financial Livestock Conventional management species Gross margin Net margin (after Production costs IRR NPV @ Average Unit net (before labor) labor) (including labor) 10% stock size margin LSL per US$ per LSL per US$ per LSL per US$ per % LSL Heads US$ per year year year year year year head per year Cattle 6,618 484 2,778 203 10,752 787 13 2,878 16 13 Dairy cows 21,849 1,600 17,369 1,272 14,676 1,074 42 61,440 40 32 Goat 33,758 2,471 20,800 1,523 46,400 3,397 23 51,224 476 3 Sheep 44,088 3,227 22,884 1,675 84,700 6,201 12 16,354 613 3 Pig 45,209 3,310 26,009 1,904 82,591 6,046 22 85,726 128 15 Poultry 23,797 1,742 16,117 1,180 58,770 4,302 23 53,864 894 1 Financial Livestock CSA-Improved practices species Gross margin Net margin (after Production costs IRR NPV @ Average Unit net (before labor) labor) (including labor) 10% stock size margin LSL per US$ per LSL per US$ per LSL per US$ per % LSL Heads US$ per year year year year year year head per year Cattle 20,901 1,530 16,677 1,221 13,008 952 44 62,878 31 39 Dairy cows 44,654 3,269 38,382 2,810 19,327 1,415 52 139,494 52 54 Goat 52,270 3,827 31,066 2,274 69,107 5,059 29 93,173 547 4 Sheep 82,973 6,074 61,769 4,522 168,465 12,333 20 131,606 1,285 4 Pig 149,991 10,980 125,031 9,153 152,725 11,180 37 487,608 160 57 Poultry 32,782 2,400 22,798 1,669 64,991 4,758 26 81,118 1,036 2 Economic Livestock Conventional management species Gross margin Net margin (after Production costs IRR NPV @ Average Unit net (before labor) labor) (including labor) 10% stock size margin LSL per US$ per LSL per US$ per LSL per US$ per % LSL Heads US$ per year year year year year year head per year Cattle 4,418 323 1,538 113 13,216 967 4 –5,794 16 7 Dairy cows 5,635 412 2,275 167 16,882 1,236 10 –254 40 4 Goat 44,987 3,293 35,268 2,582 44,330 3,245 78 121,220 476 5 Sheep 44,088 3,227 28,185 2,063 79,399 5,813 22 65,458 613 3 Pig 36,605 2,680 22,205 1,626 65,703 4,810 24 79,158 128 13 Poultry 29,555 2,164 23,795 1,742 50,547 3,700 42 107,326 894 2 (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 27 TABLE 3.3: (Continued) Economic Livestock CSA-Improved practices species Gross margin Net margin (after Production costs IRR NPV @ Average Unit net (before labor) labor) (including labor) 10% stock size margin LSL per US$ per LSL per US$ per LSL per US$ per % LSL Heads US$ per year year year year year year head per year Cattle 9,849 721 6,681 489 13,864 1,015 25 19,711 31 16 Dairy cows 17,720 1,297 13,016 953 23,157 1,695 30 40,755 52 18 Goat 59,301 4,341 43,398 3,177 63,806 4,671 172,656 547 6 Sheep 88,391 6,471 72,488 5,307 138,200 10,117 31 200,500 1,285 4 Pig 121,423 8,889 102,703 7,519 122,132 8,941 38 407,385 160 47 Poultry 39,480 2,890 31,992 2,342 55,251 4,045 44 144,575 1,036 2 Source: Authors Note: IRR = Internal rate of return; NPV = net present value. FIGURE 3.1: RELATIONSHIP BETWEEN ECONOMIC AND FINANCIAL BENEFITS FROM CSA FARM BUDGETS 140,000 120,000 y = 1.26x + 1207.5 R2 = 0.99 100,000 Economic benefits (US$) 80,000 60,000 40,000 20,000 0 0 20,000 40,000 60,000 80,000 100,000 120,000 Financial benefits (US$) Source: Authors the farmer profits from CSA adoption, the society higher because of wool exports. On the other hand, benefits an additional US$26 through subsidies or the economic net margins are higher than the transfer payments (figure  3.1). The ratio between financial net margins for all crops because of the financial and economic net margins depends on lower cost of labor, which constitutes the biggest the contribution of different inputs and outputs cost in crop management. The only exception is to the overall farm budgets. For example, for cattle maize under agroforestry for which importation beef and dairy production, economic net margins of tree seeds/seedlings is key. CSA also generates are lower than financial net margins because of carbon sequestration, biodiversity conservation, imported feed, medicines, and vaccines. For goat and other public goods that accrue to society but and sheep production, economic net margins are not to the farmers engaged in market transactions 28 Climate-Smart Agriculture Investment Plan for Lesotho alone. However, only the estimation of carbon inputs—­which may represent an adoption sequestration is included as shown in chapter  5. In barrier to CSA implementation. CSAIP is addition, CSA can create jobs that could stimulate expected to overcome such barriers and facilitate Lesotho’s rural economy (see chapter 4). adoption (see chapter  5). Labor costs are a key determinant of the financial and economic results 102. The potential for aquaculture development shown in the activity models. They represent an has recently increased and could represent an important component of total production costs. interesting investment for the private sector as Most farmers rely on family labor only. The analysis indicated by the profitability of the economic does not differentiate between family and external model presented in table  3.4. Fish farming plays labor but evaluates both using the average a very important role in the development of the cost incurred to hire external laborers (which is fisheries sector in Lesotho. In the current structure of used as a proxy of labor value). In general, CSA CSAIP costs, aquaculture investments are included implementation implies an increase in the overall only to a limited extent, and only a small number labor requirements, and this may represent an of fish farmers is assumed. The aquaculture model adoption barrier.17 considered in the current analysis refers to the most consolidated production system, that is, warm-­water 104. Additionally, the CSAIP promotes a set of fish farming in the lowlands. The model includes sustainable land management (SLM) measures production of common carp, also known as trout to protect against erosion and provide other (Cyrprinus carpio), which is one of the main species ecosystem services:18 produced. It describes the individual fish farmer • Terraces and other physical measures—­ bench system, where farmers who have abundant water terraces, vegetated soil bunds, and stone bunds near their farmland or have water stored for other purposes utilize it for fish farming. rock • Flood control and drainage measures—­ catchment water harvesting and runoff/ 103. However, farmers face higher production floodwater farming for improved seeds, fertilizers, and other costs—­ • Gully control measures—­ gully erosion management, reshaping of gully erosion through BENEFITS FROM AQUACULTURE TABLE 3.4:  integration of silt fences, erosion blankets and PRODUCTION brush packing, stone wall check dams Financial up Net margin start-­ LSL 4,177 US$306 • Reforestation and natural regeneration of Net margin LSL 69,526 US$5,090 vegetation cover non-­start-­up Economic Net margin start-­ up LSL 3,381 US$248 105. The unit costs of such measures vary, depending Net margin LSL 56,279 US$4,120 on the intensity of input use, mainly labor. Most non-­start-­up of the measures require establishment costs as well as yearly maintenance costs and are reported Source: Authors. The estimates correspond to a pond size of 600 m2 with 3,600 fingerlings. Each cycle of 6 months produces 2.1 tons of fish in table  3.5 and included in the overall CSAIP costs or 4.2 tons of fish per year. (chapter 5). 17 In some models, for example, potato and sorghum, it was assumed that producers could switch to tractor land preparation in the “with CSA investments” scenario. However, the low access to tractors and consequent reliance on manual labor is currently a major constraint to agriculture, especially for potato which is highly labor-­ intensive. Such constraints are considered by allocating only a small amount of land to potato production. In addition, to reflect the difficulty of getting increased access to tractors for cultivation, the reduction in labor requirements for land preparation also considers the possibility of using animal draft power, given also the expanded size of the livestock subsector in the CSIP investments. However, the implications on the labor market are not considered in this report. 18 SLM is the implementation of land-­ use systems and management practices that enable humans to maximize the economic and social benefits from land while maintaining or enhancing the ecosystem services from land resources. SLM practices include technologies and approaches to increase land quality. The practice must be site-­ specific because different areas will require different interventions. For example, tree planting may be an SLM practice in one area but not in another because the practice may negatively affect downstream water availability. SLM technologies include agronomic, vegetative, structural, and management measures, while SLM approaches include ways and means of support that help introduce, implement, adapt, and apply technologies in the field. Climate-Smart Agriculture Investment Plan for Lesotho 29 TABLE 3.5: COSTS OF SLM OPTIONS Activity Unit of measure Unit cost US$ 1. Terraces and other physical measures Bench terraces Establishment costs, 5 years ha 387 Maintenance costs, twice per year ha 102 Vegetated soil bunds Establishment costs, 15 month(s) ha 231 Maintenance costs, once per year ha 24 Stone bunds Establishment costs, 36 month(s) ha 45 Maintenance costs, once per year ha 16 2. Flood control and drainage measures Rock catchment water harvesting Establishment costs, 5 years Community 144,555 Maintenance costs, once per year Community 799 Runoff/floodwater farming Establishment costs, 30 month(s) ha 72 Maintenance costs, once per year ha 153 3. Gully control measures Gully erosion management Establishment costs, 15 month(s) ha 869 Maintenance costs, once per year ha 85 Reshaping of gully erosion through integration of silt fences, erosion blankets and brush packing Establishment costs, 15 month(s) ha 141,343 Maintenance costs, once per year ha 220 Stone wall check dams Establishment costs, 15 month(s) ha 129 Maintenance costs, once per year ha 56 4. Reforestation and natural regeneration of vegetation cover a. Training of village NRM committees in grasslands rehabilitation and plant nurseries Community 2,000 b. Establishment of community nurseries Community 3,000 c. Input packages for community nurseries Community 1,200 d. Tree planting and grasslands management on communal areas Community 5,000 Source: Authors 30 Climate-Smart Agriculture Investment Plan for Lesotho IV. CSA Impacts at the Sector Level 106. This chapter presents the results of key narrowing the agricultural yield gap. Constraints agricultural sector indicators for the narrative that must be overcome include weather-­ induced scenarios and in the context of future climate yield variability, soil fertility constraints, pest change. Performance indicators include crop infestation, and market accessibility. production, livestock production, food availability, • Subject to narrowing yield gaps and improving and GHG emissions. The chapter also evaluates the enabling environment for CSA adoption, the feasibility and implications of meeting the Lesotho can prioritize orchards, vegetables, and CSA targets developed during the stakeholder potato for exports. consultation. The key findings are as follows: • Climate is a major determinant of crop yield variability. Very dry conditions can suppress 4.1 Crop prices for the yields, leading to low productivity. The variability of yield and thus production from year to year can scenarios be extreme and is primarily due to rainfall deficits 107. For maize to maintain a 60  percent share of leading to soil moisture stress and reduced cropland, under the CT scenario, the subsidized rangeland productivity. price by 2050 was estimated at US$1.14 per • There is an urgent need to increase production to kg or 2.85  times the historic price. Likewise, meet caloric food demand. To prevent cropland given the low profitability of beans, a high price is expansion to natural vegetation, sustainable necessary to maintain its production, which was agricultural intensification strategy is required for found to be more than five times the market price. FIGURE 4.1: HISTORICAL COMMODITY PRICES (BLUE) AND THE ESTIMATED PRICES BY 2050 TO ACHIEVE PRODUCTION LEVELS ENVISIONED UNDER THE NARRATIVE SCENARIOS Historical Current trends Commercialization Resilient landscapes 3.5 3 2.5 US dollars/kg 2 1.5 1 0.5 0 Beans Maize Orchards Potato Sorghum Vegetable Wheat Source: Authors Climate-Smart Agriculture Investment Plan for Lesotho 33 All the narrative scenarios give some priority to R ATIO OF THE COMMODITY PRICES FOR TABLE 4.1:  beans production. The prices for wheat, sorghum, THE ALTERNATIVE SCENARIOS RELATIVE and orchards are higher, while those of potato and TO THE HISTORICAL PRICES BY 2050 vegetables are slightly lower. This is consistent with CT RL CZ the observed trends, where potato and vegetable production has increased in market share and thus Beans 5.5 5.5 6.0 has a higher social value. To maintain the share Maize 2.85 2.0 0.7 of potato and vegetables at the historic levels, the Orchards 1.33 1.6 2.0 future input price should be reduced; otherwise a disproportionate amount of potato and vegetables Potato 0.7 1.1 1.35 would be grown, which is inconsistent with the CT Sorghum 4.5 6.0 5.0 scenario. Vegetable 0.85 1.0 1.5 108. Under the RL scenario, support for maize is Wheat 2.4 3.5 2.5 maintained through subsidies reflected in its higher relative price but not at the level of the CT scenario. Sorghum and wheat prices are both maintains an interest in sorghum production, but higher, as are orchards and beans, suggesting that the high price multiplier suggests that it is not a price subsidy or input support is still necessary to socially preferable commodity, rather a reliable, achieve this diversified portfolio. A broad goal is a drought-­tolerant commodity. To continue to grow diversified agricultural sector markedly different some wheat and beans given the dramatic increase from the common wheat-­ maize monocropping valued crops, the price multiplier for in the higher-­ system, which despite its prevalence is unsustainable wheat and beans is 2.5 and 6, respectively. This and insufficient to feed the country’s population. scenario implies increased investment in potato, The RL scenario assumes a smaller share of maize orchards, and vegetables with potential to export, supported by a larger share of more drought-­tolerant with the relative prices about double the historic sorghum. Wheat production increases since it still fits value. into the cropping system, as it is traditionally a winter variety. A significant benefit of the RL scenario is that the total planted area is reduced, allowing for more efficient systems including agroforestry systems and 4.2 Planted areas under production practices that focus on soil conservation no climate change and soil health improvements. Similarly, incentives are provided that enable livestock owners to adopt 110. For the CT scenario, the price support and climate-­smart livestock technologies and improve subsidies are maintained for maize and wheat rangeland management practices. monocultures. Area planted with maize increases by about 30  percent, from 120,000  ha to about 109. Under the CZ scenario, all crops targeted for 140,000  ha. The scenario implies the historical increased production to enhance diversification portions of crops are generally maintained and and resilience would require price increases. the total cropped area increases to keep up with This is consistent with the high degree of market population growth (table  4.2). The CZ scenario liberalization pursued under the scenario taking implies a large increase in the production of into consideration agricultural commodities for commercial crops: potato, vegetables, and which Lesotho has distinct comparative advantage. orchards. In the RL scenario, potato still are a large Increased agricultural exports are a main strategy share of the total production but only grow to of this scenario; monocropping of cereals is about 8,600 ha. While the area of maize decreases, deemphasized, and thus, the price of maize is the area of sorghum is generally maintained, and reduced to 70 percent of the historic price. Table 4.1 the area of wheat grows by about 50  percent to shows that sorghum is still supported at a high yield a more balanced production of the main level, with a price multiplier of 5, as the narrative grain crops. 34 Climate-Smart Agriculture Investment Plan for Lesotho TABLE 4.2: DISTRIBUTION OF CROPS UNDER THE SCENARIOS BY 2050 CT CZ RL Crops ha % ha % ha % Maize 137,000 62 24,000 21 44,000 36 Sorghum 22,000 10 18,000 16 23,000 19 Beans 21,000 10 14,500 13 12,000 10 Wheat 21,000 10 20,000 17 24,300 20 Potato 9,000 4 15,000 13 8,600 7 Fresh vegetables 5,500 2 11,000 10 5,500 4 Orchards 4,500 2 12,000 10 5,000 4 Total 220,000 100 114,500 100 122,400 100 4.3 Livestock units  NNUAL LIVESTOCK GROWTH TABLE 4.3: A RATES (PERCENT) 111. While the normative vision approach modifies CT CZ RL input prices for crops to infer production costs, Cattle 1.24 0.90 1.50 it applies a prescriptive approach for changes in livestock. Within the LesAgMod, baseline growth Dairy 1.40 1.75 1.75 numbers were adjusted such that animal numbers Sheep 1.25 1.70 1.60 grew at a rate enough to achieve the targets listed Goats 0.45 0.90 0.80 in table 4.3. No changes were made to offtake rates, which imply that in cases where numbers decrease Chicken 1.50 1.75 1.85 over time, the baseline growth rate is exceeded Pigs 1.50 1.90 1.50 by the offtake rate. These baseline growth rates Horses 0.25 0.25 0.50 are reflective of the level of investment through agricultural support that would be required to Donkeys 0.25 0.25 0.50 achieve the targets (table 4.4). TABLE 4.4: TARGET LIVESTOCK NUMBERS AND LIVESTOCK UNITS FOR EACH NARRATIVE SCENARIO CT CZ RL Livestock No. LSU No. LSU No. LSU Cattle 600,000 300,000 540,000 270,000 690,000 345,000 Dairy 100,000 50,000 90,000 45,0000 115,000 57,500 Sheep 1,600,000 160,000 1,920,000 192,000 1,840,000 184,000 Goat 825,000 82,500 990,000 99,000 948,750 94,875 Chicken 906,000 9,060 951,000 9,510 1,041,900 10,419 Pigs 100,000 20,000 115,000 23,000 100,000 20,000 Horses 50,000 25,000 50,000 25,000 65,000 32,500 Donkey 80,000 24,024 80,000 24,024 96,000 28,829 Total 4,261,000 670,584 4,736,000 1,092,534 4,896,650 773,123 Climate-Smart Agriculture Investment Plan for Lesotho 35 112. The target populations set under the RL scenario projections used for this study and were selected to reflect the largest increase in the number of reflect a range of possible future climate variability, livestock units over the 2010 levels, with over with 5 of the 10 climate scenarios suggesting 105,000 livestock units added by 2050. Livestock generally drier and warmer conditions till 2050. The units increased by 19,000 and 38,500 under CT and CZ climate projections included scenarios that ranged scenarios, respectively. An increase in the number of from about a 15 percent decrease in annual average livestock units implies an increase also in their density. precipitation to a 5 percent increase in precipitation, According to FAO, since 1980, densities for “major while the average annual temperature increase of livestock types” have averaged about 0.27 livestock the future projections is more than 2°C when the units (LSU) per ha (coefficient of variation [CV] = averaging period is 2035 through 2065 to represent 0.08) on 2.3 million ha (CV = 0.01) of rangeland (FAO the 2050 warming relative to the historic period. More 2019). With changes in land use assumed with each important than the changes in the annual mean are of the narrative scenarios, livestock densities would the characteristics of each scenario, such as length remain relatively unchanged under the CT scenario. and intensity of droughts. Densities would increase slightly to 0.28 LSU per ha and 0.30 LSU per ha for CZ and RL scenarios, Figure  4.4a shows the annual average temperature respectively. These densities are within the range estimated as the difference (°C) and precipitation of those observed historically. However, to meet change estimated as a ratio for the historic the improved rangeland objectives under the RL 30-­year period from 1980 through 2010 and the scenario, it would be necessary to increase densities future 30-­year period of 2035 through 2065. These further, which may be achieved through the adoption averaging periods were used to reflect the average of CSA agroforestry strategies. change at the 2050 mid-­ century mark based on the 10 climate models used in the study and indicated year averaging by the red marks in figure  4.3. A 30-­ 4.4 Climate projections interval is commonly used to represent mean climate change to smooth out internal variability 113. Analysis of precipitation and temperature trends of the climate system. The temperature change in Lesotho over 1950 through 2010 suggests a slight at mid-­ century is more than 2°C for most part of decreasing trend in precipitation and an increase Lesotho, while the average projected precipitation in temperature. The precipitation trend appears change is not large, with the mean value less than to be biased by a large precipitation event around 1.0 and much drier conditions generally projected 1950, while there appears to have been about a 0.5°C for the western side of the country. The bottom-­ left average warming over the country for the 60-­ year map is the standard deviation of the ratio of the period. The historical annual average precipitation future and current annual precipitation. It indicates over Lesotho is about 760 mm. Figure 4.2 shows the the magnitude of the range of change among the range of future climate change from a collection of 10 GCMs used in the study. Again, the western region over 144 Global Circulation Model (GCM) projections suggests less precipitation with greater variability. over Lesotho for 2040 to 2050 relative to 1990 to 2000. The projected increase in air temperature 114. Table 4.5 summarizes the attributes of the historic derived from the GCMs ranges from no change to climate period (1948–1998) and the 10 climate about 1.0°C above the historical average, with the change projections (2001–2050). Generally, the greatest projected warming nearing 2°C for this future drought and wet spell attributes of the climate averaging period. Considering all the future climate projections do not differ significantly from those of projections, the average precipitation decreases by the historic climate. The longest dry spell length is about 5 percent. Of the 144 climate projections, 84 16 years (CanESM2), which is four years longer than or 60 percent have below-­average precipitation, with the historic, while the Commonwealth Scientific and the range of projected precipitation change including Industrial Research Organization (CSIRO) projection both an increase and decrease of about 20 percent is the shortest over this period. The maximum or 160  mm annually. Two climate scenarios show number of consecutive dry years is the HadGEM2 annual increase in precipitation greater than model at eight years, while the CSIRO-Mk3 model has 20 percent. The red marks in figure 4.3 show the GCM the longest wet spell length at seven years. 36 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 4.2: HISTORIC AVERAGE ANNUAL TEMPERATURE AND TOTAL ANNUAL PRECIPITATION OVER LESOTHO Historical annual average temperature 14.0 13.5 °C 13.0 12.5 1950 1960 1970 1980 1990 2000 2010 Historical annual precipitation 1200 1000 MM 800 600 1950 1960 1970 1980 1990 2000 2010 Source: Sheffield 2006 Climate-Smart Agriculture Investment Plan for Lesotho 37 YEAR FIGURE 4.3: SUMMARY OF TEMPERATURE AND PRECIPITATION CHANGE FOR THE 30-­ YEAR AVERAGING PERIOD OF AVERAGING PERIOD OF 1980–2010 RELATIVE TO THE 30-­ 2035–2065 FOR 121 CLIMATE PROJECTIONS 2.0 Temperature change from baseline °C 1.5 1.0 0.5 0 –20 –10 0 10 20 Percent change from baseline Source: Authors Note: The 10 GCMs selected for the analysis are highlighted by red marks. TABLE 4.5: DRY AND WET SPELL ATTRIBUTES OF THE HISTORIC AND CLIMATE PROJECTIONS No. GCM Avg. Wet Dry Wet Dry Avg. Avg. Max. Max. Spells Spells Length Length Dry Wet Dry Wet 1 Historic 793 11 12 23 27 2.3 2.1 7 3 2 ACCESS1-0_run1_rcp85 808 13 14 25 25 1.8 1.9 4 5 3 CanESM2_run1_rcp85 705 15 16 22 28 1.8 1.5 3 2 4 CCSM4_run1_rcp85 843 12 13 22 28 2.2 1.8 5 3 5 CSIRO-Mk3-6-0_run1_rcp85 723 8 9 27 23 2.6 3.4 4 7 6 GFDL-CM3_run1_rcp85 788 11 12 21 29 2.4 1.9 6 0 7 GFDL-ESM2M_run1_rcp85 787 13 14 25 25 1.8 1.9 3 5 8 HadGEM2-CC_run1_rcp85 782 12 13 22 28 2.2 1.8 8 3 9 MIROC-ESM_run1_rcp85 757 11 12 22 28 2.3 2 7 4 10 MIROC5_run1_rcp85 833 13 14 21 29 2.1 1.6 6 4 11 NorESM1-M_run1_rcp85 813 10 11 23 27 2.5 2.3 6 5 Average (excluding historic) 785 12 13 23 27 2 2 5 4 Source: Authors Note: Avg = Average annual precipitation (mm); Wet Spells = Number of occurrences where there are at least two consecutive years where the annual precipitation is above average; Dry Spells = Number of occurrences where there are at least two consecutive years where the annual precipitation is below average; WetLength = Number of years of above- average precipitation; Dry Length = Number of years of below- average precipitation; Avg. Dry = Average number of consecutive dry years; Avg. Wet = Average number of consecutive wet years; Max. Dry = Maximum number of consecutive years of below- average precipitation; and Max. Wet = Maximum number of consecutive years of above- average precipitation. 38 Climate-Smart Agriculture Investment Plan for Lesotho CENTURY (2035 TO 2065) AVERAGE TEMPERATURE AND PRECIPITATION CHANGE FIGURE 4.4: PROJECTED MID-­ Annual temperature change (°C 2050 vs 2000) Annual precipitation change (Ratio 2050 vs 2000) Value Value 0 5 0 0 95 90 3. 2. 2. 1. 0. 0. Standard deviation of precipitation ratio (2050 vs 2000) Value 8 6 5 0 0 0 0. 0. 0. Source: Authors Note: Temperature is in °C while precipitation is the change in the average (top-­ left) of the precipitation ratio of right) and standard deviation (bottom-­ the mid-­century and historic climate (1980 through 2010). Climate-Smart Agriculture Investment Plan for Lesotho 39 4.5 Crop yields alone. Therefore, LesAgMod was run for 2010–2050 using a static land-­ use and cropping pattern and 115. On average, climate change generally increases CSA practices based on historic conditions to isolate yields for Lesotho’s major crops. The warmer the relative impacts of climate change on crop yield temperatures extend the growing season supported alone. Figure 4.5 indicates the percentage change in by mostly adequate moisture regimes. By extending yields for the 10-­year period 2010–2020 relative to the the growing season, grain filling stages are increased 10-­year period 2040–2050 averaged for all 10 climate that may otherwise have been curtailed by cooler projections. Note that a 10-­ year averaging period temperatures. Wheat is the exception, which shows is quite short to draw conclusions, as a particularly a general decline, with reduced winter and spring dry or wet period that had high yields could bias the soil moisture that results in suppressed yields. result. Since the future narrative scenarios encompass a wide range of CSA adaptation and actions within 116. The projected changes in yield under climate the context of future climate change, it is difficult to change are summarized in figure 4.5 and table 4.6. isolate the impacts of climate change on crop yield The minimum projected impact of climate change FIGURE 4.5: AVERAGE CHANGE IN CROP YIELDS DUE TO CLIMATE CHANGE 20 Percent change 10 0 –10 Beans Maize Orchards Potato Sorgham Wheat Vegetables Source: Authors TABLE 4.6: PROJECTED IMPACTS OF CLIMATE CHANGE ON CROP YIELDS (%) Crops Minimum First quartile Median Third quartile Maximum Beans –2 5 9 13 21 Maize –6 –2 3 12 15 Orchards –5 –2 0 6 9 Potato 4 8 15 21 25 Sorghum 3 6 10 14 20 Wheat –14 –11 –7 –4 4 Vegetables 2 6 12 15 18 Negative Positive Source: Authors 40 Climate-Smart Agriculture Investment Plan for Lesotho on yield is negative for wheat (15 percent decrease), 118. Despite predicted yield improvements, this maize (6  percent decrease), orchards, (5  percent report shows that Lesotho is unlikely to meet the decrease) and beans (2  percent decrease). On CSA target of increasing yields of major staples by average, potato has the largest positive impact with a factor of 2.5. There is need for further research to 15 percent increase in yield, followed by vegetables develop high-­yielding, stress-­tolerant, climate-­ready (12 percent increase), sorghum (10 percent increase), varieties that are adapted to Lesotho’s environment. and beans (9 percent), suggesting that crops would tolerant germplasms are one component Stress-­ generally benefit from global warming in Lesotho. of CSA that, when used in combination with other The warmer temperatures extend the growing components, can sustainably increase production season supported by mostly adequate moisture and resilience of agriculture systems. Development regimes. By extending the growing season, grain tolerant varieties is of importance given the of heat-­ filling stages are increased that may otherwise have projected increase in warming for Lesotho. The been curtailed by cooler temperatures. Wheat is Agriculture Productivity Project for Southern Africa the exception, which shows a general decline, with (APPSA) in Lesotho could collaborate with ongoing reduced winter and spring soil moisture that results research at the International Maize and Wheat in suppressed yields. The maximum projected Improvement Center (CIMMYT) on heat-­ tolerant positive impact of climate change on yield ranges varieties to generate species and cultivars adapted from 4 percent for wheat to 25 percent for potato. to Lesotho’s context. 117. The RL and the CZ scenarios show the influence of the CSA practices on yield, with the RL scenario having the highest level of CSA 4.6 Production adoption resulting in higher yields compared with the CZ scenario. The ratios in figure 4.6 are Area under cultivation for 4.6.1  all greater than 1, indicating an increase in yield the narrative scenarios relative to historical for all scenarios under climate change. Relative to the CT scenario, the overall smart 119. A major key to making agriculture climate-­ benefit of the CSA practices on yield under climate is increasing land-­ use efficiency through higher change is modest. The year-­ to-­ year variability productivity, thereby reducing the need for of yield is primarily due to soil moisture deficits clearing more land for agricultural production. and heat stress. Potato and vegetables show the Adoption of CSA leads to a reduction in the estimated greatest increase in yield overall, benefiting from cropland requirement by 20  percent for the RL CSA practices, including the increase in application scenario and 30 percent for the CZ scenario relative of nitrogen fertilizers. to historical requirements. On the other hand, the CT FIGURE 4.6: RATIO OF CROP YIELDS UNDER CLIMATE CHANGE VERSUS HISTORICAL BY 2050 2 1.8 1.6 1.4 1.2 CT 1 CZ 0.8 RL 0.6 0.4 0.2 0 Beans Maize Orchards Potato Sorghum Wheat Vegetables All crops Source: Authors. Ratios above 1 show that relative to historical, cropland extent will increase. On the other hand, ratios below 1 indicate that cropland extent will decrease relative to historical. Climate-Smart Agriculture Investment Plan for Lesotho 41 scenario shows cropland expansion by 50  percent with the historic climate, the total area under maize (figure  4.7). The estimated cropland area under the cultivation by 2050 is about 140,000 ha (not shown), scenarios by 2050 are 300,280 ha for CT, 153,480 ha whereas the area under maize cultivation is more for RL, and 132,250 ha for CZ. Figure 4.8 summarizes than 180,000  ha or 28  percent greater when the the total area planted for each crop in 2010, in 2030, model is forced with the climate projections. In and in 2050 for each narrative scenario, averaged contrast, the cultivated area of maize for the RL and for all climate projections. Note that because 2010 CZ scenarios shows considerable declines, consistent represents the starting point for the analysis, the with the goals of those narratives. These later planted area is common for all narrative scenarios scenarios prioritize diversity and higher-­valued crops, and climate projections. For the CT scenario, the resulting in a smaller cropped agricultural footprint area under cultivation for all crops increases, which across the landscape of Lesotho. The RL scenario is consistent with the goals of that narrative. The results in a more diversified cropping pattern, with area of maize increases considerably when climate more balanced grain production that includes change is considered. When LesAgMod is forced sorghum and wheat, while the CZ scenario greatly FIGURE 4.7: RATIO OF CROPLAND EXTENT UNDER CLIMATE CHANGE VERSUS HISTORICAL BY 2050 3.5 3.0 2.5 2.0 CT 1.5 CZ RL 1.0 0.5 0 Beans Maize Orchards Potato Sorghum Wheat Vegetables Total Source: Authors FIGURE 4.8: CROPLAND EXTENT FOR THE NARRATIVE SCENARIOS AVERAGED FOR ALL THE FUTURE CLIMATE PROJECTIONS Beans Maize Orchards Potato Sorghum Wheat Vegetables 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2010 CT 2030 CT 2050 CZ 2030 CZ 2050 RL 2030 RL 2050 Source: Authors 42 Climate-Smart Agriculture Investment Plan for Lesotho reduces maize area and intensifies the cultivation of production has more than doubled. Potato still are a vegetables, orchards, and potato. large share of the total mass of production, but only grow to about 10,000 ha, with their total mass output more than doubling. Sorghum remains important Crop production for the narrative 4.6.2  in the diversification strategy of the RL scenario, scenarios under climate change with its production increasing and exhibiting robustness in terms of increased production relative 120. Total food production under climate change to the historic (no climate change) scenario. The CZ is estimated to increase fourfold to sixfold for scenario implies a large increase in production, the scenarios relative to historical production particularly for potato, vegetables, and orchards. (figure  4.10). The estimated total production The high tonnage of potato reflects its relatively was 496,000  tons for CT, 590,000  tons for RL, and high density, although its area planted has grown 742,000  tons for CZ. The proportion of maize from about 7,000 ha in 2010 to more than 13,000 ha production decreases from 30  percent for CT to by 2050. 3 percent for CZ. Potato is the most dominant crop accounting for 43  percent under CT, 54  percent CROP PRODUCTION AND THEIR TABLE 4.7:  under RL, and 62  percent under CZ scenario. The PROPORTIONS FOR THE SCENARIOS production of orchards under CZ doubles that of the UNDER CLIMATE CHANGE CT scenario (table 4.7). CT CZ RL ton % ton % ton % 121. The efficiency of CSA practices in minimizing Beans 10075 2 10169 1 12020 2 conversion of natural vegetation to cropland is evident in the production of the RL and CZ Maize 146770 30 24536 3 51172 9 scenarios. Basically, less land is used to produce Orchards 17555 4 57692 8 40000 7 more crop output. Note that this increase in Potato 214100 43 461743 62 320493 54 production is also due to the increased utilization of nitrogen-­based fertilizers, an imperative for Lesotho Sorghum 18015 4 19098 3 26631 5 to boost crop yields. For the RL scenario, maize area Wheat 18418 4 21160 3 32125 5 under cultivation will decrease to 44,000 ha by 2050, Vegetables 70881 14 147415 20 107993 18 while maize production will increase to 51,000 tons by 2050 under climate change. Orchards area Total 495815 100 741813 100 590433 100 under cultivation has increased by 50 percent while Source: Authors FIGURE 4.9: RATIOS OF CROP PRODUCTION BY 2050 UNDER CLIMATE CHANGE FOR THREE SCENARIOS VERSUS HISTORICAL CROP PRODUCTION 16 14 12 10 CT 8 CZ 6 RL 4 2 0 Beans Maize Orchards Potato Sorghum Wheat Vegetables Total Source: Authors. Ratios above 1 show that relative to historical, crop production will increase. On the other hand, ratios below 1 indicate that crop production will decrease relative to historical. Climate-Smart Agriculture Investment Plan for Lesotho 43 a small percent of its national production. While 4.6.3 Livestock production imports are 30  percent more than total national 122. While modeling results suggest steady increases production, only about 2  percent of national of livestock over time, these changes are production is exported. Per capita food rates occasionally moderated by variability in climate have been modestly low and would benefit from and water supply. However, these effects are increased production. modest. The effects of climate and water supply reliability are more pronounced when looking at net 124. Within the context of the CZ scenario, some production of livestock, because stresses caused by nationally produced agricultural commodities, heat and scarcities of food and water have a larger such as vegetables, orchards, and potato, influence on reducing the productivity of livestock could serve Lesotho’s export market. Assuming than on increasing mortality. population will grow to 3  million by 2050 and current food calorie shortfalls will be met through national production, figure  4.11 indicates that 4.7 Food availability calories potentially derived from national production by 2050 could increase by a factor ranging from 3.6 and trade for potato to 10.2 for vegetables. Within this context, the CZ scenario prioritizes the development of an 123. Food calorie intake in Lesotho is 2,447  kcal agricultural export sector. Potato would grow to per capita per day, implying a calorie deficit nearly 462,000  tons by 2050, and Lesotho could of 11  percent compared to the recommended target 200,000  tons for national consumption, average of about 2,750  kcal per capita per doubling the historical requirement of 100,000 tons. day. National food production contributes only Thus, more than 260,000 tons could be available for 34  percent of Lesotho’s per capita calorie intake export. Likewise, vegetable and orchard production (table  4.8) with more than half of per capita are shown to grow at rates exceeding population food calories derived from maize. Lesotho relies growth rates and could also be used for exports, heavily on food imports from RSA, exporting only in addition to making food calorie intake grow to AVERAGE HISTORIC IMPORTS, EXPORTS, AND NATIONALLY PRODUCED CROP SUBSECTOR TABLE 4.8:  COMMODITIES AND THE KCAL PER CAPITA PER DAY PROVIDED BY EACH OF THOSE COMMODITIES FOR 2000–2010 National Import Export Net Calorie intake National production Calorie (kcal per production (ton) (ton) (ton) (kcal per as proportion of capita per day) from (ton) capita per day) consumption (%) national production Beans 17,000 83,000 2,000 98,000 370 17 64 Maize 96,000 213,000 2,000 307,000 1,350 31 422 Orchards 16,000 5,000 0 21,000 20 76 15 Potato 100,000 8,000 0 108,000 95 93 88 Sorghum 22,000 7,000 0 29,000 100 76 76 Wheat 17,000 83,000 2,000 98,000 370 17 64 Vegetables 26,000 17,000 0 43,000 12 60 7 Livestock 27,000 8,000 0 35,000 130 77 100 Total 321,000 424,000 6,000 739,000 2,447 836 Source: FAOSTAT. Food items were converted to calories using Lesotho food composition table. 44 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 4.10: LIVESTOCK PRODUCTION (TONS) FOR THE NARRATIVE SCENARIOS AVERAGED FOR ALL THE FUTURE CLIMATE PROJECTIONS Cattle Chickens Cows Goats Pigs Sheep 30,000 25,000 20,000 15,000 10,000 5,000 0 2010 CT 2030 CT 2050 CZ 2030 CZ 2050 RL 2030 RL 2050 Source: Authors FIGURE 4.11: RATIOS OF CALORIES POTENTIALLY DERIVED FROM NATIONAL FOOD PRODUCTION BY 2050 UNDER CLIMATE CHANGE FOR THE CZ SCENARIO VERSUS CALORIES FROM HISTORICAL (2000–2010) NATIONAL PRODUCTION 11 10 9 8 7 6 5 4 3 2 1 0 Beans Maize Orchards Potato Sorghum Wheat Vegetables Livestock Source: Authors. Orchards, potato and vegetables can be prioritized for export. Ratios above 1 show that relative to historical, calories derived from national production will increase. On the other hand, ratios below 1 indicate that calories derived from national production will decrease relative to historical. more acceptable standards of around 2,750  kcal 125. The high point of the analysis on food calorie per capita per day. To improve nutritional quality, intake and export is that there is an urgent need to Lesotho could also step up its biofortification increase production to meet caloric food demand efforts to cover beans, maize, wheat, and sorghum. and other needs in Lesotho. Yield gap measured Biofortification, a technique that uses conventional as the ratio of predicted yields by 2050 divided by breeding methods to produce more nutritious attainable yield varies from 0.2 for beans to 0.8 for crops—­ with a higher content of vitamin  A, zinc, potato (figure  4.12). Except wheat, the yield gaps iron, or other micronutrients than standard crop for cereals are below half of the attainable yields. varieties—­ could contribute to healthier diets in Intensification and extensification (that is, expansion Lesotho. of agriculture) are the two main options available to Climate-Smart Agriculture Investment Plan for Lesotho 45 meet the growing crop demands. The study indicates gullies. Some 2.7  percent of the country has been that to meet the food calorie demand by 2050, rendered entirely bare land, while more than cropland must expand to 682,000  ha under the RL 11 percent occupied by pasture has been degraded. scenario or 696,000 ha under the CZ scenario. Such The annual cost of land degradation in Lesotho is land expansion is clearly unsustainable given the estimated at US$57 million, equivalent to 3.6 percent fragile nature of Lesotho’s landscape. Land expansion of the country’s GDP.19 The returns on taking actions to natural vegetation will increase soil erosion and against land degradation in Lesotho, estimated at GHG emissions and adversely affect biodiversity and US$6 for every US$1 invested in restoring degraded ecosystem services. It is therefore crucial to design land provides a clear justification for bold actions to location-­specific input and management strategies reduce land degradation in the country. Catchment-­ for closing the yield gap. Constraints to be addressed catchment comparison indicates that predicted to-­ to effectively narrow yield gaps are discussed in soil loss is lowest under the RL scenario and highest chapter 5. under the CT scenario, indicating positive effects of CSA adoption in controlling erosion.20 The range of average predicted erosion rates are 0.06 to 4.8 Soil erosion 20  ton per ha per year for the CZ scenario, 0.06 to 18.01  ton per ha per year for the RL scenario, and 126. Land degradation is rampant in Lesotho and 0.08 to 24.09 ton per ha per year for the CT scenario. needs to be controlled due to the significant social Higher average erosion rates are associated with and economic costs to the country. Cropland land areas with steep topography, indicating the occupying about 1  percent of Lesotho’s entire land strong influence of slope length and slope steepness area has been degraded, while another 1  percent factors on soil loss. Under the CT scenario, some of the country’s land area has been converted to 58  percent of the sub-­ catchments have predicted FIGURE 4.12: LESOTHO CROP YIELD GAP 0.9 0.75 0.6 0.45 0.3 0.15 0 Beans Sorghum Maize Peach Apricot Apple Wheat Lettuce Cabbage Spinach Potato Source: Authors. Based on yield data provided by Department of Agricultural Research, Lesotho. Note: All values are below 1, indicating that estimated yields by 2050 for the crops are below the attainable yields. 19 https://www.unccd.int/sites/default/files/inline-­files/Lesotho.pdf. 20 The Revised Universal Soil Loss Equation (RUSLE) (Renard et al. 1997) was used to quantify and understand the distribution of soil erosion in Lesotho’s catchment. The RUSLE model represents how climate, soil, topography, and land use (that is, vegetation or soil cover) affect soil erosion caused by raindrop impacts. The model has been extensively used to estimate soil erosion loss; assess soil erosion risk; and guide development and conservation plans to control erosion under croplands, rangelands, and forest lands. The application of RUSLE in this report only covers sheet and rill erosion, as the model does not give an estimate of gully erosion. 46 Climate-Smart Agriculture Investment Plan for Lesotho erosion rates higher than 10 ton per ha per year, the management efforts for addressing the problem commonly accepted maximum average (tolerable) need to consider among other factors terracing, annual soil loss that will permit production levels check dams, grassland reseeding, rotational grazing, to be maintained economically (figure  4.14). This protection and demarcation of grazing reserves, proportion declines to 42 percent and 36 percent for fodder production, and capacity building for the CZ and RL scenarios, respectively, but still reflects rangeland fire management. the magnitude of the soil erosion menace in Lesotho. In terms of land cover, table 4.9 reveals the highest 127. Low tolerance for soil erosion is indispensable erosion rates on grassland and shrubland across for soil carbon conservation. Removal of the the scenarios. This confirms that poor rangeland vegetation cover aggravates losses by soil erosion management is the primary cause of soil erosion and and increases the rate of decomposition due to land degradation in Lesotho. Integrated catchment changes in soil moisture and temperature regimes. FIGURE 4.13: PREDICTED SOIL LOSS UNDER CLIMATE CHANGE FOR THE SCENARIOS FOR LESOTHO’S SUB-­ CATCHMENTS (THOUSAND TONS PER YEAR) CT scenario CZ scenario 0–300 0–300 300–600 300–600 600–900 900–1200 600–900 1200–1500 900–1200 RL scenario 0–300 300–600 600–900 900–1200 Source: Authors Climate-Smart Agriculture Investment Plan for Lesotho 47 FIGURE 4.14: CUMULATIVE FREQUENCY DISTRIBUTION OF AVERAGE EROSION RATES ACROSS SUB-­CATCHMENTS FOR THE SCENARIOS CT CZ RL 100 90 Cumulative frequency % 80 70 60 50 40 30 20 10 0 0 5 10 15 20 25 Ton per ha Source: Authors TABLE 4.9:  EROSION RATES BY LAND COVER production and rangelands in 8 of the country’s (TON PER HA PER YEAR) 10  districts were affected with about 90  percent of the damage concentrated in Berea, Leribe, Maseru, and Land cover Mean erosion rates Mafeteng districts. More than 36,000 ha representing over CT CZ RL 25 percent of the planted area were affected with the Cropland 14.30 11.43 10.73 largest losses of up to 100 percent occurring for maize. As grasslands are often breeding grounds for thousands of Grassland 23.83 19.47 17.92 armyworms, the pest also severely affected rangelands, Shrubland 23.99 19.51 18.03 an essential source of feed for livestock. Forest 12.83 10.11 9.59 Source: Authors 129. Climate change will likely increase the probability of African armyworm infestation in Lesotho. The probability of occurrence of African armyworm Because soil organic matter is concentrated on in Lesotho was estimated using the occurrence the soil surface, accelerated soil erosion leads to data from January–March 2013 as the training progressive depletion of soil carbon. data. These training data were combined with location data to derive predictive relationships for the future occurrence of the pest. The predictor 4.9 Pest infestation under variables included elevation, land use, soil type, climate change minimum temperature, maximum temperature, and monthly precipitation. Figure  4.15 (left) shows 128. Agricultural pests have large impacts on the probability of occurrence associated with the production in Lesotho. The African armyworm 2013 infestation and may be regarded as the no (Spodoptera exempta) is one of the economically climate change scenario. Figure  4.15 (right) is the important pests affecting crop yields. Although predicted probability map under projected climate Lesotho recorded African armyworm outbreaks change. The model predicts higher probabilities of as early as the early 1990s, control measures were agricultural pest infestation and potentially larger easier and effective, as outbreaks were limited to affected land area under climate change. The grasslands, and thus exerted minimal impacts on highest predicted probability of pest infestation the economy. The African armyworm outbreak that was 0.8 under no climate change but increased to swept across the country in 2013, however, resulted in about 0.9 under climate change. Affected areas with significant impacts on crops and rangelands. Cereal probabilities of infestation greater than 0.4 under no 48 Climate-Smart Agriculture Investment Plan for Lesotho INDUCED CARBON EMISSIONS UNDER CLIMATE CHANGE TABLE 4.10: ESTIMATES OF EROSION-­ Scenario Gross erosion Soil carbon displaced by soil Emissions (20% of displaced Emissions in carbon (thousand erosion (2–3% of sediment; soil carbon; thousand tons of dioxide equivalent tons per year) thousand tons of carbon per year) carbon per year) (thousand tons) CT 48,126 962–1,444 192–289 704–1,061 RL 34,968 699–1,049 140–210 514–771 CZ 38,515 770–1,155 154–231 565–848 Source: Authors Note: Rates of carbon depletion were adapted from Lal (2003). FIGURE 4.15: PREDICTED PROBABILITIES OF AFRICAN ARMYWORM INFESTATION UNDER NO CLIMATE CHANGE (LEFT) AND CLIMATE CHANGE (RIGHT) 0.79 0.86 0 0.01 Source: Authors climate change scenario increased from 709,000 ha LESOTHO LAND AREA UNDER TABLE 4.11:  to 928,000 ha under climate change (table 4.11). This DIFFERENT PREDICTED PROBABILITY result indicates that Lesotho must be well prepared OF PEST INFESTATION for future pest outbreaks. A clear strategy for the Without climate With climate control of migratory pests, including development Predicted change change of an effective monitoring and surveillance system, probability is urgently needed. ha % ha % < 0.4 2,776,129 80 2,555,531 73 ≥ 0.4 709,179 20 927,823 27 GHG emissions 4.10  130. Reducing emissions within the agricultural sector indicates that under the CT scenario, gross GHG may contribute significantly to Lesotho’s NDC emissions will increase by 32  percent to 1.6  million target. From 2010 to 2016, total GHG emissions in tCO2eq relative to historical emissions. A similar Lesotho have risen from 2.8 million tCO2eq per year trend is found under the CZ scenario, while under to 3.2 million tCO2eq per year. During this period, the the RL scenario, gross GHG emissions decrease by agricultural sector accounted for 40–50  percent of 45 percent to 0.7 million tCO2eq. Livestock dominates Lesotho’s total emissions (FAOSTAT 2019). Table 4.12 the GHG emissions sources for the three scenarios. Climate-Smart Agriculture Investment Plan for Lesotho 49 Afforestation and rangeland improvement are livestock intensification, carbon sequestration in carbon sinks under the RL and CZ scenarios avoiding rangelands, and reducing emissions from manures—­ emissions of about 0.3 million tCO2eq and 0.2 million could help reduce total emissions, while other tCO2eq under CZ, respectively. technologies, such as stress-­ tolerant breeds and artificial insemination (AI), are more likely to reduce the 131. There are several options for lowering GHG intensity of emissions, rather than total emissions emissions in the livestock subsector, while also (Herrero et  al. 2016). Yet, some other technologies, improving productivity and resilience (table  4.13). such as inhibitors and selecting for low methane The technologies cover three broad aspects of climate-­ ruminants, are at the proof of concept stage and would smart livestock production: breeding, feeding, and health require experiential learning and adaptation before management. Some technologies—­such as sustainable being rolled out for large-­scale adoption (figure 4.16). TABLE 4.12: ANNUAL GHG EMISSIONS (tCO2eq) UNDER THE SCENARIOS Current From From From Land 2050 Total From From From Land total crops livestock Use Change crops livestock Use Change CT 1,224,000 10,089 1,213,911 −183,333 1,618,510 18,795 1,599,716 0 CZ 1,224,000 10,089 1,213,911 −183,333 1,605,181 102,534 1,696,434 −193,787 RL 1,224,000 10,089 1,213,911 −183,333 673,489 3,710 1,054,389 −384,611 Source: Authors  LIMATE-­ TABLE 4.13: C SMART OPTIONS FOR LIVESTOCK PRODUCTION AND THEIR CONTRIBUTION TO THE CSA PILLARS Technologies P R M Stress-­tolerant breeds ✓ ✓ ✓ Animal breeding: AI technologies for increased productivity (support to bull/semen stations and procurement ✓ ✓ of semen) Selection for low methane producing animals ✓ ✓ Animal nutrition rations for livestock value chains ✓ ✓ ✓ ready forage seeds Planting better grasses and legumes and distribution of climate-­ ✓ ✓ ✓ Manure management ✓ ✓ Incorporation of dietary supplements in livestock feeds ✓ ✓ ✓ based disease reporting system to alert users of disease outbreaks and potential actions Internet- and mobile-­ ✓ ✓ Operationalization of epidemiological surveillance networks ✓ ✓ Active disease surveillance and implementation of biosecurity measures for livestock diseases ✓ ✓ ✓ Virus characterization and vaccines matching ✓ ✓ Diseases screening in dairy farms ✓ ✓ ✓ Combating antimicrobial resistance ✓ ✓ Improving milk collection centers ✓ ✓ Quality control of livestock products inspection ✓ ✓ Source: Authors Note: P = Productivity; R = Resilience; and M = Mitigation. 50 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 4.16: GHG MITIGATION OPTIONS IN LIVESTOCK m Ru G od m & en F An ifica en breeetics nu eed Summary of options di tri & he ima tio tio Feed & alt l n ng n h nutrition Transferring the Animal genetics m Ma an n microbiome of & breeding ag ur low-methane Finding em e producing ruminants new traits for G e GHG emissions m ra nt an ss ag la Vaccines to reduce em nd methane production Di en in the rumen Selecting for sc t low-methane Improved ov producing performance er y ruminants Animals Rumen on low- quality feed & feed modification Increase disease resistance Inhibitors Carbon Feed Pr sequestration supplements oo fo fc Precision on feeding ce pt Grassland Storage management cover Dietary improvements & substitutes Animals & farm system Pi lo Efficient & Improving management ts robust animals tu forage quality dy Manure deposition & application Increasing Capturing productive biogas from lifetime of Grazing anaerobic animals practices processes Prevention, Temperature control & & aeration eradication of Pasture Be of manure diseases st management Manure Animal pr ac management health tic e Collection & storage facility Climate-Smart Agriculture Investment Plan for Lesotho Source: Global Research Alliance (2013). Note: Discovery = exploring promising concepts for future proof of concept; Proof of concept = the measure has been demonstrated in an experimental setting, next step is a pilot; Pilot = 51 pilot project has been carried out, next step is commercial development; and Best practice = measure has been successfully implemented in diverse contexts, next step is scaling up. 132. Emissions intensity, defined as the quantity Lesotho’s most vital development agenda is to of GHG emitted per unit of produce declines ensure economic growth that translates into following the implementation of CSA practices stable, wage-­paying jobs. In line with NSDP II that therefore positively contributing to climate recognizes agriculture as one of the potential change mitigation. While the overall activity sectors for job creation and inclusive economic level of RL and CZ scenarios leads to larger total growth, this report also examines how agricultural emissions, the CSA strategies implemented within change under the different scenarios could create these scenarios generate higher yields such that the stable jobs and thus improve the rural economy. emissions intensity decreases in these scenarios As reflected in table  4.15, labor requirements and relative to CT. For crops, the decline in emission therefore job creation potential differ among intensity ranges from 1.1 tCO2eq per ton product for cropping systems from 10 jobs for every 1,000 ha for potato and vegetables to 20.4 tCO2eq per ton product maize to 1,300 jobs for every 1,000  ha of orchards for legumes. Switching to climate-­ smart livestock and vegetables. Under the CT scenario, potato, practices leads to a decline in livestock emission orchards, and vegetables farming are the main intensity, ranging from 1 percent for sheep and goats job creators (2,700–7,150 jobs). Shifting from low-­ to 37  percent for poultry. The average decrease in value grain production to more labor-­ intensive and livestock emissions intensity, estimated at 21 percent, higher value-­added crops (potato, orchards, and is lower than the 25 percent CSA target for the country. vegetables) generates more jobs especially under the CZ scenario. Staple crops such as maize, beans, sorghum, and wheat are inherently the lowest job Impact of CSA adoption 4.11  creators under the scenarios while orchards and on job creation vegetables in the CZ scenario generate the highest numbers (14,300–15,600 jobs). 133. Adoption of CSA practices could create jobs 134. The key to job creation in Lesotho’s agriculture in Lesotho’s horticulture subsector. One of sector is taking a value chain approach. An agricultural value chain is a set of linked activities GHG EMISSION INTENSITIES FOR TABLE 4.14:  that add value to an agricultural product. It CROPS AND LIVESTOCK (tCO2eq comprises a set of actors and actions that improve PER TON PRODUCT) the product while linking commodity producers to Conventional CSA Difference processors and markets (figure 4.17). Depending on Crops Maize 2.2 −11.7 −13.8  STIMATED NUMBER OF FARMING TABLE 4.15: E Maize - CA −8.2 −8.2 JOBS CREATED UNDER CLIMATE Other cereals 1.3 −6.1 −7.4 CHANGE Legumes: beans 8.4 −11.9 −20.4 Coefficient CT RL CZ and peas (jobs/ha) Potato and 0.4 −0.7 −1.1 Beans 0.02 609 475 472 vegetables Maize 0.01 1859 438 235 Livestock Orchards 1.30 6658 10643 16599 Dairy cattle 115.38 78.54 −32 Potato 0.30 3194 3060 4614 Other cattle 316.61 245.57 −22 Sorghum 0.05 2013 1956 1486 Sheep 3.38 3.34 −1 Wheat 0.05 992 1077 779 Pigs 0.18 0.12 −32 Vegetables 1.30 10484 10033 15193 Goats 2.32 2.29 −1 Total 25,809 27,682 39,378 Poultry 0.07 0.04 −37 Source: Data on number of jobs per ha for different cropping systems Source: Authors are modified from World Bank (2011, 2018a). 52 Climate-Smart Agriculture Investment Plan for Lesotho the nature of the product, several actors are directly altitude, Lesotho’s fruits can be harvested 2 to 3 weeks or indirectly involved in different aspects of the value earlier than those of RSA’s Western Cape Province (the chain. The key to a job-­ focused agricultural value main center for fruit production), resulting in price chains are identifying opportunities for job creation premiums for Lesotho producers. To strategically (more jobs); empowering small farms to capture capitalize on this comparative advantage, Lesotho more value (better jobs); and integrating small can also build on its proximity to RSA, a leading farms with established sources of demand (inclusive global exporter of fruit that has advanced research jobs). The pathways to more, better, and inclusive institutions, export infrastructure, and market jobs in Lesotho’s agricultural sector are indicated intelligence (World Bank, 2018b). Lesotho’s access in table  4.16. Lesotho currently has the highest to water resources can also make it an attractive readiness to operationalize the skills, incubation investment destination for private sector investment and agripreneurs pathway focusing on youth from the water-­ scarce Western Cape Province if the development, and the jobs through aggregation irrigation infrastructure is developed. pathway focusing on helping existing producer organizations to become SMEs. 135. Unlocking the job creation potential in the Linkages between SDGs 4.12  commercial horticulture subsector will require and NDC in Lesotho Lesotho to exploit its comparative advantage in the production of fruits and vegetables. Lesotho’s 136. Scaling up CSA will help Lesotho in simultaneously climate is favorable to production of many vegetables meeting its SDG and NDC commitments. There are and deciduous fruits. Due to the country’s high a lot of synergies between Sustainable Development FIGURE 4.17: AGRICULTURAL VALUE CHAIN ECOSYSTEM Business climate (including policies, regulations, and market structure) Packaging and handling Farmers Primary and secondary Breeders processors Logisitic companies Farmers associations Crop scientists Grocery stores Farm labor Packaging Livestock scientists Food and beverage Equipment operators Machinery supplies companies Inputs Production Processing Distribution & marketing Storage/warehouse Extension services Input suppliers Milling Agroweather Distribution centers Soil testing services advisories Sorting Retail stores Financial services Irrigation services Grading Cooling technologies Support services (including agronomic, finance, information, technology, water, power and infrastrucure) Source: World Bank Group—Future of Food Climate-Smart Agriculture Investment Plan for Lesotho 53 TABLE 4.16: PATHWAYS TO AGRICULTURAL JOBS IN LESOTHO Pathways Examples Readiness to operationalize pathways Informal and Formal SMEs Transform micro enterprises to SMEs Low–Medium Support transition from informal to formal organizations Services, inputs, and other direct and indirect activities across the value chains Skills, incubation, and agripreneurs Incubation High (focus on youth) Technical and Vocational Education and Training Agripreneur programs Agriculture programs in Universities Social enterprises Scouting and scaling up innovative business models Low Digital agriculture using ICT Venture capital Productive alliances with large and Linking smallholders with agribusiness companies in Medium mid-­size agribusiness companies value chains Jobs through Aggregation Supporting farmer organizations to become SMEs High Source: Modified from World Bank (2018d). Readiness rankings in the last column were based on Authors’ assessment. Note: ICT = information and communication technology; SMEs = small and medium enterprises. Goals (SDGs) and Nationally Determined Contribution reforestation and protecting forests for their economic (NDCs). SDGs are a plan of action by countries to and ecosystem services, among other measures. address the most pressing development challenges, whereas NDCs are an outline of country-level Lesotho’s NDCs stress the co-­ benefits of climate adaptation and mitigation strategies to address actions for six SDGs: poverty reduction, food security climate change. Lesotho’s NDCs specifically highlight and zero hunger, employment generation, waste the adoption of climate-smart agriculture for reduction, and sustainable management of land. improving food security and farmers income. The The potential contribution of CSAIP to the NDCs and NDCs also state the importance of afforestation, SDGs are indicated in table 4.17. TABLE 4.17: SDGS–NDCS LINKAGES IN LESOTHO SDGs Alignment of SDG and NDC Potential CSAIP contribution 1: No poverty Build resilience of the poor and those in Poverty is a rural phenomenon in Lesotho vulnerable situations and reduce their exposure where majority depends on agriculture. and vulnerability to climate-­related extreme Adoption of CSA will lead to 3 to 5 times events and other economic, social and increase in rural household income. environmental shocks and disasters. 2: Zero hunger Ensure sustainable food production systems and CSA is the core of Lesotho’s ambition to implement resilient agricultural practices that: end hunger. This report shows that food • increase productivity, production will increase fourfold to sixfold • maintain ecosystems, following the adoption of climate smart • strengthen climate change adaptation practices. CSA will also reduce soil erosion to capacity, and levels that will sustain production. • improve land and soil quality. Sustainable food production systems also help to reduce greenhouse gas emissions from the food system, thereby contributing to NDC targets (continued ) 54 Climate-Smart Agriculture Investment Plan for Lesotho TABLE 4.17: (Continued) SDGs Alignment of SDG and NDC Potential CSAIP contribution 8: Decent work and economic Achieve higher levels of economic productivity CSA adoption could create jobs that will growth through diversification, technological stimulate Lesotho’s rural economy. Shifting innovation, including through a focus on climate- from low-­ value grain production to more smart, high-­value added and labor-­intensive labor-­intensive and higher value-­added sectors. crops like potato, orchards, and vegetables could generate stable jobs for men and women. 12: Responsible consumption Substantially reduce waste generation through Lesotho CSAIP promotes IPM and and production prevention, reduction, recycling and reuse. postharvest management that will help Reduce carbon emissions through these reduce food loss and waste. processes 13: Climate action Integrate climate change measures into national The CSAIP recommends wide ranging policy policies, strategies and planning. measures that will improve CSA knowledge Improve education, awareness-­ raising and systems and mainstream CSA into GoL human and institutional capacity on climate strategies and policies. change mitigation, adaptation, impact reduction and early warning. 15: Life on land Promote the implementation of sustainable Lesotho CSAIP promotes sustainable management of forests, halt deforestation, landscape management including restore degraded lands, and substantially afforestation, reforestation and rangeland increase afforestation and restoration. management. The CSA practices promoted These practices would help reduce climate in this report will lead to increase in land-­ vulnerability, enhance resilience and also help use efficiency through higher productivity, sequester carbon thereby reducing the need for clearing more land for agricultural production. Source: Authors. Alignment of SDGs and NDCs modified from Climatewatch.21 Potential for meeting 4.13  in the prospect of meeting the targets; for instance, increasing agricultural productivity (target 1) is a Lesotho CSAIP targets prerequisite to doubling farmers’ income (target 2), increasing exports (target 3), and to a lesser extent 137. The analyses presented in chapters  3 and 4 reducing agricultural emissions and livestock enable us to assess the prospect of meeting emissions intensity (targets 4 and 5). Thus, it is crucial Lesotho’s CSA targets. Table  4.18 shows that the that the CSAIP identifies an integrated solution that probability of meeting the targets vary from low for will address the potential constraints to meeting the increasing productivity and agricultural exports to targets, while synergistically delivering productivity high for reducing agricultural emissions and livestock and climate benefits to farmers. emissions intensity. There are interdependencies 21 https://www.climatewatchdata.org/countries/LSO#ndc-­sdg-­linkages Climate-Smart Agriculture Investment Plan for Lesotho 55 TABLE 4.18: POTENTIAL OF MEETING LESOTHO’S CSA TARGETS No. Targets Probability of Remarks meeting the target 1 Increase yields of Low Yield gap needs to be narrowed by introducing climate-­ ready, stress-­ major staples by a tolerant species and cultivars adapted to Lesotho’s context. Other factor of 2.5. constraints that must be addressed to effectively close the yield gap include weather-­induced yield variability, soil fertility constraints, pest infestation, and market accessibility. 2 Double income of Medium Farmers’ income more than doubles for most CSA practices, but cost of smallholder farmers. adoption may be a barrier to meeting this target. 3 Increase agricultural Low The target can be met if Lesotho is able to narrow yield gap, prioritize exports by a factor horticulture and potato for exports, and create the enabling environment of 2.5. for higher levels of CSA adoption. 4 Reduce agricultural High Can be met following the adoption of climate-­ smart livestock practices GHG emissions by under the RL scenario. Integrated catchment management will help 25%. reduce soil erosion and the associated loss of soil carbon. Better rangeland management will also help sequester carbon. Sustainable crop intensification will help reduce cropland expansion, while better livestock and manure management will also help put Lesotho on track of meeting this target. 5 Reduce livestock High This target has the highest probability of being met by stepping up the emissions intensity adoption of climate-­smart livestock practices. More efforts are particularly by 25 percent. required in lowering emission intensities from goat and sheep. 56 Climate-Smart Agriculture Investment Plan for Lesotho V. CSA Investment Needs 138. To determine Lesotho’s CSA investment needs, water management technologies is a key part of emphasis was placed on integrating proven the CSAIP in Lesotho. In addition to improved water CSA technologies that will minimize trade-­ offs use efficiency, strengthening the adaptive capacity and capitalize on synergies between CSA pillars of smallholder farmers to adjust and modify their as exemplified in figure  5.1 where successive production systems to minimize the potential addition of CSA technologies leads to an overall future impacts from climate variability will require increase in productivity and climate benefits solutions that improve soil health, and increase derived from the agricultural system. Climate farm productivity. Regional demand for fruit and modeling indicates that yield variability is primarily vegetables is likely to increase as urban populations due to rainfall deficits, implying that there is need grow, incomes rise, and the popularity of healthy resistant, higher yielding crop varieties, for stress-­ diets increases. Higher production and sales of and greater cropping intensity to meet food high value crops would also deepen domestic demand. Increasing cropping intensity implies agricultural markets, generate rural employment that expanding efficient irrigation and agricultural and improve nutrition. Lastly, implementation of FIGURE 5.1: RELATIONSHIP BETWEEN CSA BENEFITS AND CLIMATE SMARTNESS OF TECHNOLOGIES Adapted technologies + Productivity and climate benefits Adapted Climate- technologies specific + management Climate- + Adapted specific Seasonal technologies management agroweather + + forecasts and Climate- Seasonal advisories Adapted specific agroweather + technologies management forecasts and Integrated + + advisories catchment Adapted Climate- Seasonal + management technologies specific agroweather Integrated + + management forecasts and catchment Efficient Climate- + advisories management resource use Adapted specific Seasonal + + + technologies management agroweather Integrated Efficient Enabling Baseline forecasts and catchment resource use environment advisories management Climate smartness Source: Modified from CCAFS (2014) Climate-Smart Agriculture Investment Plan for Lesotho 59 sustainable landscape management encompassing • Promote market access for farmers; and interventions from the micro-­ catchment scale • Support sustainable landscape and integrated managed largely by communities, to wider catchment management. development among multiple sectors concerned with productive and non-­productive land uses will The components of these thematic areas are fully help optimize ecosystem functions and services. described in box 5.1 and annex 6. 139. As noted in chapter  4, very dry conditions 141. Under the RL scenario, total CSAIP financial costs can suppress yields, and the observed yield amount to about US$268  million over a 5-­ year variability from crop simulations is primarily due investment period, corresponding to investment to rainfall deficits. This implies that there is need for costs of about US$54 million per year. Under the higher crop yields and greater crop intensity to meet CZ scenario, total CSAIP economic costs amount to food demand. Thus, expanding the use of efficient about US$208  million over the 5-­ year investment irrigation and agricultural water management period, or about US$42  million per year (table  5.1). technologies is a key part of the CSAIP investment in Under both scenarios, it is assumed that there are Lesotho. This will entail promoting a more efficient use no further investment costs after the fifth year, except of surface water accompanied by a more sustainable for the costs of equipment, maintenance, and inputs use of groundwater, leading to improved availability which are included from year 6 to 30, as these costs and quality of water at the farm level. In addition to will have to be incurred if the future benefits of the improved water use efficiency, strengthening the investment plans are to be sustained. Such costs are adaptive capacity of smallholder farmers to adjust estimated at 10 percent of the yearly cost. and modify their production systems to minimize the potential future impacts from climate variability will require solutions that improve soil health, and 142. The CSAIP indicates that total benefits accruing increase farm productivity. Regional demand for to society (excluding any external environmental fruit and vegetables is likely to increase as urban benefit) amount to about US$31 million under the populations grow, incomes rise, and the popularity of RL scenario and about US$63  million under the healthy diets increases. Higher production and sales CZ scenario (tables 5.2 and 5.3). The overall flow of of high value crops would also deepen domestic CSAIP benefits is based on the number of household agricultural markets, generate rural employment adopters. However, additional CSAIP benefits and improve nutrition. Lastly, implementation of related to improved climate information services, sustainable landscape management encompassing modernization of land titling system, and reduced interventions from the microcatchment scale land degradation are also considered (annex 3), even managed largely by communities and other local though they are not directly related to the number of stakeholders, to wider development among multiple households that adopt CSA. sectors and stakeholders concerned with productive and non-­ productive land uses will help optimize 143. Under the RL scenario, most of the benefits ecosystem functions and services including food derive from rain-­fed crop production (30 percent) and agricultural production; ecological regulation of and aquaculture (26  percent). There is a switch nutrients, carbon stocks, greenhouse emissions, and from conventional to conservative practices for water flow and supply. maize production: a loss of US$10.6  million from reduction in conventional maize production 140. Given the above considerations, four thematic and a corresponding gain of US$6.9  million and areas have been identified and validated with US$2.1 million from increasing maize under CA and stakeholders as priority areas for the CSAIP agroforestry, respectively. investments. They are: 144. Under the CZ scenario, most benefits derive • Improve water management in rainfed and from irrigated crop production (40  percent) and irrigated agriculture; aquaculture (40  percent). A significant reduction • Scale up CSA technologies for crops, livestock, in maize area under conventional management and and aquaculture; the consequent reduction in the incremental benefits 60 Climate-Smart Agriculture Investment Plan for Lesotho BOX 5.1: BRIEF DESCRIPTION OF THE LESOTHO CSAIP COMPONENTS Component 1: Improve water management in rainfed and irrigated agriculture Enhanced and efficient water management is a key factor for adaptation and increasing the efficiency of other CSA measures. The CSAIP will promote off- and on-­farm investments in hydraulic infrastructure to restore and improve water distribution and reduce losses, improve water use efficiency, and increase and regulate water access management and governance for household consumption and agriculture production, particularly in areas of high agricultural potential. The CSAIP investment activities will include: sustainable water management practices such as micro-irrigation, water harvesting; modernization of hydraulic infrastructures, and strengthening institutions for effective agricultural water management. Component 2: Scale up CSA technologies for crops, livestock and aquaculture This CSAIP component will promote integrated soil fertility management; agroforestry; and conservation agriculture. For livestock, the CSAIP will finance three key interventions: improving access to better livestock breeds, improving animal nutrition; and improving access to animal health services. For aquaculture, the CSAIP will focus on improved stocks, production intensification, better feeding practices, and improved water use efficiency in the ponds. Component 3: Promote market access for farmers Activities to be supported under this component include: development of Agriculture Clusters Service Enterprises; development of Market Hub Enterprises; aggregation of smallholder farmers into upgraded commodity value chains; piloting weather index insurance to manage risks; and promoting food quality standards. The component will also support the development of integrated climate information services through public-private partnership. Component 4: Support sustainable landscape and integrated catchment management This component will finance structural and vegetative measures of sustainable landscape management. The structural measures include terracing; gully control; flood control; and check dams. The vegetative measures include afforestation/reforestation and grassland rehabilitation. In addition, the component will finance the modernization of land administration through digital land registry and titling, spatial data infrastructure development, and capacity building for land administration. TABLE 5.1: CSAIP INVESTMENT COSTS (US$, THOUSANDS PER YEAR) Components RL CZ 1. Improve water management in rainfed and irrigated agriculture 14,944 18,382 2. Scale up CSA technologies for crops, livestock, and aquaculture 15,473 9,793 3. Promote market access for farmers 5,882 4,272 4. Support sustainable landscape and integrated catchment management 17,207 9,210 Total amount per year 53,505 41,658 Total over the complete investment period (5 years) 267,525 208,288 Source: Authors are accompanied by an increase in the area under underestimated. The two scenarios differ for vegetables, potato, and fruits. A reduction in the the number of hectares for each crop and the benefits from sheep and poultry is also recorded due number of livestock heads. Results are based on to the reduction in animal numbers under the scenario. the assumptions made about the adoption rate, that is, the proportion of farmers implementing 145. Due to conservative assumptions on adoption the CSA options promoted within the CSAIP. The rates, the CSA benefits are most likely assumptions that only 40  percent of farmers Climate-Smart Agriculture Investment Plan for Lesotho 61 FLOW OF ECONOMIC BENEFITS (US$, THOUSANDS PER YEAR) OF THE CSAIP TABLE 5.2:  UNDER THE RL SCENARIO Phasing of the investment plan Y1 Y2 Y3 Y4 Y5 TOTAL Crop production Rain-­fed 588 882 1,176 1,470 1,763 5,878 Irrigated 164 247 329 411 493 1,644 Maize −1,061 −1,591 −2,121 −2,651 −3,182 −10,605 Maize (CA) 691 1,036 1,381 1,727 2,072 6,907 Maize (Agroforestry) 215 322 430 537 644 2,148 Sorghum 186 278 371 464 557 1,855 Wheat 175 262 350 437 525 1,750 Legumes 307 461 615 768 922 3,073 Potato 290 435 580 725 869 2,898 Fresh vegetables 123 184 246 307 369 1,230 Orchards 41 62 83 104 124 415 All crops 967 1,451 1,934 2,418 2,901 9,671 Livestock rearing Cattle 256 384 512 640 767 2,558 Dairy cows 67 100 134 167 201 670 Goats 42 62 83 104 125 415 Sheep 89 133 177 222 266 886 Pig 136 205 273 341 409 1,364 Poultry 24 35 47 59 71 236 Animal draft power Horse and cart 404 607 809 1,011 1,213 4,044 Donkey and plough 64 96 128 160 192 639 Non-­timber forest products (NTFPs) and medicinal plants 434 434 434 434 434 2,172 Aquaculture Trout production 1,648 1,648 1,648 1,648 1,648 8,240 Total 4,131 5,155 6,179 7,203 8,227 30,894 will switch from conventional to CSA production Landscape Scenario and $24.7 million for the are conservative, and thus, the estimation of Commercialization Scenario (tables 5.2 and 5.3). economic benefits is most likely underestimated. The CZ scenario also assumes expanded area for In the CZ scenario, a bigger number of aquaculture medicinal plants and other high-­ value products households is assumed; 400 households under (mushroom production). In addition, in the same resilient landscape scenario compared with scenario, it is implicitly assumed that a bigger role 2,000 households under commercialization will be played by improved water management, scenario. Thus, over a 5-year investment period, since it will make possible the expansion of scaling up aquaculture is projected to yield fresh vegetables and irrigated, high-­ value fruit economic benefits of $8.2 million for the Resilient production systems. 62 Climate-Smart Agriculture Investment Plan for Lesotho  LOW OF ECONOMIC BENEFITS (US$, THOUSANDS PER YEAR) OF THE CSAIP TABLE 5.3: F UNDER THE CZ SCENARIO Phasing of the investment plan Y1 Y2 Y3 Y4 Y5 TOTAL Crop production Rain-­fed 1,109 1,558 2,007 2,456 2,905 10,033 Irrigated 1,324 1,986 2,648 3,310 3,972 13,241 Maize −380 −570 −761 −951 −1,141 −3,803 Maize (CA) 121 181 242 302 362 1,208 Maize (Agroforestry) 0 0 0 0 0 0 Sorghum 62 93 123 154 185 617 Wheat −15 −23 −31 −38 −46 −153 Legumes 447 670 894 1,117 1,341 4,470 Potato 898 1,347 1,796 2,245 2,694 8,980 Fresh vegetables 1,076 1,614 2,152 2,690 3,228 10,761 Orchards 248 372 496 620 744 2,481 All crops 2,456 3,684 4,912 6,140 7,368 24,560 Livestock rearing Cattle 102 152 203 254 305 1,016 Dairy cows 30 46 61 76 91 305 Goats 111 167 222 278 333 1,110 Sheep −49 −73 −97 −122 −146 −487 Pig 917 1,375 1,834 2,292 2,751 9,170 Poultry −44 −67 −89 −111 −133 −444 Animal draft power Horse and cart 194 292 389 486 583 1,944 Donkey and plough 33 50 67 83 100 333 NTFPs and medicinal plants 94 94 94 94 94 470 Aquaculture Trout production 4,120 4,944 5,768 5,768 4,120 24,720 Total 7,965 10,664 13,363 15,239 15,466 62,697 CSAIP PROFITABILITY INDICATORS TABLE 5.4:  146. The proposed CSAIP will generate positive WITHOUT CARBON BENEFITS returns, above the opportunity cost of capital Summary results EIRR (%) NPV @ 10%, under both scenarios. The overall EIRR of the US$, millions investments plan is estimated at about 13  percent (base case, RL scenario) and about 32 percent (base RL 13 40 case, CZ scenario) which is above the opportunity CZ 32 228 cost of capital in Lesotho estimated at 10  percent. Source: Authors The NPV is about US$40 million and US$228 million Climate-Smart Agriculture Investment Plan for Lesotho 63 year period of analysis, under the RL over the 30-­ management technologies, such as agroforestry, and CZ scenarios, respectively. The profitability is terracing, flood control, gully reshaping, and erosion higher under the CZ scenario, characterized by more control, entail significant up-­ front expenditures commercially oriented assumptions. before benefits are realized. When benefits increase, the EIRR and NPV increase, as well. 147. The profitability indicators provide the evidence base on the suitability of the CSAIP investment. 150. The CSAIP is also robust to the number of CSA The indicators are comprehensive of all costs adopters. The break-­ even point to have a profitable and benefits. However, while it is assumed that investment (expressed in terms of minimum number investment costs are mainly public, the estimated of beneficiaries needed to obtain a positive NPV) benefits are estimated on-­ farm. A transfer of equals 4,972 households, corresponding to a resources from the public sector to the smallholder decrease in the adoption rate from 40  percent to farmers is therefore implicitly assumed in the CSAIP. about 1  percent under the RL scenario; it equals Nevertheless, eventual contributions from the 7,555 households, corresponding to a decrease in private sector to the funding of the CSAIP could be the adoption rate from 25 percent to about 2 percent in the interest of the private sector itself which would under the CZ scenario. This indicates that the CSAIP directly and indirectly benefit from the economic is very robust in relation to a possible decrease in the development of the agriculture sector in Lesotho. number of CSA adopters. 148. The EIRR and NPV were subject to sensitivity 151. Carbon valuation markedly increases the benefits analysis to measure variations due to unforeseen from CSA investments. The mitigation impact of factors and account for risk. Criteria adopted in the the CSAIP activities (annex 7) has been included in sensitivity analysis are 10  percent and 20  percent the economic analysis by valuing the GHG balance cost overrun, 10  percent and 20  percent increase at two shadow prices of carbon: low (LSP) and high in benefits, and 10 percent and 20 percent benefits (HSP) (World Bank Group 2017). Table 5.6 indicates decrease (table 5.5). that the mitigation impact of the CSAIP are up to US$4.6–30  million per year for the RL scenario, 149. As expected, when costs increase, and benefits under the LSP and HSP hypotheses, respectively. decrease (or are delayed), the profitability of For the CZ scenario, the mitigation impacts of the investment plan worsens (as indicated CSAIP-­related activities are up to US$0.3–1.8 million by decreases in EIRR and NPV). Many land per year, under the LSP and HSP hypotheses, TABLE 5.5: SENSITIVITY ANALYSIS RL Scenario Cost increments Benefits increments Benefits decrease Benefits delay Base case +10% +20% +10% +20% −10% −20% 1 year 2 year EIRR (%) 13.0 9.0 7.5 12.7 14.6 8.8 6.4 9.0 7.6 NPV @ 39,700 −14,690 −38,808 34,488 59,549 −15,633 −46,055 −15,102 −37,401 10% (US$, thousands) CZ Scenario Cost increments Benefits increments Benefits decrease Benefits delay Base case +10% +20% +10% +20% −10% −20% 1 year 2 year EIRR (%) 31.6 26.5 23.5 34.2 38.5 26.1 21.7 22.7 18.6 NPV @ 227,850 185,503 166,726 243,486 282,692 165,075 118,448 165,848 130,909 10% (US$, thousands) 64 Climate-Smart Agriculture Investment Plan for Lesotho ECONOMIC EVALUATION OF THE CSAIP MITIGATION IMPACT USING THE SHADOW TABLE 5.6:  PRICES OF CARBON 1 RL scenario Environmental benefits 874,283 tCO2eq per year Phasing of the investment plan Y1 Y2 Y3 Y4 Y5 Effective targeted households, % of the total % 4 6 8 10 12 Adoption rate of CSA practices % 40 40 40 40 40 Targeted households, % of the total % 10 15 20 25 30 low Social price of carbon—­ US$ per ton 40 41 42 43 44 high Social price of carbon—­ US$ per ton 80 82 84 86 87 Environmental benefits—­ low carbon price US$, thousands, per year 1,399 2,151 2,938 3,759 4,616 Environmental benefits—­high carbon price US$, thousands, per year 27,977 28,676 29,376 30,075 30,425 2 CZ scenario Environmental benefits 84,066 tCO 2eq per year Phasing of the investment plan Y1 Y2 Y3 Y4 Y5 Effective targeted households, % of the total % 3 4 5 6 8 Adoption rate of the CSA options % 25 25 25 25 25 Target households, % of the total % 10 15 20 25 30 Social price of carbon—low US$ per ton 40 41 42 43 44 Social price of carbon—high US$ per ton 80 82 84 86 87 Environmental benefit—low carbon price US$, thousands, per year 84 129 177 226 277 Environmental benefits—high carbon price US$, thousands, per year 1,681 1,723 1,765 1,807 1,828 Source: Authors. Detailed GHG assessment is found in Annex 7. respectively. The benefits have been included in Integrated Soil Fertility Management (ISFM), CA, the economic analysis reported in table  5.7. When and crop diversification increase yields and are the mitigation impact of the CSAIP is included, the therefore important for improving food security. EIRR increases from 13 percent (base case) to about Vegetable and high-­ value crop production, including 16 percent (LSP) and 73 percent (HSP) and the NPV medicinal plants and mushrooms, and aquaculture from US$40  million (base case) to US$76  million production can also be effective in diversifying (LSP) and US$322  million (HSP) in the RL scenario. and smoothening households’ incomes, thereby For the CZ scenario, the EIRR will increase from increasing their resilience. Improved water use 31.6  percent (base case) to 31.8  percent (LSP) and efficiency will also help minimize yields variability, 34.2  percent (HSP), and the NPV will increase from while adoption of climate-­ smart livestock practices US$228  million (base case) to US$230  million (LSP) will help reduce methane. The expansion of and US$245 million (HSP). orchards in addition to increasing incomes will help sequester carbon, while land rehabilitation and integrated catchment management will help address land degradation. 5.1 CSA adoption constraints 153. Despite the productivity and climate benefits, the adoption of CSA can face significant 152. This report demonstrates the productivity and socioeconomic and institutional barriers. These climate benefits of CSA. Improved crop varieties, include the need for significant up-­front expenditures Climate-Smart Agriculture Investment Plan for Lesotho 65 TABLE 5.7:  CSAIP PROFITABILITY INDICATORS catchment management, afforestation/deforestation INCORPORATING CARBON BENEFITS scale irrigation (69 percent), and (69 percent), small-­ gully control (63  percent) are mostly influenced LSP by the adoption factors. Livestock and grassland CZ RL management are influenced the most, scoring Economic NPV, US$, millions 228 40 highest across most of the adoption factors. Value of carbon at LSP, US$, millions 2 36 Land tenure influences agroforestry, rotational grazing, Economic NPV with carbon benefits, 230 76 grassland reseeding, terracing, and land rehabilitation the US$, millions most. Secure land tenure is critical to the sustainability EIRR (%) 32 13 of land use and CSA implementation. If land tenure EIRR with carbon benefits (%) 32 16 cannot be protected effectively, farmers and commercial investors will be unwilling to invest, or will even give up HSP long-­ term investments on farmland entirely. Inadequate CZ RL research impacts the adoption of climate-­ smart livestock Economic NPV, US$, millions 228 40 practices the most, with stakeholders scoring improved animal breeds and feeding practices as the most critically Value of Carbon at HSP, US$, millions 17 282 impacted (85 and 80 percent, respectively). Economic NPV with carbon benefits, 245 322 US$, millions EIRR (%) 32 13 5.2 Improving the enabling EIRR with carbon benefits (%) 34 73 Source: authors. NPV is estimated at 10 percent discount rate. environment for CSA implementation on the part of poorer farmers, the non-­availability of 155. Critical to achieving CSA outcomes is an enabling some inputs in the local markets, lack of information environment that provides efficiency-­ enhancing about the potential of improved techniques, and public goods in addition to reforming policies often limited capacity to implement the techniques. that distort market prices and associated input Certain techniques associated with CSA can be use and production decisions (World Bank 2017, incompatible with traditional practices that farmers 2018c). One area in which Lesotho could improve the are accustomed with. The implementation of some enabling environment for CSA adoption is to realign practices requires collective action that may be agricultural support to break adoption barriers and lacking (World Bank 2018b). promote CSA. Currently, fertilizer subsidies contribute 15 percent to maize production, 8 percent to wheat, 154. Ranking of adoption constraints against CSA 7  percent to sorghum, and a modest 3  percent to practices by stakeholders reveals that inadequate leafy vegetables. Although increased fertilizer use implementation capacity (75  percent) and is vital to reduce deforestation, reverse nutrient access to inputs or finance (71  percent) are the depletion, and deliver food security and income most critical adoption barriers for all groups of benefits to rural poor, Lesotho’s fertilizer subsidy CSA practices (table  5.8 and figure  5.2). Within program has not effectively targeted the farmers who crop management, the adoption of improved crop need the inputs the most. The subsidy program has varieties (68  percent), postharvest management crowded out the private distributors that are needed (68  percent), and IPM (65  percent) are influenced for sustainable input markets due to uncertainties by the factors the most. For climate-­ smart regarding government sales and pricing. livestock management, animal health control (75  percent), grassland reseeding (73  percent), and 156. An alternative to the fertilizer subsidy delivery improved animal breeds (73  percent) suffer from method could be a time-­ bound market-­smart the adoption constraints the most. For integrated subsidy (MKS) to promote market development 66 Climate-Smart Agriculture Investment Plan for Lesotho TABLE 5.8: RELATIVE IMPACT OF FACTORS FOR ADOPTION OF CSA PRACTICES IN LESOTHO Inadequate Inadequate Limited Land Research Inadequate Public Average access to access to implementation tenure access to policy finance markets capacity issues infrastructure including (awareness, (roads, storage inputs and skill, training, facilities, credits and education) and ICT) Crop management Minimum soil disturbance, residue 48 40 80 50 65 35 60 54 retention Crop rotation 58 50 60 53 58 38 55 53 Agroforestry 73 48 73 70 63 43 68 62 Judicious fertilizer 73 48 60 35 55 35 55 51 application Organic fertilization 58 45 60 28 58 43 53 49 Inorganic fertilizer 73 58 58 35 55 43 48 53 Improved crop varieties 80 80 70 48 73 63 60 68 Integrated Pest Management 75 55 73 53 73 50 75 65 Postharvest management 75 75 88 35 83 60 58 68 68 55 69 45 64 45 59 58 Livestock and grassland management Rotational grazing 60 45 70 78 63 43 80 63 Fire management 50 25 68 53 55 28 78 51 Grassland reseeding 85 63 80 80 78 43 80 73 Fodder production 88 70 78 70 75 43 55 68 Livestock diversification 75 70 85 50 73 55 55 66 Improved animal breeds 88 75 85 45 85 68 68 73 Animal and herd 68 50 68 68 63 53 68 62 management Animal diseases and 88 80 80 55 75 70 78 75 health control Improved feeding 70 63 78 50 80 60 63 66 practices Manure management 58 40 70 38 60 58 60 55 73 58 76 59 71 52 68 65 (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 67 TABLE 5.8: (Continued) Inadequate Inadequate Limited Land Research Inadequate Public Average access to access to implementation tenure access to policy finance markets capacity issues infrastructure including (awareness, (roads, storage inputs and skill, training, facilities, credits and education) and ICT) Integrated catchment management Small-scale irrigation 83 63 73 68 70 65 60 69 Rainwater harvesting 65 38 65 40 38 50 53 50 Terracing 40 20 83 73 58 48 53 53 Gully control 78 35 88 65 53 60 60 63 Flood control 68 25 73 60 50 63 60 57 Check dams 65 28 73 63 53 65 65 59 A orestation/reforestation 73 40 88 88 60 68 70 69 Grassland rehabilitation 80 35 73 78 50 55 65 62 69 35 77 67 54 59 61 60 Aquaculture Improved stocks 80 78 78 40 75 63 63 68 Production intensification 78 70 83 53 73 60 60 68 Better feeding practices 78 75 85 38 65 60 63 66 Improved water use e iciency and pond 75 65 85 45 70 78 68 69 management Diseases control 85 78 83 38 78 55 68 69 79 73 83 43 72 63 64 68 Average 71 54 75 54 65 54 63 Low High Source: Based on stakeholders’ ranking. Note: Importance of factors for adoption was first rated as 1 = Very low; 2 = Low; 3 = Moderate; 4 = High; and 5 = Very high. Thereafter, scores for each factor were averaged over the number of respondents and expressed as a percentage. Higher scores indicate that it is more critical and urgent to address a factor (or enabling condition) for effective CSA implementation in Lesotho. 68 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 5.2: IMPACT OF FACTORS ON THE ADOPTION OF CSA PRACTICES Crop management Inadequate access to markets, 55% Limited implementation capacity (awareness, skill, training, and education), 69% Research, 64% Inadequate access to infrastructure (roads, storage Inadequate access to finance, Land tenure facilities, ICT), including inputs and credits, 68% Public policy, 59% issues, 45% 45% Livestock and grassland management Limited implementation capacity (awareness, skill, training, and education), 76% Research, 71% Inadequate Land tenure access to issues, 59% markets, 58% Inadequate access to finance, including inputs and credits, Inadequate access to infrastructure 73% Public policy, 68% (roads, storage facilities, ICT), 52% (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 69 FIGURE 5.2: (Continued) Integrated catchment management Limited Limited implementation implementation capacity capacity (awareness, (awareness, skill, skill, training, and education), 77% 76% training, and education), Research, 71% issues, 67% Land tenure Inadequate Land tenure access to issues, 59% markets, 58% Inadequate Inadequate Inadequate access access to to finance, finance, access to including including inputs inputs and and credits, credits, markets, Inadequate access to infrastructure 69% 73% Public Public policy, policy, 61% 68% Research, (roads, 54% storage 35% facilities, ICT), 52% Aquaculture Public policy, 64% Limited implementation capacity Inadequate access to (awareness, skill, training, and markets, 73% education), 83% Inadequate access to infrastructure Inadequate access to finance, (roads, storage Land tenure including inputs and credits, 79% Research, 72% facilities, ICT), 63% issues, 43% (continued ) 70 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 5.2: (Continued) All CSA practices Limited implementation capacity (awareness, skill, training, and education), 75% Research, 65% Inadequate access to Land tenure markets, 54% issues, 54% Inadequate access to Inadequate access to finance, infrastructure (roads, storage including inputs and credits, 71% Public policy, 63% facilities, ICT), 54% Source: Authors TABLE 5.9: ROLE OF DELIVERY MECHANISMS IN ADDRESSING CONSTRAINTS TO CSA ADOPTION Delivery Implementation Access to finance Inadequate Infrastructure Land tenure mechanisms capacity and markets research Efficient Establishment of Higher and better Investment irrigation irrigation institutions agricultural in irrigation technologies and strengthening produce from infrastructure and their capacity irrigation help to will increase institutions through technical deepen agricultural productivity and assistance and markets. enhance access training. to domestic and export markets. This will attract private investment, enhance job creation, and stimulate growth. Pluralistic* Increase the Farmer aggregators Feedback from extension knowledge and and other service extension and services and skills of farmers, providers can help FFS can stimulate FFS farmer aggregators, connect farmers to further research agro-­processors, relevant markets. and ameliorate agro-­dealers, and yield-­limiting national and district constraints. level extension staff in proven CSA technologies. (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 71 TABLE 5.9: (Continued) Delivery Implementation Access to finance Inadequate Infrastructure Land tenure mechanisms capacity and markets research Market Horizontal Improved legal Public investment Public private linkages alliance helps to and regulatory can be used to partnership can shift smallholder framework for leverage private help address thinking from commercial investment in underinvestment, subsistence farming agriculture helps agricultural poor to agribusiness by improve access to research, including infrastructure, training farmers market. developing deficient services, to identify crops improved seeds low visibility, with potential for and seedlings and and insufficient commercialization, IPM measures funding. grow them profitably, tailored to local and establish conditions. relations with market agents. SLM through Participatory element Large mitigation The delivery participatory of SLM and landscape benefits from method includes approaches approaches facilitates landscape modernizing knowledge exchange restoration land titling and between farmers could open up administration that and community opportunities from helps to improve members. carbon finance. tenure security and proper land market functioning. Secure land tenure incentivizes CSA adoption. Agricultural Combining Improved crop and research and agricultural research livestock breeding, innovation innovation with increased yields, extension will disease resistance, help enhance abiotic stress farmers’ capacity to tolerance, and implement integrated nutrition. CSA solutions. Digital ICT-­based ICT tools can Regulatory Digitizing and solutions and agroweather, facilitate buyer-­ mechanisms documenting land services agronomic, and seller matching and that improve rights in ways that market advisories market transactions affordability will are supported by can be used to for agricultural increase internet local stakeholders facilitate learning commodities. ICT penetration. This enhances through feedback also promotes will help diffuse transparency and (bidirectional financial inclusion. CSA technologies provides incentives information flow) Market information and innovations. for CSA adoption, between farmers and systems will help sustainable advisories providers. reduce information land use, and costs. intensification. Source: Authors *Pluralistic extension system is provision of extension services for farmers through different providers such as NGOs, private companies, farmer organizations, and public extension services at district or national level. The pluralistic extension system does not eliminate the public extension workers , but rather, the system adds other potential extension agencies to compliment the existing public extension agency. 72 Climate-Smart Agriculture Investment Plan for Lesotho and encourage private investment in fertilizer and livestock. Complementing improved breeds, and other agricultural inputs. An example of MKS it is important to develop ICT-­based agroweather is the input voucher system that local microfinance forecasting and dissemination tools and marketing institutions or agricultural credit cooperatives use information system to help farmers address the to qualify farmers for loans and issue cash or credit challenges of climate variability and change and vouchers that can be used to redeem inputs, such enhance their resilience. Agroweather and market as seeds or fertilizers. Facilitating access to input advisories will help improve long-­ term capacity credit using the voucher system has proven to for CSA and sustainable agricultural intensification encourage farmers to adopt productivity-­ enhancing under changing climatic conditions. They enable technologies in many countries in Africa. farmers to better manage production and marketing risks, helping farmers make informed decisions on 157. Constraints that must be addressed to effectively what, when, where, and how to produce. close yield gaps in Lesotho are weather-­ induced yield variability, soil fertility constraints, pest 158. To address productivity declines, better soil problems, and market accessibility. Managing management practices, including access of climate and weather variability is fundamental to farmers to fertilizer blends tailored to soil and a long-­term strategy for adapting agriculture to crop requirements, are needed. Lesotho soils climate change in Lesotho. This will involve stepping are inherently low in nutrients that are needed for up research efforts in breeding to include precision producing crops for food and nutrition security. phenotyping involving the introduction of stress Furthermore, declining soil fertility due to poor tolerance and yield improvement traits into crops soil management practices is a major threat Climate-Smart Agriculture Investment Plan for Lesotho 73 to agricultural productivity, manifesting in low mitigation potentials. CA, crop rotation, rainwater per capita food production and agroecosystem harvesting, and intercropping with lower profits resilience. Reversing Lesotho’s soil productivity and little mitigation potentials generate relatively declines cannot be adequately addressed without higher profits while requiring minimal government increased use of inorganic fertilizer combined with support. improved crop varieties and organic materials. Judicious fertilizer application helps counter soil 161. The CSAIP activities are expected to be nutrient depletion, reduces deforestation and implemented through different delivery methods, expansion of cultivation to marginal areas, and depending on the characteristics of the activities. increases crop yields. There is a need to establish Since investment activities are homogeneously fertilizer blending facilities to produce major grouped into components, it is assumed that nutrients and micronutrients that are compatible to each CSAIP component is implemented through needs. Soil fertility testing services also need to be a different delivery method (table  5.10). Research promoted to deliver soil health solution packages and innovation, and digital solutions and services to farmers in a commercially viable way. delivery methods are considered a cross-­ cutting approach as they relate to different investment 159. To reduce crop losses, there is also the need components and benefits are bundled. to scale up IPM and strengthen early warning systems for effective pest surveillance and 162. Delivery methods. Figure  5.3 reports the CSAIP control. IPM entails the coordinated integration profitability indicators by delivery methods. All of multiple complementary methods to suppress the delivery mechanisms generate positive NPVs effective, and environmentally pests in a safe, cost-­ demonstrating their capacity to produce benefits friendly manner. Early warning systems enable higher than the costs. The investments aimed at more proactive, less reactive responses, which are increasing market access are expected to generate well tailored for local conditions. Lesotho’s early the highest IRR, followed by SLM interventions and warning system should incorporate contingency research for technology innovation in agriculture. plans, which encompasses efforts to rapidly identify Relatively lower IRRs are generated by water pests, assess the geographical extent of the pests, management and FFS due to the high costs of the create awareness among farming communities, and initiate emergency responses to control the pests. TABLE 5.10: CSAIP DELIVERY MECHANISMS The development of rural storage facilities could also help reduce postharvest losses. No. Delivery mechanism RL CZ US$, thousands, 160. The pattern of public support is as crucial per year as the amount of support for full realization 1 Efficient irrigation 14,944 18,382 of productivity, mitigation, and adaptation technologies and benefits in agriculture. Public support that institutions focuses on research and investments in improved land management and land tenure rather than on 2 Pluralistic extension 15,473 9,793 services and FFS input support are generally more effective, benefit more farmers, and are more sustainable in the 3 Market linkages 5,882 4,272 long run. CSA technologies that involve significant 4 SLM through participatory 17,207 9,210 change in land use (afforestation and rangeland approaches rehabilitation) and landscape alteration (terracing 5 Agricultural research and 7,630 7,725 and gully reshaping) generate low private benefits. innovation22 The low profits suggest that farmers may be reluctant to privately invest in these technologies. 6 Digital solutions and 4,140 5,140 Strong public involvement in these technologies services is justifiable given their relatively high carbon Source: Authors 22 Specific costs in component 2 for research + extension costs through FFS + advisory services and information costs 74 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 5.3: NET PRESENT VALUE AND INTERNAL RATE OF RETURN OF LESOTHO CSAIP DELIVERY MECHANISMS 180,000 70% 66% 160,000 60% 140,000 50% 50% 120,000 100,000 40% 80,000 30% 60,000 25% 22% 20% 14% 40,000 12% 10% 20,000 0 0% Efficient Pluralistic Market linkages Participatory Agricultural Digital solutions irrigation extension SLM research and and services technologies services innovation and institutions and FFS NPV @ 10%, $'000 FIRR Source: Authors. NPVs and IRRs were averaged for CZ and RL. investments compared to the expected benefits and COMPARISON OF INDICATORS UNDER TABLE 5.11:  due to the time lag between the investment costs THE TWO SCENARIOS and the benefits. CZ RL 163. Prioritizing CSA practices that are adapted to a Net household income US$ 1,233 698 country’s context is a key step toward optimizing per year the productivity and climate benefits of the Increase in crop yields over 60 70 practices. Table  5.11 shows that comparison over historical (%) 13 indicators shows that the RL scenario performs Cropland area (ha) 132,247 153,482 better on 6 indicators (46  percent), while CZ performs better on 7 indicators (54  percent). Five Livestock production (ton) 38,849 45,765 important lessons emerge for effective scaling up of Erosion control: Gross erosion 39 35 CSA in the country: (Mt per year) • Though commercialization is more profitable, it Food availability23 675 649 requires larger farm size. It is more appropriate (kcal/capita/day) for medium-­ size, emerging farmers and requires Export potential moderate none strong market-­ oriented agricultural policies for it GHG mitigation: carbon −2,521,976 −26,228,494 to be successful. balance tCO2-­eq • Furthermore, commercialization would require Job creation 39,378 27,862 more private initiative and resources, for Economic internal rate of 32 13 instance in developing the agricultural value return (EIRR) % chain and well-­ functioning land markets. This could constitute a serious barrier given Lesotho’s Carbon benefits (US$ million) 2−17 36−282 nascent private sector. EIRR % with carbon benefits 32−34 16−73 • Commercial agriculture generates more stable Financial cost (US$ million) 208 268 jobs but will also require a transformational shift Source: Authors. Green color indicates that a scenario performs better in the farming systems and may be challenging on an indicator; orange color indicates otherwise. 23 This measures food calories derived from national agricultural production. Climate-Smart Agriculture Investment Plan for Lesotho 75 given the current level of implementation 164. Climate-resilient farming seems more feasible capacity. given the above considerations. Alternatively, Lesotho may opt for climate-resilient farming and • Though less profitable, climate-­ resilient sustainable landscape management in zones more agriculture delivers 10 times more carbon benefits prone to soil erosion, suitable for afforestation and as commercial agriculture. Thus, climate-­ resilient farmer-managed natural regeneration of vegetation, agriculture could potentially benefit from climate and where less fertile land needs restoration and finance. Climate-­ resilient agriculture is also more replenishment. Commercial agriculture can be effective in controlling soil erosion. practiced in more fertile areas that are suitable for • Climate-­resilient agriculture is 30 percent costlier potato, orchards, and vegetables. In figure 5.4, the for the public sector but is easier to implement. most productive lands in Lesotho are the versatile It is more tailored toward adapted technologies, and the highly versatile land classes that can landscape resilience and sustainable agricultural be  preferentially allocated to commercial agriculture. intensification that the average smallholder The recommended CSA practices for Lesotho’s farmer can practice. agroecological zones are shown in table 5.12. FIGURE 5.4: LESOTHO AGRICULTURAL VERSATILITY MAP Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hoek Quthing Agricultural versatility index Least versatile Moderately versatile Versatile Highly versatile Source: Authors 76 Climate-Smart Agriculture Investment Plan for Lesotho RECOMMENDED CLIMATE-SMART AGRICULTURE PRACTICES FOR LESOTHO’S TABLE 5.12  AGROECOLOGICAL ZONES Lowlands Foothills Senqu River Valley Mountains Altitude (m) <1,500 1,501–1,800 1,801–2,000 2,001–3,500 Topography Flat to gently rolling Steeply rolling Steeply rolling Very steep with bare rock outcrops Climate Moist in the north, Moist Dry Cold and moist moderately dry in the south Soils Mostly sandy textured, Rich, alluvial soils along Calcareous/lime soil, Fragile, thin horizon of rich some clayey soils in the valleys, thin and thick clayey red soils with low black loam south on slopes water infiltration Crops Wheat, beans, sorghum, Wheat, peas, potato, Beans, sorghum, wheat, Potato, maize, wheat, peas, vegetables, orchards, orchards, maize vegetables, orchards, orchards maize maize Crop Conservation Conservation Conservation agriculture, Conservation agriculture, management agriculture, agriculture, Integrated soil Integrated soil practices Integrated soil Integrated soil fertility management, fertility management, fertility management, fertility management, intercropping, keyholes, intercropping, keyholes, intercropping, keyholes, intercropping, trench gardening, trench gardening, trench gardening, keyholes, trench polytunnels, shade-net, polytunnels, shade-net, block farming, gardening, polytunnels, drip irrigation, sprinkler drip irrigation, sprinkler polytunnels, shade- shade-net, drip irrigation, rainwater irrigation, crop-trees net, drip irrigation, irrigation, sprinkler harvesting integration (agroforestry), sprinkler irrigation, irrigation, crops- rosehip trees rainwater harvesting, tree integration crops-tree integration (agroforestry), rosehip (agroforestry) Livestock and Poultry, piggery, dairy Sheep, goats, beef Beef cattle, sheep, goats, Beef cattle, sheep, aquaculture cattle, beef cattle, sheep cattle, horses and horses and donkeys, goats, donkeys, horses, and goats, improved donkeys, improved improved breeds, manure improved breeds, manure breeds, manure breeds, manure management, aquaculture management, aquaculture management management, (carp) (trout) aquaculture (carp) Rangeland Rotational grazing, Rotational grazing, Rotational grazing, Rotational grazing, management grassland re-seeding, removal of invasive removal of invasive shrubs, removal of invasive shrubs, practices building of stone walls shrubs, re-seeding re-seeding grasses, fodder re-seeding grasses, grasses trees, pasture-trees pasture-trees integration integration (silvopasture) (silvopasture) Sustainable Afforestation, Afforestation, Reforestation, gully Afforestation, landscape reforestation, gully reforestation, gully control, check dams, flood reforestation, gully control, management control control control terracing, gully control, check dams, flood control Climate-Smart Agriculture Investment Plan for Lesotho 77 5.3 Financing the be public, multilateral, bilateral, or private (figure 5.6), but for climate finance to be effective in achieving investment plan its goals, strengthening the link between financial institutions and farmers is important. 165. Assuming Lesotho pursues the RL pathway, the cumulative financing gap amounts to US$34 167. The two major approaches to climate finance million in year 1, increasing to US$211.5 million are upfront financing typically made available at by  year 5 (figure  5.5). In estimating the CSAIP the early stages of the project cycle, for example financing gap, the report considered existing through grants, low-­ cost debt (concessional related expenditures agricultural projects with CSA-­ loans), equity, and guarantees; and results-­ and the duration of such projects. The annual based financing (RBF) that disburses funds to a financing gap was then estimated as the difference recipient upon the achievement and independent between annual cost of CSAIP and available funds verification of pre-­ agreed results such as supporting CSA-­related expenditures. emissions reduction. RBF flows can serve as an additional revenue stream for climate projects. A 166. Lesotho can benefit from climate finance given recent example from Zambia is shown in box 5.2. its vulnerability to climate risks. Climate finance refers to all financial flows that help achieve climate related programs and 168. The main funders of CSA-­ change adaptation and mitigation objectives. It can projects in Lesotho include the World Bank and the be instrumental in supporting Lesotho’s agriculture African Development Bank (AfDB), as well as bilateral sector in three main ways. The first way is meeting the funding institutions, such as IFAD, United States gap in financing or increasing the attractiveness of an Agency for International Development (USAID), investment to leverage financing from other sources. U.K. Department for International Development The second way is reducing risks associated with (DFID), and the European Commission, while an agriculture project either by reducing the overall United Nations agencies such as FAO, UNDP, and financing requirement or through providing climate United Nations Environment Programme (UNEP) finance in the form of risk mitigation instruments, have also contributed financially and technically. such as guarantees. The third way in which climate Lesotho, however, has not yet accessed some of the finance could support Lesotho’s agriculture sector is major international climate finance instruments, using it to finance interventions that systematically such as the GCF and the AF, and more could be done reduce the transaction cost associated with CSA at to ensure access to these instruments. Lesotho may the sector level. The sources of climate finance can adopt a blended finance approach in which public FIGURE 5.5: CUMULATIVE ANNUAL PROPORTION OF FUNDS UNDER EXISTING AGRICULTURAL PROJECTS AND CSAIP FINANCING GAP Available fund Financing gap 350 300 250 $ million 200 150 100 50 0 Year 1 Year 2 Year 3 Year 4 Year 5 Source: Authors. 78 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE 5.6: SOURCES OF FINANCE FOR CSA Potential sources of financing for CSA UNFCCC National and Multilateral Market-based financial Bilateral funding regional climate funding funding mechanism funds German Global National Climate Development Bank Clean Development Environment World Bank Funds (NCFs) and (KfW)–International Mechanism (CDM) Facility (GEF) Regional Climate Climate Initiative Funds (RCFs) are mechanisms that support countries to Japan’s Fast- Voluntary carbon manage their GCF IFAD-ASAP Start Finance markets (VCM) engagement with climate finance by facilitating the collection, blending, Least Developed and coordination of, Millennium Countries Fund and accounting for, UN-REDD Challenge (LDCF) and Special climate finance. Corporation Climate Change Fund (SCCF) AfDB AF Source: Adapted from http://csa.guide. Note: ASAP = Adaptation for Smallholder Agriculture Programme; UNFCCC = United Nations Framework Convention on Climate Change; UN-REDD = United Nations Programme on Reducing Emissions from Deforestation and Forest Degradation. BASED CLIMATE FINANCE TABLE 5.13: EXAMPLES OF UPFRONT AND RESULT-­ Upfront Climate Finance Results-­based Climate Finance 1 Adaptation Fund 1 Transformative Carbon Asset Facility (TCAF) 2 Global Environment Facility (GEF) 2 Forest Carbon Partnership Facility (FCPF) 3 Green Climate Fund (GCF) 3 BioCarbon Fund (Bio-CF) 4 Special Climate Change Fund (SCCF) 4 Bio-CF Initiative for Sustainable Forest Landscape 5 Least Developed Countries Fund (LDCF) 6 Pilot Program for Climate Resilience (PPCR) 7 Climate Investment Funds Climate-Smart Agriculture Investment Plan for Lesotho 79 BOX 5.2: CARBON PAYMENT SUPPORTS CSA ADOPTION IN ZAMBIA Recent years have not been easy for smallholder farmers in Eastern Province of Zambia due to high weather variability. Traditional farming practices, as well as lack of access to improved production technologies and affordable inputs, have resulted in crop production shortfalls. Farmers have pursued unsustainable agricultural practices to help them cope, which have created several landscape challenges including deforestation, soil erosion, nutrient depletion, and biodiversity loss. This led to the launch of the Community Markets for Conservation (COMACO) Landscape Project in the Eastern Province. The COMACO Project illustrates successful partnership in landscape management involving the private sector (COMACO), the Government of the Republic of Zambia, and the World Bank. The project covering 270,000 hectares is a model for rural development that uses inputs, technologies, and markets to help smallholders achieve food security and boost incomes, while conserving the natural resources they rely on. COMACO model’s premise is that with the right incentives and training, smallholders will favor CSA practices over unsustainable traditional methods, especially if basic food and income needs are met. Through contract farming, COMACO offers above market prices for crops that are produced in compliance with sustainable soil, farming, and conservation agriculture practices. Farmers are recruited and organized into cooperatives by COMACO. They then receive training and inputs to implement CSA practices using the lead farmers extension approach. CSA practices disseminated through the project include Agroforestry: planting crops in alleys of Gliricidia, a fertilizer tree that fixes nitrogen in soils; mulching and crop residue retention (no burning of biomass); crop rotation and diversification with legumes; and composting. Through contract farming arrangement, COMACO provides markets for crops produced by farmers. In addition, REDD+ activities are being implemented on more than 116,000 hectares of community forests. The project beneficiaries stretch across nine chiefdoms in the province. Land use plans are developed for communities and rules for forest conservation enforced. COMACO finances farmers’ recruitment, training, activities monitoring, supervision and other implementation costs. The World Bank offers technical support in project preparation that include emissions reduction feasibility assessment, baseline preparation, and verification and purchase of emissions reduction was generated by the project through a BioCarbon Trust Fund (Payment for Results). There are no upfront investment costs. In 2017, 18,000 smallholder farmers and participating communities received over $800,000 in carbon payments from the BioCarbon Fund (https://www.biocarbonfund.org/) for 228,000  tons of carbon dioxide equivalent emission reductions verified by international standards. The project provides evidence that climate mitigation and socioeconomic development can be simultaneously achieved through active participation of local communities and policy measures that generate tangible benefit to the communities. The Zambia Integrated Forest Landscape Program is scaling up the COMACO approach and expanding the beneficiary group to more than 250,000 smallholder households over the 14 districts in the Eastern Province with an expected carbon payment of up to US$30 million if net results on reducing deforestation and emissions are achieved. sector finance is used to crowd in private investment the RL pathway, the cumulative financing gap for its CSA Program. Blended finance can be effective amounts to US$34  million in year 1, increasing to in catalyzing investments in situations where perceived US$211.5 million by year 5 (figure 5.5). risk is higher than actual risk, which is especially true for new sectors and projects with which investors do not 170. Lesotho CSAIP may benefit from the use of have prior experience. blended finance, that is, the use of public sector finance to crowd in or scale up private investment 169. In estimating the CSAIP financing gap, the report for the CSAIP (table 5.15). Blended finance can be considered existing agricultural projects with particularly effective in catalyzing investments in related expenditures and the duration of CSA-­ sectors where perceived risk is higher than actual such projects. The total cost of existing projects is risk, which is especially true for new sectors and $137  million with about 42  percent funded by the projects with which investors are unfamiliar. Blended World Bank (table 5.14). Assuming Lesotho pursues finance can also help deliver enhanced development 80 Climate-Smart Agriculture Investment Plan for Lesotho RELATED EXPENDITURE TABLE 5.14: AGRICULTURE PROJECTS WITH CSA-­ Project name Funding source Financing period Total budget US$ million SADP-AF WB 2018–2020 10 SADP-II WB, PHRD 2019–2026 52 WAMPP IFAD 2015–2022 39 Reducing Vulnerability from Climate Change in the LDCF 2015–2020 36 Foothills, Lowlands, and the Lower Senqu River Basin Total 137 TABLE 5.15: POTENTIAL SOURCES OF FUNDING FOR CSAIP DELIVERY MECHANISMS Delivery mechanisms Possible sources of finance Efficient irrigation technologies and institutions IFAD, IFC, IDA, set up PPPs with assistance of development partners Pluralistic extension services and FFS IFAD, AfDB Market linkages IFC, MCC, set up PPPs with assistance of development partners, GCF, other climate funds Participatory SLM NDC Partnership, GEF, UNCCD, European Commission, GCF, UNDP Agricultural research and innovation BMG, AfDB, IDA Digital solutions and services GFDRR, IDA, set up PPPs with assistance of development partners Source: Authors Note: UNCCD = United Nations Convention to Combat Desertification. impacts. In the case of the six delivery mechanisms, forestry, soil conservation, water, and rangeland the following financing strategies are proposed. management. 2) Improve knowledge management systems Policy recommendations 171. Scaling up CSA in Lesotho will require changes in 173. Several climate-­smart technologies are policy and environment. Policy actions to support knowledge-­ intensive, and promoting their effective delivery of CSA in Lesotho are outlined adoption will require well designed, inclusive, below. and innovative knowledge management systems. The priorities are to strengthen farmers’ knowledge 1) Establish nationally owned CSA Program of CSA practices, facilitate sharing the techniques, and provide the greatest support to local and 172. CSA requires judicious policy management: indigenous knowledge systems, such as the MFS. proper coordination between agencies across This will result in more robust knowledge systems different sectors at central and local levels. CSA and farmer-­ led approaches. The use of co-­ learning needs to shift beyond development practitioners to and co-­management strategies involving scientists involve government agencies more often. Nationally and farmers is a way to do this. Scientific experts and owned climate-­ smart agricultural policies and farmers working closely together will, in turn, lead to action frameworks tend to increase the adoption of mutual accountability. CSA technologies. Lesotho’s national CSA program should also incorporate sustainable landscape 3) Foster equitable access to land management approaches for better management of agricultural production and ecosystem services. This 174. Secure land rights are necessary for climate-­ will involve multidisciplinary teams from agriculture, smart agriculture, providing incentives for local Climate-Smart Agriculture Investment Plan for Lesotho 81 communities to manage land more sustainably. smart agriculture cannot 177. The goals of climate-­ Customary land rights and gender equality need to be be met without policies and initiatives that recognized. Fast, effective, and low-­ cost approaches encourage agricultural innovations and research, involving the use of satellite images, global positioning and establish stronger linkages between farmers, systems, and computerized data management climate-­ smart supply chains, and markets. There technologies to access, register, and administer land is a need to strengthen research and establish rights are needed. Improving land governance—­ the partnership with CGIAR and other international way land rights are defined and administered—­ can research institutes to develop high-­ yielding, stress-­ be the missing link between land availability and tolerant, climate-­ ready varieties that are adapted sustainable agricultural development. to Lesotho’s environment. Development of heat-­ tolerant varieties is of importance given the projected 4) Establish Strategic Food Reserve Agency increase in warming for Lesotho. Agricultural extension services should be upgraded to catalyze 175. Lesotho needs to establish a Food Reserve Agency the agricultural innovation process and bring the to support food security policies and social safety actors together, coordinate and create networks, net mechanisms. The Food Reserve Agency will help facilitate access to information, knowledge and ensure a reliable supply and meet local shortfalls in expertise, and provide technical backstopping. the supply of agricultural commodities critical to food security. The Agency can also help the country 7) Create enabling environment for private meet food emergencies caused by drought, floods, sector hail, or any other natural disasters, manage food storage facilities, stabilize food prices, and provide 178. Introducing policies and incentives that provide relevant market information and agricultural credit an enabling environment for private sector scale farmers. facilities to small-­ investment can increase overall investment. 5) Realign agricultural support to promote CSA Public investment can be used to leverage private investment in research and development, 176. There is a need to realign agricultural support establish agroforestry, promote afforestation, and to break adoption barriers and promote CSA. It develop improved seeds and seedlings. Bundling is vital that government policies and investments agricultural credit and insurance together and address the demand and supply sides of agricultural providing different forms of risk management, input use. Reversing land degradation and improving such as climate information services, index-­ soil health in Lesotho will require increased but based weather insurance, or weather derivatives, targeted use of fertilizers and other inputs. This, are areas of private investment that can be in turn, will require building sustainable private encouraged through public policy and public-­ sector-­led input markets. However, progress in private partnerships. improving input distribution systems is likely to be 8) Build Capacity to Access Climate Finance unsustainable without strong, effective demand for the inputs. Effective demand can only be assured if 179. Lesotho faces a financing gap in the agriculture farmers have access to reliable markets to sell their sector with low capacity to access climate finance. products at a profit. Thus, both demand- and supply-­ Critical areas that need capacity development include side interventions are needed to strategically break identifying funding gaps and needs; assessing public the adoption barriers associated with climate-­smart and private financing options; developing payment practices. Examples of demand-­ side interventions for ecosystem services programs; developing are improving farmers’ ability to purchase inputs bankable investment plans, project pipeline, and and providing them with risk management tools. financing propositions; and developing financially Examples of supply-­ side interventions include viable opportunities for effective private sector improving road and rural infrastructure to lower engagement. transport costs and developing market information systems to reduce information cost. Table 5.16 provides information on specific measures 6) Strengthen agricultural research and under each policy option, responsible authorities, extension and time frame for implementing the measures. 82 Climate-Smart Agriculture Investment Plan for Lesotho TABLE 5.16: LESOTHO CSA POLICY MEASURES AND TIME FRAME FOR IMPLEMENTATION Time Responsible authorities frame Establish nationally owned CSA Program (i) Establish Lesotho CSA Program to guide Short Department of Planning and Policy Analysis of the implementation of CSA and landscape approaches, Ministry of Agriculture and Food Security; Ministry of strategies, practices and technologies Development Planning; Ministry of Forestry, Range and Soil Conservation (ii) Update irrigation policy and support policy planning Medium Department of Planning and Policy Analysis of the for mainstreaming CSA Ministry of Agriculture and Food Security (iii) Introduce evidence-based policies and institutional Short– Department of Planning and Policy Analysis of the strengthening for CSA Medium Ministry of Agriculture and Food Security Develop knowledge management system (i) Establish CSA Knowledge Portal Medium– Department of Agricultural Research; Department Long term of Crop Services; Department of Livestock all of the Ministry of Agriculture and Food Security; Lesotho Meteorological Services; National University of Lesotho (ii) Promote inclusive Climate Information Services and Medium– Department of Field Services; Lesotho Meteorological Advisories Dissemination Platform Long term Services; Ministry of Science and Communications; ICT Service Providers (iii) Document MFS practices and integrate with modern Short Department of Field Services; Department of Agricultural science Research; Machobane Agricultural Development Foundation; National University of Lesotho Foster equitable access to land (i) Develop cost-effective approaches for managing land Medium Land Administration Authority rights (ii) Document different types of land rights supported by Medium Land Administration Authority stakeholders (iii) Identify opportunities for commercial farming Short Land Administration Authority; Department of Soil and Water Conservation; Lesotho National Development Corporation (iv) Link land rights to land suitability, soil carbon Medium Land Administration Authority; Department of Soil and and other key parameters of land use using satellite Water Conservation imageries Establish Strategic Food Reserve Agency (i) Set up Food Reserve Agency and define functions: Medium Ministry of Agriculture and Food Security; Ministry of administer the strategic food reserves, facilitate market Development Planning; Ministry of Finance; National development, and manage warehouse/storage facilities Disaster Management Authority (ii) Awareness building on the role of the Agency Short Ministry of Agriculture and Food Security; Ministry of Development Planning; Ministry of Finance; National Disaster Management Authority (iii) Build and manage warehouses and storage facilities Medium– Ministry of Agriculture and Food Security; National for national seed and grain reserve Long Disaster Management Authority (iv) Subsidize seed and grain storage for qualifying Long Ministry of Agriculture and Food Security; Ministry of farmers Development Planning; Ministry of Finance; National Disaster Management Authority (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 83 TABLE 5.16: (Continued) Time Responsible authorities frame Realign agricultural support to promote CSA (i) Policy reform to align agricultural support to Short Ministry of Agriculture and Food Security; Ministry of promote CSA Planning; Ministry of Finance (ii) Establish inputs e-voucher system Short– Ministry of Agriculture and Food Security; Ministry of Medium Planning; Ministry of Finance (iii) Develop market information systems to reduce Short– Department of Field Services of the Ministry of information costs Medium Agriculture and Food Security; Ministry of Small Business Cooperatives and Marketing; Basotho Enterprise Development Corporation Strengthen agricultural research and extension (i) Establish partnership with international research Long term Department of Agricultural Research, Department of institutes and develop high-yielding, stress-tolerant, Field Services, all of the Ministry of Agriculture and climate-ready varieties Food Security; Lesotho Agricultural College , Ministry of Agriculture and Food Security; National University of Lesotho (ii) Upgrade agricultural extension services to facilitate Short– Department of Field Services, Department of access to information and improved technical Medium Agricultural Research, Ministry of Agriculture and Food backstopping Security Create enabling environment for private sector (i) Introduce policies and incentives that provide an Short Ministry of Agriculture and Food Security; Lesotho enabling environment for private sector investment National Development Corporation; Ministry of Small Business Cooperatives and Marketing; Basotho Enterprise Development Corporation (ii) Encourage private financial service providers to Medium Ministry of Agriculture and Food Security; Lesotho tailor instruments that enable farmers who adopt CSA National Development Corporation; Ministry of Small practices to overcome adoption barriers Business Cooperatives and Marketing; Basotho Enterprise Development Corporation (iii) Promote PPP and design innovative risk Medium– Ministry of Agriculture and Food Security; Lesotho management products (bundling credit and weather Long term National Development Corporation; Ministry of Small index insurance, Business Cooperatives and Marketing; Basotho Enterprise Development Corporation Build Capacity to Access Climate Finance (i) Build capacity to identify funding gaps and needs; Long term Ministry of Agriculture and Food Security; Ministry of assess public and private financing options Finance; Ministry of Development Planning (ii) Develop financially viable opportunities for effective Long term Ministry of Agriculture and Food Security; Ministry of private sector engagement Finance; Ministry of Development Planning (iii) Develop results-based financing/ payment for Long term Ministry of Agriculture and Food Security; Ministry of ecosystem services programs Finance; Ministry of Development Planning Source: Authors Note: Short term = 1–2 years; Medium term = 2–5 years; Long term = greater than 5 years 84 Climate-Smart Agriculture Investment Plan for Lesotho BOX 5.3: BEST PRACTICES IN DESIGNING PAYMENT FOR ECOSYSTEM SERVICES The diverse benefits that humans derive from the natural ecosystems are referred to as ecosystem services. Examples include the supply of food, water, and timber (provisioning services); the regulation of climate, air quality, and flood risk (regulating services); essential underlying functions such as soil formation and nutrient cycling (supporting services); and opportunities for recreation, tourism and education (cultural services). The type, quality, and quantity of services derived from an ecosystem is a function of decisions of individuals and communities managing the ecosystem. When the benefits of an ecosystem service accrue mainly to resource managers, as in the production of crops or livestock, private markets usually work relatively well in inducing service provision. However, when the benefits of an ecosystem service flow primarily to others, such as climate regulation or water purification, public interests and the interests of the resource manager may be misaligned. This difference in private and social benefits, or the problem of “externalities,” results in a market failure: individuals will tend to provide too little of the ecosystem service (Jack et al. 2008). Potential policy solutions to externalities problems include: provision of services by government; private contracts between the provider and the recipients; voluntary efforts by individuals, communities and businesses; direct government regulation; and incentive or market-­ based mechanisms in form of charges (for example, taxes and user fees), tradable permits (for example, markets for pollution reduction), certification schemes (for example, eco-­ labels), and payment for ecosystem services (PES). PES is a scheme whereby the beneficiaries provide payment to the providers of ecosystem services. PES provides an opportunity to put a price on previously unpriced ecosystem services, and in doing so brings the ecosystem services into the wider economy (Smith et al. 2013). PES typically involves a series of payments to resource managers in return for a guaranteed flow of ecosystem services over and above what would otherwise be provided in the absence of the payment (figure B5.3.1). FIGURE B5.3.1: LAND MANAGED PRIMARILY FOR AGRICULTURAL PRODUCTION VERSUS LAND MANAGED TO PROVIDE MULTIPLE ECOSYSTEM SERVICES UNDER A PES SCHEME Payments for Business-as-usual – ecosystem services – Land managed to provide Maximum Land managed multiple ecosystem services theoretical primary for through integrated payment agricultural production catchment management. Ecosystem service benefits (e.g. carbon Payment range ($) Additional sequestration, flood external risk management, benefits water quality regulation, biodiversity Private returns conservation) from agriculture Minimum payment Private returns required to cover from agriculture private returns foregone Source: Modified from Smith et al. (2013) PES can be developed at a range of spatial scales including local, catchment, national, and international. In terms of financing, PES can be a public payment scheme in which government pays resource managers to enhance ecosystem services on behalf of the wider public; a private payment scheme featuring self-­ organized private deals in which private payment scheme that beneficiaries of ecosystem services contract directly with service providers; or a public-­ (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 85 BOX 5.3: (Continued) draws on both government and private funds to pay resource managers for the delivery of ecosystem services. The mode of payment can be output-­based, or input based. Output-­based payments are made based on actual ecosystem services provided. For example, payments might be made for a certain level of carbon sequestration, emissions reduction, or a measured increase in biodiversity. Input-­based payments are made based on certain land management activities (practices) being implemented. For example, payments might be made for the creation and maintenance of buffer strips along watercourses, reforestation of degraded land, rangeland conservation or adoption of other CSA practices. Context interacts with PES Policy design to determine the success of PES schemes (figure B5.3.2). Lessons on PES design that may be relevant for Lesotho are indicated below. FIGURE B5.3.2: THE ROLE OF ENVIRONMENTAL, SOCIOECONOMIC AND POLITICAL CONTEXTS ON PES DESIGN AND OUTCOMES Environmental, Outcomes PES Policy Environmental effectiveness socioeconomic and Design Cost-effectiveness political contexts Equity Context dynamics Source: Adapted from Jack et al. (2008) Political and economic feasibility of PES depends on the political power of those who bear the costs and benefits. Ecosystem service providers tend to prefer a PES policy over traditional regulation because a PES approach offers compensation for environmental conservation, and participation is voluntary. However, the overall viability of a PES will be determined by the preferences and power of all relevant stakeholders, including beneficiaries of the ecosystem service, policymakers, financiers, community members, and program administrators. Thus, an important aspect of PES policy design is a process involving negotiating and implementing the PES agreement. To ensure consistency with macroeconomic objectives, it is important to assess the immediate quantitative impact of the PES on the fiscus, including the overall cost, cashflows over the duration of the PES, and how long it could take for costs to be recovered. Managing tradeoffs between cost-­ effectiveness and poverty alleviation. When land that produces a high level of services is held by poor members of the society, then a PES approach may contribute to poverty reduction by paying these landholders for the services they provide. However, PES schemes are likely to make a true improvement in poverty outcomes only if they pay landowners an amount substantially higher than they otherwise could have earned with the land. Minimizing transaction costs. PES schemes are often focused on many individual landowners whose collective activities alter the levels of a given ecosystem service. This may increase policy costs but working with a third-­ party technical service provider such as an NGO or a community could reduce the costs of working with many farmers. Also, participatory processes may help reduce long-­term monitoring and enforcement costs in addition to promoting equity outcomes. Assessing ecosystem services. 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Climate-Smart Agriculture Investment Plan for Lesotho 89 Annex 1: Major Stakeholders Consulted During the CSAIP Process Institutions No. Ministry of Agriculture and Food Security 29 Lesotho Agriculture College (LAC) 16 National University of Lesotho (NUL) 14 Lesotho National Farmers Union (LENAFU) 16 Lesotho Meteorological Services (LMS) 8 Department of Agricultural Research (DAR) 9 Food and Agricultural Organization (FAO) 6 Ministry of Development Planning (MDP) 5 World Food Program (WFP) 5 Catholic Relief Services (CRS) 5 Disaster Management Authority (DMA) 4 Alliance Insurance 3 Bureau of Statistics 3 Lesotho National Development Corporation (LNDC) 3 United Nations Development Program (UNDP) 3 Department of Water Affairs (DWA) 2 Department of Science and Technology 3 European Union (EU) 2 Maseru District Agriculture 2 Red Cross 2 Tasty Food Packers Pvt. Ltd 2 Second Private Sector Competitiveness and Economic Diversification Project (2nd PSCEDP) 1 District Agricultural Officer - Mafeteng (DAO Mafeteng) 1 Central Bank of Lesotho (CBL) 1 Energy Department 1 Finance and Administration 1 International Fund for Agricultural Development (IFAD) 1 Khotla Business Forum 1 (continued ) 90 Climate-Smart Agriculture Investment Plan for Lesotho Institutions No. Lesotho Flour Mills Ltd 1 Ministry of Finance 1 Ministry of Small Business Development, Cooperatives and Marketing 1 Moratuoa Prepakers 1 Ministry of Small Business Development, Cooperatives and Marketing–Department of Marketing 1 Potato Lesotho Association (PLA) 1 Private Sector Development and Economic Diversification Support Project (PSDEDSP) 1 Private Sector Foundation of Lesotho (PSFL) 1 Smallholder Agricultural Development Project (SADP) 1 Wool and Mohair Promotion Project (WAMPP) 1 World Vision Lesotho (WVL) 1 Total 160 Climate-Smart Agriculture Investment Plan for Lesotho 91 Use Scenarios Annex 2: Land-­ Assumptions up area was based on UN projections The demand for built-­ It is assumed that 15,000  ha of cropland will be applied of average annual urbanization rate of 2.85 percent for all with fertilizer and manure. Fertilizer use will increase from scenarios. Cropland under the CT scenario was assumed about 25 kg N per ha under CT to 80 kg N per ha under to grow at the same rate as the population, while water the CZ scenario and 50 kg N per ha under the RL scenario. and barren land were kept static for all the scenarios. Manure use under the CZ and Comparative Advantage scenario will be 5 ton per ha, increasing to about 15 ton Land cover extent and cropland proportions under CT are per ha under the RL scenario. Irrigation of crops under the assumed to be the same as current. Under the CT scenario, CT scenario is 20 percent of irrigable area. Strategies under crop production will be largely by conventional methods the other two scenarios are as indicated in table A2.3. as observed in the Household Production Survey analysis of adoption of agricultural practices. Some 60  percent of grassland under the CT scenario is severely degraded. Some 25  percent of this will be About 40 percent of maize will be under CA under the CT improved through better practices under the CZ scenario, scenario but will increase to 70 percent under the Resilient increasing to 40  percent under the RL scenario. The and Diversified Landscape scenario. The RL scenario also remaining pastures will stay moderately degraded. Some includes agroforestry practices on 30 percent of farmland. 20 percent of forests under the RL scenario will be under managed natural regeneration. Leguminous farmer-­ Improved varieties with a reduction in growing period shrubs will be planted on 70  percent of shrubland for to 90  percent of conventional varieties will be used on the RL scenario and only 10 percent for the CZ scenario. all farmlands under the two scenarios excluding CT. Under the RL scenario, about 25  percent of land that The improved varieties will have advantages for weed would have been cropped under the CT scenario is spared competition, pest resistance, and drought tolerance. To for biodiversity conservation, but none under the CZ address nutrition concerns, the proportion of biofortified scenario. The CZ scenario however includes exploitation crops will be 10 percent for the CZ scenario increasing to of aquaculture and NTFPs (honey, mushroom, aloes, and 40 percent for the RL scenario. rosehip) for exports. TABLE A2.1: LAND COVER EXTENT FOR THE SCENARIOS (HA) BY 2050 Scenario Built-­up Cropland Grassland Shrubland Forest Water Barren Total area land ha % ha % ha % ha % ha % ha % ha % ha % CT 288,372 9.4 774,341 25.4 1,516,379 49.6 232,686 7.6 45,836 1.5 60,710 2.0 133,562 4.4 3,051,886 100 CZ 288,372 9.4 971,241 31.8 1,288,922 42.2 232,686 7.6 76,393 2.5 60,710 2.0 133,562 4.4 3,051,886 100 RL 288,372 9.4 579,939 19.0 1,592,198 52.2 244,320 8.0 152,785 5.0 60,710 2.0 133,562 4.4 3,051,886 100 92 Climate-Smart Agriculture Investment Plan for Lesotho CROPLAND PROPORTIONS UNDER TABLE A2.2:   RRIGATION LAND UNDER THE TABLE A2.3: I EACH SCENARIO (PERCENT) SCENARIOS (HA) Crop CT CZ RL Crop Trend CZ and Resilient and comparative diversified Maize 62 22 35 advantage landscape Sorghum 11 16 20 Potato 500 5,000 4,000 Bean 10 20 10 Fresh 1,500 5,000 4,500 Wheat 7 7 20 vegetables Potato 6 15 7 Orchards 500 2,500 4,000 Fresh vegetables 2 10 4 Total 2,500 12,500 12,500 Orchards 2 10 4 Total 100 100 100 Climate-Smart Agriculture Investment Plan for Lesotho 93 Annex 3: Approach for the CBA The methodology consists of a combination of financial Activity models were constructed with Excel models and economic analyses, in both “with” and “without” CSA which simulate different crops, livestock, and aquaculture investment scenarios. On-­ farm profitability indicators activities, as well as the different household typologies are estimated, considering all inputs used, including operating in the agriculture sector of Lesotho. The labor. Economic values are computed and used in the proposed set of “activity” models considers both analytical models. Based on the targeted land area, “without CSA investments” (that is, “conventional” number of livestock heads, farm typologies, number of farm management) and “with CSA investments” (that households, and the estimated CSA adoption rates, farm is, CSA-­improved farm management). It was assumed models’ results are aggregated to estimate the flow of that following CSA investments, farmers will be able to expected net incremental benefits consequent to CSA switch from conventional to CSA-­ improved technology, adoption (“with” CSA investment scenario) with respect introduce high-­value agriculture activities in their farms, to the baseline (“without” CSA investments scenario). and fully adopt new agricultural activities. Investment costs are estimated from data available in the literature and from previous public investment projects Financial analysis. The financial analysis aimed at in the country. A comparison between overall economic assessing the financial viability of hypothetical CSA costs and benefits of the potential investments is made investments, therefore determining the incentives and overall profitability indicators of CSA are computed, for the target group to engage in CSA. The financial namely EIRR and NPV. The robustness of the economic activity models simulate farm gate budgets of running analysis is measured through a sensitivity analysis which activities, considering revenues, operating costs, and considers the performance of the investment options in margins. Crop “activity” models refer to rain-­ fed and case of changes in the analytical assumptions and risk. irrigated production, depending on the crop. They refer An estimation of the environmental benefits related to 1 ha of cropland. Livestock “activity” models simulate to carbon sequestration is also provided, including an the dynamic of a typical herd (average) over a 20-­ year indication of the environmental impact on the profitability month period. Aquaculture “activity” model refers to a 6-­ indicators EIRR and NPV. The carbon sink associated with production cycle. Production costs include cash inputs the implementation of the CSA practices is evaluated and labor costs. All inputs are valued at market price. using the recommended shadow price of carbon as Both gross and net margins are computed. In addition, indicated by the World Bank and calculated based on the returns to family labor are computed. Financial concept of marginal abatement cost. The shadow price performance indicators computed at the activity level of carbon indicates the carbon price which is consistent are computed before tax. with achieving the core objective of the Paris Agreement on climate change of keeping temperature rise below Economic analysis and estimation of unit benefits. 2°C. The detailed analytical methodological phases are The economic analysis estimates the main quantifiable described below. economic benefits arising from the potential CSA investments, considering the perspective of the society The CBA was applied to “with” and “without” CSA rather than individuals alone. It uses economic prices investments scenarios in which the CT scenario is assumed instead of the financial ones. Table A3.1 shows details to be the without CSA investment scenario and the CZ and about the computation of shadow exchange rate (SER) RL scenarios are the with CSA investment scenarios. and standard conversion factor (SCF). 94 Climate-Smart Agriculture Investment Plan for Lesotho TABLE A3.1: COMPUTATION OF SER AND SCF Average 2016–2017 Source of data US$, millions 1) Total imports (M) 678 World Bank 2) Total exports (X) 1,594 World Bank 3) Import taxes (Tm) 39 World Bank 4) Export taxes (Tx) 148 SER 13.01 SER = (M + X)/[(M + Tm) + (X − Tx)] × OER Official Exchange Rate (OER) 13.66 SCF 0.95 SCF = SER/OER Value added tax (VAT) 0.15 SCF (with VAT) 0.81 SCF with VAT of 15% also applied to all tradable goods Source: Authors. For some key traded goods, specific import/export households cultivate 0.5  ha (Table A3.2). It is assumed parity prices at farm gate are computed with reference to that in the RL scenario, households will have the same international border prices, applying conversion factors amount of land available, while in the CZ scenario, they for each category of costs and eliminating taxes and will become more commercially oriented and will be able transfers. Specifically, import parity prices are computed to expand their cropland to 2.5  ha for instance through for fertilizers which are among key imported items, starting farmer aggregation promoted under the scenario. from the international free on board (FOB) prices at the Therefore, the targets include 122,125 households, or nearest port and considering tariffs and taxes, marketing 23  percent of households in Lesotho, in the RL scenario charges, and transportation costs. Export parity prices are and 28,107 farmer groups in the CZ scenario. Two different computed for major exportable crop commodities. adoption rates for CSA were used as aspirational targets for 2050: 40 percent under the RL scenario and 25 percent The economic analysis computes the net incremental under the CZ scenario. benefits per hectare of land per unit of livestock production. The economic analysis is conducted over a Other sources of benefits including climate information year period, 2020–2050. Net benefits are computed 30-­ services, land titling, and administration needed for after (family) labor costs. proper functioning of the land market, and reduced erosion were also considered in the CSAIP (table A2.4). Benefits from climate information services were estimated Assumptions and through two techniques: benchmarking of disaster risk reduction (Hallegate 2012) and contingent valuation (Lazo computation of the overall 2015). The benchmarking approach was used to estimate direct benefits the order-­ magnitude benefits of reducing damages of-­ The unit economic benefits are aggregated over the total  ISTRIBUTION OF FARM SIZES TABLE A3.2: D number of beneficiaries to estimate the overall flow of IN LESOTHO economic benefits. Inputs for the estimation included Farm Farm sizes Average Proportion cropland area, cropland proportions, and irrigated land category (number of hectares); CA adoption rates (percentage); and ha Ha % livestock proportions (number of heads). The economic Small Less than 1 0.5 66 analysis was performed considering 122,400  ha of Medium 1–4 2.5 28 cropland area in the RL scenario and 111,000 ha in the CZ scenario, corresponding to 15.5  percent and 14  percent Large Greater than 4 6.0 6 of total national cropland area, respectively. On average, Source: Based on Lesotho Household Budget Survey Climate-Smart Agriculture Investment Plan for Lesotho 95 TABLE A3.3: IMPORT PARITY PRICE FOR KEY IMPORTABLE INPUTS Commodity Ureaa Phosphatea Compound Da Unit Financial Economic Financial Economic Financial Economic Price FOB, January 2019 US$ per metric ton 260.00 260.00 102.50 102.50 215.50 215.50 Plus: - Transport, insurance, and US$ per metric ton 53.0 53.0 53.0 53.0 53.0 53.0 freight to Lesotho - Marketing Charges (2.5%) US$ per metric ton 6.50 6.50 2.56 2.56 5.39 5.39 Border cost, insurance, and US$ per metric ton 319.50 319.50 158.06 158.06 273.89 273.89 freight (CIF) price LSL equivalent LSL per metric ton 4,364.37 4,156.26 2,159.13 2,056.18 3,741.30 3,562.91 - VAT (15%) LSL per metric ton 654.66 — 323.87 — 561.20 — - Marketing Charges (2.5%) LSL per metric ton 109.11 103.91 53.98 51.40 93.53 89.07 - Import tariff (13%) LSL per metric ton 567.37 — 280.69 — 486.37 — Wholesale border price LSL per metric ton 5,128.13 4,260.17 2,536.98 2,107.58 4,396.03 3,651.98 - Transport to regional LSL per metric ton 800.00 800.00 800.00 800.00 800.00 800.00 market 2 - Transport to farmgate 3 LSL per metric ton 100.00 100.00 100.00 100.00 100.00 100.00 - Marketing charges (2.5%) LSL per metric ton 128.20 106.50 63.42 52.69 109.90 91.30 Farm Gate Import Price LSL per metric ton 6,156.34 5,266.67 3,500.41 3,060.27 5,405.93 4,643.28 Farm Gate Import Price LSL per kg 6.16 5.27 3.50 3.06 5.41 4.64 % of nutrient in product % 0.46 0.46 0.45 0.45 0.60 0.60 Input subsidy (50%) LSL per kg 6.69 — 3.89 — 4.50 — Farm gate market price LSL per kg 6.69 11.45 3.89 6.80 4.50 7.74 Conversion factor 1.71 1.75 1.72 Source: World Bank 2017. Note: a. Urea: Black Sea, bulk; Phosphate: Casablanca, rock; Potassium: Vancouver, standard grade; b. 200 km @ LSL 4 per km; c. 100 km @ LSL 4 per km. from weather-­related events resulting from the adoption control and drainage, gully control, reforestation, and of the integrated weather and market information natural regeneration of vegetation cover. It is expected that services. The results of contingent valuation of weather such practices are implemented on degraded cropland, services in Mozambique were transferred, correcting and grasslands, and forested land. adjusting for the Lesotho context. Table A3.5 illustrates the conversion of per household willingness to pay (WTP) Following Zhou et al. (2009), we estimated such benefits to Lesotho from Mozambique using simple income ratios considering the amount of avoided soil loss due to and then aggregating to national benefit estimates. erosion (estimated under both the RL and CZ scenarios) and using the average U.S. dollar value indicated in Zhou Following World Bank 2011 report on Rising Global et al. (2009), adjusted to the Lesotho context through the Interest in Farmland, benefits from land titling were benefits transfer approach. Additional indirect benefits assumed to be 9 percent of the average gross revenues for from reduced grassland degradation could also include the crops modeled in the analysis (Deininger et al. 2011). better livestock feeding consequent to improved pastures. The benefits were from reduced land degradation and soil However, to be conservative in the overall benefits from loss resulting from the implementation of SLM practices, reduced erosion and land degradation estimation, such including terraces and other physical measures, flood benefits are not included in the estimates. 96 Climate-Smart Agriculture Investment Plan for Lesotho TABLE A3.4: EXPORT PARITY PRICE FOR EXPORTED OUTPUT Commodity Unit Merino wool Financial Economic FOB price at port of arrival US$ per metric ton 11,000.00 11,000.00 Maritime fret US$ per metric ton 50.00 50.00 International insurance (2% of FOB price) US$ per metric ton 220.00 220.00 Exchange rate LSL per US$ 13.66 13.01 CIF price at port of departure LSL per metric ton 147,254.80 140,233.21 Export duties (10% of CIF) LSL 14,725.48 0.00 Handling (2.5% of CIF) LSL 3,681.37 3,681.37 Storage fee (1% of CIF and duties) LSL 1,619.80 1,402.33 Port fee (50% of the storage fee and handling fee) LSL 2,650.59 2,541.85 Transportation cost from port to farm LSL per metric ton 22,088.22 22,088.22 Price at the farm gate (LSL per ton) LSL per metric ton 102,489.34 110,519.43 Price at the farm gate (LSL per kg) LSL per kg 102.49 110.52 Conversion factor 1.08 Source: Authors  ENEFITS FROM CLIMATE INFORMATION SERVICES, LAND ADMINISTRATION, TABLE A3.5: B AND EROSION CONTROL Benefits from climate information services Benchmarking calculation of benefits from improved Lesotho information services GDP, 2017 US$, millions 2,600 Vulnerability factor % 1% Loss reduction factor % 26% Benchmarking benefit estimate (national) US$, millions 6.63 Benchmarking benefit estimate for agricultural sector at 5.8% US$, millions per year 0.38 Conversion of Mozambique contingent valuation parameters to Lesotho context Lower Middle Upper Mozambique annual WTP (US$) 0.53 1.16 2.62 GDP per capita (current US$) Mozambique (2017) 416 606 606 Lesotho (2017) 1,181 1,181 1,181 Income ratio: Lesotho versus Mozambique (2013) 2.84 1.95 1.95 Adjusted Lesotho annual WTP 1.51 2.26 5.11 Number of CSAIP households RL scenario 120,866 120,866 120,866 (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 97 TABLE A3.5: (Continued) CZ scenario 28,107 28,107 28,107 CSAIP WTP (US$ per year) RL scenario 181,982 273,246 617,158 CZ scenario 42,319 63,542 143,517 RL scenario CZ scenario Total climate information services US$, thousands per year 1,001.70 528.06 Benefits from improved land titling and administration Costs US$, thousands per year 2,000.00 RL scenario CZ scenario ha 122,400 111,000 Value of gross revenue % 9% Average gross revenue crops Lesotho US$ per ha 2,915 Total benefits 000 $ 32,107 29,117 Benefits by year US$, thousands per year 6,421 5,823 Benefits by year US$ per year 6,421,481 5,823,402 Benefits from reduced land degradation and soil loss CT RL CZ Soil loss due to erosion ton per ha 13 12 13 Save ton per ha 1.7 0.5 Save US$ per ha 15.4 4.5 Save overall US$, thousands 1,881 500 Save by year US$, thousands 376 100 Save by year US$ 376,111 100,078 98 Climate-Smart Agriculture Investment Plan for Lesotho Annex 4: LesAgMod Use and Limitations Computer simulation models are widely used to support level. It is not intended to be used to support real-­time a range of policy decisions, planning processes, and operations. Model results are best interpreted using environmental review. With the prevalence of models various statistical measures such as long-­term averages. to support such efforts, it becomes important to identify the purpose for which models are developed, LesAgMod divides Lesotho into 74 sub-catchments and appropriate model use, model limitations, and to guide uses an annual timestep to estimate changes in land the interpretation of model results. use over the simulation period and a monthly time step for estimating agricultural production. The model necessarily simplifies the depiction of streamflows by Model objectives aggregating surface water diversions, return flows, surface runoff, and groundwater inflows to the stream network. LesAgMod has been developed by the World Bank to Only downstream from these points of aggregation will support the Government of Lesotho’s effort to plan for LesAgMod accurately simulate streamflows. Operational investment in climate smart agriculture. The model may requirements that affect day-­ day management of to-­ be used to inform the following types of analyses: water infrastructure are not included in the model, such as timed reservoir releases or daily irrigation scheduling. • Estimate the impact of climate change on agricultural Average monthly flows may not accurately represent production in Lesotho operations that respond to daily variability in water • Estimate the socioeconomic implications of changing conditions. Therefore, disaggregation of model results agricultural land use and management practices in at the monthly time scale to finer time scales should be Lesotho undertaken with caution and may not be an appropriate • Estimate greenhouse gas emissions from agriculture use of the model. under different management regimes. It is intended that LesAgMod be transparent, easy to use, Computational method and freely available. The WEAP software and its GUI were designed to facilitate a shared model vision. However, LesAgMod uses a Linear Programming (LP) solver to the LesAgMod application is complex and requires the solve a series of equations that seek to maximize an model user to be familiar with modeling concepts and objective function that will best allocate land and water the agricultural context within Lesotho. Additionally, resources in a manner that maximizes farmer profits. This LesAgMod requires a significant investment of time to set of equations also includes physical and operational become familiar with the schematic, properties of objects, constraints of the system, such as constraints on the and interpretation of model results. availability of suitable land within each sub-­catchment and across Lesotho as a whole. The LP solver does not optimize across multiple time steps Interpretation of model or across multiple objectives (that is, it is not formulated results period optimization). Rather, the LP solver runs as a multi-­ annual to allocate available and water resources within LesAgMod is a long-­ term planning model developed the system that maximizes profit based on estimates of national for planning analysis at the national and sub-­ crop prices and cost of production. Objectives achieved Climate-Smart Agriculture Investment Plan for Lesotho 99 for a given time step are enforced as constraints in all 5. The estimation of area planted within each sub-­ successive iterations. catchment is assumed to be based on a profit maximization and does not consider institutional or cultural constraints to agricultural expansion or Some model limitations contraction. 6. Cost of inputs are assumed to apply uniformly across As with any computer-­ based, mathematical model that is Lesotho and are thus not represented at the sub-­ trying to represent and provide new insights to physical catchment level. and socio-­economic systems, there are limitations of the 7. The model assumes a rate of potential growth or model in terms of what it represents and the information contraction of planted area at the sub-­catchment level it can provide. LesAgMod is no different. Some of the for each of the commodities. The rate varies among model limitations include: the commodities, but the same rate is applied to each sub-­catchment. 1. The model primarily represents the production side of 8. Cropped area that is designated as “under-­production” the agricultural systems of Lesotho, with demand not within a sub-­ catchment is assumed to be actively explicitly accounted for. cropped. This means that while total crop production 2. Only the seven primary crops of Lesotho are considered can change from year-­ year due to changes in yield, to-­ in the model, and thus other crops that might become cropped area expands or contracts in a relatively more important in the future cannot be considered. continuous manner from year-­ year. Indiscriminate to-­ 3. In terms of crop and livestock production inputs, input crop fallowing is not considered. substitution is not explicitly modeled (for example, 9. Planting and harvest dates are defined exogenously labor cannot be substituted for fertilizer to achieve the for  each crop and are assumed to apply the same to same yield). all sub-­catchments. 4. Livestock profit optimization is currently not modeled, rather livestock value is estimated simply as the net benefit. 100 Climate-Smart Agriculture Investment Plan for Lesotho Annex 5: Land Suitability Evaluation for Lesotho Land suitability evaluation is a process used to determine In addition, an agricultural versatility map was produced to the potential of land for different kinds of land use. identify the areas of Lesotho that are suited for a diversity It entails matching the inherent characteristics of of crops, where each of the seven digital land suitability land with the requirement of the envisaged use. Land maps for orchards, vegetables, beans, wheat, maize, suitability evaluation is central to land-­use planning and potato, and sorghum were combined within a GIS. Each development because it informs resource managers about suitability class was assigned a numerical value where the suitability of parcels of land and their limitations in the Highly suitable = 3; Suitable = 2; Moderately suitable = 1; quest for ensuring long-­term productivity and sustainable and Not suitable = 0. Theoretically, the additive grids use of the land. for all seven spatial map surfaces therefore should have a range between 0 (implying a pixel is not suitable to Climate, topography, and soil characteristics are the all crops) and 21 (implying a pixel is highly suitable to all principal factors governing agricultural land suitability crops). Considering, however, the fact that some land in Lesotho. The land suitability technique applied was areas are not highly suitable or even suitable for some a parametric method that rated the land characteristics crops in Lesotho, the actual maximum for the range is 16. based on the requirements of a given crop on a scale The resultant Agricultural Versatility Map was classified ranging from 0 (not suitable) to 100 (highly suitable) into four classes: Least versatile (versatility index = 0–2); within a geographical information system (GIS). The index Moderately versatile (versatility index = 3–5); Versatile of productivity for each pixel of land was calculated using (versatility index = 6–8); and Highly versatile (versatility the equation index = 9–16). The agricultural versatility map is useful for investors looking at land suited to a wide variety of B C D crops, and to inform protection of agricultural land from IP = A * * * , non-­ agricultural development. It can be used to target 100 100 100 interventions such as crop intensification, diversification, and natural regeneration of trees and other vegetation. where A is the overall lowest characteristic rating, and B, C, and D are the lowest characteristic ratings for each land The land suitability and versatility maps are shown in quality group. The land quality groups considered in this figure A5.1. study are climate, topography, soil physical properties, and chemical fertility. Four land suitability classes and their respective IP values for each crop were defined: Highly suitable (75–100); Suitable (50–74); Moderately suitable (25–49); and Not suitable (0–24). Climate-Smart Agriculture Investment Plan for Lesotho 101 FIGURE A5.1: LAND SUITABILITY AND VERSATILITY MAPS Suitability map for orchards (apples, peaches, apricots) Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hack Quthing Not suitable Moderately suitable Suitable Suitability map for potato Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hack Quthing Not suitable Moderately suitable Suitable Highly suitable (continued ) 102 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE A5.1: (Continued) Suitability map for vegetables (cabbage, spinach, lettuce) Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hack Quthing Not suitable Moderately suitable Suitable Highly suitable Suitability map for beans and pulses (Kidney beans, Fortified beans, Chickpea) Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hack Quthing Not suitable Moderately suitable Suitable Highly suitable (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 103 FIGURE A5.1: (Continued) Suitability map for maize Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hack Quthing Not suitable Moderately suitable Suitable Suitability map for wheat Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hack Quthing Not suitable Moderately suitable (continued ) 104 Climate-Smart Agriculture Investment Plan for Lesotho FIGURE A5.1: (Continued) Suitability map for sorghum Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale’s Hack Quthing Not suitable Moderately suitable Suitable Agricultural versatility map Butha-Buthe Leribe Berea Mokhotlong Maseru Thaba-Tseka Mafeteng Mafeteng Qacha’s Nek Mohale's Hoek Agricultural versatility index Quthing Least versatile Moderately versatile Versatile Highly versatile Source: Authors Climate-Smart Agriculture Investment Plan for Lesotho 105 Annex 6: Critical Investments for Lesotho’s Agricultural Transformation Based on modeling and consistent with Lesotho’s NDC I. Improve water management in rainfed and plan and agricultural policies, a set of integrated solutions irrigated agriculture crucial to transforming Lesotho’s agricultural sector were identified. The solutions were also validated with Lesotho Enhanced and efficient water management is a key stakeholders and are consistent with the country’s NDC factor for adaptation and increasing the efficiency of (box A6.1), NSDP II, and other agriculture-­related policies. other CSA measures. The recent Climate Risk Assessment BOX A6.1: CSA OPTIONS ARTICULATED IN LESOTHO’S NDC The following practices are indicated in the Lesotho NDC with reference to agriculture and related vulnerable sectors (see NDC 2017, table 2, page 10): Agriculture sector • Diversify livestock; improve range management; increase access to drought resistant crops and livestock feeds; adopt better soil management practices; provide early warning/meteorological forecasts and related information. • Increase use of irrigation systems that use low amounts of water; increase rainwater and sustainable ground water harvesting for use in agriculture; increase planting of native vegetation cover and promotion of re-­ greening efforts; and intensify crop and livestock production. • Build adaptation capacity in climate resilient agronomic practices for smallholder farmers • Promotion of climate-­smart agriculture (Agro-­meteorology) • Support an expanded program of constructing multipurpose dams for irrigation and aquaculture • Promote innovations in post-­harvest storage and food processing • Promote the growing of drought-­tolerant and heat-­tolerant crop varieties and hardy livestock • Implement CA and agroforestry practices • Adjustment of planting dates and crop variety; crop relocation; improved land management, for example, erosion control and soil protection through tree planting Water sector • Implement integrated catchment conservation and management program • Expanded rainwater harvesting; water storage and conservation techniques; water re-­ use; water-­use and irrigation efficiency • Support an expanded program of constructing multipurpose dams to enhance water storage • Support the revision of water-­related policies and strategies • Establish a national integrated water resource management framework that incorporates district and community-­based catchment management Land use sector • Integrated approach to Sustainable Land Use Planning and Management • Promote improved land use practices 106 Climate-Smart Agriculture Investment Plan for Lesotho (Impact Mapping) identified this as an extremely high for updating soil capability and suitability assessment, potential contribution to improving smallholder farmers’ soil survey mapping, dissemination of soil and crop resilience. The CSAIP will promote off- and on-­ farm suitability products, data generation, and database investments in hydraulic infrastructure to restore and management). improve water distribution and reduce losses, improve (b) Promote soil testing services to deliver soil health water use efficiency, and increase and regulate water solution packages to farmers in a commercially viable access management and governance for household way. consumption and agriculture production, particularly in (c) Establish fertilizer blending facilities to produce areas of high agricultural potential. Farmers will increase fertilizers that are compatible to needs. adoption of irrigation and expand cultivation of high-­ (d) Build institutional capacity for integrated soil fertility value crops (for example, irrigated vegetable and fruit management. production). Increased water availability will also create opportunities for aquaculture investments. The CSAIP The fertilizer blending facilities will be promoted as joint investment activities will include ventures between farmer organizations, private firms, and the government (central and district) and may over (a) Water harvesting promotion (for example, rainwater time transfer their shares to the public through equities runoff collection, through provision of household or debts. surface ponds to receive runoff water from adjoining lands and roof water gutters and tanks); Livestock is Lesotho’s main agricultural subsector with (b) Restoration/modernization/construction of hydraulic wool and mohair contributing more than 50  percent of infrastructures (for example, reservoirs, weirs, agricultural exports. The short-­ cycle stock (chicken and dams, dikes, wells/boreholes, canals, and livestock pigs), especially kept by women, contribute significantly watering points); rehabilitation and modernization to household food security. Cattle rearing is a source of of existing small-­ scale gravity/manual/motorized draft power, milk, fuel (dung), and meat. To improve irrigation schemes; repair or replacement of the resilience and productivity of the local production headworks, conveyance system canals and pipelines, of meat, milk, wool, and mohair, while reducing GHG and irrigation system structures and installations, emissions per unit of produce, the CSAIP will finance three including water-­saving systems such as drip irrigation; key interventions: improving access to better livestock supply and installation of distribution and on-­ farm breeds (for example, introduction of heat-­tolerant breeds, pressurized and/or pipeline systems; and auxiliary promoting AI technologies for increased productivity, irrigation equipment, including groundwater selection of low methane-­ producing animals, and abstraction systems where technically feasible; and supporting the development and implementation of (c) Implementation of sustainable water management the regulatory framework for animal genetic resources practices through capacity building at farmers’ level. improvement), improving animal nutrition (for example, developing and disseminating animal nutrition rations Most of these practices will also contribute to land for livestock value chains; supporting the enforcement conservation and soil erosion reduction through retarding of quality standards for industrial animal feeds; and runoff flows. supporting the production of better grasses and legumes and distribution of climate-­ ready forage seeds, that is II CSA approaches for crops, livestock, and drought-­ tolerant feed crops, such as cowpeas, sorghum, aquaculture maize, and soybeans to targeted livestock small-­ scale producers. The project will also support the incorporation Given the declining soil fertility levels in Lesotho and of dietary supplements in livestock feeds) and improving its adverse impacts on agricultural productivity and access to animal health services (for example, improved the critical need to build climate resiliency, this CSAIP veterinary services and animal disease surveillance and component will also provide investment support for soil enhanced prevention and control of animal diseases). fertility management interventions as follows: III. Promote market access for farmers (a) Develop the Lesotho Soil Information System to disseminate information on nutrient status and The CSAIP will strengthen the role of the private sector agricultural potentials of soils (for example, support in CSA implementation and will contribute to the Climate-Smart Agriculture Investment Plan for Lesotho 107 development of agribusiness models with smallholders. management tools to enable farmers to better manage Activities to be promoted include the following: production and marketing and mitigate environmental risks. (a) Development of Agriculture Clusters Service Enterprises (ACSEs) as drivers of commodity value Achieving growth among smallholder farmers has always chains. These enterprises will own food processing required access to timely, cost-­ effective, and personally and storage plants and will be set up as joint ventures relevant information on improved agricultural practices, between farmer organizations, private operators, and markets, prices, inputs, and weather―and news of the government (central and local); impending disasters. Integrating information on weather (b) Development of Market Hub Enterprises (MHEs) as and markets into planning for adaptation and sustainable drivers of food distribution system transformation. agriculture entails the following: MHEs will own and operate food market hubs equipped with adequate infrastructure close to major • The use of modern tools for climate data sourcing cities. They will be specialized in aggregating priority and analysis, including automatic meteorological food commodities and distribution to wholesalers. measurements and satellite data products on a near MHEs may be promoted as joint ventures between real-­time basis; ACSEs, banks, private firms, and the government • Analysis of weather risks and assessment of impacts (central and local) and may over time transfer their using advanced crop-­weather interactions modelling; shares to the public through equities or debts; • The formulation of highly practical advice that famers (c) Promotion of the aggregation of smallholder farmers can apply directly to their operations; and into upgraded commodity value chains. This builds • Dissemination of weather and market advisories to on the fact that smallholder inclusion in value chains farmers using modern information and communication is critical for poverty reduction, food and nutrition technologies. security, and resilience; (d) Pilot weather index insurance to manage risks It is important to develop agroweather forecasting associated with adverse weather events. Agricultural and dissemination tools and a marketing information meso-­ level operators, such as farmers’ associations, system to help farmers address the challenges of climate input providers, financial service providers, and variability and change and enhance their resilience. processors represent an optimal channel to reach Agroweather tools will improve long-­ term capacity for many smallholder farmers and could result in better CSA and sustainable agricultural intensification under management of agricultural risks through developing changing climatic conditions. An integrated agroweather innovative links (for instance, access to farm inputs and market information systems development under the and credits) along the supply chain and improving CSAIP will involve three activities: quality of weather index insurance products and promoting commercial scalability; • Improve agrometeorological forecasting and (e) Promotion of food quality standards, enhancement monitoring. of import and export policies, improvement of • Develop climate-­ smart, agroweather, and market regulatory and legal framework for the private sector, information system and advisories using ‘big data’ and building of technical and institutional capacity of analytics. service providers; and • Build institutional and technical capacity for (f) Postharvest management, which is key to reduce agrometeorological observation, forecasting, agricultural postharvest losses, which could be problematic statistics, and market advisory dissemination. especially due to climate change (increase in pests and diseases and increase in losses due to extreme IV. Sustainable landscape and integrated catchment climatic events). management This component also includes support for an integrated Investing in improved land management, such as with agroweather and market information system and advisory conserving technologies, will also considerably resource-­ services. Managing climate variability is fundamental to improve on-­ farm water productivity in both rain-­ fed a long-­ term strategy for adapting agriculture to climate and irrigated agricultural systems (Bossio et  al. 2010). change in Lesotho. There is a need to expand risk Soil management practices to improve infiltration and 108 Climate-Smart Agriculture Investment Plan for Lesotho soil water storage (such as zero till) can boost water (b) flood control and drainage measures, for example, use efficiency by an estimated 25–40  percent, while rock catchment water harvesting and runoff/floodwater nutrient management can boost water use efficiency by farming; and (c) gully control measures, such as gully 15–25 percent (Hatfield, Sauer, and Prueger 2001). Pretty erosion management, reshaping of gully erosion through et al. (2006) suggest that improved land management is integration of silt fences, erosion blankets and brush one of the most promising ways of increasing on-­ farm packing, and stone wall check dams. Such structures water productivity in low-­ fed systems. yielding rain-­ will require from one to five years to be established and Therefore, the CSAIP will adopt a landscape approach to mostly annual maintenance interventions. The CSAIP will improve crop, livestock, and aquaculture production in consider both the establishment and the maintenance the context of rural development and enhancement of costs. The CSAIP will also address land degradation household livelihoods, restoration of degraded land, and through vegetative measures including reforestation integrated catchment management. and natural regeneration of vegetation cover, through training of village NRM committees in tree nurseries Activities under this theme would include afforestation, and sustainable forest management, establishment of development of a multi-­ stakeholder institutional community nurseries, input packages for community framework for integrated catchment area management nurseries, and tree planting and grasslands management (for example, through community awareness campaign, on communal areas. Such activities will complement soil establishment of natural resource management [NRM] degradation control measures listed above. Additional committees at the community level, development of vegetative measures (for example, intercropping, CA, village action plans, and development of catchment mulching and crop residue management, and crop area management plans and functional catchment rotation) have already been considered in previous committees); land-­ use planning to identify and map the investment areas (see CSA adoption). A summary of the combination of land uses that can best meet the needs investment activities is provided in table A5.1. of stakeholders while safeguarding resources for the future; promotion of the conservation and sustainable The computation of the investment costs related to the management of aquaculture resources; and promotion of above described activities is made using the following CSA options at the farm level for crops (for example, crop approaches: diversification and climate-­ ready cultivars and improved water use efficiency through appropriate irrigation). (a) Estimating the unit cost per household head and Activities will also target the development of NTFPs, as using the total number of targeted households, as well as aquaculture production. indicated in the section on investment targets; (b) Computing the unit cost per hectare or livestock head Land degradation in Lesotho is undermining the finite and using the total number of hectares per head resources on which people depend for food security.24 targeted; Widespread degradation is detected on the arable parts (c) Identifying the needed number of infrastructure and of the lowlands, where cultivation is intensive (cropland using the corresponding unit cost (establishment and occupying about 1 percent of Lesotho’s entire land area maintenance); and has been degraded while another 1 percent of the country’s (d) For communal investments, computing the unit land area has been converted to gullies); on grasslands, cost per community interventions and considering mainly due to overgrazing; and on gentle slopes, due to the number of communities (for example, villages) the expansion of cultivated land. The CSAIP will finance targeted by the CSAIP. interventions aimed at reducing soil erosion and land degradation, through a combination of structural and Costs are computed using available figures from other vegetative measures. The structural measures will include investment programs in the agriculture sector of Lesotho, (a) terraces and other physical measures, for example, or from the literature (for example, see Liniger et al. 2007; bench terraces, vegetated soil bunds, and stone bunds; Liniger and Studer 2019).25 Costs already included in the 24 The annual cost of land degradation in Lesotho is estimated at US$57 million, equivalent to 3.6 percent of the country’s GDP. See https://www.unccd.int/ sites/default/files/inline-­files/Lesotho.pdf. 25 In these cases, a ‘transfer function’ to determine the equivalent cost in Lesotho is used. For instance, assume a practice costs 100 dollars in country x with GDP per capita of 1,000 dollars in year 2000. If Lesotho’s GDP per capita is assumed to be 1,020 dollars in year 2000, then that CSA practice will cost 102 dollars in year 2000 in Lesotho. Then, 102 dollars in year 2000 can be converted to the corresponding current amount. Climate-Smart Agriculture Investment Plan for Lesotho 109 TABLE A6.1: LESOTHO CSA INVESTMENT ACTIVITIES I. Improve water management in rainfed and irrigated agriculture Water harvesting Roof water gutters and tanks Garden surface ponds Small-­scale irrigation Weirs Small earth dams Rehabilitation and modernization of irrigation schemes fed gravity systems Spring- and stream-­ Manual lifting systems Motorized pumping systems Drip irrigation (drip kit and treadle pump) Implementation of sustainable water management practices Capacity building Strengthening water institutions and building water management capacity at farm level II. Scale up CSA technologies for crops, livestock, and aquaculture resilient technologies and management practices Agricultural research toward climate-­ Multi-­stakeholder institutional framework for integrated catchment area management Community awareness campaign Establish village natural resource management (NRM) committees and develop village action plans Development of catchment area management plans (CAMPs) and functional catchment committees Land-­use planning Promote better soil fertility management Soil information system development and information dissemination Promote soil testing services to deliver the packages to farmers in a commercially viable way Establish fertilizer blending facilities to produce fertilizers that are compatible to needs Build institutional capacity for integrated soil fertility management Crops Promote CSA options at the farm level: minimum soil disturbance residue retention, crop rotation, agroforestry, judicious fertilizer application, organic fertilization, inorganic fertilizer, improved crop varieties, postharvest management IPM NTFPs development Training of village NRM committees in technical issues related to NTFPs (honey and so on), business planning, and links to market Training of youth in making inputs for NTFP production such as beehives Inputs and small equipment for producer groups (continued ) 110 Climate-Smart Agriculture Investment Plan for Lesotho TABLE A5.1: (Continued) Livestock Development and monitoring of improved rangeland management plans at community level Promote CSA options at farm level: rotational grazing, fire management, grassland reseeding, fodder production, livestock diversification, animal and herd management, improved feeding practices, manure management Improved animal nutrition Improved access to better livestock breeds Improved access to animal health services Support to animal health sector Support to wool and mohair processing and marketing Aquaculture Improved stocks Production intensification Better feeding practices Improved water use efficiency and pond management Diseases control III. Promote market access for farmers Develop ACSEs Develop MHEs Market link development and upgraded commodity value chains Pilot meso-­level weather index insurance Promote food quality standards Postharvest management Support integrated agroweather and market information system and dissemination of advisory services Develop information on climate vulnerability and impacts at smallholders’/community level Develop agricultural statistics country agrometeorology capacity Strengthen in-­ IV. Support sustainable landscape and integrated catchment management Terraces and other physical measures Bench terraces Establishment costs, 5 years Maintenance costs, twice per year Vegetated soil bunds Establishment costs, 15 months Maintenance costs, once per year Stone bunds Establishment costs, 36 months Maintenance costs, once per year (continued ) Climate-Smart Agriculture Investment Plan for Lesotho 111 TABLE A5.1: (Continued) Flood control and drainage measures Rock catchment water harvesting Establishment costs, 5 years Maintenance costs, once per year Runoff/floodwater farming Establishment costs, 30 month(s) Maintenance costs, once per year Gully control measures Gully erosion management Establishment costs, 15 months Maintenance costs, once per year Reshaping of gully erosion through integration of silt fences, erosion blankets, and brush packing Establishment costs, 15 months Maintenance costs, once per year Stone wall check dams Establishment costs, 15 months Maintenance costs, once per year Reforestation and natural regeneration of vegetation cover Training of village NRM committees in grasslands rehabilitation and plant nurseries Establishment of community nurseries Input packages for community nurseries Tree planting and grasslands management on communal areas Improve and modernize land administration system (digital land registry and titling, national spatial data infrastructure, and capacity building for land administration) Source: Authors estimation of the net incremental benefits through the Research will provide support to all the components as economic analysis described above (for example, costs at required. The adoption of CSA-­related crop, livestock, and the farm level borne by farmers engaging in the proposed aquaculture production techniques would be promoted activities and accounted for in the economic models) are through the FFS approach which has been proven excluded here to avoid double counting. farm technology dissemination. The effective in the on-­ landscape approach and planning would be promoted Investment costs are estimated assuming that the Lesotho through a pluralistic participatory approach (public CSAIP will mainly rely on public sector-­ driven delivery extension service in partnership with local NGOs and mechanisms. The “support to integrated agroweather the active participation of local communities). Last, information system and advisory services” will be led by the private sector participation for sustainable agri-­ the agriculture extension department with inputs from food system would be strengthened through a public-­ the Lesotho Meteorological Service. The “promotion of private partnership (development of business models better soil fertility management” will be anchored in the and adoption of a Matching Grant Facility [MGF] for Department of Soil Conservation, while “improvement of wider inclusion of micro, small, and medium enterprises water management” will be led by the irrigation section in [MSMEs] and farmers’ organizations). the Department of Crops. The Department of Agricultural 112 Climate-Smart Agriculture Investment Plan for Lesotho Annex 7: Estimation of GHG Balance EX-ACT developed by the FAO was used to estimate the GHG alternative business as usual ‘without-­ project’ scenario emissions and carbon sequestration of the agricultural in which the project never took place. Negative values development resulting from the land-­ use scenarios. indicate avoided emissions or increased sequestration EX-ACT is an appraisal system aimed at providing ex ante while positive values indicate an increase in emissions. estimations of the impact of development programs, In this analysis, the CT scenario was assumed to be the projects, and policies in the agriculture, forestry, and “without-­project” scenario while the CZ and RL scenarios other land-­ use sectors on GHG emissions and carbon are the “with-­project” scenarios. stock changes, constituting the carbon balance. It is a land-­based accounting system, measuring GHG impacts Table A7.1 indicates that the RL scenario will generate per unit of land, expressed in tCO2-­ eq per hectare and a net carbon sink of 26  million tCO2-­eq, equivalent to year. It allows to make projections about the impacts eq per year, or 1.5 tCO2-­ 0.87  million tCO2-­ eq per ha that a prospective project or intervention is most likely to per year. Livestock activity is the major carbon emitter have and to compare this “with-­ project” scenario to the eq, followed by inorganic fertilizers with 6  million tCO2-­ TABLE A7.1: ESTIMATED CARBON BALANCE FOR THE RL SCENARIO Over the economic project lifetime eq per year) Annual average (tCO2-­ (tCO2-­eq) GHG Gross Net GHG GHG Gross Net GHG emissions emissions emissions emissions emissions emissions of without-­ of with-­ (2−1) of without-­ of with-­ (4−3) Project activities project project project project scenario scenario scenario scenario (1) (2) (3) (4) Afforestation — −6,517,278 −6,517,278 — −217,243 −217,243 Annual crops to orchards — −18,223 −18,223 — −607 −607 Rangeland improvement — −2,498,661 −2,498,661 — −83,289 −83,289 Improved annual crop production 223,940 −1,730,829 −1,954,768 7,465 −57,694 −65,159 Improved orchards practices −15.000 −164,243 −149,243 −500 −5,475 −4,975 Grassland management — −20,741,663 −20,741,663 — −691,389 −691,389 Livestock management 46,117,926 52,354,542 6,236,615 1,537,264 1,745,151 207,887 Forest rehabilitation — −2,504,146 −2,504,146 — −83,472 −83,472 Fertilizers application 106,307 2,006,377 1,900,070 3,544 66,879 63,336 Aquaculture — 18,804 18,804 — 627 627 Total 46,433,173 20,204,680 −26,228,494 1,547,772 673,489 −874,283 Per hectare 81 35 −46 2.7 1.2 −1.5 Climate-Smart Agriculture Investment Plan for Lesotho 113 eq. However, improved grassland with 1.9  million tCO2-­ equivalent to 84 thousand tCO2-­eq per year, or 0.2 tCO2-­eq management helps reduce most of these emissions with per ha per year. Livestock activity is also the major carbon carbon sequestration of 21 million tCO2-­eq. Afforestation, eq), while application of fertilizers emitter (7 million tCO2-­ switching from annuals to orchards, rangeland and pesticides emits about 4.9 million tCO2-­eq. Grassland improvement, forest rehabilitation, and improved crop management, conversion of annuals to orchards, production all sequesters about 13.5 million tCO2-­eq. GHG afforestation, rangeland improvement, and improved dynamics for the CZ scenario are similar but generate practices in orchards are estimated to sequester about considerably lower carbon sink of 2.5  million tCO2-­eq, 8.4 million tCO2-­eq. TABLE A7.2: ESTIMATED CARBON BALANCE FOR THE CZ SCENARIO Over the economic project lifetime eq per year) Annual average (tCO2-­ (tCO2-­eq) GHG Gross Net GHG GHG Gross Net GHG emissions emissions emissions emissions emissions emissions of without-­ of with-­ (2−1) of without-­ of with-­ (4−3) Project activities project project project project scenario scenario scenario scenario (1) (2) (3) (4) Afforestation — −2,281,062 −2,281,062 — −76,035 −76,035 Annual crops to orchards — −174,423 −174,423 — −5,814 −5,814 Rangeland improvement — −3,358,130 −3,358,130 — −111,938 −111,938 Improved annual crop production 718,680 −494,730 −1,213,410 23,956 −16,491 −40,447 Improved orchards practices −12,600 −1,425,630 −1,413,030 −420 −47,521 −47,101 Grassland management — −6,102,907 −6,102,907 — −203,430 −203,430 Livestock management 49,865,026 56,920,719 7,055,693 1,662,168 1,897,357 235,190 Fertilizers and pesticides application 106,307 4,996,386 4,890,078 3,544 166,546 163,003 Aquaculture — 75,215 75,215 — 2,507 2,507 Total 50,677,413 48,155,437 −2,521,976 1,689,247 1,605,181 −84,066 Per hectare 103 98 −5 3.4 3.3 −0.2 114 Climate-Smart Agriculture Investment Plan for Lesotho