Finance | Swaziland secures US$63 million AfDB loan to finance smallholder irrigation project

Mbabane, Swaziland, Capital Markets in Africa: Swaziland has secured a US $63 million (ZAR 2.01 billion) loan to finance the second phase of the Lower Usuthu Smallholder Irrigation Project (LUSIP II) in the south eastern part of the country.

The LUSIP II, approved by the African Development Bank Board on Wednesday, May 5, 2016, is a follow-up project to the LUSIP-I which was completed in 2010. The project was a response to the Government’s recognition that the natural resources potential of the Lower Usuthu River Basin provided an excellent opportunity for effective integration of poor smallholder farmers into the commercial agriculture sub-sector.

The project aims to divert part of the peak flow of the Usuthu River into a 155-million m³ capacity off-river storage reservoir to be used to irrigate 11,500 ha (in two phases) of downstream land to grow sugarcane.

Its overall objective is to increase household income, enhance food security and improve access to social and health infrastructure for the rural population by creating the conditions for the transformation of subsistence level smallholder farmers into small-scale commercial farmers.

The construction of the Main Conveyance System and the Secondary System; On-Farm Infrastructure Development as well as Project Management and Engineering Supervision, are the four main components of the project.

It is expected to increase agricultural production, improve infrastructure, environmental and natural resources conservation and build the beneficiaries’ capacity in various aspects of agricultural production, environment and natural resources management and entrepreneurship.

In addition to other benefits, the project is expected to significantly increase the food and nutritional security and incomes of 2,259 rural households, 50% of the beneficiaries are women. It will transform about 5,217 hectares of land into diversified commercial cash and food cropping land.

The project will substantially address the agricultural production constraints and development challenges faced by the rural communities identified in the AfDB’s Swaziland Country Strategy Paper, 2014. These include limited irrigation infrastructure, which impedes the agricultural sector’s growth and crop diversification, and sourcing water from some major rivers located outside the country, which necessitates negotiating its water rights with other countries, especially South Africa.

Finally, by introducing bananas, maize, and beans into its crops mix, in addition to sugar production, the project will help diversify the country’s agricultural production and export base, in line with four components of the Bank’s High 5 priorities (Feed Africa, Industrialise Africa, Integrate Africa (through regional sugar exports), and Improve the quality of life of the people of Africa (through increased cash incomes from sugar sales).

The total cost of LUSIP II is estimated at US $148 million (ZAR 2.01 billion).The AfDB will finance the Main Conveyance System (Component 1) of the project. Other contributors are, the European Investment Bank; Kuwait Fund and Arab Bank for Economic Development in Africa; and the Government of Swaziland.

*1 UA = 20.08 ZAR (SZL) on 6 March 2016

Source: AfDB website