Annual Report 2021 II

When the Coronavirus first made the headlines in early 2020, little did we know about how it would change the world. In just a few weeks, lockdowns kept striking countries to contain the spread of the disease, which the World Health Organization declared a global pandemic in March 2020. 

As a major threat to humans’ health, COVID-19 forced govern­ments to implement a series of restrictions that would later disrupt our connected world. According to the United Nations Conference on Trade and Development (UNCTAD), the pandemic generated a 10 per cent decline in international trade in goods and services for the year 2020. This disruption, combined with increased price volatility, specifically put developing coun­tries in an increasingly vulnerable position. As a result, the global extreme poverty rate rose for the first time since 1998: from 8.4% in 2019 to 9.5% in 2020 [1]. And according to the World Bank projections, when combined with other crises such as rising inflation and the conflict in Ukraine, the effects of COVID-19 will still be felt in 2022, with an additional 75 million to 95 million people living in extreme poverty in 2022, compared to pre-pandemic projections [2].

Food being a basic need, the demand per se was not affected by the pandemic, yet its structure was. Lockdowns forced restaurants, hotels, catering and markets to halt their activities, leading to a surge in demand from supermarkets. In their endeavours to support local producers, other continents solicited less imported products hence slowing down small­holder farmers’ activities and reducing their incomes. Moreover, logistics challenges, including borders closures, resulted in shortages of inputs in several developing countries and limited the exporting capacity of the agri-SMEs, consequently reducing farmers and SMEs’ revenues.

CFC’s response to the crisis

Early on, the Common Fund for Commodities (CFC) realized the effects of the pandemic on the SMEs it was supporting, which enabled it to rapidly respond. First, in June 2020, the CFC’s Executive Board approved an Emergency Liquidity Facility (ELF) of up to two million USD. This aimed at further helping CFC projects affected by the pandemic, providing immediate working capital to qualifying SMEs who were at risk of terminating their operations. As such, the ELF enabled healthy businesses to access short-term liquidity to endure the challenges posed by the crisis.

The rapid implementation of the ELF stems from the CFC’s con­cern about the short- and long-term effects of the pandemic on commodity dependent developing countries (CDDCs). This enabled SMEs operating in the commodity sector in CDDCs to resist the pandemic, in such a way that they could expand their presence in global markets during the pandemic recovery.

Second, the CFC’s Executive Board approved a measure offer­ing more flexible terms for CFC-financed companies facing difficulties due to the pandemic. This enabled the CFC to swiftly accommodate to the short-term needs of successful projects supported by the CFC by postponing repayments during moments of crisis. Qualifying projects thus had the ability to maintain sufficient liquidity and business operations amid the current circumstances.

Despite the challenges the pandemic posed to the CFC, this was an opportunity to demonstrate that collaboration and innovation are key to resilience. As a matter of fact, 2021 was the year with the highest disbursement amount since its reform in 2012. The number of projects approved also reached a new high, as eleven investments were approved by the CFC's Executive Board, with an outlay of USD 114.3 million, including USD 18.9 million of CFC contribution. In total, these projects are set to benefit 228,165 smallholder farmers by supporting them with better market access and productivity. This year was also marked by more variation in the projects as they cover commodities like fruits and vanilla, as well as companies focusing on global food security, waste reduction, climate change mitiga­tion, and resisting loss of biodiversity – and this by consistently considering gender empowerment.

The challenge of growing inequalities between countries and war in Ukraine

Two years have passed and, as the world seems to emerge from the pandemic, developing countries are still enduring its effects. In fact, the ongoing war in Ukraine added salt to developing countries’ injuries as the current conflict has sent prices of essential commodities up to new and perilous heights.

Soaring food and fuel prices will affect the most vulnerable in developing countries, putting pressure on the poorest house­holds which spend the highest share of their income on food, resulting in hardship and hunger. As a result, it is anticipated that all countries will be affected by this crisis, but developing countries already hit by the COVID-19 pandemic, rising debt and climate change will be hit especially hard by disruptions in food, fuel, and finance.

This will add to the ever widening gap in sustainable develop­ment between developed and developing countries. Besides a tough economic recovery, suffering labour markets, and high public debt, poorer countries are affected by vaccine inequity.

One thing COVID-19 has proved once more is that strong action needs to be undertaken if we strive for more equality worldwide. Throughout the pandemic, the war in Ukraine and the recovery, poorer countries have been the most affected as they experienced more poverty and health risks.

The CFC understands the challenges agri-SMEs in developing countries are facing and is using its best resources to help them recover. Partnerships, technology, and innovation are at the forefront of our approach to building resilient value chains. With an increasing number of companies needing support to upscale their activities and help their communities, our Commodity Impact Investment Facility (CIIF) comes at a timely moment. As an impact investment fund established and advised by the CFC, the CIIF paves the way for more engagement from impact investors in the development of the commodity. Ultimately, through our CFC and CIIF investments, we envision that our efforts and collaborations will contribute to a thriving commodity sector in a post-pandemic world in places where CFC works.

Report on progress of projects under implementation

© 2022 - Common Fund for Commodities

Graphic Design 

Anita Simons, symsign

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