motivation and context note kosura.pdf · poverty increasingly assuming an african face. continent...
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Motivation and Context Structure and trend of African agriculture Rationale for improving Ag productivity and competitiveness (APC) in Africa Rethinking Agriculture for Transformation Stakeholder Roles Drivers for improving APC Priority actions and Way Forward
Poverty increasingly assuming an African face. Continent accounts for 30% of the worlds poor Agriculture is the key sector in a typical African economy, contributing the largest share of GDP In SSA, the sector accounts for at least 40% of exports, 30% of GDP, up to 30 % of foreign exchange and 70 to 80 % of employment
To tackle poverty, we need to realize and distribute growth Agriculture is the main growth driver in Africa Improving agricultural performance therefore key in reducing poverty in Africa
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35
1980 1997 2006
Perc
ent C
ontr
ibut
ion
Year
Trend of Agriculture sector contribution to GDP in Africa
Increasing APC Key to achieving Africa’s agenda of attaining sustained 10% of GDP growth Diversified Farming Systems Diversified Agro‐Ecology‐Dependence on Rainfall Diversified Consumption Patterns Growing Demand due to Pop growth rate (3% p.a) and a growing middle class putting pressure on meat and dairy products Sustainability issue , given limited resources and climate/Rainfall pattern Change
Challenges abound! Weak infrastructure, institutions, Inadequate Incentives, Fragmented Markets, Inadequate Investment in R&D and Public Extension Services , Inadequate investment in the key resource it has in plenty: its people Unclear Strategies to exploit opportunities that globalization presents
Foundation for Development 75 % labour force 24% GDP 60% Export Earnings 75% Raw Materials for Industry 75 % live in rural areas deriving livelihoods Provides most direct & effective lever for wealth creation
African agriculture characterized by dual production systems. However, up to 90% are smallholders Current changes in the market structure present a major challenge to the sustainability of smallholder entrepreneurs To survive, they need institutional support and capacity building to benefit from the changes
Public spending in agriculture has been declining over time in Africa The continent recorded the lowest levels compared to other developing regions To realize the big agenda, 10% of total public spending need to be devoted to the sector
Trends in public spending on agriculture
02468
10121416
1980 1990 2002
YearPe
rcen
t of s
tate
sp
endi
ng
Asia Caribbean Africa
The trend has resulted in food insecurity, worsening balance of trade and widespread poverty in most African countries However, these gaps presents an opportunity for farmers to expand agricultural output to improve their livelihoods For this to happen, farming in the continent must become more competitive
Continent contributes (value) the lowest to world trade in the world Opportunities exist in value addition to increase share of world exports African imports however dominated by food imports – including food aid
Agricultural growth is fundamental to growth and poverty reduction in the continent A 1% increase in crop yield reduces the number living in poverty by 6.25 million – 95% of those in Asia and Africa (Thirtle, Lin and Piesse, 2003) Rising agricultural productivity will also reduce food prices, and raise real income in urban areas
Low investment in research
Very limited access to markets
Poor policy and regulatory environments Low input usage and yield levels
Average cereal yields by region, 1960-2003 mt/ha
SSA
ROW
4
9
SSA
101
World
Fertilizer use kg/ha arable land, 2002
1.4 3.0
21.4
Nigeria
India USA
Road access Metres road/capita
Agricultural research expenditures, 2000
8.2
2.6
1.51.5
$13.8 billion
ME and N. Africa
LATAM
SSA
Asia-Pacific
100% = $36 billion per year
62% 38%
Developed countries
Developing countries
Of the ~$36 billion spent on agricultural research in 2000, only ~$1.5 billion (~4%)
was spent on SSA
Source: FAOStat; IFDC; World Bank
Net ODA and Subsidies to Domestic Agriculture Producers ((Avg. 2003-2005)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Japan US EU
% G
DP
Producer subsidiesfor agriculture
Net ODA
Policies, such as trade and investment, towards the developing world often contradict and counteract official development assistance
Developing countries
Although these regions have abundant potential (e.g., sunlight, labor, water, knowledge), productivity is low, which represents both a huge need and opportunity.
Yield Gaps: Crops: Staples (maize as little as 2 bags per acre cf potential of more than 25 bags per acre in the same zone)! Dairy –as little as 2 litres per day cf over 25 litres per day in same Agro‐ecological zones! Land: 20% arable 80% ASAL only about 4% irrigated! Irrigation increases yields of most crops by 100 to 400%! Promote sustainable irrigation: Potential to eliminate rice deficit of 66%; Increase cotton production from 25000 bales to more than 260000 bales; expand production of high valued crops (horticulture) in ASALS
Arid Semi-Arid Sub-Humid Humid Tropical Highlands
BaselinePotentialGap
yyi
eld
(kg/
ha)
010
0020
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0060
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Yield Gaps By AEZ
Maize
Arid Semi-Arid Sub-Humid Humid Tropical Highlands
BaselinePotentialGap
yiel
d (k
g/ha
)
010
0020
0030
0040
0050
0060
000
1000
2000
3000
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6000
Sorghum
Arid Semi-Arid Sub-Humid Humid Tropical Highlands
BaselinePotentialGap
yiel
d (k
g/ha
)
050
0010
000
1500
020
000
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015
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Cassava
Innovative ways to boost productivity sustainably Create Rural opportunities for more inclusive growth(especially women and youth)‐Witness the aging population in agriculture! Improve Access to productive resources to reduce yield gaps (Exploit the Bread Basket) Promote efficient distribution of inputs and off‐take of farm produce Minimize waste Think Value chain to capture the bigger picture for unlocking constraints.
Research & Development ↓
Input Distribution and Adoption ↓
Farming ↓
Trading and Processing ↓
Manufacturing and Retailing ↓
Consumer Table
Identify constraints along the value chain:
Agricultural economics serves two decision makers, a public and a private decision maker. Both are facing a changing market environment We need to understand the firm’s changing strategic behavior, in the currently competitive and strategic market We need policy analysis, not just economic analysis. This requires incorporation of other disciplines
We also need to understand the natural factor endowments and the associated changes as the on-going Physical Climate Change We therefore should expand the frontiers of the profession However, our profession is dogged by inward looking tendencies. Some people think the profession is dying because of this
Agricultural economics has various sub disciplines We try to solve the world’s problems with the various sub disciplines. However these problems require that we combine the sub disciplines We therefore need to expand our frontiers to be able to effectively address the productivity and competitiveness challenges We must understand and adjust to the current environment by expanding to other disciplines to be relevant. Otherwise, agricultural economics will die.
Factors affecting performance of African agriculture Include:
Investment climate/Policy environment Institutions and good governance Innovation Infrastructure Information (ICT) Regional Integration
Active private sector participation in the economy a key pillar for economic growth Functioning markets therefore a critical mechanism for poverty alleviation Key requirement is the overall quality of the investment climate
Weak/poor state of investment climate in Africa inhibits effectiveness of private sector and result in prohibitive cost of doing business Main structures, including institutions, policy and regulatory frameworks, infrastructure, business regulations and their enforcement have been weak Adequate incentive structures for private sector investment will increase productivity and competitiveness of the sector as observed in reforms in the Mali rice sub sector
Escape routes out of poverty impeded by institutional impediments beyond the deficiencies in factor endowments These include legal structures, customary rules, property rights, implicit or explicit contracts, and governance systems In Africa, many market failures remain unaddressed even as countries withdraw from direct market functions
Farmers find it extremely difficult to access credit as banking systems remain conservative in lending to agriculture Most countries lack adequate market institutions We still emphasize land ownership, instead of enhancing access to land and complimentary inputs/productive resources Most countries lack effective farmer organizations. Farmers do not benefit from economies of size and scale – in marketing and input purchase
While most countries have NARIs, funding to these organizations has been declining, seriously undermining an African green revolution In a number of countries, extension systems are weak and technological innovations lie on the shelves Proper institutional structures can increase productivity and competitiveness, as witnessed in the cotton sub sector in West Africa
Investment in science and technology promote sustainable and equitable agricultural development To succeed, African agriculture has to be knowledge based – a green revolution Partnerships need to be developed between public, private sectors, international agencies and research centers. Framers also need to be involved in the research to development continuum
For the research outputs to yield long term benefits, innovations need to be supported by the necessary institutions Lack of institutional support may result in failure, as was witnessed in the maize sub sector in Kenya Farmers adopted new methods of maize production but lack of institutional support has recently resulted in reduced maize production
Focus on countries with high poverty incidence Seek immediate productivity gains by promoting technologies “on the shelf” Promote sustainable intensification of the “breadbasket areas” Improve crop tolerance to stresses important to the poor, eg. drought Maximize spillover benefits by targeting R&D to the appropriate agro‐ecologies Invest in R&D across the value chain – from “farm to plate” Develop capacity at all levels for the generation and promotion of better agriculture technology
Africa has the highest cost of doing business in the world Cost of infrastructure services make up a large part of the costs Transport costs are very high, and seriously impact on production costs and competitiveness (input and output prices) For instance fertilizer cost $600/ton in some countries in Africa, compared to $150/ton in the USA Poor road networks also limit market access for rural farmers
Despite recurring droughts, only 3.7% of total arable land in Africa is irrigated, the lowest in the world Fertilizer usage in Africa is the lowest in the world. SSA consume 2M tons of fertilizer compared to 3.4M tons of Bangladesh alone. This seriously undermines soil health Farmers also need accurate price and market information to take advantage of changing market opportunities To achieve competitiveness, governments have to invest in the necessary infrastructure, and in capacity building for farmers
All countries should have an incentive to provide contributions to Regional Public Goods
Can only be overcome by a Regional or International Funding arrangements co‐financed by multilateral or other donors, probably in association with ECA and the African Union
Small land locked countries depend on regional integration Regional trade is good for growth, farmer’s income, regional foods security and the private sector; Requires harmonization of standards and sanitary measures, and sub‐regional and regional capacities to implement them; Regional infrastructure critical for access to each other and external markets;
Reversing land degradation and desertification and preserving biodiversity require trans‐ boundary collective action; Defense against plant and animal disease epidemics require collective responses at sub‐regional and regional levels; Agricultural research is far better done on a regional or sub regional basis –FARA and the SRO’s are on the right track; Bio technology is complicated and expensive requiring a large critical mass; Indigenous scientific capacity is better fostered by regional institutions which have critical mass and necessary financial support.
HIV/AIDS and agriculture: The pandemic is seriously undermining agricultural productivity because of its toll on labor force (both professionals and farmers) Armed conflicts and agriculture: Result in labor losses, output loss, loss of means of production, and destruction of infrastructure. This negatively impact productivity
Resolve the Remaining Challenges of Agricultural Incentives Implement improved land administration and land reform programs and evaluate their impacts Improve input, output and credit markets under adverse material conditions Reform and properly finance Agricultural Technology Development and Science Education
Mobilize the Private Sector to unleash agriculture as a core driver for future growth and prosperity Employ Market based solutions to activate public and private partnership investments Empower farmers and entrepreneurs to achieve their full potential Coordinate and Integrate Interventions to achieve momentum and ‐Scale up success stories Collaborate with diverse stakeholders to build strengths and distribute risks Pay attention to environmental sustainability
Thank You