GROWING OPPORTUNITIES FOR AFRICAN AGRICULTURAL DEVELOPMENT
Hans P. Binswanger-Mkhize, Derek Byerlee, Alex McCalla,
Michael Morris and John Staatz
ASTI-FARA-IFPRI Conference
December 5, 2011
Outline
Acceleration of growth and agricultural growth and its determinants
Higher international prices and market opportunities
Africa’s Sleeping Giant: The Guinea Savannas
Scale of farming and FDI The road ahead
Africa’s constraints
47 countries, many of them small and landlocked
An enormous land mass A low but rapidly growing population Under-developed infrastructure High prevalence of Malaria, TB and AIDS
And other Africa-specific diseases Extreme heterogeneity of agricultural conditions Despite relatively poor soils, there is an
enormous under-used agricultural potential
Recent Positive Trends in Africa
Recent Real Economic Growth above 6 % Agricultural growth recently at 3.5% per
year From 15 armed conflicts in 2003 to only four
today In 2010, 27 of 46 African countries had
implemented a total of 49 “Doing Business”reforms
Accelerated efforts in building of Regional and sub-Regional Institutions
CAADP: A new continental framework for Agricultural Growth
5
0
2
4
6
8
10
1983 1986 1989 1992 1995 1998 2001 2004
Mac
roec
onom
ic s
core
-1
0
1
2
3
4
5
6
-0.20 0.00 0.20 0.40 0.60Average annual change of macroeconomic score
Agr
icul
ture
gro
wth
rat
e
1984-19951995-2005
Macroeconomic Conditions and Agricultural Growth
Improving macro-economic scoreImproving macro-economic score Higher agric. growthHigher agric. growth
The recent twin food crises
Source: World Bank
Determinants of higher food prices
Slowing but still high population growthHighest in Africa, followed by Asia
Fast Income Growth in Asia and now in Africa
Low real interest rates Bio-fuels
World prices are expected to settle at higher levels than in the past
Source: OECD-FAO, 2011
Climate change is expected to contribute to higher world prices
Source: Nelson et al, 2011
Higher international prices
Will help offset adverse OECD policies Will transmit themselves to domestic
economies in Africa Will lead to higher farm gate prices Higher profits, investments, farm growth Higher nonfarm incomes and rural wages If there is no backsliding on macro
policies, and if domestic incentives improve
Where are Africa’s market opportunities
Food staples and livestock products for domestic and regional markets Farmers can compete at import parity prices rather
than lower export prices Lower quality and phyto-sanitary standards Can re-conquer markets lost to the rest of the World
Much larger opportunities than for niche developed country export markets
Longer term opportunities mainly in South-South Trade Bio-fuels in sugar-ethanol, cassava, jathropa
Requires Regional Infrastructure & Integration
Removing Barriers To Trade And Improving Markets
Progress in Regional Integration has been limited, and barriers to food trade remain high
This adds to high input prices, reduces output prices, and reduces development of competitive markets all around
Infrastructure, competition policy, and farmer organization involvement are also necessary
The critical issues of expanding improved seeds and fertilizers, and access to markets cannot be addressed without the above improvements
World BankFAO
Roma TreMichigan State
Brazilian CerradoPre-1970: Remote region,
poor soils, low population, stagnant agriculture
1970s, 80s: Transformation led by public investments in R&D, infrastructure, credit; emphasis on large-scale systems
Post-1990: Private sector-led boom built on exports (soybeans, maize, cotton, cattle); reduced poverty
Northeast Thailand
Pre-1960: Remote region, poor soils, subsistence agriculture, high poverty levels
1970s, 80s: Transformation led by pursuit of cassava export opportunity; public support for private sector; emphasis on small-scale systems
Post-1990: Further intensification and diversification; falling poverty
African Guinea Savannah
800 - 1,100 mm rainfall
150 - 220 days season7 million km2 total
area0.5 million km2
cropped3 cropping systems:
Cereal - root cropRoot cropMaize mixed
Example of cassava
Farm-level productivity lower in Africa
Cassava y
ield
(t
/ha)
But shipment values similar
Example of cassava
Sh
ipm
en
t valu
e
(US
$/t
)
other
family labor
hired labor
crop chemicals
fertilizer
seed
1. Farm-level production costs in Africa are often low compared to other regions(key factors: nutrient mining, low wages)
2. Africa’s producers are generally competitive in domestic markets
3. Africa’s producers are generally not competitive in global markets
4. Regional markets offer most promising opportunities for expansion over the short to medium term
5. Competitiveness of African countries is undermined by inefficiencies in domestic logistics
6. Smallholders have a critical role to play as source of competitiveness in Africa
Scale of production
Literature: Small farms more productive
Why have large farms survived?
Privileged treatment: Land access Tax treatment Input and output subsidies Infrastructure
Alternatives to large farms
Realization of scale economies
Contract farming with smallholders
Machine hire services by the private sector
Effective producer organizations
Scale of production
Little evidence to suggest that large-scale farming models are necessary or even particularly promising for Africa
Smallholder-led commercialization likely to lead to more inclusive growth, with greater backward and forward linkages
Bright prospects for AfricaFive principal factors1. Rapid growth and strong demand
prospects
2. Better domestic policy environments
3. Improved business climate
4. Increased incentives to invest in agriculture
5. New technologiesfor production andprocessing