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