Fostering Agricultural Transformation in Africa: A Regional Approach to Strategic Commodity ValueCha

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Fostering Agricultural Transformation in
AfricaA Regional Approach to Strategic
Commodity Value-Chain Development 

• Food Security and Sustainable Development
  Division
• UN Economic Commission for Africa
• Expert Group Meeting
• Addis Ababa, Ethiopia
• 23-25 April 2007

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PRESENTATION OUTLINE

• Importance of agriculture for MDGs and beyond
• Neglect, under-capitalization and
  underperformance of African agriculture
• Revival of the agricultural development agenda
• Enhancing Strategic Commodity Value Chains
  Strategic approach to agricultural transformation
  within a regional-integration framework

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Agriculture, MDGs and Beyond (1)

• About 46 of African population is poor - 70 of
  the poor in Africa live in rural areas
• Livelihoods of 90 of rural people depend
  directly or indirectly on agriculture
• 60 of the total African labor force is employed
  in agriculture
• A significant proportion of non-farm employment
  is linked to agriculture (esp. women in the
  informal sector)
• Urban poor spend 60-70 of their budget on food
• Despite about U 20 billion of commercial imports
  and U 2 billion of food aid, 26 of the people
  are undernourished

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Agriculture, MDGs and Beyond (2)

• Linkages between agriculture and other economic
  sectors are important for economic growth
  inter-sector growth multipliers of 1.5 to 2.7
• Agricultural development is key for broad-based
  economic growth and poverty reduction through
• Enhancing food security (reliable and affordable
  supply)
• Creating value-added and employment, especially
  for women and the poor (rural and urban)
• Providing capital and inputs to other economic
  sectors
• Creating demand for the non-farm sectors
• Improving export performance (integration in the
  global economy)

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Neglect of Agriculture (1)

• Lack of consistency in priority and policy
• 1960s-1970s piecemeal sectoral interventions
  focusing on the development of selected crops
  (mainly cash crops)
• 1970s-1980s comprehensive integrated rural
  development approach did not meet expectations,
  because of
• Lack of pro-poor technology and genuine
  participation
• Weakness of institutional capacity
• Strong urban bias and propensity for rapid
  industrialization
• High taxation of agriculture, overvaluation of
  exchange rates, direct public control of the
  sector (input delivery, credit, output marketing,
  trade, etc.)

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Neglect of Agriculture (2)

• 1980s 1990s structural adjustment programmes,
  with neglect of investment in basic productive
  and sociaal sectors
• Low and declining flow of resources for
  agriculture development
• Decrease in proportion of public spending on
  agriculture from 6.4 in 1980 to 4.2 in 2002
  against the sectors share of 25-30 of GDP
• Decline in public spending in agricultural
  research from 0.93 of GDP in 1981 to 0.69 in
  1990, compared to 2.4 in developed countries
• ODA to agriculture in the 1990s dropped to 35 of
  its level in the 1980s

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Neglect of Agriculture (3)

• Under-capitalization of Agriculture
• Only 6 of the arable land is irrigated, against
  40 in Asia
• Only 22 kg of fertilizer per hectare of arable
  land in Africa
• (8 kg/ha in SSA), i.e. less than 15 (and 7)
  of the level in Asia and Latin America
• Number of tractors per 1000 ha of arable land 3
  times greater in Asia and 8 times greater in
  Latin America than Africa
• Road density is more than 2.5 times higher in
  Latin America and 6 times higher in Asia than in
  Africa
• Very poor rural access to energy and
  telecommunications
• Institutions of agricultural education, research
  and extension are poorly staffed, under equipped
  and funded

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Neglect of Agriculture (4)

• Under-capitalization of Agriculture
• Inadequate natural resource development/management
  (especially land and water)
• Virtually absent production and poor delivery
  systems of agricultural inputs, and poor access
  to agricultural innovation
• Poor access to financing (agricultural/rural
  credit systems) and insurance schemes
• Under-developed agro-processing and agribusiness
  to meet the growing urban demand for processed
  food
• Weak regional integration of commodity chains
  fragmented markets not allowing supplies from
  food-surplus regions to flow to food-deficit ones

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Neglect of Agriculture (4)

• Poor performance of agriculture
• Very low productivity of land (25-30 of the
  levels in Asia and Latin America) and labor (60
  of that in Asia and Latin America)
• Increasing gap between continental production and
  consumption of food and agricultural products --
  3.2 increase in average annual imports from US
  16 billion in 1990-92 to US 25 billion in
  2002-04
• High dependency on food aid nearly US 2
  billion per year
• Almost 1/3 of total population still suffering
  chronic hunger
• Dramatic loss of global agricultural export
  market share, from 15 in the mid-1960s to 5 in
  2000

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Revival of the Agricultural Agenda (1)

• NEPAD/ CAADP
• A consensual framework for policies, strategies
  and partnerships among stakeholders (governments,
  regional organizations, farmers, agribusiness,
  development partners)
• With defined sub-regional/regional Priority
  Action Plans for implementation around 4 pillars
• Land and water resources development
• Rural infrastructure and trade capacities for
  market access
• Food supply chains and responses to emergency
  food crises
• Agricultural research, technology dissemination
  and adoption

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Revival of the Agricultural Agenda (2)

• NEPAD/ CAADP Endorsed at the highest political
  level
• AU 2003 Summit in Maputo, and the commitment to
  allocate at least 10 of total public
  expenditures to agricultural and rural
  development
• AU 2004 Summit in Sirte, devoted to agriculture
  and water
• AU/NEPAD Summit of June 2006 in Abuja, devoted to
  fertilizer development
• AU/NEPAD Food Security Summit of December 2006 in
  Abuja, which adopted a list of 9 continental and
  3 regional strategic agricultural commodities to
  develop and protect

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Regional Approach toAgricultural Transformation
(1)

• Promoting agricultural transformation within the
  CAADP framework requires PPPs in a regional
  approach to capturing
• Economies of complementarities -- exploitation of
  the diversity in resource endowments based on
  Comparative and Competitive advantage beyond
  national boundaries
• Economies of scale at all stages of the commodity
  value chains
• Economies of vertical coordination (transactions)
  among the productive and services sectors
  involved in commodity chains
• Focus on Technologies, Infrastructure,
  Institutions, Policies (TIIP)

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Regional Approach toAgricultural Transformation
(2)

• Work at the sub-regional/regional level around a
  limited number of strategic food and agricultural
  commodity chains
• As adopted at the Abuja Summit on Food security,
  these are commodities
• Of important weight in the African food basket
  and rural economies
• Of important weight in Africas trade balance
  through their contribution to export earnings or
  the import bill
• For which Africa has considerable unexploited
  production and trade potential (food/cash/
  biofuel crops, feed, beef, poultry, fish, dairy)

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Regional Approach toAgricultural
Transformation (3)

• Deepen regional integration for the development
  of coordinated value chains of the strategic
  agricultural commodities by
• Moving market integration beyond national and
  sub-regional levels to encompass the global
  regional market (common African market)
• Creating an appropriate environment to allow for
  profitable and secure private investment in
  coordinated regional agricultural input and
  commodity value chains (e.g. creation of
  preferential sub-regional/regional
  agricultural/agribusiness investment zones)
• Designing and implementing policies to promote
  significant private investment through joint
  regional/trans-national ventures of strategic
  input and strategic commodity chains

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Regional Approach toAgricultural Transformation
(4)

• Promoting agricultural innovation through the
  creation/strengthening of sub-regional/regional
  agricultural research and education centres of
  excellence focusing on strategic commodities
  (CAADP/FARA ongoing efforts)
• Addressing the double disconnection of African
  farmers backward from input markets and forward
  from product markets through
• Promotion of regional agro-industry/agribusiness
  development
• Innovative contractual arrangements linking
  farmers to agro-industry/ agribusiness through
  networks of rural agro-dealers

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Way Forward

• How can this regional approach to strategic
  commodity value-chain development be improved to
  yield significant impact for agricultural
  transformation in Africa?
• What are the critical gaps to fill for greater
  effectiveness and impact of such a regional
  approach?
• What are the prime TIIP movers to consider for
  the political, economic and social feasibility of
  such a regional strategy for agricultural
  transformation?
• THANK YOU FOR YOUR EXPERT INPUT TO ADDRESSING
  THESE ISSUES !