Is an Agriculture Centered Development Strategy a Viable Strategy for Africa? Questions From the Ethiopian Experience. - PowerPoint PPT Presentation

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Is an Agriculture Centered Development Strategy a Viable Strategy for Africa? Questions From the Ethiopian Experience.

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Is an Agriculture Centered Development Strategy a Viable Strategy for Africa? Questions From the Ethiopian Experience. Berhanu Nega and Berhanu Adenew – PowerPoint PPT presentation

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Title: Is an Agriculture Centered Development Strategy a Viable Strategy for Africa? Questions From the Ethiopian Experience.


1
Is an Agriculture Centered Development Strategy
a Viable Strategy for Africa? Questions From the
Ethiopian Experience.
  • Berhanu Nega and Berhanu Adenew

2
Introduction
  • I would first like to thank the organizers for
    inviting me to participate in this conference. I
    would also like to welcome all of you to Ethiopia
    for the conference. I hope you enjoy your stay
  • I also like to apologize (to the organizers and
    particularly to the discussant) for not having
    the paper ready for the discussant. My life has
    taken a sudden turn since I agreed to present the
    paper
  • So, rather than present a full paper with all its
    merits, I will attempt to raise some issues
    relevant to the broad topic I agreed to discuss
    that are becoming important policy issues in
    Ethiopia and to ask our colleagues from other
    countries to comment on them based on their own
    country experiences
  • I am not an agricultural economist by training
    and I am looking at the issue from a broader
    perspective of development. Therefore, I am
    going to speak in broad strokes, obviously
    missing the fine details

3
What are the issues?
  • What is the nature of agriculture as an economic
    activity?
  • What is the nature of the agricultural sector in
    Sub Saharan Africa in general and Ethiopia in
    particular?
  • Can the lessons of the green revolution in Asia
    in the 70s be replicated in Africa today?
  • Given this structure, can agriculture as a sector
    be the center (main driver) for the growth of
    economies such as Ethiopia?
  • What are the possible alternatives for poverty
    reduction and growth?

4
The case for an Agriculture Led growth strategy!
  • This is a strategy currently followed by the
    Ethiopian government and supported by important
    institutions such as the World Bank largely based
    on current endowment and comparative advantage
    arguments
  • More fertilizers and improved seeds
  • Leads to high levels of land productivity
  • Leads to high levels of income of the peasant
    masses
  • Leads to increased demand for industrial goods
  • Leads to industrializationprosperityNirvana

5
Some points about agriculture in general
  • Two important characteristics of agriculture as
    distinct from other industries (Cramer et.al,
    2001)
  • First, it is characterized by the cyclical nature
    of production caused primarily by physical and
    biological factors
  • Second, the sector faces serious price
    instability (owing to Engels law and other
    factors internal and external to the sector)
  • Therefore, a very risky business

6
What Characterizes the Agricultural Sector in
Africa today?
  • declining real output prices (declined by about
    2.6 between 1996-2001)
  • rising input prices (esp. fertilizer, increased
    by 37.5 during the same time)
  • limited national markets (seven farmer to one
    urban consumer in Ethiopia)
  • high price instability in liberalised markets
  • high climatic and market risk
  • absence of rural financial markets
  • declining farm sizes (farm sub-division) from 2.2
    ha. Per hh in 1978 to 1 ha in 2001 with no
    irrigation.

7
Implications to Economic Growth and Rural
Poverty The Case of Ethiopia
  • GDP growth followed the pattern of the growth of
    value-added in the agricultural sector.
  • The agricultural sector has long been susceptible
    to the fragility of nature, particularly
    rainfall.

8
Growth in GDP follows the pattern of growth in
agriculture
9
Trend in GDP Moderate and irregular
10
Per capita value-added in the agriculture has
been declining
11
Per capita value-added in the non-agricultural
sector has been rising
12
Source MOFED and CSA( Statistical Abstract, Various Issues)
13
Annual Average Per-Capita Income, In Birr, Constant 1980/81 Prices
Source MOFED and CSA( Statistical Abstract, Various Issues)
14
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15
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17
Agriculture During the Green Revolution in Asia
in the 1970s Can Africa Emulate that today?
  • The answer is no because the international
    environment has changed so much today compared
    with the 70s
  • big deficit markets, lower use of trade
  • rising or stable output prices
  • comprehensive agric support policies
  • fixed prices, floor prices
  • buffer stocks stabilisation operations
  • substantial fertilizer subsidies
  • huge subsidies to large-scale irrigation

18
So, what are the alternative options for Africa?
  • While trying to increase productivity in
    agriculture is a valid policy to increase income
    it is a questionable strategy at best to think of
    the sector as the lead sector
  • In fact, the development of other sectors around
    agriculture, particularly the process of
    urbanization seem to help the development of the
    agricultural sector
  • In general economic diversification seems to be a
    better strategy both for poverty alleviation in
    rural areas and for overall economic growth

19
Benefits of Diversification ?
  • helps overcome seasonality
  • helps ameliorate risk
  • increases knowledge, skills, adaptability
  • generates financial resources
  • yield growth arises from non-farm earnings
  • poverty vulnerability most intractable with
    high agric subsistence reliance

20
Diversification Leads to Mobility Migration
  • diversification one facet of human mobility
  • mobility essential to economic dynamism
  • ceaseless circulation the norm in growing
    economies
  • longer duration and more permanent movements
    migration, urbanisation, international migration
  • importance of remittances
  • good for the poor and for agriculture

21
Agriculture Benefits from Diversification (Ellis,
2004)

22
Urbanisation holds the key to Poverty Reduction
and growth in SSA
  • provides growing markets for agric output
  • Helps in the transformation of agriculture
    through the production of high value crops
    (horticultureetc.)
  • benefits from agglomeration economies
  • encourages economic specialisation
  • provides employment upward mobility
  • reduces unit cost of service provision
  • creates low-cost labour-intensive services

23
The Value of Urbanization for Ethiopian
Agriculture
  • empirical projections using a preliminary Demo
    Economic Model that Jean Marie Cour developed for
    Ethiopia illustrate exactly this point. (The
    model was originally done for Seven West African
    Countries with similar results)
  • a faster urbanization implies not only higher
    levels of GDP overall compared with a slower pace
    of urbanization, but more interestingly, rural
    incomes will be much higher under a faster
    urbanization scenario compared with the
    alternative.
  • A projection for the year 2025 using two
    urbanization scenarios (20 and 40 urbanization)
    show that national per capita GDP would be US
    468 under the 40 scenario compared with US 288
    for the 20 scenario while rural GDP per capita
    will be higher by US79 under a faster
    urbanization.
  • Equally interestingly, the productivity
    differentials between urban and rural areas will
    reduce from 4.1 to 3.1 under a faster
    urbanization scenario

24
So, what does this mean for Policy Priorities in
SSA? In Ethiopia?
  • poverty reduction requires human mobility
  • mobility needs to be facilitated, not disabled
    (Implications for land policy in Ethiopia?)
  • In general, policy should support
  • exchange, mobility, communication, information,
    infrastructure
  • Social and economic protection of people on the
    move
  • removal of constraints on urban growth dynamism
  • Provision of services in urban areas
  • resist enforced relocations out of urban areas
  • pursue growth where it is observed to occur

25
  • I Think I Should Stop there!!!
  • Thank You
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