Public agricultural investment and rural
finance in Africa
Emmanuel Tambi
FARA Secretariat Accra, Ghana
Outline
• Introduction
• Performance of African economies
• Why public spending is important for agriculture and
AR&D
• CA...
African economies show good signs of progress
• High-growth economies
• Between 2000 and 2010, GDP grew at 5.6% per year, ...
Agricultural productivity lags behind other regions
of the world
• Most of economic growth not coming from agriculture
• A...
Agricultural productivity lags behind other regions
of the world
• Negative TFP growth in Central Africa
• Five countries ...
o Increase in agricultural output has come from land
expansion rather than intensification
Increase in
production
‘88 – ‘0...
• Yields of strategic crops are 2 times lower than in other developing
regions of the world
• Cereal yields average 1.5 to...
• Yields of roots and tubers average 9.2 tons/ha compared
to 17.6 tons/ha in Asia
0
5
10
15
20
25
30
35
40
45
1990 1992 19...
Several factors are responsible
• Smallholder rain-fed agriculture (economies of scale?)
• Irrigation
• Low input use (fer...
Importance of public spending in agriculture
• Public spending in agriculture and AR&D is critical
o Productivity
o Rural ...
Importance of public spending in agriculture
• Public spending in agriculture, rural roads and rural
education has large p...
Importance of public spending in agriculture
Public spending in agricultural research has positive
economic returns
• Inve...
Importance of public spending in agriculture
• Public spending in agricultural research has positive economic
returns
• On...
Global public and private spending on research and
development - 2009 = US$1.11 Trillion
(Pardey & Beddow, 2013)
S-S Afric...
Global public food & agricultural R & D spending
2009 = US$33.7 billion (Pardey & Beddow, 2013)
S-S Africa spends US$2 bil...
Intensity of investment in AR&D
(AR&D spending/AgGDP)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Source of data: IFPRI, 2011
US$
• ...
CAADP and public spending in agriculture
• Maputo Declaration:
o 6% agricultural growth per annum (FAAP: assumes a 4.2%
gr...
CAADP and public spending in agriculture
0
5
10
15
20
25
30
35
1-Mar-07
1-Jul-07
1-Nov-07
1-Mar-08
1-Jul-08
1-Nov-08
1-Mar...
CAADP and public spending in agriculture
Country support to agriculture is
increasing. So far,
• 7 countries have surpasse...
CAADP and public spending in agriculture
Global support to agriculture is also
increasing
• L’Aquila (Italy) Joint Stateme...
CAADP and public spending in agriculture
Funding support received from GAFSP ranges from US$22m
to US$50m per country
0
10...
CAADP and public spending in agriculture
Donor support to AR&D in Africa (CGIAR and CAADP) 2011
• Over US$300 million thro...
Relevance to rural finance and conclusion
Increased public spending enhances agricultural and rural
finance
• Facilitates ...
Thank You
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Public agricultural investment and rural finance in Africa

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An overview of the need for investment in agriculture (especially for rural areas)

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Public agricultural investment and rural finance in Africa

  1. 1. Public agricultural investment and rural finance in Africa Emmanuel Tambi FARA Secretariat Accra, Ghana
  2. 2. Outline • Introduction • Performance of African economies • Why public spending is important for agriculture and AR&D • CAADP and public spending in agriculture • Relevance to rural finance and conclusion
  3. 3. African economies show good signs of progress • High-growth economies • Between 2000 and 2010, GDP grew at 5.6% per year, topping 7% in 2002, 2004 and 2007 0 5 10 15 20 25 %RealGDPgrowth 2011 2012 Source: Data from CIA World Factbook
  4. 4. Agricultural productivity lags behind other regions of the world • Most of economic growth not coming from agriculture • Agricultural output increased by 2.5% per year on average in the last 40 years 0 50 100 150 200 250 300 350 400 1971 1981 1991 2001 2008 Gross agricultural output index Agric total factor productivity index • Agricultural total factor productivity increased by 0.75% per year only between 1961 and 2008
  5. 5. Agricultural productivity lags behind other regions of the world • Negative TFP growth in Central Africa • Five countries have TFP growth rates > 1%: Benin, Kenya, Malawi, Swaziland, Zambia -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 Average TFP growth in Africa, 1961 - 2008 (% per year) 0 0.5 1 1.5 2 Average TFP growth rates > 1% (1961 – 2008) Source: ASTI/IFPRI, 2011
  6. 6. o Increase in agricultural output has come from land expansion rather than intensification Increase in production ‘88 – ‘08 Acreage effect Yield effect Interactio n effect Rice 11.8m t 68% 18% 14% Maize 17.2m t 50% 39% 11%
  7. 7. • Yields of strategic crops are 2 times lower than in other developing regions of the world • Cereal yields average 1.5 tons/ha compared to 3.5 tons/ha in Asia 0 1 2 3 4 5 6 7 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Cereal yields (tons/ha) Africa Asia Europe North America South America World
  8. 8. • Yields of roots and tubers average 9.2 tons/ha compared to 17.6 tons/ha in Asia 0 5 10 15 20 25 30 35 40 45 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Yields of roots and tubers (tons/ha) Africa Asia Europe North America South America World
  9. 9. Several factors are responsible • Smallholder rain-fed agriculture (economies of scale?) • Irrigation • Low input use (fertilizer, seeds, ) • Infrastructure • Mechanization • Low levels of spending in agric.
  10. 10. Importance of public spending in agriculture • Public spending in agriculture and AR&D is critical o Productivity o Rural household income o Rural consumption o Hunger & poverty reduction
  11. 11. Importance of public spending in agriculture • Public spending in agriculture, rural roads and rural education has large positive effect on growth and poverty reduction -2 0 2 4 6 8 10 12 14 16 18 Ghana Tanzania Uganda China India Thailand Returns to agric Returns to roads Returns to educSource: IFPRI, 2009 L C U
  12. 12. Importance of public spending in agriculture Public spending in agricultural research has positive economic returns • Investment in national & international agricultural research has significant and direct effect on productivity • Research-to-TFP elasticities o National (NAR) = 0.0394 o International (CGIAR) = 0.0403 • Facilitates development, dissemination and uptake of new technologies
  13. 13. Importance of public spending in agriculture • Public spending in agricultural research has positive economic returns • One US$ invested in AR&D yields US$3 on average Benefit-cost ratio IRR (NAR) IRR (CGIAR) Sub-Saharan Africa (31 countries) 3.1 23.8 29.3 Large economies (AgGDP > $4b) 4.6 34.0 40.8 Midsize economies (AgGDP $1 – 4b) 2.9 23.6 28.9 Small economies (AgGDP < $1b) Fuglie & Rada, 2011 1.8 12.9 17.0
  14. 14. Global public and private spending on research and development - 2009 = US$1.11 Trillion (Pardey & Beddow, 2013) S-S Africa spends US$11 billion on R and D Developed Countries less USA 46% USA 33% China 13% Brazil 2% India 2% S. Am. & Pacific less Brazil 1% Asia & Pacific less China & India 1% Mid East & N. Africa 1% Sub-Saharan Africa 1% Total 100 Developed Countries less USA USA China Asia & Pacific less China India Brazil Mid East and N. Africa Sub-Saharan Africa
  15. 15. Global public food & agricultural R & D spending 2009 = US$33.7 billion (Pardey & Beddow, 2013) S-S Africa spends US$2 billion on food and agric R and D Developed Countries less USA 35% USA 13% China 19% India 7% Sub-Saharan Africa 6% Brazil 5% S. Am. & Pacific less Brazil 5% Asia & Pacific less China & India 5% Mid East & N. Africa 5% Total 100% Developed Countries less USA USA China Asia & Pacific less China India Brazil Mid East and N. Africa Sub-Saharan Africa
  16. 16. Intensity of investment in AR&D (AR&D spending/AgGDP) 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 Source of data: IFPRI, 2011 US$ • Africa spends $0.6 per $100 AgGDP • Lower than NEPAD target of $1.00 per $100
  17. 17. CAADP and public spending in agriculture • Maputo Declaration: o 6% agricultural growth per annum (FAAP: assumes a 4.2% growth in TFP) o Allocation of 10% national budget to agriculture • Number of countries endorsing CAADP framework is increasing o 30 Compacts signed o 26 Investment plans developed o 22 Business meetings organized
  18. 18. CAADP and public spending in agriculture 0 5 10 15 20 25 30 35 1-Mar-07 1-Jul-07 1-Nov-07 1-Mar-08 1-Jul-08 1-Nov-08 1-Mar-09 1-Jul-09 1-Nov-09 1-Mar-10 1-Jul-10 1-Nov-10 1-Mar-11 1-Jul-11 1-Nov-11 1-Mar-12 1-Jul-12 1-Nov-12 Country Compacts Investment Plans Business Meetings No of coun tries Endorsement of CAADP gained momentum in 2009
  19. 19. CAADP and public spending in agriculture Country support to agriculture is increasing. So far, • 7 countries have surpassed the 10% target • 13 countries allocate 5 – 10% to agriculture • Remaining countries allocate less than 5% > 10% 5 – 10% Burkina Faso Benin Cape Verde Eq. Guinea Chad Gambia Ethiopia Ghana Mali Guinea Malawi Kenya Niger Lesotho Madagascar Mozambique Senegal Sudan Tunisia Zimbabwe
  20. 20. CAADP and public spending in agriculture Global support to agriculture is also increasing • L’Aquila (Italy) Joint Statement on Global Food Security, July 2009 G8 Summit • US$22 billion to agriculture • G20 meeting (Pittsburgh) – Scale-up US assistance to agriculture • Feed the Future (FTF) support to 12 countries • GAFSP Trust Fund – support to 11 countries • Joint Africa-EU Strategy support FTF GAFSP Ethiopia Burundi Ghana Ethiopia Kenya Gambia Liberia Liberia Malawi Malawi Mali Niger Mozambique Rwanda Rwanda Senegal Senegal Sierra Leone Tanzania Tanzania Uganda Togo Zambia
  21. 21. CAADP and public spending in agriculture Funding support received from GAFSP ranges from US$22m to US$50m per country 0 10 20 30 40 50 60 US$millions Funding support received from the GAFSP Trust Fund
  22. 22. CAADP and public spending in agriculture Donor support to AR&D in Africa (CGIAR and CAADP) 2011 • Over US$300 million through CGIAR • About US$100 million through CAADP Pillar IV 0 50 100 150 200 250 300 350 CGIAR CAADP Pillar 4 (FARA&SROs) non-CAADP Pillar 4 aligned non-CAADP Pillar 4 alignable NEPAD CAADP Pillars 1,2,3. IARCs & CB/PPs
  23. 23. Relevance to rural finance and conclusion Increased public spending enhances agricultural and rural finance • Facilitates smallholder farmer access to rural finance • Catalyzes agricultural value chain finance • Promotes financial linkages between agriculture and agribusiness • Mitigates agricultural finance risk • Stimulates growth of other sectors and fosters economic growth • Creates economic opportunities for rural people
  24. 24. Thank You

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