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Inter-temporal Trends and Patterns in Agricultural Investment spending in Southern Africa
 

Inter-temporal Trends and Patterns in Agricultural Investment spending in Southern Africa

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Inter-temporal Trends and Patterns in Agricultural Investment spending in Southern Africa, presented by Greenwell Matchaya (ReSAKSS-SA Project Coordinator) at ...

Inter-temporal Trends and Patterns in Agricultural Investment spending in Southern Africa, presented by Greenwell Matchaya (ReSAKSS-SA Project Coordinator) at
The 2013 Southern Africa Regional Dialogue on Agriculture,
05-06 November 2013

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    Inter-temporal Trends and Patterns in Agricultural Investment spending in Southern Africa Inter-temporal Trends and Patterns in Agricultural Investment spending in Southern Africa Presentation Transcript

    • Inter-temporal Trends and Patterns in Agricultural Investment spending in Southern Africa Research conducted by Greenwell C Matchaya, PhD, Pius Chilonda, PhD, and Sibusiso Nhlengethwa Presented by Greenwell Matchaya (ReSAKSS-SA Project Coordinator) at The 2013 Southern Africa Regional Dialogue on Agriculture 05-06 November 2013 Birchwood Hotel Johannesburg, South Africa Regional Strategic Analysis and Knowledge Support System for Southern Africa (ReSAKSS-SA) Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Outline • Part 1 – Selected background issues facing the Southern Africa region • Low fertilizer use • Low productivity • Low agGDP growth rates • Definitions and Methodology • Part 2 – Agricultural investments and productivity • Trends • Conclusions Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Part One Background and Methodology Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • SADC’s Low income countries are more Agrarian and account for the Bulk of SADC agriculture SADC SADC excl SA SADC-MI SADC-LI South Africa Tanzania Congo, Dem. Rep. Mozambique Agricultural GDP as a share of total GDP Madagascar Angola The share of agriculture in the sadc 's Agriculture Zimbabwe Zambia Malawi Namibia Mauritius Swaziland Botswana Lesotho Seychelles 0 20 40 60 80 100 • Low incomeaccount for the bulk of SADC Agriculture • MI income account for ~30% of SADC agriculture • Low-Income countries-More agrarian • MI-countries: less agrarian 120 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Issue: Cereal Productivity in the SADC: lowest compared to other sub-regions 40000 High income: OECD 35000 East Asia & Pacific (all income levels) Cereal yield -kg/ha 30000 Caribbean small states 25000 Europe & Central Asia (all income levels) Upper middle income 20000 World 15000 • Cereal productivitylowest for Africa and SADC • Highest in OECD & Eastern Asia Latin America & Caribbean (all income levels) South Asia 10000 Middle East & North Africa (all income levels) 5000 SADC 2012 2009 2006 2003 2000 1997 1994 1991 1988 1985 1982 1979 1976 1973 1970 1967 1964 1961 0 • The rate of growth for SADC is low Sub-Saharan Africa (all income levels) Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • So, spatially, cereal yields have remained below the SADC Target of 2 tons • Cereal yields have trailed the 2tonnes per ha target • SADC-LI countries, lowest yield levels Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • And, Agricultural GDP Growth has hence trailed the 6% CAADP Target • -Agricultural Growth Rates < the 6% target • Except Angola and Mozambique- Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Growth rates in labour and land productivity in SADC countries (annual average 2000-2012) • Labour and land productivity growth more in Angola, SA, Malawi, Zambia • Productivities lower in Zimbabwe, DRC, Seychelles Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Fertilizer use lowest SADC LI and lower than Abuja and SADC RISDP targets 350.00 300.00 Fertilizer Use kg/ha 250.00 200.00 2003-2010 150.00 2003-2006 2007-10 100.00 SADC RISDP target Abuja target 50.00 • Fertilizer consumption lowest in SADC LI countries • Below Abuja and SADC RISDIP targets • More investments needed SADC LI sadc-MI sadc Congo, Dem. Rep. Namibia Madagascar Angola Mozambique Tanzania Zimbabwe Zambia Seychelles Malawi South Africa World Mauritius 0.00 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Agricultural investments matter for productivity and are the focus of the present talk. • Agriculture is an anchor for livelihoods • Livelihoods meaningfully improved if agriculture improves • But productivity is low in SADC • Productivity is a function of a myriad factors • P =f (K, L, Labour, markets, technology…) • So, the below, matter – Policy, – Price signals – Investments in factors of production Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Investments and agricultural outcomes ReSAKSS WP #6 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Theory of Expenditure and Agriculture Growth • Investments in agriculture - important for poverty reduction – It is pertinent that we have an appropriate understanding of what constitutes investment and what does not • A simplistic approach- all government spending as investment – from the literature, that is too crude for most purposes – it is more useful to separate public consumption from public investment (Mankiw, 2003). Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Theory of Expenditure/investment and Agriculture Growth • Many definitions of public investment: – refers to expenditures that provides various public goods, such as R&D, infrastructure, and education (Zhang and Fan, 2004). – expenditures that generate future fiscal benefits (Easterly, Irwin, and Servén, 2008). Fan and Pardey (1998) – expenditure that adds to the physical stock and to knowledge (World Bank 2002) – constitute any goods and services purchased for future use (for example expenditure on research and development (R&D) and extension) (Mankiw, 2003). Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Theory of Expenditure/investment and Agriculture Growth • Investments are likely good for TFP in agriculture • Even the other expenditures complement investments in raising TFP • BUT The theory and evidence about public expenditure and growth offers mixed predictions about the importance of public agricultural expenditure (PAE) (Devarajan et al., 1993). • Moreover there is little empirical work on how public expenditure should be undertaken. • This is partly a problem of data availability Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Theory of Expenditure/investment and Agriculture Growth • Understanding the levels of expenditure, and how different types of expenditure affect agricultural or growth is important • studies that ignore the composition of public expenditure can’t guide prioritisation of resources across different and, competing public investment options in agriculture and other sectors of the economy (Johnson et al, 2011). Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Theory of Expenditure/investment and Agriculture Growth • BUT if mis-targeted, public spending carries with it a crowding-out effect that stifles private investment at the expense of livelihoods (see Sloman, 2006; Mankiw, 2003). – For example public expenditure on private goods eg fertilizers, is likely to stifle private sector growth. • (Gemmell, 1996; Moreno-Dodson, 2008), find that ‘productive’ public expenditure stimulates growth • Barro (1990), finds that public expenditure is important for growth, it is complementary to private investment. • Kumar et al. (2009) have found a co-integrating relationship between output measures and expenditure Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Methodology- Data Sources • Most data –Collected by ReSAKSS-SA team from resepective countries -Supplemented by data from WB, FAO, IFPRI • For analysis, countries grouped according to (WB, 2011) Low income $995 or less Congo, Dem. Rep Madagascar Malawi Mozambique Tanzania Zambia Zimbabwe Lower middle income $996-$3945 Angola Lesotho Namibia Swaziland Upper middle income $3946-$12195 Botswana Mauritius Seychelles South Africa Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Methodology: Analysis • Disaggregate expenditure as much as possible during the analysis – Disaggregate by functions, by sector, by type (recurrent versus capital etc) • To examine the partial relationships between expenditures and agriculture performance, we use: – Spearman’s correlation, locally weighted scatter plot smoothing, (Lowess) smoothing, and scatter plots • (Panel) Co-integration techniques (for LR relationships), regression and VAR etc methods, can also be used Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Part Two Results and Conclusions Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Progress towards the CAADP 10 % Agricultural expenditure target • • • • SADC-LI: allocates just under ~8% SADC-MI: ~2% Malawi &Zambia achieved 10% in a number of years, -More action needed Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • R&D expenditure as a share of agGDP trails the NEPAD 1% Target R&D Extension Malawi Mozambique Zambia Zimbabwe Madagascar Namibia Lesotho Botswana Swaziland SADC SADC-MI SADC-LI 0.2 0.5 0.2 0.8 1.1 1.6 0.7 4.6 1.1 0.6 0.7 0.6 1.2 0.3 1.2 3.1 2.1 1.0 9.3 32.2 6.5 3.1 5.0 1.5 Irrigation 0.5 0.1 0.0 1.7 1.2 0.3 0.0 0.0 2.2 0.7 0.6 0.7 Infra- subsid structur y 0.0 1.1 0.0 0.9 1.8 0.6 6.2 0.0 2.2 1.4 2.3 0.8 5.6 0.0 2.1 6.4 0.8 0.0 0.0 1.3 0.4 1.7 0.1 3.0 Other 0.0 0.7 0.0 10.3 0.0 1.7 12.4 0.0 0.0 2.7 3.5 2.1 Under capitalizat ion of agricultur e exists Subsidies favoured in LI So- low quality spending Favours pvt goods Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • SADC countries not financing 100% of their operationsdependence, is prevalent Proportion of internal to total revenue (2000-2012) 120 100 80 • SADC-LI: >30% of budgets externally financed • • 60 40 • SADC-MI: <20% of budgets externally financed Implication: dependence on aid is persistent in the SADC ~30% of SADC budget externally financed 20 0 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Low capital spending, high spending on emoluments, Goods and Services • SADC-LI Expenditure as a share of total agricultural expenditure Others SADC-MI Others SADC-LI Others -SADC Subsidies -SADC-MI Subsidies SADC-LI Subsidies -SADC Capital-SADC-MI Capital -SADC-LI Capital-SADC Goods & services-SADC-MI Goods &services.-SADC-LI Goods & services-SADC Emoluments. SADC-MI Emoluments. SADC-LI Emoluments. SADC 0 5 10 15 20 25 Shares % 30 35 40 45 – High shares of ag subsidies – High (though declining) shares of Capital spending – Low shares of spend on G&Services – And low spend on emoluments – Question-what would be the optimal sectoral allocation for efficiency? Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Spending in agriculture in the SADC is concentrated on crops Expenditu Expendit Expendit Expenditur re ure ure e crops livestock fisheries forestry SADC 2000– 2002 SADC 2003– 2012 SADC-LI 2000– 2002 SADC-LI 2003– 2012 SADC-MI 2003– 2012 SADC-MI 2000– 2002 41.79 20.01 14.31 23.88 52.05 20.36 11.32 16.27 37.37 10.50 14.62 12.94 9.20 15.23 43.95 26.32 12.87 16.86 43.55 25.26 13.17 18.01 • 29.82 62.63 • Overall: • • • Spend on crops highest Spend on crops has increased Spend on crops has increased Fisheries and forestry spend has declined Is this in line with nutritional goals? Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Quality of spending-Low: Capital spending out-stripped by subsidies Share (%) in total agricualture Expenditure 30 25 20 Irrigation 15 R&D Subsidies 10 R&D and irrigation 5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 Since 2000, share of spending on R&D/capital has declined Since 2002, share of subsidies > share of capital spending -undercapitalization of agric likely -low quality spending Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Expenditure growth in R&D higher in some SADC MI-e.g Botswana than in LI countries (Pula- constant 2005 values) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual average spending Average annual growth (%) Coefficient of variation R&D 11 208 318 12 755 108 15 672 883 22 570 770 16 178 185 20 902 756 24 049 084 25 635 272 26 553 119 34 553 237 35 148 325 32 018 088 31 015 458 Extension 105 551 600 111 067 011 137 424 465 171 688 884 149 549 782 160 416 229 165 818 393 179 050 584 158 039 290 179 952 072 218 803 986 208 035 385 248 451 720 Irrigation 83 958 120 273 134 552 166 175 50 384 11 935 61 072 97 805 68 980 136 722 100 752 78 164 96 560 Infrastructure 186 438 162 993 159 648 142 685 73 380 155 146 83 515 141 156 199 919 215 243 183 138 161 218 241 272 Subsidies, 5 218 313 5 784 997 6 378 776 5 293 626 5 922 556 5 437 349 6 446 369 7 397 213 12 227 285 9 858 113 8 024 223 8 024 223 12 104 823 23 712 354.18 168 757 646.35 92 871.58 161 980.98 7 547 528.24 9.4 5.9 -0.2 2.9 6.4 34.21 23.89 44.09 29.00 32.40 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Expenditure growth in R&D lower in SADC LI-e.g Swaziland than in MI countries (constant 2005 values-E) R&D Extension Irrigation Infrastructure Subsidies, … 2000 6 430 011 50 072 966 6 075 228 16 658 823 1 054 113 2001 6 462 742 52 792 710 6 206 821 20 555 619 1 868 302 2002 8 683 684 42 878 157 6 009 431 12 791 617 2 657 818 2003 9 323 824 56 370 607 12 669 518 37 965 708 959 754 2004 12 405 379 69 927 192 8 246 518 43 130 943 792 501 2005 11 199 968 55 860 508 16 164 053 26 449 264 394 752 2006 10 813 756 45 097 492 14 628 797 22 478 028 1 773 178 2007 10 693 162 109 067 942 16 405 308 17 791 859 3 331 492 2008 18 028 624 75 676 692 17 384 947 63 750 259 2 244 943 2009 12 659 999 283 487 956 17 618 891 84 659 613 9 901 391 2010 10 662 681 526 839 361 16 514 969 69 966 273 9 978 902 2011 8 636 592 483 336 237 70 971 237 9 119 584 2012 6 131 298 34 536 315 6 982 564 10 892 683 average 10 163 979 145 072 626 10 609 575 38 011 677 4 228 416 growth (%) 2.0 14.4 13.0 6.0 23.5 variation 31.66 118.91 39.11 68.41 96.47 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Investment in agriculture expertise, still low for LI countries (absolute numbers) Year Country Total staffing Staff per million 2012 Botswana 3637 0.19 2011 Botswana 3451 0.17 2011 Madagascar 4758 0.02 2012 Madagascar 4590 0.02 2011 Mozambique 3606 0.02 2012 Mozambique 2243 0.01 2011 Swaziland 954 0.09 2012 Swaziland 913 0.08 2012 Zambia 1809 0.01 2011 Zambia 1553 0.01 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Private expenditure on agriculture- variable; BUT Data is scant- (Mozambique- 2005 USD) Year Infrastructure Total Share in total (%) 2000 155 884 645 612 309 603 16.82 2001 86 198 925 848 448 419 6.71 2002 16 513 204 1.085E+09 1.01 2003 3 302 640.8 568 714 744 0.38 2004 3 963 168.9 345 456 227 0.76 2005 3 302 640.8 359 987 846 0.61 2006 5 284 225.3 561 448 935 0.62 2007 11 889 507 5.332E+09 0.15 2008 28 402 711 713 370 411 2.63 2009 34 347 464 3.797E+09 0.60 2010 25 760 598 2.041E+09 0.83 Average 34 077 248 1 478 592 282 2.83 annual growth (%) -7.2 15.4 -19.5 Coefficient of variation 137.91 110.37 176.90 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • FDI inflows to Agriculture increasing ,but variable Zambia 800 2100 400 200 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 0 Billion ZMK 600 2000 Million Maloti Lesotho 1600 1100 600 100 2006 2007 2008 2009 2010 2007 2008 2009 2010 2005 2005 2004 2009 2008 2007 2006 2005 2004 2003 2002 2001 0 2003 2000 2002 4000 2001 6000 1400 1200 1000 800 600 400 200 0 2000 Million SZL 8000 2000 2004 Swaziland 10000 Million Namibian $ 2006 Namibia 2003 2002 2001 2000 -400 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Capital spending favours agricultural Productivity outcomes Lowess smoother 2.96 2.94 2.92 1.9 1.92 1.94 labour productivity 2.98 1.96 3 1.98 Lowess smoother 2.9 bandwidth = .8 3 3.1 capital expenditure 3.2 3.3 2.9 3 3.1 capital expenditure 3.2 3.3 bandwidth = .8 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Capital spending favours Poverty reduction 3.0e+06 poverty 4.0e+06 5.0e+06 6.0e+06 Lowess smoother 2.0e+06 2.0e+06 3.0e+06 4.0e+06 5.0e+06 6.0e+06 Lowess smoother 2.9 bandwidth = .8 3 3.1 capital expenditure 3.2 3.3 3 3.1 3.2 goods and services 3.3 3.4 bandwidth = .8 Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Different kinds of PAE, impact productivity differently- its important to know where to invest more Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Expenditure on Irrigation and extension are all agdp enhancing Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Enabling environment e.g low interest rates– Key for private investment Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Spending, productivity and poverty • Although increasing, Spending has fallen short of the Maputo declaration • Important to examine where spending actually occurs • Capital spending –positively correlated with productivity • Capital spending positively correlated with poverty head measures • With no disaggregation, the relationship between spending and productivity and povertynot clear • Components of recurrent spending negatively correlated with poverty measures and productivity • Interest rate are a cost of capital and unsurprisingly, – There is an inverse relationship between investment and real interest rates – In SADC real interest rates –high for LI Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Summary of Major findings • Different types of public agricultural investments affect agricultural outcomes differently in the SADC region • Various countries have tended to invest in their agricultural sectors differently across time • A bias exists in public agricultural expenditure bias towards crops at the expense of other sectors Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Summary of Major findings • More and better-targeted agricultural growth enhancing investments needed • So far investments in the agriculture sector have been increasing albeit limited and volatile in the region and the quality of spending has been low • Significant donor dependence coupled with low budget execution rates calls for improvements in revenue collection and budget processes Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Important questions Going forward (post MDGs) • The 10% • Where to invest • Middle income versus low income • Agrarian versus diversified • Data systems • Analytical ability • Budget systems • Best practices in spending (?) • There is a need to embark on detailed work on spending prioritization in agriculture Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)
    • Thank you Strategic Analysis and Knowledge Support System for Southern Africa (SAKSS-SA)