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Agricultural mechanization in Africa: Lessons learned from South-South knowledge exchange

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PIM webinar conducted on October 4, 2018 by Dr. Hiroyuki Takeshima, International Food Policy Research Institute. More about PIM Webinars and archive her: https://pim.cgiar.org/resource/webinars/

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Agricultural mechanization in Africa: Lessons learned from South-South knowledge exchange

  1. 1. Outline  Background  Synthesis of the work compiling experiences in Asia and Africa  Policy engagements and key policy outcomes  Agricultural mechanization and private investment for rural transformation
  2. 2. Substantial spread of tractors for land preparation in Asia and widening gap with Africa 0 10 20 30 40 50 60 70 80 90 100 1960 1970 1980 1990 2000 2010 % of cultivated area prepared by tractors (rice area for Sri Lanka) Bangladesh India Sri Lanka Vietnam China Nepal Nigeria 0 10 20 30 40 50 60 70 80 90 100 0 20 40 60 80 100 Share (%) of area plowed by tractors % of employment in agriculture Thailand Bangladesh India VietnamChina NepalNigeria Thailand
  3. 3. Farming system intensification and labor movement out of agriculture in some African countries Ethiopia R-value = harvested area / (arable land + pasture, meadows) 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 1960 1970 1980 1990 2000 2010 Nigeria Ghana Kenya East Africa Southern Africa Tanzania West Africa Middle Africa 0 10 20 30 40 50 60 70 80 90 100 Groningen Growth and Development Center Nigeria Ethiopia Ghana Kenya Tanzania 0 10 20 30 40 50 60 70 80 90 100 World Development Indicator Nigeria Ethiopia Ghana Kenya Tanzania Declining share of employment in agriculture in African countries
  4. 4.  Mechanization is a key driver of technical change in returns-to-scale in agriculture  Shifting comparative advantage from smallholders to larger farmers  Land, labor market imperfections may become more binding constraints  Smallholders still gain from mechanization if they cannot exit farming  High-yielding varieties induce smallholders’ mechanization adoption Where adopted, mechanization has directly raised returns-to- scale, but also benefited smallholders Takeshima H. (2017). Custom-hired tractor services and returns to scale in smallholder agriculture: A production function approach. Agricultural Economics 48(3), 363–372. Takeshima H, N Houssou, X Diao. (2018). Effects of tractor ownership on returns- to-scale in household maize production: Evidence from Ghana. Food Policy 77, 33–49. Takeshima H. (2018). Mechanize or exit farming? Multiple-treatment-effects model and external validity of adoption impacts of mechanization among Nepalese smallholders. Review of Development Economics, in press. Takeshima H. (2017). The roles of agroclimatic similarity and returns to scale in demand for mechanization: Insights from Northern Nigeria. IFPRI Discussion Paper 01692 (Nils Westermarck Award at 30th Triennial Conference for International Association of Agricultural Economists, Vancouver, Canada, 2018).
  5. 5. Synthesis of the work compiling experiences in Asia and Africa
  6. 6. Scope of the synthesizing work  Scope o Historical evolution of mechanization o Demand-side factors o Supply-side factors o Effects on agricultural transformation  8 Asian countries o E / SE Asia o China, Myanmar, Thailand, Vietnam o S Asia o Bangladesh, India, Nepal, Sri Lanka  5 African countries o Ethiopia, Ghana, Kenya, Nigeria, Tanzania
  7. 7. Guiding framework of synthesis A. Rising demand for mechanization in significant areas within Africa o Farming system intensification o Induced technological change (combined with increasing off-farm employment and rising rural wages) B. Supply responds to rising demand over time, but with time lags and transition costs o The public sector can mitigate these, partly through South-South knowledge exchange 1. Farming Systems Intensification (Boserup 1965; Ruthenberg 1980) o Increasing population pressure and rising demand for agricultural products from urbanization o Shortening fallow period, growing demand for more intensive tillage o Farming system intensification in the 80s insufficient for tractor powers (Pingali, Bigot & Binswanger 1987) 2. Induced technological change in response to changing labor-land ratio (Hayami & Ruttan 1970; 1985) o Mechanization as labor-saving technologies responding to increasing off-farm employment and rising rural wages 3. Market Failures, particularly for the supply of machinery hiring service o Indivisibility o Limited spatial mobility o Seasonality of demand o Coordination failures o Knowledge barriers
  8. 8. Mechanization growth experiences in Asia 1. Demand for mechanization originally raised through technological improvements and farming system intensification 2. Demand has been further raised by rising labor costs due to economic growth, industrialization, urbanization 3. Subsidies provided but with minimum distortions; competitive, without targeting particular types of beneficiaries 4. Credit often provided by machine sellers, as well as commercial banks taking land use right as collateral 5. Local manufacturing started from spare parts, then attachments, then machines 6. Smaller machines - power tillers, 4wt (< 50hp), small to medium sized combine harvesters 7. Multifunctionality of machines fully exploited, partly through irrigation expansion (powering water pumps, carting) 8. Liberalization often facilitated mechanization growth – Vietnam, Bangladesh in the 90s, Myanmar in the 2010s
  9. 9. Mechanization growth experiences in Africa  Spatial heterogeneity in mechanization growth; Pockets of areas with rising adoption, albeit with low national level adoptions  Ghana, Nigeria, Tanzania  Ethiopia - o 1% of plots at national level o but higher adoption in wheat-barley systems in the Southeastern part of the country (flatter terrain, more presence of larger-farmers) where tractors substitute draft animals  Kenya o low adoption at national level o but higher adoptions in the tropical highlands and coastal lowlands Source: Kahan et al. (2018) Draft animal 4-wheel tractor 2-wheel tractor Tractor (Nigeria)Agricultural machinery (Ghana) (Tanzania)
  10. 10. Demand side factors in Africa 1. Rising population density and improving market access have induced the shift to permanent cropping (Binswanger-Mkhize & Savastano 2017) 2. Within-country heterogeneity in farmland endowments led to different types of demands by smallholders and large farmers o Emergence of medium scale farms (Jayne et al. 2016) 3. Urbanization without industrialization (Gollin et al. 2016) including ag-industrialization, widespread mechanization in the agricultural sector 4. Low demand at intensive margin o High demand for first tillage, but rapidly declining demand for second- or third- tillage o Low demand for multi-functional use 5. Dominance of tree, root crops in certain parts of Africa – less conducive to plowing in the short-run
  11. 11. Supply side factors: market / government failures limit supply responses where demand has emerged 1. High horsepower, expensive tractors still dominant in Africa 2. Little commercial credit extended by dealers, banks for tractor purchase 3. Manufacturing of spare parts, attachments, have not grown in Africa 4. Insufficient knowledge of tractor operations 5. Government has faced challenges in identifying efficient service providers to support
  12. 12. 13 Market-sourced tractor owners use tractors more extensively than government-sourced owners in Nigeria Source: Presenter’s calculation based on survey. MS owners operate longer hours, serve more areas than GS owners 692 499 977* 691 Mean Median Hours operated, per tractor, year GS MS 29 41 74 128 GS (mean) MS (mean) Areas served (ha), per tractor per year Own farming Hired out farming Source: Takeshima et al. (2015)
  13. 13. 14 Tractor use highly seasonal but market-sourced owners are more active all-year around in Nigeria 34 39 33 65 75 111 80 43 242427 34 63* 5559* 104* 119* 147* 126* 65 44* 57* 66* 72* 1 2 3 4 5 6 7 8 9 101112 GS MS 43 40 37 44 61 85 73 52 42 36 33 42 63* 58*59* 78* 89* 92 84 67 49 56* 67*68* Hours of operation per tractor % operating by month Month Substantial seasonality But MS owners – mitigate seasonality; still find some work in off-season * = statistically significant difference between MS and GS Source: Takeshima et al. (2015)
  14. 14. Key strategies for Africa 1. Lift import restrictions, and allowing importation of a variety of machines, tractors of various brands, horsepower o Inspection of imported tractors o Access to foreign exchanges o Licensing and import duties waiver requirements 2. Allow markets to select efficient service providers, machine designs o Service providers obtaining tractors from the competitive market, without subsidies, are often more efficient than government-selected service providers 3. Use subsidies, if needed, to increase, rather than limit, exposure to more brands, types of equipment o Past concessional loans required equipment and parts to be imported from the donor country o Greater variety of imported brands and types provides ideas for local adaptation
  15. 15. 4. Public goods o R&D to develop and adapt locally appropriate machinery, often in collaboration with domestic private sectors o Knowledge that the private sector can use o Local soil conditions, performance of different types of machines, suitable plow- depth, tractor horsepower o Investments in other complementary technology, rural infrastructure, that make mechanization feasible o Coordination (Chinese experience) o Linking combine harvester owners and customers in other regions o Coordination among migratory service providers o Harvesting calendars o Local institutional mechanisms (farm-based organizations, cooperatives) to promote local coordination in crop planting and harvesting 5. Solutions differ within countries, across agricultural systems Key strategies for Africa
  16. 16. Policy engagements and key policy outcomes  Study-tour in Bangladesh  Policy changes in Ghana, Nigeria
  17. 17. Bangladesh mechanization study tour for 9 African officials • November 3 – 7, 2015 • 9 officials from 4 African countries • With collaboration with Bangladesh consultants • Visited • Ministry of Agriculture • 2 Agri. machinery Importers • Agri. Machinery manufacturer • Machinery dealers & spare parts distributors • Farmers (rainfed region) • 2 Agri. machinery research institutes
  18. 18. Key reflections by government officials 1. Potentials of smaller tractors o Multi-functionality o Suitable soils in pockets of Africa o Lower HP 4wt used for haulage 2. Private-sector provides many kinds of services to tractor buyers, addressing market failures o After-sales services with warranties o Importers / dealers provided credit o Demonstration, advertisements of available equipment o Extensive networks throughout the country 3. Intensive tillage – several rounds of tillages as yield respond well 4. Significant investments into R&D, extension o R&D institutes specifically focusing on machinery o High human capital / skill levels of staff at R&D 5. Growth in mechanization despite still weak standardization / regulatory capacities
  19. 19. Impacts on policies in African countries: Ghana’s Agricultural Mechanization Service Enterprise Center (AMSEC)  Phase I (2007 - ) o Selective application requirements o Low machine utilization o High breakdown, damaging dues to improper operation / maintenance o High default rates  Phase II (2016 - ) o New concessional loan facility from Brazil o Partly incorporating recommendations by international agencies, including IFPRI o Less selective application requirements o Exploiting multi-functionality by providing various complementary equipment o maize shellers, harvesters that can be attached or mounted to tractors, among others o Free scheduled 1,000-hour technical tractor maintenance service o Mobile workshops set up with subsidy - run by private individuals o Spare parts o Mandatory participation in MOFA-provided training for first-time buyers
  20. 20. Impacts on policies in African countries: Nigeria  Mini Mobile Mechanization System (MMMS) o Power tillers and other machines provided, particularly for the youths o Power tillers expected to be used for o Plowing o Transportation of light machines, including small harvesters, threshers, etc. o Bangladesh study-tour helped them see the multi-functional use of power tillers  Shift from subsidized distributions of tractors to more market-oriented approach o Kaduna state in Nigeria o Facilitating tractor market stakeholders o Linking farmers’ associations and tractor-supplying companies
  21. 21. Concluding remarks  Public sector’s role in generating and transferring knowledge o Asian experiences can offer much knowledge to Africa o International (inter-continental) perspectives inform how mechanization grew, even though some constraints had remained unresolved, or which constraints had been resolved by the private sector o Important to more accurately understand Asian experiences through historical data  Significant areas for research to contribute o Determinants of mechanization spread among smallholders o Mechanization and future of smallholders o Roles of mechanical technologies on agricultural, rural transformation  Agricultural mechanization – an outcome of private investment for rural transformation o Significant roles of private investment for mechanical technologies; more private-sector driven than biological technologies (Hayami & Ruttan 1985) o Growth in agricultural mechanization reflects: o Capital deepening (increased capital-to-labor ratio) in the rural and the overall economy o Physical capital formation o Capital market development o Rural non-farm economies (tractor hiring service as backward-linkage from agriculture)
  22. 22. Acknowledgments  Writing of the country case studies: o Fredrick Abeyratne, Andrew Agyei-Holmes, Guush Berhane, Ben Belton, Madhusudan Bhattarai, Steve Biggs, Rob Cramb, Hugo De Groote, Xinshen Diao, David G. Kahan, Mekdim Dereje, Zachary Gitonga, Scott Justice, Yanyan Liu, Ahmed Mansur, Cliff Marangu, Ian Masias, Bart Minten, Geoffrey C. Mrema, Thomas Reardon, Ravindra S. Shekhawat, Gajendra Singh, Cuong Van Nguyen, Seneshaw Tamru, Viboon Thepent, Myat Thida Win, Jin Yang, Xiaobo Zhang  Bangladesh study tour o Kshirode Roy, African officials (Engineers Patrick O. Aboagye, Abdullahi G. Abubakar, Abdulai I. Adama, Addisu T. Animaw, Akeem O. Lawal, Jasper A. M. Nkanya, John M. Nyakiba,, Tamiru H. Woldemariam, Aliyu A. Musa)  Synthesizing of the Asian/African experiences o Jed Silver
  23. 23. Key references Aboagye PO, AG Abubakar, AI Adama, AO Lawal, & AA Musa (Synthesized by H Takeshima). (2016). Agricultural mechanization and south-south knowledge exchange: What can Ghanaian and Nigerian policymakers learn from Bangladesh’s experience? GSSP Policy Note 6 and NSSP Policy Note 36, IFPRI. Animaw AT, JAM Nkanya, JM Nyakiba & TH Woldemariam (Synthesized by H Takeshima). (2016). Agricultural mechanization and south-south knowledge exchange: What can Ethiopian and Kenyan policymakers learn from Bangladesh’s experience? ESSP Policy Note 47, IFPRI. Binswanger-Mkhize, H. P., & Savastano, S. (2017). Agricultural intensification: the status in six African countries. Food Policy 67, 26-40. Chamberlin J, TS. Jayne & D Headey. (2014). Scarcity amidst abundance? Reassessing the potential for cropland expansion in Africa. Food Policy 48: 51-65. Diao X, F Cossar, N Houssou & S Kolavalli. (2014). Mechanization in Ghana: Emerging demand, and the search for alternative supply models. Food Policy 48, 168–181. Diao X, J Silver & H Takeshima. (2016). Agricultural Mechanization and Agricultural Transformation. IFPRI Discussion Paper 01527. Diao X, J Silver & H Takeshima. (2017). Agricultural Mechanization in Africa: Insights from Ghana’s Experience. IFPRI Issue Brief. Diao X, J Agandin, P Fang, S E. Justice, D Kufoalor & H Takeshima. (2018). Agricultural Mechanization in Ghana: Insights from a Recent Field Study. IFPRI Discussion Paper 01729. Gollin, D., Jedwab, R., & Vollrath, D. (2013). Urbanization with and without Industrialization. Journal of Economic Growth 21(1), 35- 70.
  24. 24. Key references Hayami Y & VW Ruttan. (1985). Agricultural development: An international perspective. Baltimore and London: The John Hopkins University Press. Jayne TS, J Chamberlin, L Traub, N Sitko, M Muyanga, FK Yeboah, W Anseeuw, A Chapoto, A Wineman, C Nkonde & R Kachule. (2016). Africa's changing farm size distribution patterns: the rise of medium‐scale farms. Agricultural Economics 47(S1), 197- 214. Pingali P, Y Bigot & H Binswanger. (1987). Agricultural mechanization and the evolution of farming systems in sub-Saharan Africa. Johns Hopkins University Press, Baltimore, USA. Takeshima H, E Edeh, A Lawal & M Isiaka. (2015). Characteristics of private-sector tractor service provisions: Insights from Nigeria. Developing Economies 53(3), 188–217. Takeshima H. (2017). Custom-hired tractor services and returns to scale in smallholder agriculture: A production function approach. Agricultural Economics 48(3), 363–372. Takeshima H. (2017). The roles of agroclimatic similarity and returns to scale in demand for mechanization: Insights from Northern Nigeria. IFPRI Discussion Paper 01692. Takeshima H, N Houssou, X Diao. (2018). Effects of tractor ownership on returns-to-scale in household maize production: Evidence from Ghana. Food Policy 77, 33–49. Takeshima H. (2018). Mechanize or exit farming? Multiple-treatment-effects model and external validity of adoption impacts of mechanization among Nepalese smallholders. Review of Development Economics, in press. Zhang X, J Yang & T Reardon. (2017). Mechanization Outsourcing Clusters and Division of Labor in Chinese Agriculture. China Economic Review 43, 184-195.
  25. 25. THANK YOU ! For more information, please contact Hiroyuki Takeshima (H.Takeshima@cgiar.org) Webinars conducted by the CGIAR Research Program on Policies, Institutions, and Markets (PIM) aim to share findings of PIM’s research, discuss their application, and get feedback and suggestions from participants. Webinars are conducted by PIM researchers in the form of research seminars. Each webinar is a live event consisting of a presentation (30 min) and a facilitated Q&A session (30 min). See previous webinars here: http://pim.cgiar.org/resource/webinars/ If you wish to receive alerts about our future webinars, please subscribe: http://pim.cgiar.org/subscribe/

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