GROWING OPPORTUNITIES FOR AFRICAN AGRICULTURAL DEVELOPMENT Hans P. Binswanger-Mkhize, Derek Byerlee, Alex McCalla,  Michae...
Outline <ul><li>Acceleration of growth and agricultural growth and its determinants </li></ul><ul><li>Higher international...
Africa’s constraints <ul><li>47 countries, many of them small and landlocked </li></ul><ul><li>An enormous land mass </li>...
Recent Positive Trends in Africa <ul><li>Recent Real Economic Growth  above 6 %  </li></ul><ul><li>Agricultural growth rec...
Macroeconomic Conditions and Agricultural Growth Improving macro-economic score  Higher agric. growth
<ul><li>Better macro management </li></ul><ul><li>Uneven progress on sectoral policy </li></ul><ul><li>Many African countr...
The recent twin food crises Source: World Bank
Determinants of higher food prices <ul><ul><li>Slowing but still high population growth </li></ul></ul><ul><ul><ul><li>Hig...
World prices are expected to settle at higher levels than in the past Source: OECD-FAO, 2011
Climate change is expected to contribute to higher world prices Source: Nelson et al, 2011
Higher international prices <ul><li>Will help offset adverse OECD policies </li></ul><ul><li>Will transmit themselves to d...
Where are Africa’s market opportunities <ul><li>Food staples and livestock products for domestic and regional markets </li...
Removing Barriers To Trade And Improving Markets <ul><li>Progress in Regional Integration has been limited, and barriers t...
World Bank FAO Roma Tre Michigan State
Brazilian Cerrado <ul><li>Pre-1970:  Remote region,  poor soils, low population, stagnant agriculture  </li></ul><ul><li>1...
Northeast Thailand <ul><li>Pre-1960:  Remote region, poor soils, subsistence agriculture, high poverty levels </li></ul><u...
<ul><li>African  Guinea    Savannah  </li></ul><ul><li>800 - 1,100 mm rainfall </li></ul><ul><li>150 - 220 days season </l...
Farm-level  productivity  lower in Africa Example of cassava Cassava yield (t/ha)
But shipment values similar Example of cassava Shipment value (US$/t) other family labor hired labor crop chemicals fertil...
<ul><li>Farm-level production costs in Africa  are often low compared to other regions (key factors: nutrient mining, low ...
<ul><li>Regional markets offer most promising opportunities for expansion over the short to medium term </li></ul><ul><li>...
Scale of production <ul><li>Literature: Small farms more productive </li></ul><ul><li>Why have large farms survived? </li>...
Alternatives to large farms <ul><li>Realization of  scale economies </li></ul><ul><li>Contract farming with smallholders <...
Scale of production <ul><li>Little evidence to suggest that large-scale farming models are necessary or even particularly ...
Bright prospects for Africa <ul><li>Five principal factors </li></ul><ul><li>Rapid growth and strong demand prospects   </...
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Growing Opportunities for African Agricultural Development

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By Hans P. Binswanger-Mkhize, Derek Byerlee, Alex McCalla, Michael Morris and John Staatz. Presented at the ASTI-FARA conference Agricultural R&D: Investing in Africa's Future: Analyzing Trends, Challenges, and Opportunities - Accra, Ghana, December 5-7, 2011. http://www.asti.cgiar.org/2011conf

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Growing Opportunities for African Agricultural Development

  1. 1. GROWING OPPORTUNITIES FOR AFRICAN AGRICULTURAL DEVELOPMENT Hans P. Binswanger-Mkhize, Derek Byerlee, Alex McCalla, Michael Morris and John Staatz ASTI-FARA-IFPRI Conference December 5, 2011
  2. 2. Outline <ul><li>Acceleration of growth and agricultural growth and its determinants </li></ul><ul><li>Higher international prices and market opportunities </li></ul><ul><li>Africa’s Sleeping Giant: The Guinea Savannas </li></ul><ul><li>Scale of farming and FDI </li></ul><ul><li>The road ahead </li></ul>
  3. 3. Africa’s constraints <ul><li>47 countries, many of them small and landlocked </li></ul><ul><li>An enormous land mass </li></ul><ul><li>A low but rapidly growing population </li></ul><ul><li>Under-developed infrastructure </li></ul><ul><li>High prevalence of Malaria, TB and AIDS </li></ul><ul><ul><li>And other Africa-specific diseases </li></ul></ul><ul><li>Extreme heterogeneity of agricultural conditions </li></ul><ul><li>Despite relatively poor soils, there is an enormous under-used agricultural potential </li></ul>
  4. 4. Recent Positive Trends in Africa <ul><li>Recent Real Economic Growth above 6 % </li></ul><ul><li>Agricultural growth recently at 3.5% per year </li></ul><ul><li>From 15 armed conflicts in 2003 to only four today </li></ul><ul><li>In 2010, 27 of 46 African countries had implemented a total of 49 “Doing Business”reforms </li></ul><ul><li>Accelerated efforts in building of Regional and sub-Regional Institutions </li></ul><ul><li>CAADP: A new continental framework for Agricultural Growth </li></ul>
  5. 5. Macroeconomic Conditions and Agricultural Growth Improving macro-economic score  Higher agric. growth
  6. 6. <ul><li>Better macro management </li></ul><ul><li>Uneven progress on sectoral policy </li></ul><ul><li>Many African countries reinvesting in agriculture </li></ul><ul><ul><li>But there is continued taxation </li></ul></ul><ul><li>Taxing exports, protecting import substitutes </li></ul><ul><ul><li>Net effect neutral, but damage on both sides </li></ul></ul><ul><ul><li>Undermines competitiveness, investment returns </li></ul></ul><ul><li>Sub-Saharan farmers still face the lowest agricultural incentives in the world </li></ul>Improving policy environment
  7. 7. The recent twin food crises Source: World Bank
  8. 8. Determinants of higher food prices <ul><ul><li>Slowing but still high population growth </li></ul></ul><ul><ul><ul><li>Highest in Africa, followed by Asia </li></ul></ul></ul><ul><ul><li>Fast Income Growth in Asia and now in Africa </li></ul></ul><ul><ul><li>Low real interest rates </li></ul></ul><ul><ul><li>Bio-fuels </li></ul></ul>
  9. 9. World prices are expected to settle at higher levels than in the past Source: OECD-FAO, 2011
  10. 10. Climate change is expected to contribute to higher world prices Source: Nelson et al, 2011
  11. 11. Higher international prices <ul><li>Will help offset adverse OECD policies </li></ul><ul><li>Will transmit themselves to domestic economies in Africa </li></ul><ul><li>Will lead to higher farm gate prices </li></ul><ul><li>Higher profits, investments, farm growth </li></ul><ul><li>Higher nonfarm incomes and rural wages </li></ul><ul><li>If there is no backsliding on macro policies, and if domestic incentives improve </li></ul>
  12. 12. Where are Africa’s market opportunities <ul><li>Food staples and livestock products for domestic and regional markets </li></ul><ul><ul><li>Farmers can compete at import parity prices rather than lower export prices </li></ul></ul><ul><ul><li>Lower quality and phyto-sanitary standards </li></ul></ul><ul><ul><li>Can re-conquer markets lost to the rest of the World </li></ul></ul><ul><li>Much larger opportunities than for niche developed country export markets </li></ul><ul><li>Longer term opportunities </li></ul><ul><ul><li>mainly in South-South Trade </li></ul></ul><ul><ul><li>Bio-fuels in sugar-ethanol, cassava, jathropa </li></ul></ul><ul><li>Requires Regional Infrastructure & Integration </li></ul>
  13. 13. Removing Barriers To Trade And Improving Markets <ul><li>Progress in Regional Integration has been limited, and barriers to food trade remain high </li></ul><ul><li>This adds to high input prices, reduces output prices, and reduces development of competitive markets all around </li></ul><ul><li>Infrastructure, competition policy, and farmer organization involvement are also necessary </li></ul><ul><li>The critical issues of expanding improved seeds and fertilizers, and access to markets cannot be addressed without the above improvements </li></ul>
  14. 14. World Bank FAO Roma Tre Michigan State
  15. 15. Brazilian Cerrado <ul><li>Pre-1970: Remote region, poor soils, low population, stagnant agriculture </li></ul><ul><li>1970s, 80s: Transformation led by public investments in R&D, infrastructure, credit; emphasis on large-scale systems </li></ul><ul><li>Post-1990: Private sector-led boom built on exports (soybeans, maize, cotton, cattle); reduced poverty </li></ul>
  16. 16. Northeast Thailand <ul><li>Pre-1960: Remote region, poor soils, subsistence agriculture, high poverty levels </li></ul><ul><li>1970s, 80s: Transformation led by pursuit of cassava export opportunity; public support for private sector; emphasis on small-scale systems </li></ul><ul><li>Post-1990: Further intensification and diversification; falling poverty </li></ul>
  17. 17. <ul><li>African Guinea Savannah </li></ul><ul><li>800 - 1,100 mm rainfall </li></ul><ul><li>150 - 220 days season </li></ul><ul><li>7 million km 2 total area </li></ul><ul><li>0.5 million km 2 cropped </li></ul><ul><li>3 cropping systems: </li></ul><ul><ul><li>Cereal - root crop </li></ul></ul><ul><ul><li>Root crop </li></ul></ul><ul><ul><li>Maize mixed </li></ul></ul>
  18. 18. Farm-level productivity lower in Africa Example of cassava Cassava yield (t/ha)
  19. 19. But shipment values similar Example of cassava Shipment value (US$/t) other family labor hired labor crop chemicals fertilizer seed
  20. 20. <ul><li>Farm-level production costs in Africa are often low compared to other regions (key factors: nutrient mining, low wages) </li></ul><ul><li>Africa’s producers are generally competitive in domestic markets </li></ul><ul><li>Africa’s producers are generally not competitive in global markets </li></ul>
  21. 21. <ul><li>Regional markets offer most promising opportunities for expansion over the short to medium term </li></ul><ul><li>Competitiveness of African countries is undermined by inefficiencies in domestic logistics </li></ul><ul><li>Smallholders have a critical role to play as source of competitiveness in Africa </li></ul>
  22. 22. Scale of production <ul><li>Literature: Small farms more productive </li></ul><ul><li>Why have large farms survived? </li></ul><ul><li>Privileged treatment: </li></ul><ul><li>Land access </li></ul><ul><li>Tax treatment </li></ul><ul><li>Input and output subsidies </li></ul><ul><li>Infrastructure </li></ul>
  23. 23. Alternatives to large farms <ul><li>Realization of scale economies </li></ul><ul><li>Contract farming with smallholders </li></ul><ul><li>Machine hire services by the private sector </li></ul><ul><li>Effective producer organizations </li></ul>
  24. 24. Scale of production <ul><li>Little evidence to suggest that large-scale farming models are necessary or even particularly promising for Africa </li></ul><ul><li>Smallholder-led commercialization likely to lead to more inclusive growth, with greater backward and forward linkages </li></ul>
  25. 25. Bright prospects for Africa <ul><li>Five principal factors </li></ul><ul><li>Rapid growth and strong demand prospects </li></ul><ul><li>Better domestic policy environments </li></ul><ul><li>Improved business climate </li></ul><ul><li>Increased incentives to invest in agriculture </li></ul><ul><li>New technologies for production and processing </li></ul>

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