ReSAKSS Regional Analysis on Agricultural Expenditures and Agricultural Policy Bias: Africa Wide_2009
ReSAKSS Regional Analysis onAgricultural Expenditures and Agricultural Policy Bias: Africa Wide Babatunde Omilola and Melissa Lambert April, 2009
1. Overview of public expenditures across the worldHow does Africa’s public spending compare to public spending in other regions?
Public expenditures across world regions, 2000 international dollars, billions 50002000 international dollars, billions 4500 4000 3500 3000 1980 1990 2000 2005 2500 2000 1500 1000 500 0 SSA (13 countries) N. Africa (3 countries) LAC (16 countries) Asia (11 countries) Total (43 countries) Spending in SSA and N. Africa Total spending increased by 6 increased by 3.7 percent from 1980- percent from 1980-2005, the 2005. In SSA alone, spending majority of which was from Asia increased by 4.9 percent Source: Calculated using data from International Monetary Fund’s (IMF) Government Financial Statistics Yearbook
Public expenditures across world regions, Percentage of GDP (%) Public expenditures as a percentage of GDP is a more useful measure of the amount a country spends relative to the size of its economy 45 40 1980 1990 2000 2005 35Percentage of GDP, % 30 25 20 15 10 5 0 SSA (13 countries) N. Africa (3 countries) LAC (16 countries) Asia (11 countries) Total (43 countries) Under this measure, Africa has spent the most, although in SSA this share has declined since 1980. Sources: Calculated using data from International Monetary Funds Government Finance Statistics
How have governments allocated their total spending? Since 1980, the share of spending on health, education and agriculture in SSA has increased slightly while spending on defense has declined. 100% 90% 80%Share of total spending, % 70% Other 60% Defense 50% Social Security 40% T&C Health 30% Education 20% Agriculture 10% 0% 1980 1990 2000 2005 1980 1990 2000 2005 1980 1990 2000 2005 SSA Asia LAC The share of spending on agriculture in SSA increased since 2000 but remains at the 1980 level and below 10%. Sources: Calculated using data from International Monetary Funds Government Finance Statistics
Agriculture expenditures across regions Agriculture expenditures by region, Agriculture expenditures by region as 2000 international dollars (billions) share of agriculture GDP Agriculture expenditure share of agriculture 16 2502000 international dollars, billions 14 200 12 10 GDP, % 150 8 100 6 4 50 2 0 0 1980 1990 2000 2005 1980 1990 2000 2005 North Africa SSA LAC ASIA TOTAL North Africa SSA LAC ASIA The level of agricultural spending is Yet as a share of agriculture GDP, much higher in Asia than in N. Africa, expenditures on agriculture are highest SSA and LAC in N. Africa – but still lowest in SSA. Sources: Calculated using data from International Monetary Funds Government Finance Statistics
Drawing conclusions from the figures• Although SSA has increased total spending and agricultural spending, the levels are much lower than other regions of the world• Therefore, SSA, as a region, will need to increase its level of public spending on agriculture in order to experience successful transformation that Asian countries did through the green revolution
2. Agriculture spending in Africa Country Progress towards the Maputo Declaration target
Progress towards the Maputo Declaration target • The African continent as a whole has not met the 10% target (current spending at 6-8 percent) • But, this varies by country Only 8 countries have Agricultural Expenditures as a share of total (%), 2007 met the 10% 25 target 20 CURRENT, 2007 (Unless otherwise noted) 15% 10 5 0 Central African… Madagascar** Ghana**** Guinea Bissau*** Morocco** Gabon*** Mali Nigeria DRC** Egypt** Swaziland** Benin**** Burundi*** Tunisia** Chad*** Kenya**** Uganda**** Tanzania** Malawi Sudan*** Zambia* Gambia*** Senegal Niger* Cote dIvoire Lesotho** Togo Mauritius** Namibia** Ethiopia** Rwanda Botswana Mauritania*** Mozambique** Guinea*** Cameroon** Zimbabwe** Burkina Faso* *=2006; **=2005; ***=2004; ****=2008 estimates Sources: Various, compiled by ReSAKSS.
Have countries increased their spending in response to the 2003 Maputo Declaration?• At the continental level, Level of agricultural spending as a share of total spending, 2002-2005 agricultural spending nearly doubled between 70.0% 2000 and 2005 60.0% % of reporting countries• In 2003, only 3.2% of countries allocated 10% 50.0% or more of their budgets 40.0% to agriculture – This increased to 33.3% 30.0% in 2006 before slightly falling to 25% in 2007 20.0%• 9 countries increased 10.0% their allocations from 0.0% less than 5% spending to 5-10% spending 2002 2003 2004 2005 2006 2007 Less than 5% 5%-10% More than 10% Sources: Various, compiled by ReSAKSS.
Agriculture expenditures as a share of agricultural GDP • Measures government spending on agriculture relative to the size of that countrys agriculture sector • Under this measure, more countries fall into the category of low budget support to agriculture Agricultural expenditures as a share of agricultural GDP, 2007 80 60 The range is CURRENT, 2007 (Unless otherwise noted) considerable% 40 (1 to 60%) 20 0 *=2006; **=2005; ***=2008 estimatesOn aggregate , Africa spends between 5-7% Sources: Various, compiled by ReSAKSS. of agricultural GDP on agriculture, compared to 15% in Asia during its Green Revolution
3. Development Assistance to Agriculture in Africa
Development Assistance for African agricultureSince 1995, official development assistance (ODA) toagriculture in Africa has fallen and has been less thanODA to emergency relief and food aid Sources: OECD statistical portal, accessed November, 2008.
Agricultural aid to Africa, by country 10 All countries spent Agricultural aid as a share of total aid, % 9 less than 10% of aid 8 budgets on 7 agriculture 6 5 4 3 2 1 0 2002 2003 2004 2005 2006• Agriculture has not been prominent on the donor agenda, perhaps not becauseof any conscious decisions but due to pressure to broaden the aid agenda• It is crucial for development agencies to also commit to the 10% budgetaryallocation to agriculture Source: OECD statistical portal, accessed November, 2008.
4. Reaching the first Millennium Development Goal in AfricaIs it possible at the continental-level and country-level?
MDG1 in Africa• African agriculture will need to grow at a rapid rate of 7.5 percent annually in order for the continent to meet the MDG1• At the country level: – Mali, Nigeria, Burkina Faso, Tanzania, Mauritania, Ethiopia, Cameroon, Uganda, Mozambique, and Ghana, require a growth rate of 6 percent or less• To achieve the desired growth rates, overall, African countries will need to boost their agricultural spending to $33 to $39 billion annually (in 2000 international dollars) from 2005-2015 – This translates into an increase of agricultural spending by 20 to 24 percent annually• At the country level: – Ethiopia, Ghana, Mozambique, and Uganda can potentially reach MDG1 by increasing agricultural expenditures by up to 10 percent annually – The majority of countries, however, will need to scale up spending by 20 to 30 percent per year Source: Fan, et al. 2008. ReSAKSS Working Paper No. 25
5. Agricultural Bias in AfricaPolicy bias against agriculture – what remains?
Policy bias against agriculture in Africa• Distortionary policies have been reduced in Africa over time, yet substantial distortions remain and still impose a large tax burden on Africa’s poor• Distortionary polices worsened following independence, but after the 1970s, various reforms successfully reduced them and now average rates of agricultural taxation are at their pre-1960 levels• African farmers have become less taxed in part because of the changing trade orientation of African agriculture Source: Anderson and Masters, 2009.
Nominal Rate of Assistance• NRA = the percentage by which government policies have raised gross returns to farmers above what they would have been without the government’s intervention• If NRA is positive, then farmer support is high• If NRA is negative, farmers are being taxed Source: Anderson and Masters, 2009.
Nominal Rate of Assistance• In Africa, NRA were less than 10% in early 1960s, rose sharply in 1960-70, and has since fallen to below the early 1960s level• At the country level, from 1960 to present: – There were major reductions in farmer taxation in Ghana, Uganda, Tanzania, Cameroon, Senegal and Madagascar from reforms that occurred between 1975-79 and 2000-04 – There was a shift from taxation of farmers to support of farmers in Mozambique and Kenya – There was a shift from slight support of farmers to slight taxation in Nigeria – Continued heavy taxation of farmers in Cote d’Ivoire, Zambia and Zimbabwe – NRAs favored sugar, rice and milk the most and taxed coffee, cotton, tobacco and cocoa the most – NRAs favored import-competing products while taxing exportables • In other words, NRAs were in favor of self-sufficiency Source: Anderson and Masters, 2009.
Consumer tax equivalents• CTE = the percentage by which policies have raised prices paid by consumers of agricultural outputs• If CTE is positive, consumers are essentially paying a tax on agricultural goods• If CTE is negative, consumers are essentially receiving a subsidy for agricultural goods Source: Anderson and Masters, 2009.
Consumer tax equivalents• In Africa, CTE reached -10% immediately following independence, fell to -17% by the early 1970s, and then gradually progressed to zero today• Historically, (in dollar terms), – subsidies to consumers were the largest in Ethiopia and Sudan – tax on consumers has been the largest in Nigeria and South Africa Source: Anderson and Masters, 2009.