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Icraf Nairobi March 20 2007 V1
1.
2. Underappreciated Facts about
African Agriculture:
Implications for Poverty Reduction and
Agricultural Growth Strategies
T.S Jayne
with colleagues at Michigan State University
ICRAF / Nairobi
March 20, 2007
3. Major development strategies
in retrospect, 1960-2000
1960 1970 1980 1990 2000 2010
“Big push” Integrated rural Structural adjustment;
capital-intensive development liberalization ??
investment
Community-
Community-driven empowerment
development
Untied
budget
support
4. Current thinking on “strategy”
Emerging coalition for “big push” agricultural
strategy
• e.g., Sachs, Sanchez,…maybe Gates?
Strong consensus about need for greater
investment in public goods (infrastructure,
crop science) and certain policy reforms
Major debate with regard to what constitutes
the right “enabling environment”
• Food price support/stabilization
• Input subsidies
5. Many of these debates can be informed
by a solid empirical understanding of
how rural economies work
6. Organization of presentation:
1. Underappreciated “empirical regularities”
of small farm agriculture in Africa
2. Discuss the implications of these findings
for current policy debates
7. Six underappreciated aspects
about African agriculture:
1. Farm sizes are declining Huge land disparities
rural population is hardly growing new
demands on food marketing systems
2. Given plausible assumptions about productivity
growth possibilities, grain productivity growth will be
inadequate to kick-start growth in most of the
region diversification into higher-return activities
will be crucial
3. Most farmers in the region are buyers of staple
food directly hurt by higher grain prices
4. Retail food prices are trending downward in most of
the region
8. Six underappreciated aspects
about African agriculture:
5. Supermarkets account for less than 4% of
urban food expenditures in almost all
African countries. Even with major growth
in supermarket volume, investments in
traditional marketing channels will remain
much more important for small farmer and
consumer welfare
6. “Market liberalization” -- inaccurate
description of situation in E&S Africa
9. Fact #1
• Emerging land pressures are
generating fundamental challenges
for poverty reduction and investment
strategies
10. Cultivated land per agricultural
person (hectares)
1960-69 1970-79 1980-89 1990-99
Ethiopia 0.508 0.450 0.363 0.252
Kenya 0.459 0.350 0.280 0.229
Mozambique 0.389 0.367 0.298 0.249
Rwanda 0.215 0.211 0.197 0.161
Zambia 1.367 1.073 0.896 0.779
Zimbabwe 0.726 0.664 0.583 0.525
Source: FAOStat website: Source: FAO Stat database: www.faostat.fao.org/
11. Farm size distribution:
Small farm sector
hectares 7
6
5
4 bottom 25%
2nd
3 3rd
2 top 25%
1
0
Ken Eth Rwa Moz Zam
12. Characteristics of smallholder farmers,
Zambia 1999/00
N= Farm Asset Gr. Rev., Gr. Rev., Total hh
size values maize sales crop sales income
(ha) (US$) (US$) (US$) (US$)
Top 50% of
maize sales 23,680 6.0 1,558 690 823 2,282
(2%)
Rest of
maize 234,988 3.9 541 74 135 514
sellers (23%)
Households
not selling 762,566 2.8 373 0 36 291
maize (75%)
14. Share of Urban population in total
population, 1968 and 1998
15. More than 50% of Africa’s population will
be urban by 2015.
– 2000: 10 farm households feed 7 non-farm
households
– 2020: 10 farm households feed 16 non-farm
households
Upshot: urban demand for food is rising
rapidly
16. Are imported wheat and rice crowding out
domestically-produced grain?
• 3.6% annual growth in cereal imports
• Of total grain imports by African countries,
only 5% is produced by African farmers
• Growth in urban demand is being met
mainly by imported rice and wheat
18. Fact #2
Given plausible assumptions about
new technology development, farm
sizes are too small for grain-based
productivity growth to lift most rural
households out of poverty
Hence, diversification into higher-
return activities will be crucial
This transition is already occurring
19. Role of maize in small farm incomes is
declining (share of gross sales revenue)
Other
Non-food Animal
grains/ Fruits -
Maize cash
beans/ veges products
crops
oilseeds
Kenya 13.3 7.9 34.0 14.7 26.7
Malawi 32.3 11.8 44.9 na na
Mozam 13.8 9.3 16.9 30.4 23.4
Zambia 28.2 7.7 16.7 27.5 14.7
20. Fact #3
Most rural farm households are buyers of
maize (or net buyers)
21. Smallholder Households’ Position
in the Maize Market
60
50
percent
40
sell only
30 buy only
both
20 neither
10
0
Mozambique Zambia Kenya
22. Fact #3
Most rural farm households are buyers of
maize (or net buyers)
2% of households account for 50% of
marketed grain surplus
Crop price supports:
• highly concentrated benefits
• anti-poor
• Most likely impede small farm diversification
into higher-valued activities
27. Fact #4
• Retail maize meal prices are trending
downward
• Why?
– Food market reform has encouraged rapid
investment in informal, small-scale milling
and trading networks
– The informal channel exerts competitive
pressure on commercial millers/retailers
– Exception: South Africa
28. 4000
Phase 1 Phase II Phase III
constant 2000 rand per metric ton
3000
2000
1000
0
1980 1985 1990 1995 2000
producer maize
wholesale maize
retail maize meal
29. Fact #5
The performance of “traditional” food
systems will remain a much more
important determinant of farmer welfare
and consumer food security than
“supermarkets”
Hence, focus investment priorities on
improving the performance of traditional
food marketing systems
– linking traditional with new agribusiness
systems
31. Even with 20% annual growth of
supermarkets, in relatively progressive
Kenya, in 10 years, the supermarket
share will be:
12.4% market share in 2016.
32. Fact #6
Major misunderstanding of the staple
food and input market policy
environment
• “liberalization” – a misnomer
• marketing boards continue to pay major
role in food and input markets
• Handle 25-60% of marketed maize in Zambia,
Kenya, Malawi, Zimbabwe
• policy uncertainty
33. Sources of Policy Unpredictability
• Export bans, import quotas (year to year & within year)
• Uncertainty over changes in import tariff rates
• When and where will marketing boards enter the
market
– current example: Zambia 2006
• Prices at which the MBs buy and sell
unpredictable
• Farmer & trader inventory carrying risks are high
• All of these sources of unpredictability impede
private traders’ servicing small farmers’ needs
34.
35. Sources of Policy Unpredictability
• Why does it matter how we characterize
the market environment over past 15
years?
• It matters a great deal
36. African Countries - % Growth in Cereal
Production between 1985 and 2005
80
61.7
% growth in production
60
39
40
Sub-Saharan Africa
20
4 Kenya
0 -3 Malawi
Zambia
-20
Zimbabwe
-40
-60 -62
-80
37. African Countries - % Growth in Cereal
Production between 1985 and 2005
157
160
% growth in production
140
120 111
100 Sub-Saharan Africa
78 Mali
80
61.7 Mozambique
60 Uganda
40
20
0
38. Where from here?
Implications of:
• > 50% of rural farm households have < 1
hectare and are extremely poor
• > 50% of rural farm households are net
buyers of staple food
• Massive rural-to-urban migration: massive
under-employment
• but lacking the human capital to contribute
productively to society
39. Much research evidence documents high
returns to investment in
1. R & D: (Alston, Grilliches, Mellor)
2. Education: turns information into knowledge
(Johnston)
3. Extension systems: farm management
(Evenson)
4. Infrastructure: road, rail, port, communications
(Antle)
5. Investments in health and addressing HIV/AIDS
(Binswanger)
40. Budget allocation to Agricultural Sector in
Zambia: ZMK465 million in 2005
Infrastructure
2%
Irrigation Development
3% Personnel Emoluments
Food Security Pack & 20%
EDRP
12%
Food Reserve Agency
Operational funds
Maize Marketing
11%
15%
Fertilizer Support Program
37%
41. Total Assets Landholding
Zambia Income size
‘000 kwacha per ha per capita
Fertilizer source: capita
Households not acquiring 266 173 .15
fertilizer:
Cash purchases from private 774 342 .20
retailers:
Government Fertilizer Support 804 425 .23
Program (50% subsidy)
42. Political economy of public resource allocation
Donor
budget support
Government budget
•Long-term productive investments: • Fertilizer subsidies,
R&D, extension, irrigation, etc. • marketing board price supports,
• land bills, food aid
• Immediate political payoffs;
• High social payoffs
• Visible support to constituencies
• But payoffs come 5-20 later
• contribution to sustained growth /
• Critical for sustained poverty reduction
poverty reduction is unclear
43. Spending 70% of agricultural budget on
input/output subsidies is most likely a
regressive mis-use of budget resources
with questionable long-term payoffs
Opportunity costs
44. As massive as the poverty problems are
now, they will be much greater unless
budgets are re-allocated sooner or later to
investments that will make the economy
productive in the long-term:
– Population growth w/o productivity growth
civil strife
– Not a viable option to have more and more
“failed states” in Africa
45. Major Challenge:
how best to encourage governments
to reallocate public budgets toward
crucial investments with long-term
payoffs instead of investments with
short-term payoffs with limited impact
on L.T. development?
Future of ‘untied’ budget support?
46. Farmer groups
Organizing small farmers into viable groups
will be crucial for poverty reduction and
agricultural growth
Millions of remote farms < 1 hectare have
major problems with access to
• credit and inputs
• extension services, soil testing
• market outlets
Reducing the transaction costs of linking
small farms to markets and services will
require aggregating farm units into groups
47. Getting Markets Right:
What does this mean?
• Not getting government out of markets
• Changing the role of government from direct
intervention to supportive investments to
make markets work
– Public goods investment
– Support development of farmer organizations
– Create “stable” policy environment: Clear, rule-
based public operations in markets
– Commodity risk management tools (e.g.
warehouse receipt systems)
– Greater transparency and consultation needed
between private and public sectors
48. Policy response (cont.)
• Lobby forcefully for more level playing
field in international trade
– OECD support for Africa: $50 bill./yr
– OECD ag. subsidies: $350 bill./yr
– Reassess developed country policy of
dumping free food in Africa under guise
of “food for development”