ENVIRONMENTAL WORKFORCE FOR AFRICA BRIEF BY WASTE OR CREATE HUB.pdf
Livingston
1. Sub-Saharan Africa: The state of
smallholders in agriculture
Geoffrey Livingston, Steven Schonberger and Sara Delaney
2. Session 3
Breakout Session 1
Sub-Saharan Africa: The state of smallholders in agriculture1
Geoffrey Livingston, Steven Schonberger and Sara Delaney2
Paper presented at the IFAD Conference on New Directions for Smallholder Agriculture
24-25 January, 2011
International Fund for Agricultural Development
Via Paolo Di Dono, 44, Rome 00142, Italy
1 Copyright of the paper is reserved by IFAD. The paper may not be reproduced in part or in full and in any
form without written permission of the Conference Organisers at IFAD (e-mail: at.rahman@ifad.org)
2 The authors Respectively are Regional Economist at East and Southern Africa Division, Regional Economist
and Consultant at Western and Central Africa Division, IFAD.
3.
4. Sub-Saharan Africa: The state of smallholders in agriculture
SUMMARY
This paper provides an overview of agricultural and economic characteristics of sub-Saharan
Africa (SSA), in comparison with other developing regions and the opportunities which the medium-term
outlook holds for SSA’s small holder farmers. Seizing these opportunities will depend on
shifting from extensive to intensive production systems. The paper reiterates a key conclusion of
IFAD’s 2011 Rural Poverty Report: the ability of SSA’s smallholder farmers to increase on-farm
investments in productivity is constrained by their capacity to manage the risk-return trade-offs in
moving towards intensified agriculture.
Risks are often specific to different types of supply chains. Generally speaking, smallholders
in disbursed supply chains (cereals, rice) are exposed to a larger number of business risks and lower
returns than those operating in integrated markets (fair trade cocoa, specialty coffee) where risks are
more widely shared among supply chain actors. While there remains a need for more rigorous
evaluation of the relative impacts on livelihoods of participating farmers, experience under IFAD-financed
projects which aim to move farmers towards greater market integration has generally
confirmed significant, positive impacts on both the level and stability of incomes of participating
smallholders. However, evidence on the ground is highlighting that these investments, of themselves,
are not sufficient in most cases for farmers to move effectively from a dependence on dispersed staple
crop markets towards more integrated market opportunities.
While there are a myriad of explanations offered, most emphasizing the weakness of
institutions or governance, we suggest that a more focused and practical element merits greater
attention: effective coordination of project interventions in terms of place and timing of development
support.
5. Introduction
The purpose of this paper is to provide a regional canvas for the broader discussion of the future
directions on smallholders in agriculture. We do not attempt to provide a comprehensive overview of
sub-Saharan Africa (SSA), its agricultural sector or even all of the challenges and opportunities
associated with smallholder farming. Rather, the intention is to communicate our appreciation of the
richness and complexity of the continent in comparison with other developing regions, and through
discussion of the role of smallholder farmers in agricultural growth, focus the broader discussions of
the conference on some of the key issues which, from our experience and that of IFAD projects
working in SSA, are particularly relevant in our efforts to assist smallholder families definitively
escape poverty through the transition towards ‘farming as a business’.
We begin in Section One with a brief overview of the land, geography, people, economy and of
course, smallholder agriculture in SSA. Following this, in Section Two, we look more closely at the
opportunities for SSA’s smallholders, adapting the perspective of IFAD’s recently released Rural
Poverty Report to our regional context, and use a risk management lens to connect overall ecological
and market contexts to the specific endeavours of smallholder farmers. In Section Three, we move
rapidly from the general to a specific focus on an issue which we feel merits much greater
consideration – the importance of spatial and temporal coordination in reducing risk, increasing
returns and allowing for project success. Finally, we conclude with some key recommendations on
how these ideas can be transformed into an operational approach.
6. Table 1 Surface area of developing regions (km2)
Sub-Saharan Africa (SSA) 24,241,910
Latin America & Caribbean (LAC) 20,421,620
East Asia & Pacific (EAP) 16,298,850
Middle East & North Africa (MENA) 8,777,910
South Asia (SAR) 5,131,070
2
1) Overview – Sub-Saharan Africa in Perspective
Sub-Saharan Africa is a region of superlatives and contrasts. It has the largest land area of any
developing region and the smallest countries. It has the oldest geology and the youngest population.
It has the greatest concentration of high value minerals and the highest concentration of degraded
soils. It has the fastest growth in agriculture and the greatest level of agricultural imports. It has the
highest proportion of rural poor and the greatest potential for smallholder agriculture led poverty
reduction.
The Land
Sub-Saharan Africa is big – with a surface area
of 24 million km2 it is larger than all other
developing regions (Table 1). (WDI 2010)
This area is home to a large diversity of agro-ecological
climates, ranging from the arid
drylands of northern Mali, to the humid tropics of
the Congo. Figure 1 shows SSA divided into six agro-ecological zones, differentiated by the length of
the potential growing period for rain-fed agriculture. Rainfall ranges dramatically, from over 2,000
mm/year in central Africa to less than 400mm/year in arid areas (Bationo et al. 2006).
Sub-Saharan Africa is rich in
minerals. The region’s
geology has been the most
stable of all continents with
the result that it contains
concentrations of many rare
minerals, including
diamonds, of which is
produces 55% of world
supply, cobalt (52%),
chromite (37%), and gold
(22%).(USGS 2008)
This geological stability has
also resulted in a high
proportion of low-fertility
soils. In the absence of
volcanic rejuvenation, cycles
of weathering, erosion and
Figure 1 Agro-Ecological zones (FAO 2002)
leaching on the continent over the years have left soils inherently low in nutrients. It has also resulted
in wide diversity of soil types, differing dramatically in their ability to retain and supply nutrients to
plants, to hold or drain water, to withstand erosion or compaction and to allow for root penetration.
About 55% of the continent is considered unsuitable for cultivated agriculture. Of the remaining land,
16% is considered high quality, 13% medium, and 16% of low potential (Figure 2). (Bationo et. al.
2006)
7. Many of these already low-fertility
soils have suffered further losses in
nutrients, biodiversity and structure
over the years due to management
practices. This impacts greatly on
the productive capacity of the soils
and therefore farmer incomes. IFDC
has estimated that SSA loses around
eight million tonnes of soil nutrients
per year, and that over 95 million ha
of land on the continent had been
degraded to the point of greatly
reduced productivity. During the
2002-2004 cropping season over
80% of countries in Africa1 were
estimated to be losing more than 30
kg/nutrients per year, and 40% of
countries an astounding 60 kg or
more per year. (Henao & Baanante
2006)
Table 2 Political Geography (World Bank 2009, WDI 2010) 2
3
Figure 2 Land Classification (Bationo et al. 2006)
Political Geography
SSA has the largest number of
countries per surface area, and one
of the smallest populations per
Ratio of
Population per
Population in
country out of the developing
countries to
country (million
landlocked
regions (Table 2).
area
inhabitants)
countries (%)
EAP 1.44 125 0.4
Further, sub-Saharan Africa has the
LAC 1.52 24 2.8
highest number of landlocked
MENA 1.60 19 0
countries, 15 out of the total 43 in
SAR 1.67 196 3.8
the world, and the greatest
SSA 2.00 20 40.2
proportion of population living in
landlocked countries. (World Bank 2009)
Instability, state fragility and conflict have, tragically, been much more frequent in SSA than other
regions. Sub-Saharan Africa scored the lowest on the Center for Global Policy’s State Fragility Index
of all regions, with seven countries experiencing major conflicts in 2009, four countries with recently
ended conflicts and almost all countries in the region falling into the serious, high or extreme fragility
categories. Some countries have made improvements, including Equatorial Guinea, Togo, Liberia and
Angola. (Marshall and Cole 2009)
The People
Sub-Saharan Africa’s current population of 800 million makes it one of the most sparsely populated
regions, but also the fastest growing. As in other regions, population has steadily increased over the
last 50 years and is projected to reach around 1.7 billion by 2050. Population growth between 1988
and 2008 was 66%, similar to that in MENA, but much higher than APR and LAC which both had
growth rates around 30%. Birth rates in SSA, while currently the highest of the developing regions,
declined at a similar pace to others during the period above. SSA’s rapid population growth has
1 In this paper we focus on sub-Saharan Africa. When the term ‘Africa’ or ‘the continent’ is used it is because
the statement refers to the continent as a whole, rather than SSA.
2 Small-island nations taken out of calculations
8. 4
resulted in a young population. Youth under fourteen now make up 42% of the inhabitants of the
region, with the next youngest region being South Asia (32%). (IFAD 2010, WDI 2010)
Of the total 800
million, around 500
million (63%)
currently live in
rural areas. Only
South Asia has a
higher proportion
of rural inhabitants
(70%) (Figure 3)
The trend towards
urbanization, which
is occurring in all
developing regions,
is happening slower
and later in SSA,
and the tipping
point, at which the
2,000,000,000
1,800,000,000
1,600,000,000
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
70%
Urban and Rural Population
63%
South Asia Sub-
Saharan
Africa
55%
East Asia &
Pacific
Figure 3 Urban and Rural Population (WDI 2010)
Urban Population
Rural Population
42% 21%
Middle East
& North
Africa
Latin
America &
Caribbean
population will become more urban than rural, is not expected to occur in SSA until around 2050.
(IFAD 2010)
Poverty and Equity
Sub-Saharan Africa’s population is poorer than other regions and is falling further behind. While
other regions have managed to reduce the absolute number of poor despite population growth, in SSA
the number of poor has steadily grown. The proportion of poor in the population has, however,
decreased slowly since the late 1990s, and is currently about 53%, compared to 27% in APR and 7%
in LAC. In contrast to LAC, MENA, and East Asia, but consistent with South and Southeast Asia, the
poor in Africa live mainly in rural areas with the rural communities being home to 75-80% of the
poor.
Looking beyond
poverty rates to
progress on other
MDG indicators, the
SSA region as a
whole had a more
challenging starting
point, and has for
the most part made
slower progress than
other regions. The
most recent FAO
calculations show
that the proportion
of undernourished3
in SSA is by far the
Figure 4 Proportion of undernourished by region (FAO 2010)
highest, estimated at 30% in 2010, compared to 16% in APR, 8% in LAC, and 7% in MENA. (Figure
3 Refers to the condition of people whose dietary energy consumption is continuously below a minimum dietary
energy requirement for maintaining a healthy life and carrying out a light physical activity. The term is a
measure of a country's ability to gain access to food and the income distribution in that country, and is derived
from Food Balance Sheets prepared by the FAO.
9. 4). These numbers gloss over a huge amount of variation within the region. The Democratic Republic
of Congo, for example, is contributing disproportionately to the number of hungry in the region; the
proportion of hungry there has increased from 26% in 1990/2, to 69% as of 2005/7. On the other
hand, many countries in SSA are making consistent and often overlooked progress. As of 2007
Ghana, Mali, Nigeria and the Congo had already achieved the undernourishment target of MDG1, and
eleven others were close to achieving it. (FAO 2010)
Improvements in health and education have likewise been slow. Child nutrition remains a challenge -
with 28% of children under five underweight for their age, 38% suffering from stunting and 9% from
wasting. The high prevalence of stunting, second only to South Asia, is particularly concerning, as
this reflects nutritional deficiencies and illnesses that occur during the most critical periods for child
growth and development and cause irreversible effects on human development and capacity. (Unicef
2007)
At current progress SSA is the only region which will not come close to the target of reducing the
under-five mortality rate by two-thirds, although current rates put it on track to reduce risk by close to
half. SSA is also furthest from the primary school completion target, with around 65% of boys and
55% of girls now completing primary school, after consistent progress since 2000. With increasing
numbers of youth completing primary and secondary school, sub-Saharan Africa is in great need of
investments in university level education and skilled vocational training. Adult literacy, currently at
61%, is still far lower than other regions. (World Bank 2009b, World Bank 2010)
Experience in other regions highlights
that economic growth is often associated
with increasing income and gender
inequality. SSA currently ranks
reasonably well in this regard when
compared to other developing regions.
(Table 3). (IFAD 2010)
5
The Economy
Economic growth in SSA, as a region, has for the
most part been lower than that in Asia and LAC over
the last two decades (Table 5). (IMF 2010) However,
as with other indicators, the regional average does not
show the particularly low, or high, growth rates in
some SSA nations. While Asian averages have been
largely driven by the high growth of China, SSA also
has some strong performers. In fact, as recently
published in the Economist, over the last ten years six
out of the world’s ten fastest growing economies
were in SSA. (Economist 2011) The region also
proved surprisingly resilient to the 2009 economic
crisis and is expected to bounce back strongly (Table
4) (IMF 2010).
Table 5 GDP Growth (IMF 2010)
1990s 2000s 2009 2010*
SSA 3.0 4.8 2.6 5.0
PR 7.2 8.3 6.9 9.4
LAC 3.0 5.7 -1.7 5.7
Table 4 World’s ten fastest-growing
economies* (annual average GDP growth
%)
2001 - 2010 2011-2015 (IMF
forecast)
Angola 11.1 China 9.5
China 10.5 India 8.2
Myanmar 10.3 Ethiopia 8.1
Nigeria 8.9 Mozambique 7.7
Ethiopia 8.4 Tanzania 7.2
Kazakhstan 8.2 Vietnam 7.2
Chad 7.9 Congo 7.0
Mozambique 7.9 Ghana 7.0
Cambodia 7.7 Zambia 6.9
Rwanda 7.6 Nigeria 6.8
*Excluding countries with less than 10m and
Iraq and Afghanistan
Table 3 Equality by region
(0 = no inequality; 1= complete inequality)
Gini Index Gender Index
AEP 0.57 0.23
SSA 0.42 0.18
LAC 0.52 0.02
MENA 0.38 0.27
10. National economies in sub-Saharan African countries are typically less diverse than in other regions,
and are, for the most part, dependent on fuel, minerals, or agriculture to generate value-added. Taken
as a region, the GDP in SSA is split between products classified as services (54%), industry (32%, of
which about 15% is manufacturing) and agriculture (15%). This hides considerable variation, ranging
from countries relying heavily on agriculture, such as Ethiopia and Sierra Leone, where 52% of GDP
comes from the sector, to countries where agriculture contributes around 25%, such as Sudan and
Mozambique, and then to those for which it makes up 5% or less of the economy such as South
Africa, Botswana and Gabon. Output classified as industry also includes agro-industry and in
agriculture-based countries, such as Uganda, agro-industries contribute up to 61% of total
manufacturing sector output. (Mhlanga 2010)
Trade
Africa’s share in world trade is proportionally very small, accounting for only about 3% of world
exports and imports, shares similar to Latin America, but dwarfed by all other regions. Europe is
currently Africa’s largest trading partner, however trade with Asia and other developing regions has
been steadily increasing. (Table 6 and Figure 5)
Figure 5 Export Destinations (IMF 2010)
6
Table 6 Trade Shares (WTO 2010)
Imports to
Africa
Exports from
Africa
Europe 42% 40%
Asia 26% 22%
North
7% 17%
America
Africa 12% 12%
Middle East 8% 3%
Other 5% 6%
Exports are dominated by fuels (55%), with manufactures (19%), agricultural products (10%) and
mining products (9%) making up the remainder. (WTO 2010) Agricultural exports are primarily high-value
cash-crops such as cocoa, sugar, coffee, tea, cotton, and oranges. (Figure 6) Agricultural
imports are primarily basic food items. Wheat is the largest food import to SSA, at 8.6 million tonnes
in 2008, owing to the steady increase in demand for bread, particularly in urban areas. Wheat can only
be grown on about 1% of the land or 24 million ha in SSA, mostly in the highlands in East Africa.
(FAO 1991, Morris and Byerlee 1993) However, as seen in Figure 6, countries in SSA import large
quantities of commodities which could be supplied locally, including rice, maize, sugar, palm oil and
soybeans.
11. 7
Top exports - SSA
Quantity
(tonnes)
Top imports - SSA*
Quantity (tonnes)
Value (1000 $)
Figure 6 Imports and Exports (FAOStat 2010)
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Value (1000$)
Tonnes
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Value (1000$)
Tonnes
*Excluding Wheat
Intra-regional trade is also very low compared to other regions. Total intra-regional trade is only 12%
of total trade to and from SSA countries as compared to 52% in Asia and 26% in LAC. The main
traded commodities between SSA countries are fuel and mining products, with intra-region
agricultural product export totalling only US$8 billion or 18% of officially recorded agricultural
exports. (WTO 2010)
Investment
Public
As economies diversify and with increased resource revenues, governments can raise levels of public
investment. The historically high share of public expenditures on military is gradually decreasing in
some countries, with resulting increases in infrastructure, health, education and other public services.
SSA countries, on average, currently devote 5-7% of their public expenditures to agriculture, as
compared to 8-10% percent in Asia (Resakss 2010). In 2003, the African heads of state committed to
increase the share of public expenditures going to agriculture to at least 10%, reflecting the
recognition of agriculture’s potential as both an engine of growth and driver of poverty reduction.
While only eight countries have been able to confirm having reached or surpassed this goal as of mid-
12. 2010, agriculture’s share of public expenditures has been rising in most countries. (Donor Platform
2010, Resakss 2010)
Private
Private investment has been slowly increasing in the last few decades in all developing regions.
Investment in sub-Saharan Africa, as a whole, is small compared to other regions, but when viewed in
relation to GDP, is on par with others. (World Bank, 2009) Most of this investment in SSA is going in
to the oil and gas, mining and telecommunications industries. However, private investment in
agriculture, and particularly agri-industry, has been slowly increasing. Total investment (public plus
private) to SSA was projected to increase by some 7% in 2010 and 6% in 2011. (IMF 2010)
Continued investment growth – both domestic and foreign – and particularly in the non-minerals
sectors, will depend on steady improvements in the overall business climate. In terms of macro-economic
8
management, sub-Saharan Africa compares favourably with other developing regions with
relatively stable, if slightly higher inflation, reflecting generally good monetary discipline in the face
of the impact of sudden increases in investments and receipts associated with oil and mineral
exploitation. Average inflation from 2007-2010 in SSA was 9.1%, compared to 6.4% in LAC, 5.5% in
developing Asia and 1.5% in the advanced economies. (IMF 2010)
In terms of ‘the ease of doing business’, while overall there is improvement, the countries of SSA
account for 9 of the bottom 20 in the Transparency International corruption perception rankings, and
15 of the bottom 20 of the IFC Doing Business Rankings. Despite some improvements, starting a
business still costs 18 times as much (relative to income per capita), on average, in Sub-Saharan
Africa as in OECD high-income economies. This encourages firms to remain informal, resulting in
disincentives for growth and job creation, and limits the ability of governments to increase their fiscal
revenues. At the same time, however, several countries, including Rwanda and Ghana, have improved
their standing on both indices substantially, and in 2010 Rwanda was highlighted as a global best
performer in improving its business climate. (Transparency International 2010, IFC 2011)
Infrastructure, while improving in some areas, remains a major constraint relative to other regions.
Road condition and density are very low, as we will expand upon in Section Three. Electricity
generation capacity has remained stagnant since the 1980s, and now averages only 37MW/million
people, as compared to 326MW across other low income regions. (Foster and Briceño-Garmendia
2010) Costs in much of SSA are also significantly higher, averaging 14c/kWh, as compared to
4c/kWh in EAP or to 1c/kWh in South Asia, and access is unreliable, with only South Asia
experiencing more outages. Many small businesses must rely on small diesel powered generators,
with which electricity can cost up to 0.40kWh. (Foster and Briceño-Garmendia 2010b) Ten years ago
telephone access in SSA was much lower than other developing regions, however, exponential
increases in mobile phone use, from 650,000 in 1995 to over 330 million in 2010, have now put the
region on par with South Asia, and on a path for continued expansion in communications
connectivity. (International Telecommunications Union 2010)
Table 7 Infrastructure
Region Paved Roads
(%)
(WDI
latest)
Road Density (km2
of road/surface
area) (WDR 2009)
Access to
Electricity (%)
(WDR 2009,
AICD 2009)
Telephone, mobile
and fixed (per 100
people) (WDI 2009)
EAP 11 0.72 89* 75
MENA 76 0.33 78 74
LAC 22 0.12 90 99
South Asia 57 0.85 52 36
SSA 12 0.13 26 35
*excluding China
13. Agriculture
Sub-Saharan Africa’s rural economy remains strongly
based on agriculture relative to other regions. Agriculture
in SSA (excluding South Africa) employed 62% of the
population and generated 27% of the GDP of these
countries in 2005. (Staatz and Dembele 2007). These
agricultural production systems are largely based on
smallholder farms. Smallholder farms, when defined as
being two ha or less, represent 80% of all farms in SSA,
and contribute up to 90% of the production in some SSA
countries. (Wiggins 2009). A large percentage of these
smallholders are women, responsible for key components
of household production such as weeding, harvesting and processing. Further, women often
independently grow non-cereal crops for income and are increasingly heading rural households due to
male urban migration. (Oxfam 2008)
As in other regions, SSA agricultural households have varying levels of diversification in income
sources beyond agriculture - though agriculture remains the dominant source of livelihood in poorer
countries and poor regions within less poor countries. (IFAD 2010) (Figure 7).
9
Figure 7 Rural Household Incomes (IFAD 2010)
Table 8 Agriculture
Agriculture
value added
(%GDP)
Agriculture Performance
The growth in agricultural GDP in SSA has been relatively strong in
recent decades, and was the highest of the developing regions in 2009
(Table 9). Overall, increases in agricultural production have kept
pace with population growth (FAOStat 2010, IFAD 2010). However,
in contrast to other regions, this has occurred largely through
expansion of the cultivated area onto the region’s relatively abundant
land rather than increases in land productivity (Figure 8).
Agricultural
Employment (%)
2008 2007
SSA 16 (27*) 46 (62*)
APR 13 44
LAC 6.5 12
*Figures excluding South Africa, for 2005
Table 9 Agriculture GDP
growth (%) (WDI)
1990s 2000s 2009
SSA 2.7 3.0 4.8
APR 3.6 3.9 3.8
LAC 2.1 3.3 1.5
14. 10
Figure 8 Increases in cereal production in South Asia and SSA (Index: 1961=100) (Henao and
Baanante 2006)
The pursuit of an extensification strategy by SSA’s farmers reflects the relative availability and lower
costs of land relative to capital inputs required for intensification, such as credit, fertilizer and
irrigation. As in LAC, SSA has a further 800 Mha of uncultivated land with rainfed crop production
potential. In comparison, there is almost no available land in South Asia, East Asia or North Africa
(Figure 9).
At the same
time, while
overall
production
growth has
been based
mainly on
extension of
cultivated area,
the picture
regarding
intensification
is a bit more
nuanced.
Looking at the
net production
value per
hectare, which
Figure 9 Potential for cropland expansion (FAO 2009)
compares the value of production of all agricultural products against a base year (after taking out that
used for feed or seed), one can see that while SSA overall has made slower progress over the last 50
years compared to others there is quite a wide degree of variation across the continent, and in fact the
more densely populated West Africa region has progressed at a rate slightly greater than that of LAC.
(Figure 10).
15. 11
800
700
600
500
400
300
200
100
0
World Developing Regions
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
Net Production /Ha ($)
180
160
140
120
100
80
60
40
20
Figure 10 Net Production in Developing Regions and African Regions
(Wiggins 2010, FAOStat 2010)
Breaking this down even further, there is considerable variation from country to country. For
example, Figure 11 shows production values in more crowded Malawi shooting up starting in the
early 1990s, as compared to steady and slow progress in less densely populated Burkina Faso and
Kenya and stagnation until recently in Senegal.
400
350
300
250
200
150
100
50
Figure 11 Production in selected Africa countries (FAOStat 2010)
Africa
LAC
Asia
0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
Net Production /Ha ($)
African Regions
Africa
Eastern
Middle
Northern
Southern
Western
0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
Net Production /Ha ($)
Select African Countries
Burkina
Faso
Kenya
Malawi
Senegal
16. 2) Opportunities for Sub-Saharan Africa’s Smallholders
The agricultural sector faces growing global and regional demand for agricultural products for food,
feed, industry and fuel. Continued population and income growth, combined with urbanization,
particularly in developing countries and, as we have seen, including those in SSA, is placing pressure
on current food supplies at the same time that global productivity increases are levelling off. At the
same time, geo political and environmental concerns are placing increased emphasis on the
replacement of petroleum with renewable sources, such as crops, for production of fuels, lubricants
and fibres. The consequences of this rapid growth in demand, combined with slowing scope for
supply response from traditional producing regions has resulted in increased sensitivity of agricultural
markets to supply variations due to weather. The resulting tendency towards increased price volatility
was clearly observed in the context of the 2007 and 8 food price crisis. Higher prices and volatility are
forecast to continue, particularly in the context of expected impacts of climate change (for example,
Godfray et. al. 2010).
The world has turned to sub-Saharan Africa, given its relatively abundant, uncultivated land
resources, and unrealized potential productivity gains as a major source of future supply and stability
for food and industrial agricultural markets. At the same time, SSA’s governments, recognizing the
need to feed an increasingly urbanized population, as well as the opportunity to develop agro-processing
12
industries, are also focused on rapidly increasing agricultural production. This was
highlighted at the African Union Congress in 2004 where Heads of State committed to achieving an
average 6% annual growth rate of agriculture, supported by a minimum of 10% allocation of public
expenditures to the agricultural sector.
While expansion of large, plantation-type operations will likely account for some of SSA’s supply
response, there remains significant scope for smallholders, and smallholder farmer organisations, to
increase their role as commercial suppliers. The circumstances favouring plantation approaches are
quite limited due to the economies of scale involved in careful timing and rapid transfer of harvests to
processing facilities, as well as the need for significant investments in infrastructure in remote,
sparsely populated areas (Hayami 2004). However, even in the case of these so-called “plantation
crops” the impact of labour management challenges provide scope for alternative institutional
approaches which maintain the central role of smallholders, such as nucleus estates. (Deininger and
Byerlee 2010)
SSA’s smallholders are positioned to be significant beneficiaries of the improving opportunities in
agricultural markets. The theoretical efficiency advantages of smallholder production systems - in the
absence of scale economies for input and output markets - for most crops, particularly in countries
with relatively high capital costs relative to labour – are well known. (Binswanger and Rosenzweig
1986, Hazell et. al. 2007) This theoretical advantage of smallholder farming is confirmed empirically
for SSA in the World Bank’s Awakening Africa’s Sleeping Giant study (World Bank 2009c) which
concluded that smallholder production costs at the farm gate for several key crops are competitive
with other regions, despite lower productivity, making them competitive suppliers in local markets.
For example, Nigerian soybean producers can supply Ibaden markets at 62% of the cost of imports,
and Zambian sugar farmers can supply Nakambala markets at 55% of the cost of imports. More
broadly, as shown above, SSA’s farmers, of which 80% are smallholders, have been responding to
improved production incentives with steady, if relatively slow, growth in production and productivity.
From Extensification towards Intensification
The primary challenge now is a move from extensification towards greater intensification in the
supply response strategies of smallholders. While Africa’s relatively abundant, uncultivated arable
land suggests significant scope for expansion, this is facing limits which is increasing the ratio of the
cost of land to capital inputs faced by farmers. In particular, efforts to develop these lands through
large scale concessions – particularly to foreign investors – has made it clear that “uncultivated” does
not mean “unused”. Expansion must take into account impacts on existing economic uses – such as
grazing and woodsheds, as well as social and ecological functions whose importance often becomes
17. apparent when efforts are made to convert the land. Importantly, and as discussed in more depth in
Section Three, these areas also often suffer from very limited access to infrastructure or market
centres. (FAO 2009).
Continued smallholder production growth will require increased investments in intensification. In
order for smallholders to increase production with less additional land and without major increases in
labour inputs, they will need to increase their own productivity through greater capital and technology
investments. While there is some scope for increasing labour intensity of agriculture, given the
growing, young population profile, in fact, there is little evidence that this can be realized in the
context of smallholder agriculture on a broad scale as educated youth are much more inclined to seek
urban and even rural employment opportunities which offer perceived higher returns for effort than
extensive agriculture – particularly given traditional difficulties faced by youth in obtaining land. In
fact, attracting youth to agriculture as a livelihood is likely to coincide with increased intensification
which improves returns per unit of labour and land and builds on their educational advantages. The
Sleeping Giant study concludes that “[current farm-level] competitiveness does not represent a
sustainable path out of poverty, because at current productivity levels and farm size, agriculture is
economically impoverishing and technically unsustainable. The challenge facing African countries is
to invest in developing a more sustainable, productivity-driven base for competitive commercial
agriculture over the long-run.”
Accordingly, the smallholder supply response will depend on increased on-farm investments, such as
appropriate seeds and fertilizers, irrigation and mechanization technologies, and reductions in post-harvest
losses (PHL). Despite recent increases, SSA remains well behind other regions in the use of
improved seeds and fertilizers. On average, farmers in SSA apply less than 10 kg of nutrients/ha,
compared to around 140 kg/ha in both Latin America and South Asia. (WDI 2010) Use of high
quality seed is also much lower than it could be with surveys for staple crops in West Africa
indicating improved varieties accounting for only 2-33% of seed and renewal of seed stock occurring
only every 9-13 years. From 1997 to 2007 in West Africa, there was only enough improved maize
seed to meet one-third of farmer demand (Ndjeunga and Bantilan 2002, AGRA 2011, Adesina 2010).
Productivity improvements will also
require greater use of irrigation. While
there has been a steady increase in the
amount of agricultural land irrigated
worldwide in the last 50 years, this has
mostly occurred in Asia, where
irrigated land has increased from 27%
to around 36%. In contrast, only 11%
of land is irrigated in LAC, and less
than 3% in SSA. (IFAD 2010) Many
countries in Asia are now irrigating
close to their full potential, while in
Latin American countries the percent of
potential used is lower (5-35%). (FAOAquastat 2010) While there is considerable potential to expand
irrigation in SSA, opportunities vary greatly across the region, due to differences in rainfall,
renewable water resources and land. While some areas have high irrigation potential, they also receive
abundant rainfall, making irrigation less crucial; others receive less rain, but also have less water to
draw from. (Table 10) One-third of the potential on the continent is concentrated in two very humid
countries: the Democratic Republic of the Congo and Angola. (FAO 2005) The crops that are
irrigated in SSA are mainly cash crops; whereas 40% of cash crop production in SSA comes from
irrigated systems, only 15% of cereal production does. (Dorosh et. al. 2009)
The use of mechanization is also substantially lower than in other regions. In SSA only 15 tractors are
in use per 100km2, in contrast to around 170 in EAC and SAR, and 100 in LAC.
13
Table 10 Irrigation Potential (FAO 2005)
Irrigation Potential (ha) % of irrigated
potential used
DR Congo 7,000,000 0
Liberia 600, 000 3
Angola 3,700, 000 6
Burkina Faso 165,000 28
Kenya 353,060 31
Senegal 409,000 37
Zambia 523,000 49
Botswana 13,000 61
South Africa 1,500,000 100
18. Once crops are harvested, many farmers in SSA currently suffer significant post-harvest losses from
grain shattering, spillage during transport and from bio-deterioration during each step of the chain,
including storage. Losses in the East and Southern Africa region, for example, have ranged from
14%-17% each year from 2003-2009 (weighted average of all cereals). (PHL Network, 2010).
However, relatively low-cost storage and transport facilities and protocol are increasingly available in
forms and at prices accessible to smallholders based on innovations from Southeast and South Asia.
(World Bank/FAO 2010)
The Role of Risk Management in Farming as a Business
The ability of SSA’s smallholder farmers and farmer organisations to increase on-farm investments in
land and labour productivity is constrained by their ability to manage the risk-return trade-offs in
moving toward intensified agriculture. IFAD’s 2011 Rural Poverty Report has highlighted the role of
risk in inhibiting smallholders from pursuing commercial agriculture opportunities. The RPR clearly
demonstrates that given the precariousness of their livelihood context, poor, rural families are highly
risk adverse and therefore are less inclined than non-poor groups to move up the “risk-return” ladder
towards potential higher incomes, contributing to the growing income disparities we see in developing
countries, including in those in SSA. These risks cover a broad range from social to political to natural
resources to business (Figure 12).
14
Figure 12 Risks faced by smallholders
In the context of SSA, these risks vary significantly with the different agro ecological zones. As in
other regions, it is difficult to generalize risks faced by smallholders given the diversity of farming
and marketing systems. In order to capture both the risks and their diversity, we have provided an
initial categorization according to agro-ecological systems whose characteristics, along with the
marking systems and market access factors discussed below, drive much of the risk profile faced by
smallholders. Table 11 summarizes the principle production zones and associated risks.
19. 15
Table 11 Characteristics of agro-ecological zones in SSA (Authors based on Dixon et. al 2001 and Bationo 2006)
Length of
growing
period
(days)
Average
Rainfall
(mm)
Farming
systems
Land
area (%
of SSA)
Agricultural
Population
Main Soil
Types*
*simplified
for chart
Agricultural
Products
Risks
Arid <90 0-600 Pastoral 14% 27 million
(7%)
Lithosols,
xerosols
Cattle, camels, sheep,
goats.
Health, Social Obligations, Conflict, Crime,
Corruption, Drought, Animal Semi-arid 90-179 600-1400 Diseases, Prices
Agro-pastoral
8% 33 million
(8%)
Lixisols,
arenosols,
vertisols
Sorghum, millet: with
pulses, sesame. Cattle,
sheep, goats, poultry.
Health, Social Obligations, Conflict, Crime,
Corruption, Land Tenure, Climate, Soils, Animal/
Plant Diseases & Pests, Prices, PHL, Transport
Sub-humid
180-269 1400-
3000
Mixed
cereal/root-crop
13% 59 million
(15%)
Ferralsols,
lixisols
Maize, sorghum,
millet: and cassava,
yams, legumes, cattle
Health, Social Obligations, Conflict, Crime,
Corruption, Land Tenure, Climate, Soils, Animal/
Plant Diseases & Pests, Prices, PHL, Transport
Mixed maize 10% 60 million
(15%)
Ferralsols,
lixisols
Maize: with tobacco,
cotton, cattle, goats
and poultry
Health, Social Obligations, Conflict, Crime,
Corruption, Land Tenure, Climate, Animal/Plant
Diseases & Pests, Soils, Input and Output
Policies, Prices, PHL, Transport, Contracts
Root crops 11% 44 million
(11%)
Ferralsols,
lixisols,
acrisols
Yams, cassava,
legumes, cattle
Health, Social Obligations, Conflict, Crime,
Corruption, Land Tenure, Climate, Animal/Plant
>270 3000-
Humid Diseases & Pests, Prices, PHL, Transport
4500 Tree crop 3% 25 million
(7%)
Ferralsols,
acrisols
Cocoa, coffee, oil
palm, rubber: with
yams, maize
Health, Social Obligations, Conflict, Crime,
Corruption, Climate, Plant Diseases & Pests,
Input & Output Policies, Prices, PHL, Transport,
Contracts
Forest-based 11% 28 million
(7%)
Ferralsols,
acrisols
Cassava: with maize,
sorghum, beans and
cocoyams.
Health, Social Obligations, Conflict, Crime,
Corruption, Climate, Plant Diseases & Pests,
Input Policies, Prices, PHL, Transport
Highlands 180 -
>270
1400-
4500
Highland
Perennial
1% 30 million
(8%)
Vertisols,
cambisols
Banana, plantain,
enset, coffee: with
cassava, sweet potato,
beans, cereals. Cattle.
Health, Social Obligations, Conflict, Crime,
Corruption, Land Tenure, Climate, Animal/Plant
Diseases & Pests, Input Policies, Prices, PHL,
Transport, Contracts
Highland
Temperate
2% 28 million
(7%)
Vertisols,
cambisols
Wheat and Barley:
with peas, lentils,
broad beans, rape, tef
and potatoes. Cattle.
Health, Social Obligations, Conflict, Crime,
Corruption, Climate, Animal/Plant Diseases &
Pests, Input Policies, Prices, PHL, Transport,
Contracts
20. 16
The potential for investments in farming as a business is particularly influenced by supply chain risks.
While risks associated with health, social obligations and conflict are fairly consistent across agro-ecological
zones, those associated with marketing and other aspects of farming as a business are often
supply chain specific. Table 12 attempts to summarize, in broad terms, the different types and
characteristics of supply chains which smallholders generally work with in SSA, and the implications in
terms of risks.
Table 12 Indicative Risks Associated with Smallholder Supply Chains
Marketing
System
Typical Products Characteristics of Supply Chain Risks for
Smallholder
Highly-
Integrated
Exports of high value
for processing in
specialized market
Ex: (organic and fair
trade cocoa, coffee, oil
palm, cotton, honey) and
in fresh markets
(flowers, fruits,
vegetables)
Marketing margins: Very low (producers receive
60 to 80% of price of export/processor)
Structure: Highly structured/integrated: Lead
firm directly manages chain back to individual
producer or co-op to ensure quality requirements
and certification; usually involves contract with
international trade, value-added and/or quality
standards specified. High level of interlinking.
Failure to meet
quality standards
Input and trade
policy
Climate
Integrated
with
intermediary
High value for
domestic/regional fresh
and processed markets
Ex: (dairy, eggs, fruits,
vegetables, meat) and
exports for processing
(conventional coffee,
cocoa, oil palm, cotton)
Marketing margins: Low (producers receive 40
to 75% of export price)
Structure: Structured with one or two local
aggregators who transmit/enforce quality
standards between producers and lead firm –
often contract and/or informal credit. Some
interlinking. Some cases of co-ops integrating
chain.
Failure to meet
quality standards
Contract
enforcement
Price volatility
Input and trade
policy
Climate
Dispersed Low value
domestic/regional staple
crops and biofuel stocks
Ex: (cassava, rice, corn,
millet, sorghum)
Marketing margins: High (producers 15% to
50% of price to processor or consumer)
Structure: Absence of lead firm - unstructured,
spot market transactions with multiple channels
and numerous intermediary
transporters/aggregators – limited or no
transmission of quality standards to participants
in supply chain. Absence of long-term
investments or inter-linked market relationships
(weak access to private input markets)
Post harvest losses
Transport delays
and costs
Price volatility
Input and trade
policy
Climate
(Authors based on Pingali and Rosengrant 1995, Swinnen, et al 2007, USAID 2009)
Generally speaking, smallholders in dispersed supply chains are exposed directly to a larger number of
business risks, as well as realizing a lower share of returns, while in integrated markets, there is generally
a greater level of risk sharing amongst supply chain actors, as well as a higher share of benefits to
21. producers. While there remains a need for more rigorous evaluation of the relative impacts on livelihoods
of participating farmers, experience under IFAD-financed projects which aim to move farmers towards
greater market integration, such as for potatoes in Guinea, palm oil in Uganda, cocoa in Sao Tome and
Sierra Leone and coffee in Rwanda, has generally confirmed significant, positive impacts on both the
level and stability of incomes of participating smallholders. (Raswant and Khanna 2010)
While agro-ecological and location constraints will continue to impede a significant share of smallholders
from participating in more integrated supply chains, the potential benefits for smallholders of
participation are well recognized. Farmer organisations, such as the Network of Peasant Organizations
and Producers of West Africa (ROPPA), are now focused on helping members to become competitive
suppliers of high value products for domestic markets, such as rice, meat, dairy and vegetables.
Governments have placed increased attention on revitalizing the role of smallholders in production of
export crops and domestic import substitutes, as reflected in the CAADP investment plans. Support for
improved supply-chain integration, market-access and commercialisation is prominent in 11 out of the 15
currently completed CAADP investment plans. (CAADP 2011)
Donor support is also generally well aligned to these priorities. Donor financing is increasingly focused
on helping smallholders gain capacity to participate in more integrated supply chains through investments
in irrigation, roads, rural finance, research, weather insurance, inputs and farmer organization. (OECD
2011) These investments are intended to reduce both the costs and the risks faced by smallholders in
associated with intensification of production so as to become more efficient suppliers of markets.
However, evidence on the ground is highlighting that these investments, of themselves, are not sufficient
in most cases for farmers to move effectively from a dependence on dispersed staple crop markets
towards more integrated market opportunities. This is seen in the case of irrigation and roads in SSA,
where assessments have demonstrated relatively lower returns relative to projects in other regions
(Inoncencio et. al. 2007, World Bank 2009), and in lower adoption rates for improved seeds and fertilizer
(Ndejeunga and Bantilan 2002). While there are a myriad of explanations offered, most emphasizing the
weakness of institutions or governance, we suggest that a more focused and practical element merits
greater attention: effective coordination in terms of place and timing of development support as discussed
in the next section.
17
22. 3) Right Place, Right Time - Lowering Business Risk
In seeking to lower risks and increase opportunities for smallholder farmers, there seems to be a
pronounced tendency to search for new technical solutions while often ignoring the potential to strengthen
the impact of existing investments. There is a predisposition among development practitioners, be they
academic researchers, officers of international financial institutions or staff from non-governmental
organizations, to look for new solutions to rural poverty alleviation, food security and income generation.
Improved seed varieties, micro-dosing of fertilizers, more crop per drop irrigation schemes, sustainable
agronomic practices, innovative financial instruments and the like all certainly have a role to play in
improving the lives of the rural poor in Africa. However, there are potentially enormous gains that can be
achieved through improving the spatial and temporal coordination of existing development interventions
by simply responding to the two, proverbial “elephants in the room”:
18
1. More than one third of all sub-Saharan rural Africans are so geographically and economically
isolated from market towns that, at present, they are virtually condemned to a life of subsistence
agriculture, regardless of their access to modern inputs, irrigation infrastructure or financial
services.
2. The majority of development programmes and projects do not deliver goods, services and works
in a timely manner and this has had an extremely negative impact on productivity and increased
revenues of project beneficiaries. Successful agricultural campaigns are all about planning and
timing. Without rigorous project management, farmers will not gain the full benefits of new
technological solutions.
Right Place
Increasing access to markets figures prominently in
Table 13 People Living more than Five Hours
rural poverty reduction strategies (and is one of
to a Market Town of 5,000
IFAD’s six strategic objectives). But the extreme
degree of geographical isolation of SSA smallholders
Region Percent Number (millions)
is not widely apprehended. According to a spatial
SAR 5% 45
analysis undertaken in 2007 (Sebastian), 34% of the
EAP 17% 188
rural population in sub-Saharan Africa live more than
LAC 20% 26
five hours from a market town of 5,000 people. As
MENA 31% 23
can be seen from Table 13, SSA has the greatest
percentage of population and the second greatest
Central Asia 32% 32
number of people living five hours or more from a
SSA 34% 131
market town.
The density of SSA’s road network is substantially lower than in other developing regions and is, in fact,
regressing as there are fewer kilometres of roads today in SSA than there were 30 years ago. There are
only 204 kilometres of road, only 12% of which is paved, per 1000 square kilometres of land area. This
density is less than 30% than that of South Asia, the next lowest region. Only 34% of Africans live within
two kilometres of an all-season road, compared to 65% in other developing regions. (Dorosh 2009, WDI
2010).
These sobering sub-Saharan statistics mask significant regional differences. The East Africa region has a
much lower overall population density, smaller local markets and lower road connectivity than West
Africa. The average travel time to a major city (of 100,000 people) is 2.2 times greater than in West
Africa. This large inter regional difference is attributable to a much less dense secondary and tertiary road
23. network in East Africa, where distances to these smaller roads are 1.8 times farther than in West Africa.
(Dorosh 2009)
So what is the impact of remoteness to market on agricultural productivity?
If a farmer cannot profitably market her surplus, then there is no logical reason to produce more than her
family can store and/or consume. There is thus no motivation to adopt productivity enhancing
technologies, particularly those external inputs which are costly and, in any event, are not likely to be
available. This intuitive conclusion is borne out by the previously referenced AICD report which
estimates that an average farmer is producing at 45% of the theoretical agronomic potential when located
four hours from a major city. This percentage drops to 20% when the farmer is six hours away and 12%
when eight hours away. So, fully one third of the rural population in sub-Saharan Africa is sitting on the
side lines with no real chance of participating in the market economy nor improving their economic
condition.
What about the other two-thirds of rural sub-Saharan
Africans who theoretically are in sufficient proximity to
market towns to sell surplus production? The 2007
spatial analysis categorized access to market as high (< 1
hour), medium (2 – 4 hours) and low access (> 5 hours).
There is a significantly lower percent of rural people in
SSA than other regions with high access to market towns
as can be seen from the Table 14.
The number of rural sub-Saharan Africans which enjoy
medium access to market towns is, at 46%, higher than
all other regions with the exception of East Asia.
However, the significance of distance to market is primarily (though not exclusively) one of transport cost
to receive inputs and evacuate product. And here, the relative benefits of medium access to market
evaporate in the face of high transport costs. As can be seen in Figure 13, it can cost up to five times as
much to travel the same distance in parts of Africa as it does in Pakistan. This, in effect, means that from
a cost perspective, a SSA farmer located one hour away from a market town (high access) pays the same
for transport as a Pakistani farmer located five hours from a market town (low access). The extremely
high cost of transport in Africa in effect dramatically increases the impact of distance to market.
19
Table 14 People Living less than one hour to
a Market Town of 5,000
Region Percent Number (millions)
SAR 56% 512
EAP 33% 366
LAC 46% 61
MENA 26% 19
Central Asia 26% 26
SSA 21% 81
24. 20
Figure 13 Transport prices (Teravaninthorn and Raballand 2008)
The importance of widely differing transportation costs comes into clear focus when considering the
relative cost of agricultural inputs and the opportunities for agricultural import substitution in SSA.
A concrete example is the
impact of transport costs
on fertilizer prices where
differences in transport
costs are the most
important contributor to
the higher prices in SSA
countries as compared to
Thailand. (Figure 14).
One notes that a ton of
fertilizer is, on average,
80% more expensive in
Mali than in Thailand.
(Bumb 2009) Landlocked
countries typically must
absorb US$50-100 per
tonne in additional
transport costs to have
goods delivered from the
nearest port to their own
border. The problem is
made worse by small
Figure 14 Fertilizer price formation in Thailand, Tanzania and Mali in 2006
(Bumb 2009)
market size and fragmentation and unnecessary product differentiation, making it difficult to achieve the
necessary economies of scale for more efficient production or import. (World Bank, n.d.)
As can be seen from Figure 6 in Section One, SSA countries import more than seven million tons of rice
per year (whole and broken), more than 90% of which is produced in Thailand, China and Pakistan by
smallholder farmers. Rice imports represent almost 40% of total consumption in SSA. In much of the
region, locally produced rice cannot compete on a cost basis with product grown in remote rural areas of
25. Asia and transported several thousand kilometres to market, and this, despite similar or lower
smallholder farm gate production costs in Africa. (Africa Rice Center 2007)
The Sleeping Giant study identifies very promising opportunities for smallholder import substitution in
domestic and regional markets for rice, as well as soybeans, sugar and maize. These opportunities,
however, can only be realised through dramatic decreases in SSA’s transportation costs to render them
cost competitive in primary destination markets. (World Bank 2009c)
Reasons for High Transport Prices
The high price of road transport in SSA is widely apprehended but the reasons for this are much less
widely understood. High prices have generally been attributed to the poor state of the transportation
network, and, secondarily, inefficient logistics and endemic corruption. Several donors, in particular, the
World Bank, have, since the 1970s, invested heavily in improving SSA’s transportation infrastructure,
particularly along key trade corridors. These investments have facilitated road transport and have, in fact,
reduced the costs for trucks carrying cargo.
According to a July 2008 study, ‘Transport Prices and Costs in Africa: A Review of the Main
International Corridors’, reduced transport costs have not translated into reduced transport prices for
farmers and shippers in much of Africa. On the contrary, particularly in West and Central Africa, the
reduction in transport costs due to improved road conditions have served principally to increase profit
margins for trucking companies. (Teravaninthorn and Raballand 2008)
Analyses contained in the report bring into question much conventional wisdom regarding transport in
Africa and have direct impacts on smallholder competitiveness and the role that donors and governments
must play to facilitate access to markets. For example:
21
The cost of transport along major corridors is not significantly higher in SSA than in European
countries. The report estimates that average costs per vehicle kilometre in Central and East Africa
(USD 1.87 and USD 1.33) were similar to those in France (USD 1.52) and Germany (USD 1.71)
and were, in fact, lower than in Poland (USD 2.18). Although variable costs, primarily for vehicle
maintenance and fuel, were significantly higher, fixed costs for truck acquisition and driver’s
salaries were much lower.
The trucking industry in Pakistan shares many similarities with SSA (purchase of old used trucks,
very poor condition of transport infrastructure, low wage levels for drivers) yet transport prices in
Pakistan are but a fraction of what they are in most of sub-Saharan Africa. The prevailing low
prices for truck transport in Pakistan enable Pakistani rice to be competitive on African markets.
Estimated profit margins registered by trucking companies are very high, particularly in Central
and West Africa. Estimates range from 118% on the Ngaoundëré-N’Djamema corridor, 80% on
the Tema-Bamako corridor, 86% on the Mombassa-Kampala corridor to a low of 18% on the
Lusaka-Johannesburg corridor.
Under present industry conditions, rehabilitation of major road networks, reduction in border
crossing times, decreases in fuel prices and bribes will have no impact on transport prices for
smallholder farmers in Central and West Africa.
The study highlights the very different prevailing conditions in East and Southern Africa, as opposed to
West and Central Africa. Transport costs and prices are significantly lower in East and Southern Africa.
The main reason for this is competition within the sector.
26. In West and Central Africa the trucking industry is highly regulated. Freight allocation is controlled by
trucking cartels which erect barriers to entry, promulgate and enforce regulations which limit competition,
and create conditions which favour bribery to increase market share under the “tour de role” freight
allocation system. The structure of the industry and the policy frameworks do not provide incentives to
invest in newer rolling stock nor maximize existing trucking capacity through more efficient use of
vehicles. Not coincidentally, trucking firms in these regions are often owned by the politically well
connected.
By contrast, in Eastern and Southern Africa, direct contracting between shipper and transporter is the
norm rather than the quasi-government freight allocation systems which prevail in the other regions. This
has fostered a more open, competitive environment which is reflected in more efficient services, newer
truck fleets, and lower costs and prices in the region.
The study examined the impact of the 1994 deregulation of the trucking industry in Rwanda (the only
such case of deregulation in Africa, according to the study) following the genocide. Deregulation of the
parastatal trucking industry resulted in a decline in prices by more than 30% in nominal terms and almost
75% in real terms. Moreover, lower prices also led to an increase in the size of the Rwandan fleet.
While not identified as a
main contributor to
transport costs on the
principal international
corridors analysed in the
AICD study previously
referenced, illicit payments
to government agents,
associated delays and
subsequent spoilage weigh
heavily on the cost of local
transport of agricultural
products in Africa. These
additional transport costs
are distributed to producers
in the form of lower farm
gate prices and to
consumers through higher
retail prices. Producers of
perishable goods, who are
predominantly women
smallholders, are
disproportionately affected
by these issues because of
significant losses incurred during transport. The World Bank’s 2009 World Development Report argued
that illicit payments act as a major barrier to agricultural growth. Figure 15, for example, shows the
number of checkpoints, time of delay, and the average amount of bribes for a section of the roads in West
Africa - an illustration which makes starkly clear the level of challenge faced by local producers and
traders.
So, for much of Africa, revising the policy environment for the trucking industry to make it more
competitive would effectively shorten the “economic distance” from farm to market, decrease the cost of
purchased inputs, improve profit margins for smallholder marketable surpluses and level the playing field
22
Figure 15 Checkpoints, bribes and delays on corridors in West Africa
(West African Trade Hub 2007)
27. for millions of SSA smallholders so that they may better seize opportunities for import substitution.
Farmers organisations have been working in concert with regional economic communities to draw
attention to these issues through collective action.
Right Time
Observe due measure, for right timing is in all things the most important factor.(Heriod, Greek Poet,
circa 800 b.c.)
Development stakeholders pay insufficient attention to the critical importance of project planning and
management as a factor in rural poverty reduction. Discussions concerning improved productivity, greater
food security and increased revenues centre on the new silver bullet, the breakthrough technology, the
new “it”. Talking about the impact of improved planning, prompt disbursements and timely delivery of
goods, works and services on poverty reduction and economic growth is not very exciting. It does not
generate research grants or fellowships nor provide the raw material for refereed papers in prestigious
journals. Perhaps this is why there is so little data on the impact of poor management and late delivery of
inputs on economic growth.
But anyone with even a passing knowledge of hands-on development practice knows that SSA
agriculture, as the engine of economic growth, is running on perhaps four of its six cylinders and this is
because inputs, be they financial, agronomic or technical, are, all too often, not being delivered in a timely
manner, be it at a donor institution, ministry of agriculture, the project implementation unit, the bank or
MFI or the agricultural cooperative. Of course, no one knows the exact impact of untimely delivery of
goods, services, and funding but there is widespread recognition that the problem is pervasive. It is also
correctable.
Agricultural development projects mostly provide the same services: financing, technical expertise, and
physical inputs, but they achieve varying levels of success. And the difference, more often than not,
comes down to the delivery of the required goods and services in a timely manner.
The history of fertilizer subsidy programmes in SSA is an eloquent case in point. Late fertilizer deliveries
to farmer’s fields have been a salient characteristic of fertilizer subsidy programmes. Dorward (2009)
examined ten fertilizer subsidy programmes and found that in nine of the ten cases, fertilizer was
delivered late to substantial portions of the beneficiaries. In Ghana, Yawson (2010) reported that 82% of
respondents indicated that subsidized fertilizer was not available at planting time. A similar situation was
described by Xu et al. (2006).
It is commonly recognized that late application of fertilizers have a negative effect on yield response
(Minde et al. 2008, Xu et al. 2006) and the lowered yield response can often be the difference between
adoption and non-adoption of farmers of improved input packages. In Zambia, Xu found that late
application of fertilizer on maize in several provinces had a significant negative impact on yield,
compared to those farmers who applied the recommended doses at planting time. Of the 21 sample groups
examined, yields were significantly higher in all cases among those farmers who had access to fertilizer in
a timely manner. On time fertilizer applications registered value/cost ratios of >2 in eight of the 21 cases,
compared to none among those who received fertilizer late. It is generally admitted that value/cost ratios
of greater than two are a condition for farmers to adopt fertilizer into their production systems.
To our knowledge, there is not a multi-country study which examines the larger impact of late fertilizer
delivery on profitability and fertilizer adoption but the empirical evidence seems quite clear: subsidized
fertilizers are frequently delivered late; late delivery and application decrease yields compared to “right
time” application and do not provide incentives for farmer adoption of a technology which could improve
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28. food security and livelihoods. The increased use of inorganic fertilizers is not, of course, a panacea. Their
use, even when the appropriate blend is employed in a timely fashion, may not always be financially
justifiable. Moreover, inorganic fertilizers need to be associated with better agronomic practices. But in
cases where marginal returns are positive, improved management of fertilizer procurement could have a
significant impact on food security, smallholder revenues and adoption rates.
Another glaring case where delayed delivery of inputs has a pronounced negative impact on smallholders
is the tardy delivery of marketing loans to cooperatives for raw material acquisition. Over the past decade,
Rwanda has invested tens of millions of dollars in the construction of coffee wet mills, new coffee trees
and training to improve coffee quality and capitalize on the increased world-wide demand for premium
coffees. A significant portion of this development has been through cooperatively owned processing
facilities. Cooperatives depend on marketing loans to finance coffee cherry4 purchases from cooperative
members and non-members. Generally commercial bank loans are provided in tranches during the
marketing season against warehoused inventories of parchment coffee. The history of coffee cooperatives
in Rwanda is characterized by late positioning of marketing loans which in turn interrupts cherry
purchases as farmers will not sell their cherries on credit to the cooperative and instead sell to
neighbouring privately owned processing facilities or other coffee cooperatives. Interrupted cherry
deliveries means that cooperatives cannot process adequate amounts of coffee to pay off long term capital
loans for processing facility construction. The result is frequent cooperative insolvability, cessation of
activity and outstanding bad loans which weaken bank financial positions and discourage further
investment in the coffee sector. (Reimen 2010)
The reasons for delayed positioning of marketing loans are varied. It may be due to late or incomplete
submission of loan applications by cooperatives, or tardiness on the part of bank loan officers, but the
upshot is still the same: the lack of “right time” management is a serious impediment to fully capitalizing
on existing investments and is a significant brake on increasing small holder food security and incomes
using existing resources and technologies.
Multilateral and bilateral donors share a significant part of the responsibility for this pervasive lack of
urgency in the implementation of development initiatives. Lag times between donor project approval and
start of programme implementation commonly exceed 12 months. Processing of requests for
disbursement of loan and grant funds from borrowing governments are nowhere near as expedient as they
should be. By way of example, average processing times for these requests at IFAD have substantially
decreased during 2010 to 28 days, from 35 days in 2008, but still pale in comparison to six day averages
reported by the World Bank. Donor programme evaluations are often published so long after field work
that their recommendations are out dated. Delays between the publication of vacancy announcements and
the recruitment of staff are frequently so lengthy that selected candidates get discouraged and take other
positions.
The impact of frequent (some would say systematic) slow response time on the part of donors is far
reaching. Not only does it retard programme implementation but, perhaps more importantly, sends the
exact wrong message to client governments, agricultural cooperatives, private sector partners and
smallholders that timing is not important. It also undermines donor credibility. How can donors credibly
advocate for more expedient government procurement processes when their own administrative processes
exhibit the same weaknesses?
IFAD, like other multilateral and bilateral donors, recognizes the contribution which public-private
partnerships (PPPs) can play in improving food security and income generation for small holders. To be a
viable partner to the private sector, however, requires “right time” responses. For example, in Sierra
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4 Coffee cherries are the fruit of the coffee tree. The fruit is harvested and the beans are extracted in processing.
29. Leone a very successful PPP has been developed with smallholder cocoa growers and high quality
exporters, facilitated by an IFAD funded project. However, an otherwise positive relationship amongst
farmers, marketers and the government project is strained by consistent delays in transferring
reimbursable funds to the companies and cooperatives who either have to delay disbursement to their
members for work accomplished or have to pre-finance from their own resources - calling into question
the advantages of a PPP. In this case, the project is addressing the issue, but it highlights how getting the
timing right is critical to the ability of organizations like IFAD to be attractive partners in the expanding
context of PPPs.
So why have development stakeholders not done a better job of getting the timing right? The reasons are
multiple. Some involve complex issues such as bureaucratic accountability, and competing stakeholder
political agendas while others are simpler. First, in a non-profit environment, there are few penalties for
not delivering on time, in contrast to the private sector which must rely on customer satisfaction for profit
and success. Second, improved operational planning, as mentioned in the introduction to this section, is
not a very glamorous subject and has not received the importance which it is due; realistic, detailed
chronological planning and expedient turnaround times are at the heart of successful agricultural
development programmes. Because they have not received their due, insufficient attention has been paid
to management training of project coordinators, transparent monitoring of metrics which gauge response
time and the establishment of lapse of time contracting mechanisms. These would serve to heighten the
sense of accountability and promote the timely provision of goods, works and services.
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30. 4) Conclusions and Recommendations
Sub-Saharan Africa’s unique resource endowment and political geography provide a challenging context
which has traditionally translated into relatively weak social and economic progress compared to other
regions. However, while tremendous challenges, particularly in infrastructure and governance remain, the
benefits of a growing, better educated and healthier population and improving economic management are
gradually translating into stronger economic and agricultural sector growth. In fact, several SSA
countries are emerging as the continent’s “lions” with globally leading growth rates realized and
anticipated over the coming years.
Sub-Saharan Africa’s women and men smallholder farmers are poised to be a key driver of future
economic growth and poverty reduction if the challenges faced which translate into high levels of risk can
be overcome. Growing global demand for agricultural products is translating into improved production
incentives for SSA’s farmers. Given the high proportion of smallholders and the potential and realized
productivity advantages, even in the context of current constraints, SSA’s smallholders should be major
beneficiaries of these opportunities if they can increase their productivity through increased on-farm
investments to increasingly orientate their production towards farming as a business, and when
appropriate to form collective farmer organisations to facilitate this. As highlighted in IFAD’s Rural
Poverty Report, their willingness to undertake these investments is dependent on reducing the actual and
perceived risks which trap many rural households in a subsistence equilibrium around the poverty line.
Governments, donors, NGOs and others are investing increasingly in technology, infrastructure and other
efforts to reduce risks and increase returns to facilitate smallholders participation into more integrated
supply chains with generally higher returns at lower risk levels. However, the effectiveness of these
efforts in terms of adoption and sustainability by farmers, and their impact in terms of economic returns.
Efforts to boost the impact of investments in smallholder agriculture have not paid sufficient attention to
issues of spatial and temporal coordination. The tendency is often to address under performance with the
search for new technologies or paradigms when the very practical constraints of spatial and economic
isolation and lack of timeliness in delivery of development assistance are staring stakeholders in the face.
The impact of geographic isolation, high transport costs, time lost to road blocks, as well as failure to
deliver credit or fertilizer on-time to producers, or for producers to deliver product into the market when
prices are more favourable, can completely undermine the returns to investments in irrigation, inputs,
credit, insurance, post-harvest storage, training, etc. The result is a likely abandonment of these efforts by
producers who are understandably cautious in investing their own time and scarce cash in the necessary
sustaining activities. This can disproportionately impact women who generally devote a greater share of
their agricultural effort on perishable market production relative to staple crops. Hence there is a need for
much more focus on both “right place” and “right time”.
How do we transform right place, right time from a slogan or analytical framework into an operational
approach?
Operationalizing “right place” essentially means making more informed choices regarding project
implementation zones, distinguishing clearly between objectives of enhanced commercial access and food
security. This entails assessing not only the quality of roads, but also the costs of transport in terms of
freight charges and official and unofficial controls and tariffs. In principle, this should be a standard
element of value chain analysis, however at least in IFAD’s projects, this is rarely carried out. While
changing some of the contributing cost factors confronts very powerful interest groups in a country,
failure to highlight the issue can result in encouraging smallholders to undertake investments and incur
risks whose returns are much lower than expected. Documenting the inherent contradictions in investing
millions of budgetary and borrowed funds into agricultural development while simultaneously allowing
the sector to be unofficially taxed out of competitiveness will, as the experience of official taxation in the
26
31. 27
1970s and 1980s highlighted – result in depressed prices for farmers and declining production and
productivity as farmers disinvest – exactly the opposite result being pursued through CAADP.
The increasing prevalence of harmonized donor/government sectoral strategies and integrated medium-term
investment plans under the CAADP umbrella presents a new opportunity to provide more holistic
responses to the interlinking challenges of increased agricultural productivity, improved transport
infrastructure, greater access to markets and increased returns for SSA smallholders.
Translating this opportunity into improved programme performance will require a more realistic
assessment of marketing opportunities during project design through the implementation of more detailed
value chain assessments. In very geographically isolated project areas, opportunities for farming as a
business may be minimal and this needs to be reflected in programme strategy.
Focus must shift from the provision of inputs to the achievement of outcomes. Co-financing schemes
involving transport and agricultural development, so frequently characterized by piecemeal approaches,
need to give way to real joint planning and implementation if the essential synergies are to be realized. It
is commonly recognized that the challenges to rural poverty alleviation are interlinked and so too must be
the solutions.
But the right place approach can only be effective if combined with a timely provision of goods, works
and services by co-financiers and this has rarely been the case. Greater donor attention to the temporal
dimensions of development programmes and more rapid institutional responsiveness is a sine qua non to
liberate the synergies required to address the interlocking challenges of rural poverty alleviation.
Operationalizing “right time” requires much more attention to valuing the timing as well as the act of
delivery of goods and services to farmers and to markets. Again, in the first instance this requires
analysis of the timing requirements for production and marketing, as well as assessment of the roles of
actors to achieve this. In terms of implementation, the issue of timing needs to be at the forefront of
planning of activities and needs to be a key driver of management oversight. For example, in the context
of IFAD-financed projects, annual work plans and budgets (AWPBs) are prepared and discussed between
the projects management units, governments, IFAD and other partners. While the timing of activities is
presented, these are rarely, if ever highlighted relative to the timing needs of farmer production cycles, or
marketing windows.
In summary, following are our key recommendations:
Policy/Strategy
o Draw attention to a holistic assessment of isolation in terms of time and cost of
connecting with input and output markets
o Build awareness of critical temporal coordination requirements in terms of timing of
inputs and marketing as a key element of agricultural support
o Utilize value chain analysis to highlight and benchmark cost and time implications in
terms of both inputs and outputs for smallholder farmers in isolated areas
o Encourage management studies training as part of curriculum of agricultural ministry and
farmer organization staff.
Operational Design
o Use value chain assessments to identify isolation constraints across the range of factors –
poor infrastructure, official and unofficial road taxes, monopsonies in transport services,
etc. to ensure realistic assessment of probable returns to smallholder farm level and
producer group investments.
32. 28
o Promote greater synergies among co-financiers by adopting joint design and
implementation support missions.
o Ensure that critical timing aspects are identified and agreed with and understood by
project stakeholders.
o Include specific indicators for transport costs and critical timing aspects into monitoring
framework.
Implementation
o Ensure that annual work plans and budgets define and respects spatial and temporal
coordination requirements.
o Provide systematic and robust orientation and training to project coordinators in results-based
management.
o Monitor spatial and temporal coordination by donor, government and project
management unit as part of project performance assessment.
We are sure that there are many more opportunities to improve the spatial and temporal coordination in
our support to Africa’s smallholders, and hope that this discussion will stimulate attention to this issue in
the thematic sessions looking at marketing, inputs and credit.
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