Agricultural Growth in Sub-Saharan African Countries and China: 95

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This largely reflects a move to low productivity, 8 non-tradable services in urban areas, consistent with the emergence of consumption cities following Africa's resource boom Gollin et al. Nonetheless, a glance at the national accounts would suggest that huge gains can still be reaped from an accelerated reallocation of labour out of agriculture. Also using macro data, Gollin et al. Yet measuring the potential gains from intersectoral labour reallocation is wrought with measurement challenges, and the national accounts and macro data routinely overstate the prospective gains from leaving agriculture.

When adjusting their macro estimates for sectoral differences in human capital and hours worked, the agricultural labour productivity gap declines by half, to 3. Important new work by McCullough using household income and individual hourly labour input data by sector collected through nationally representative household surveys in four countries under the World Bank-led Living Standards Measurement Study — Integrated Surveys on Agriculture LSMS-ISA initiative points in the same direction.

Once one accounts for intersectoral differences in time worked, which is particularly important due to the seasonal nature of agricultural work as well as the often-diversified income portfolios of rural households, the productivity differentials commonly found in less detailed datasets nearly disappear.

The powerful implications are that what is commonly understood as an intersectoral labour productivity gap may be more an employment gap and that the commonly used agricultural productivity gap measures drawn from the national accounts should not be taken as proof of agriculture as an intrinsically less productive sector.

The lower-than-expected domestic migration observed in Africa de Brauw et al. Furthermore, important labour productivity gaps appear within sectors. Bringing those operating at the 25th percentile in the net labour productivity distribution to the 75th percentile would increase net agricultural labour productivity 4. Substantial scope for intrasectoral labour productivity gains have been similarly observed within the non-agricultural sectors. Finally, while the drivers of structural change are hard to properly identify econometrically, McMillan and Harttgen and Gollin et al.

Agricultural Growth in Sub-Saharan African Countries and China

These findings signal i the continued importance of focusing on agricultural productivity growth as a vehicle for ushering in structural transformation—rather than prematurely shifting workers to other sectors—and ii the substantial scope for improving labour productivity and employment within sectors. Agricultural transformation based on productivity growth, improved market functioning and growth in the rural non-farm economy, remains essential to achieve the goal of inclusive growth and prosperity in SSA.

Several key structural features of the region heavily condition the available paths for structural transformation and the policies most likely to help stimulate sustainable transformation. First, land is an emerging problem in SSA even though as a continent it remains relatively land-abundant. Nearly half of the world's uncultivated arable land is in SSA Deininger and Byerlee, , making it the world's primary remaining agricultural frontier.

Africa's rural population lives highly clustered in more accessible areas with high agricultural potential, in both land abundant and land constrained settings, with limited potential for land expansion Jayne et al.

Over time this will increase pressure for a growing group of smallholders to remain commercially viable and practice sustainable intensification, especially given that the median farm size is declining, in both land abundant and land scarce countries, and given that, beyond a more continuous cultivation of land, agricultural intensification through use of improved seed, fertiliser, agro-chemicals and water control, as well as mechanisation has remained lower than expected so far in light of population pressures and market access conditions Binswanger and Savastano, This challenge is compounded by the generally poor and degrading quality of Africa's soils.

It also raises the importance of the distribution of especially fertile land and the insecurity of land rights in a number of countries in southern and eastern Africa as well as the imperfect functioning of Africa's land markets, with the rise of medium and large-scale farmers posing additional challenges for smallholder farm expansion Jayne et al. Together, these constraints limit access to credit, investment in soil fertility and labour mobility Deininger and Jin, ; Pender and Fafchamps, ; Dillon and Voena, Nonetheless, the best available evidence from SSA still indicates a strong inverse relationship between farm size and crop yields Barrett et al.

While this is not evidence of intrinsic superiority of smaller farms per se—it may well be the endogenous outcome of the various factor market imperfections or behavioural phenomena that generate these patterns 10 —the historical evidence from Asia Ravallion and Chen, , and more recently also from densely populated African countries such as Ethiopia and Rwanda World Bank, a , b , shows that increasing smallholder productivity can induce rapid poverty reduction, at least in the initial stages.

IMF Policy Discussion Papers

Studying land rental markets in six African countries, Deininger et al. Proper land certification is in some cases, also having positive impacts for smallholders, inducing them to maintain soils, make productive investments, and enhance land productivity Holden et al. Second, water resources are sharply limiting in most of the region. Even within the arid states, rain and water resources tend to be concentrated, leaving some subregions particularly arid and hence vulnerable to climate shocks.

Climate change poses a serious threat. Improved water and land management can help stem or even reverse those patterns. Expanding the irrigated frontier is a major untapped source of agricultural potential, especially where it can be done economically using surface water or renewable energy resources to pump groundwater Burney et al.

Third, weak human capital in rural areas limits agricultural labour productivity growth. Education and health levels remain low across the continent. SSA suffers by far the world's highest rates of under-five and maternal mortality and youth and adult illiteracy Beegle et al. The continuing high prevalence of early child growth retardation almost 2 in 5 children under five years old are stunted further casts a long shadow on the productivity potential of Africa's future labour force.

Early childhood growth retardation impairs cognitive development, delays school enrolment and reduces future earnings Grantham-McGregor et al. The dearth of educated, healthy farmers challenges uptake of innovations and limits the capacity for internally driven innovation in the agricultural sector. For example, where low- and middle-income countries in Asia and Latin America routinely have dozens, if not hundreds, of agricultural researchers per million of population economically engaged in agriculture, the comparable number is less than 10 in 24 of the 33 SSA countries for which data are available Alene et al.

Current agricultural education and training institutions prove also ill prepared to provide Africa's youth with the skills needed to develop agribusinesses, thereby foregoing important remunerative off farm employment opportunities along the agricultural value chains Kabasa et al. Evidence from India indicates that simple management training can obviate informational barriers and lead to significant productivity gains in non-farm businesses Bloom et al. Fourth, the institutional and physical infrastructure that underpins SSA food systems is relatively weak and expensive.

Across SSA, insufficient transportation and communications infrastructure poses significant problems by impeding smooth market functioning for farmers trying to purchase inputs or sell surpluses as well as for post-harvest processors. Weak market integration commonly renders government macroeconomic and sectoral policies ineffective by impeding market transmission of economic signals related to policy change Moser et al.

Similarly, without good access to distant markets that can absorb excess local supply, adoption of more productive agricultural technologies typically leads to a drop in farmgate product prices, erasing many of the gains from technological change and thereby dampening incentives for farmers to adopt new technologies that can stimulate economic growth.

It also raises the costs of inputs, undermining the profitability of input use, as documented among a sizeable number of Nigerian maize smallholders Liverpool-Tasie et al. Markets also play a fundamental role in managing risk associated with demand and supply shocks; good market integration facilitates adjustment in net export flows across space and time, thereby reducing price variability faced by consumers and producers, as most recently observed in Ethiopia Hill and Fuje, , while poor market integration leads directly to price volatility.

The problem arises from the combination of poor transport infrastructure and high cost transport services. The arid countries with low population density, such as Mauritania and Niger, have the severest dearth of roads, with approximately 1 km of road for each km 2 of area, against the low SSA average of about 20 km.

Poor transport infrastructure poses particular problems for the 17 land-locked African countries that face distances of — km from their capital cities to the nearest seaports. All-season rural roads access appears a key means of overcoming spatial poverty traps, not least of which by encouraging greater market participation, input use, and agricultural specialisation Stifel and Minten, ; Calderon, ; Jacoby and Minten, ; Gollin and Rogerson, Indeed, transport costs are so considerable in land-locked regions, that global oil price shocks have a greater impact on local maize prices than do global maize price shocks Dillon and Barrett, Rail systems hold promise.

In addition, crossing borders to reach ports leads to high costs beyond the burden of poor physical infrastructure. Border crossings often entail fees—both official and unofficial—that increase transaction costs and delay deliveries. Non-infrastructure related transaction costs also add a lot to the price of transporting goods within countries. Teravaninthorn and Raballand report, for example, that Africa's transportation costs along four major transport corridors in four different parts of the continent are no higher than in other developing countries, such as China.

Many African countries restrict entry of new companies, enabling incumbents to earn large profits. When Rwanda—a landlocked country—deregulated its transport sector, transport prices dropped dramatically, almost overnight. Fifth, African agriculture is especially exposed to uninsured risk as a result of weak infrastructure, limited water management, and its exceptionally high domestic orientation. Financial markets fail for the rural poor for a host of reasons Besley, The resulting lack of insurance and credit routinely trap poor agrarian households in low return, lower risk technologies, thereby perpetuating poverty and low productivity Carter and Barrett, ; Dercon and Christiaensen, ; Barrett and Carter, Financial market failures are directly associated with relatively anaemic rates of development and uptake of modern agricultural inputs, in particular irrigation and machinery Sheahan and Barrett, Finally, weak governance and political capture remains an important impediment to aggressive agricultural productivity growth.

Shimeles, Gurara and Tessema , for example, show how fertiliser import prices across a large section of Africa cannot be explained by actual transport and finance costs, implying that market power fostered by government regulation drives high agricultural input prices, starting at import and continuing through the supply channel. Berhanu and Poulton show how the largest public agricultural extension programme in SSA—run by the Ethiopian government—is implemented with election outcomes in mind, undermining its effectiveness as an agricultural productivity enabler.

These demonstrations of the political capture of agricultural input systems that should directly translate into agricultural productivity gains suggest structural features that thwart more aggressive and inclusive growth. At the same time, weak governance and planning could mean that that economic systems change without the transformation necessary for job creation and robust productivity growth. Resnick and Thurlow detail how this scenario unfolded in Zambia, ultimately leading to the overthrow of the government. Despite substantial structural issues, the first decade of the 21st century brought significant progress in agricultural productivity growth after decades of decline or stagnation Block, , albeit with important divergence between countries Barrett and Upton, The largest strides have been made where concerted investments have taken place.

The resulting varieties have generated significantly greater yields and spread widely in West Africa over a short period of time. Meanwhile, a global initiative successfully eradicated rinderpest, a disease that affects cattle and can be disastrous for sub-Saharan African pastoralists; the last outbreak was reported in The spread of information and communication ICT technology unlocks further potential, in particular by making markets more efficient and reducing price dispersion Aker, ; Aker and Mbiti, The limited available evidence points to strong, albeit heterogeneous impacts.

The roll out of extension programmes through ICTs is still in its infancy Nakasone et al. Overall though, despite promising examples of positive impacts on rural livelihoods of ICT—the so-called digital dividends—these have not yet scaled up to the extent expected Deichmann et al. Technology is helping address some of the barriers, but as with any successful intervention in agriculture, simultaneous complementary interventions on different fronts will be needed on which, more below.

A recent update on our understanding of African agricultural and rural areas, drawing on six nationally representative LSMS-ISA household surveys from Ethiopia, Malawi, Nigeria, Niger, Tanzania and Uganda 16 further shows that while fertiliser and agro-chemical application rates remain very low in several countries in the region, they also have become substantial in several others, including in certain areas within countries Sheahan and Barrett, This has been fuelled in part by government subsidy programmes and high-level attention afforded to the subject by the Africa Fertiliser Summit in Abuja.

Country-level factors, embodying policy and broader institutional phenomena, appear most important in driving agricultural input adoption. Careful study of rural factor markets show substantial activity in labour and land rental markets. At the same time, household factor endowments labour, land still affect the extent of labour and land use in smallholder farming, which is clear evidence of continuing pervasive market failures. These market failures are not specific to a given sub-population e.

Financial markets for agriculture remain especially underdeveloped. Traditional formal or informal credit use remains especially low, with farmers primarily financing modern input use purchases with cash from non-farm activities and crop sales Adjognon et al. These food marketing channels are generally domestically oriented, however, in spite of the attention paid to export promotion.

In part because of the high costs of commerce due to poor infrastructure, regulatory and competition issues along the value chains, and unpredictable trade policies, an unusually large share of food consumed in SSA is produced within the same country where it is eaten, with virtually all of the remaining imports coming from outside the continent. As global prices and SSA food demand have increased, the region continues to rely heavily on its own output to feed its population.

Net imports have increased slightly, especially for cereals and meat, from 15 to 26 million tons and from 0. The highly domestic orientation of SSA agriculture accentuates the opportunity and necessity of agricultural structural transformation and of development of viable food value chains to efficiently move food from farms to growing cities. Increasing regional food trade across countries within Africa would further open up opportunities for a number of countries with higher agricultural potential to supply neighbours that currently meet their rising cereal and meat demand with imports from outside the continent Brenton, And as structural transformation trends continue to pick up in Africa, an impending dietary transformation will quickly follow adding new jobs to the agribusiness sector in turn Tschirley et al.

The dietary transformation can help the transition towards off-farm employment as well as the structural transformation in agriculture itself by providing access to capital. A substantial part of this difference relates to differences in levels of development GDP per capita that spur demand for non-food goods and services. But this difference also reflects much lower engagement in non-agricultural wage employment in rural Africa. By contrast, shares of non-farm self-employment income are comparable across countries of similar level of development.

This points to the need for greater attention on growing formal non-farm businesses in rural areas and small towns across SSA. Promoting the structural transformation of African agriculture and of the rural spaces within which most agricultural activities occur is essential to advance an inclusive growth agenda in Africa. But researchers have yet to convincingly identify precisely the reasons for sharp intersectoral productivity differentials that keep agricultural labour productivity so low in Africa. Most likely there are multiple reasons, each of which lends itself to distinct policy interventions.

These policy priorities are best grouped into six distinct domains. Invest in physical and institutional infrastructure to remedy deficiencies that differentially penalise agriculture. For decades, there has been public and private underinvestment in rural areas. In response, rural households and firms still hold too much capital in liquid and unproductive forms as a strategy to manage risk in the face of thin and highly imperfect credit and insurance markets, and invested too little in productivity-increasing capital, such as education, irrigation or machinery, and variable inputs, such as improved seed or fertiliser.

SSA governments need to learn from the experience of countries that successfully shifted investment priorities in favour of rural growth and benefited from the pre-existing disequilibrium in rates of return, at least initially, as real value added per farm worker increased rapidly due to both increased factor productivity within agriculture and to increased efficiency in factor allocation across sectors.

Reversing urban bias requires concerted, large-scale public or philanthropic investment in village-level physical and institutional infrastructure in order to crowd in private investment. But such investments need not be undertaken exclusively by government. Rural roads, electricity, telephone, internet, financial and agricultural extension services can all be delivered by private providers if offered adequate incentives.

The state can play a valuable role by providing essential especially transport infrastructure and facilitating the emergence of networks of profitable private providers. The mobile telephony revolution that has swept SSA over the past generation serves as an important example to try to replicate, with private providers, supported by government, inducing a rapid increase in rural labour productivity and improvements in rural market performance and standards of living Aker and Mbiti, ; Aker and Fafchamps, Africa now also seems on the cusp of rapid electrification of its rural towns and villages through off-grid solar power The Economist, Because structural transformation requires redirecting attention downstream, beyond farm-level production to post-harvest distribution and value addition, the other essential public goods required are reliable and transparent contract law, grades and standards and police protection that reduce the transactions costs that burden agricultural value chains and that lead to precautionary behaviours that significantly add to the costs of commerce in African agriculture Fafchamps, Address the water and soil constraints that hold back agricultural productivity.

Agricultural productivity depends uniquely on the productivity of the natural resource base on which the sector depends. As soils and water sources degrade, it undercuts growth in agricultural labour productivity and retards structural transformation. SSA is by far the world's least irrigated agricultural region, largely because it remains too expensive for farmers to withdraw groundwater given the cost of fuel and limited access to credit to invest in pumps and pipes.

But the physical potential is considerable. Emergent technologies, such as solar-powered methods for withdrawing abundant groundwater supplies during periods of maximal evapotranspiration Burney et al. When irrigation becomes affordable, attention then needs to turn to the complementary infrastructure that is necessary to facilitate improved technology adoption Gollin et al. In a similar spirit, integrated soil fertility management methods to end or even reverse soil degradation could substantially increase yields without stimulating sharply increased reliance on unaffordable, imported fertilisers Place et al.

Efforts to promote the integrated use of agroforestry, fallows, inorganic fertilisers, legumes and manure has the potential to fix carbon, restore soils, and even combat desertification but need explicit encouragement and investment in order to help break cycles of poverty Barrett and Bevis, a , b. African states need to improve the security of resource tenure generally and the terms and transparency of land contracts and deals specifically.

Continued increase in external demand for land and water will spark further large-scale land acquisitions to bring more uncultivated arable land into production. These have the potential to boost agricultural productivity through judicious investments that might close yawning yield gaps in undercapitalised African agriculture and generate environmentally and socially sustainable food supplies for domestic and regional markets. But if land and water deals occur in a less than transparent fashion, with little or no objective monitoring and evaluation, and without increased safeguards on the tenurial security of traditional cultivators and herders, then legitimate concerns will build around dispossession of the rural poor and despoliation of increasingly fragile natural resources and the prospect of productivity-reducing and poverty-increasing social unrest will rise.

Land deals and enhanced tenurial security may lead to farmland consolidation, which can help stem the growth in farms too small to be commercially viable and to effectively absorb surplus labour Jayne et al. Invest in the development and diffusion of new agricultural technologies appropriate to sub-Saharan Africa. The yawning productivity gap between African smallholder agriculture and farmers elsewhere in the world offers the promise of productivity growth on the existing resource base.

While price policies suffer from the food price dilemma—e. This will necessarily take a different form than the earlier Green Revolution in Asia, which developed and disseminated a few blockbuster improved seed varieties along with mass-produced inorganic fertilisers and standardised irrigation methods across vast homogeneous landscapes. The patchwork quilt of SSA's heterogeneous agro-ecologies necessitates highly localised solutions.

That will require sharply expanded investment in local, national and regional agricultural research and development systems that currently lack adequate scientific capacity to develop animal and plant genetic material and complementary inputs well-suited to local agro-ecologies and consumer tastes. Productivity improvements may be enhanced by enabling adoption of genetically modified GM foods.

It will also require removing regulatory obstacles to the development of GM crops designed to better withstand stresses like drought, pathogens, and pests. The use of GM crops requires adequate biosafety controls, but external political pressure has induced overreaction against GM seed adoption in SSA, with adverse consequences for the region Paarlberg, The need for GM options will increase in the years ahead, especially in the face of climate change.

Therefore SSA countries need to get responsible, rigorous but not onerous biosafety controls in place and ignore the external political pressures to pass on modern biological science. GM adoption has also worked best when domestic research institutions are involved in their development World Bank, And evidence from south Asia shows that small farmers whose financial liquidity constraints otherwise limit their ability to apply agro-chemicals especially benefit from yield increases arising from GM crops Qaim and Zilberman, ; Qaim, A related priority area for agricultural research is animal disease management , including of zoonotic diseases related to manure management that African governments have typically been unable to regulate effectively.

If the African agricultural research and veterinary care community can contain poultry diseases and trypanosomiasis, thereby opening vast new areas for cattle, the impacts of reduced risk and adverse spillover effects could be considerable on productivity growth, as well as on animal-source food supplies and prices. Africa's land abundance and limited water control gives it comparative advantage in livestock production.

And both herd sizes and animal product output have been increasing rapidly in SSA over the past decade. Focus as much on the post-harvest value chain and the rural non-farm economy as on farm-level production. But the traditional input systems that supply them and the value chains that evacuate, aggregate, process and distribute their harvests are demonstrably inefficient Fafchamps, ; Reardon et al. A growing body of evidence suggests that modern agricultural value chains effectively internalise many of the externalities that lead to inefficiency in traditional agriculture in SSA Swinnen, ; Reardon et al.

The appropriate mode of organisation of the post-harvest value chain varies dramatically by crop and location, but whether it is vertical integration, coordination mechanisms through outgrower schemes or contract farming arrangements, or other forms, the emergence of new modes of linking farmers to consumers is slowly bearing fruit in African agriculture, not least of which by promoting uptake of modern inputs, innovation in natural resources management and post-harvest practices, and upgrading of quality control Reardon and Timmer, ; Swinnen, ; Reardon et al.

At the same time, the rapid expansion of telecommunications and electrification into secondary towns is stimulating robust growth in the non-farm sector that appears to have greater productivity boosting and poverty reducing effects than does rural-to-urban migration Christiaensen and Todo, Structural transformation will require accelerated expansion of downstream agricultural value chains and rural towns, as well as of non-traditional, higher-value agricultural products. Encourage the emergence of rural financial institutions and products to help African farmers and traders manage risk more efficiently.

Several key structural features of the region heavily condition the available paths for structural transformation and the policies most likely to help stimulate sustainable transformation. First, land is an emerging problem in SSA even though as a continent it remains relatively land-abundant.

Nearly half of the world's uncultivated arable land is in SSA Deininger and Byerlee, , making it the world's primary remaining agricultural frontier. Africa's rural population lives highly clustered in more accessible areas with high agricultural potential, in both land abundant and land constrained settings, with limited potential for land expansion Jayne et al. Over time this will increase pressure for a growing group of smallholders to remain commercially viable and practice sustainable intensification, especially given that the median farm size is declining, in both land abundant and land scarce countries, and given that, beyond a more continuous cultivation of land, agricultural intensification through use of improved seed, fertiliser, agro-chemicals and water control, as well as mechanisation has remained lower than expected so far in light of population pressures and market access conditions Binswanger and Savastano, This challenge is compounded by the generally poor and degrading quality of Africa's soils.

It also raises the importance of the distribution of especially fertile land and the insecurity of land rights in a number of countries in southern and eastern Africa as well as the imperfect functioning of Africa's land markets, with the rise of medium and large-scale farmers posing additional challenges for smallholder farm expansion Jayne et al. Together, these constraints limit access to credit, investment in soil fertility and labour mobility Deininger and Jin, ; Pender and Fafchamps, ; Dillon and Voena, Nonetheless, the best available evidence from SSA still indicates a strong inverse relationship between farm size and crop yields Barrett et al.

While this is not evidence of intrinsic superiority of smaller farms per se—it may well be the endogenous outcome of the various factor market imperfections or behavioural phenomena that generate these patterns 10 —the historical evidence from Asia Ravallion and Chen, , and more recently also from densely populated African countries such as Ethiopia and Rwanda World Bank, a , b , shows that increasing smallholder productivity can induce rapid poverty reduction, at least in the initial stages.

Studying land rental markets in six African countries, Deininger et al. Proper land certification is in some cases, also having positive impacts for smallholders, inducing them to maintain soils, make productive investments, and enhance land productivity Holden et al. Second, water resources are sharply limiting in most of the region. Even within the arid states, rain and water resources tend to be concentrated, leaving some subregions particularly arid and hence vulnerable to climate shocks.

Climate change poses a serious threat. Improved water and land management can help stem or even reverse those patterns. Expanding the irrigated frontier is a major untapped source of agricultural potential, especially where it can be done economically using surface water or renewable energy resources to pump groundwater Burney et al. Third, weak human capital in rural areas limits agricultural labour productivity growth.

Education and health levels remain low across the continent. SSA suffers by far the world's highest rates of under-five and maternal mortality and youth and adult illiteracy Beegle et al. The continuing high prevalence of early child growth retardation almost 2 in 5 children under five years old are stunted further casts a long shadow on the productivity potential of Africa's future labour force. Early childhood growth retardation impairs cognitive development, delays school enrolment and reduces future earnings Grantham-McGregor et al.

The dearth of educated, healthy farmers challenges uptake of innovations and limits the capacity for internally driven innovation in the agricultural sector. For example, where low- and middle-income countries in Asia and Latin America routinely have dozens, if not hundreds, of agricultural researchers per million of population economically engaged in agriculture, the comparable number is less than 10 in 24 of the 33 SSA countries for which data are available Alene et al.

Current agricultural education and training institutions prove also ill prepared to provide Africa's youth with the skills needed to develop agribusinesses, thereby foregoing important remunerative off farm employment opportunities along the agricultural value chains Kabasa et al. Evidence from India indicates that simple management training can obviate informational barriers and lead to significant productivity gains in non-farm businesses Bloom et al.

Fourth, the institutional and physical infrastructure that underpins SSA food systems is relatively weak and expensive. Across SSA, insufficient transportation and communications infrastructure poses significant problems by impeding smooth market functioning for farmers trying to purchase inputs or sell surpluses as well as for post-harvest processors.

Weak market integration commonly renders government macroeconomic and sectoral policies ineffective by impeding market transmission of economic signals related to policy change Moser et al.

Similarly, without good access to distant markets that can absorb excess local supply, adoption of more productive agricultural technologies typically leads to a drop in farmgate product prices, erasing many of the gains from technological change and thereby dampening incentives for farmers to adopt new technologies that can stimulate economic growth. It also raises the costs of inputs, undermining the profitability of input use, as documented among a sizeable number of Nigerian maize smallholders Liverpool-Tasie et al. Markets also play a fundamental role in managing risk associated with demand and supply shocks; good market integration facilitates adjustment in net export flows across space and time, thereby reducing price variability faced by consumers and producers, as most recently observed in Ethiopia Hill and Fuje, , while poor market integration leads directly to price volatility.

The problem arises from the combination of poor transport infrastructure and high cost transport services. The arid countries with low population density, such as Mauritania and Niger, have the severest dearth of roads, with approximately 1 km of road for each km 2 of area, against the low SSA average of about 20 km. Poor transport infrastructure poses particular problems for the 17 land-locked African countries that face distances of — km from their capital cities to the nearest seaports.

All-season rural roads access appears a key means of overcoming spatial poverty traps, not least of which by encouraging greater market participation, input use, and agricultural specialisation Stifel and Minten, ; Calderon, ; Jacoby and Minten, ; Gollin and Rogerson, Indeed, transport costs are so considerable in land-locked regions, that global oil price shocks have a greater impact on local maize prices than do global maize price shocks Dillon and Barrett, Rail systems hold promise.

In addition, crossing borders to reach ports leads to high costs beyond the burden of poor physical infrastructure. Border crossings often entail fees—both official and unofficial—that increase transaction costs and delay deliveries. Non-infrastructure related transaction costs also add a lot to the price of transporting goods within countries.

Teravaninthorn and Raballand report, for example, that Africa's transportation costs along four major transport corridors in four different parts of the continent are no higher than in other developing countries, such as China. Many African countries restrict entry of new companies, enabling incumbents to earn large profits. When Rwanda—a landlocked country—deregulated its transport sector, transport prices dropped dramatically, almost overnight. Fifth, African agriculture is especially exposed to uninsured risk as a result of weak infrastructure, limited water management, and its exceptionally high domestic orientation.

Financial markets fail for the rural poor for a host of reasons Besley, The resulting lack of insurance and credit routinely trap poor agrarian households in low return, lower risk technologies, thereby perpetuating poverty and low productivity Carter and Barrett, ; Dercon and Christiaensen, ; Barrett and Carter, Financial market failures are directly associated with relatively anaemic rates of development and uptake of modern agricultural inputs, in particular irrigation and machinery Sheahan and Barrett, Finally, weak governance and political capture remains an important impediment to aggressive agricultural productivity growth.

Shimeles, Gurara and Tessema , for example, show how fertiliser import prices across a large section of Africa cannot be explained by actual transport and finance costs, implying that market power fostered by government regulation drives high agricultural input prices, starting at import and continuing through the supply channel.

1. Introduction

Berhanu and Poulton show how the largest public agricultural extension programme in SSA—run by the Ethiopian government—is implemented with election outcomes in mind, undermining its effectiveness as an agricultural productivity enabler. These demonstrations of the political capture of agricultural input systems that should directly translate into agricultural productivity gains suggest structural features that thwart more aggressive and inclusive growth.

At the same time, weak governance and planning could mean that that economic systems change without the transformation necessary for job creation and robust productivity growth. Resnick and Thurlow detail how this scenario unfolded in Zambia, ultimately leading to the overthrow of the government. Despite substantial structural issues, the first decade of the 21st century brought significant progress in agricultural productivity growth after decades of decline or stagnation Block, , albeit with important divergence between countries Barrett and Upton, The largest strides have been made where concerted investments have taken place.

The resulting varieties have generated significantly greater yields and spread widely in West Africa over a short period of time. Meanwhile, a global initiative successfully eradicated rinderpest, a disease that affects cattle and can be disastrous for sub-Saharan African pastoralists; the last outbreak was reported in The spread of information and communication ICT technology unlocks further potential, in particular by making markets more efficient and reducing price dispersion Aker, ; Aker and Mbiti, The limited available evidence points to strong, albeit heterogeneous impacts.

The roll out of extension programmes through ICTs is still in its infancy Nakasone et al. Overall though, despite promising examples of positive impacts on rural livelihoods of ICT—the so-called digital dividends—these have not yet scaled up to the extent expected Deichmann et al. Technology is helping address some of the barriers, but as with any successful intervention in agriculture, simultaneous complementary interventions on different fronts will be needed on which, more below. A recent update on our understanding of African agricultural and rural areas, drawing on six nationally representative LSMS-ISA household surveys from Ethiopia, Malawi, Nigeria, Niger, Tanzania and Uganda 16 further shows that while fertiliser and agro-chemical application rates remain very low in several countries in the region, they also have become substantial in several others, including in certain areas within countries Sheahan and Barrett, This has been fuelled in part by government subsidy programmes and high-level attention afforded to the subject by the Africa Fertiliser Summit in Abuja.

Country-level factors, embodying policy and broader institutional phenomena, appear most important in driving agricultural input adoption.

1. Introduction

Careful study of rural factor markets show substantial activity in labour and land rental markets. At the same time, household factor endowments labour, land still affect the extent of labour and land use in smallholder farming, which is clear evidence of continuing pervasive market failures. These market failures are not specific to a given sub-population e. Financial markets for agriculture remain especially underdeveloped. Traditional formal or informal credit use remains especially low, with farmers primarily financing modern input use purchases with cash from non-farm activities and crop sales Adjognon et al.

These food marketing channels are generally domestically oriented, however, in spite of the attention paid to export promotion. In part because of the high costs of commerce due to poor infrastructure, regulatory and competition issues along the value chains, and unpredictable trade policies, an unusually large share of food consumed in SSA is produced within the same country where it is eaten, with virtually all of the remaining imports coming from outside the continent.

As global prices and SSA food demand have increased, the region continues to rely heavily on its own output to feed its population. Net imports have increased slightly, especially for cereals and meat, from 15 to 26 million tons and from 0. The highly domestic orientation of SSA agriculture accentuates the opportunity and necessity of agricultural structural transformation and of development of viable food value chains to efficiently move food from farms to growing cities.

Increasing regional food trade across countries within Africa would further open up opportunities for a number of countries with higher agricultural potential to supply neighbours that currently meet their rising cereal and meat demand with imports from outside the continent Brenton, And as structural transformation trends continue to pick up in Africa, an impending dietary transformation will quickly follow adding new jobs to the agribusiness sector in turn Tschirley et al.

The dietary transformation can help the transition towards off-farm employment as well as the structural transformation in agriculture itself by providing access to capital. A substantial part of this difference relates to differences in levels of development GDP per capita that spur demand for non-food goods and services. But this difference also reflects much lower engagement in non-agricultural wage employment in rural Africa.

By contrast, shares of non-farm self-employment income are comparable across countries of similar level of development. This points to the need for greater attention on growing formal non-farm businesses in rural areas and small towns across SSA. Promoting the structural transformation of African agriculture and of the rural spaces within which most agricultural activities occur is essential to advance an inclusive growth agenda in Africa.

But researchers have yet to convincingly identify precisely the reasons for sharp intersectoral productivity differentials that keep agricultural labour productivity so low in Africa. Most likely there are multiple reasons, each of which lends itself to distinct policy interventions.

These policy priorities are best grouped into six distinct domains. Invest in physical and institutional infrastructure to remedy deficiencies that differentially penalise agriculture. For decades, there has been public and private underinvestment in rural areas. In response, rural households and firms still hold too much capital in liquid and unproductive forms as a strategy to manage risk in the face of thin and highly imperfect credit and insurance markets, and invested too little in productivity-increasing capital, such as education, irrigation or machinery, and variable inputs, such as improved seed or fertiliser.

SSA governments need to learn from the experience of countries that successfully shifted investment priorities in favour of rural growth and benefited from the pre-existing disequilibrium in rates of return, at least initially, as real value added per farm worker increased rapidly due to both increased factor productivity within agriculture and to increased efficiency in factor allocation across sectors.

Reversing urban bias requires concerted, large-scale public or philanthropic investment in village-level physical and institutional infrastructure in order to crowd in private investment. But such investments need not be undertaken exclusively by government. Rural roads, electricity, telephone, internet, financial and agricultural extension services can all be delivered by private providers if offered adequate incentives.

The state can play a valuable role by providing essential especially transport infrastructure and facilitating the emergence of networks of profitable private providers. The mobile telephony revolution that has swept SSA over the past generation serves as an important example to try to replicate, with private providers, supported by government, inducing a rapid increase in rural labour productivity and improvements in rural market performance and standards of living Aker and Mbiti, ; Aker and Fafchamps, Africa now also seems on the cusp of rapid electrification of its rural towns and villages through off-grid solar power The Economist, Because structural transformation requires redirecting attention downstream, beyond farm-level production to post-harvest distribution and value addition, the other essential public goods required are reliable and transparent contract law, grades and standards and police protection that reduce the transactions costs that burden agricultural value chains and that lead to precautionary behaviours that significantly add to the costs of commerce in African agriculture Fafchamps, Address the water and soil constraints that hold back agricultural productivity.

Agricultural productivity depends uniquely on the productivity of the natural resource base on which the sector depends. As soils and water sources degrade, it undercuts growth in agricultural labour productivity and retards structural transformation. SSA is by far the world's least irrigated agricultural region, largely because it remains too expensive for farmers to withdraw groundwater given the cost of fuel and limited access to credit to invest in pumps and pipes.

But the physical potential is considerable. Emergent technologies, such as solar-powered methods for withdrawing abundant groundwater supplies during periods of maximal evapotranspiration Burney et al. When irrigation becomes affordable, attention then needs to turn to the complementary infrastructure that is necessary to facilitate improved technology adoption Gollin et al.

In a similar spirit, integrated soil fertility management methods to end or even reverse soil degradation could substantially increase yields without stimulating sharply increased reliance on unaffordable, imported fertilisers Place et al. Efforts to promote the integrated use of agroforestry, fallows, inorganic fertilisers, legumes and manure has the potential to fix carbon, restore soils, and even combat desertification but need explicit encouragement and investment in order to help break cycles of poverty Barrett and Bevis, a , b.

African states need to improve the security of resource tenure generally and the terms and transparency of land contracts and deals specifically. Continued increase in external demand for land and water will spark further large-scale land acquisitions to bring more uncultivated arable land into production.

These have the potential to boost agricultural productivity through judicious investments that might close yawning yield gaps in undercapitalised African agriculture and generate environmentally and socially sustainable food supplies for domestic and regional markets.

But if land and water deals occur in a less than transparent fashion, with little or no objective monitoring and evaluation, and without increased safeguards on the tenurial security of traditional cultivators and herders, then legitimate concerns will build around dispossession of the rural poor and despoliation of increasingly fragile natural resources and the prospect of productivity-reducing and poverty-increasing social unrest will rise. Land deals and enhanced tenurial security may lead to farmland consolidation, which can help stem the growth in farms too small to be commercially viable and to effectively absorb surplus labour Jayne et al.

Invest in the development and diffusion of new agricultural technologies appropriate to sub-Saharan Africa. The yawning productivity gap between African smallholder agriculture and farmers elsewhere in the world offers the promise of productivity growth on the existing resource base. While price policies suffer from the food price dilemma—e. This will necessarily take a different form than the earlier Green Revolution in Asia, which developed and disseminated a few blockbuster improved seed varieties along with mass-produced inorganic fertilisers and standardised irrigation methods across vast homogeneous landscapes.

The patchwork quilt of SSA's heterogeneous agro-ecologies necessitates highly localised solutions. That will require sharply expanded investment in local, national and regional agricultural research and development systems that currently lack adequate scientific capacity to develop animal and plant genetic material and complementary inputs well-suited to local agro-ecologies and consumer tastes. Productivity improvements may be enhanced by enabling adoption of genetically modified GM foods. It will also require removing regulatory obstacles to the development of GM crops designed to better withstand stresses like drought, pathogens, and pests.

The use of GM crops requires adequate biosafety controls, but external political pressure has induced overreaction against GM seed adoption in SSA, with adverse consequences for the region Paarlberg, The need for GM options will increase in the years ahead, especially in the face of climate change. Therefore SSA countries need to get responsible, rigorous but not onerous biosafety controls in place and ignore the external political pressures to pass on modern biological science. GM adoption has also worked best when domestic research institutions are involved in their development World Bank, And evidence from south Asia shows that small farmers whose financial liquidity constraints otherwise limit their ability to apply agro-chemicals especially benefit from yield increases arising from GM crops Qaim and Zilberman, ; Qaim, A related priority area for agricultural research is animal disease management , including of zoonotic diseases related to manure management that African governments have typically been unable to regulate effectively.

If the African agricultural research and veterinary care community can contain poultry diseases and trypanosomiasis, thereby opening vast new areas for cattle, the impacts of reduced risk and adverse spillover effects could be considerable on productivity growth, as well as on animal-source food supplies and prices. Africa's land abundance and limited water control gives it comparative advantage in livestock production.

And both herd sizes and animal product output have been increasing rapidly in SSA over the past decade. Focus as much on the post-harvest value chain and the rural non-farm economy as on farm-level production. But the traditional input systems that supply them and the value chains that evacuate, aggregate, process and distribute their harvests are demonstrably inefficient Fafchamps, ; Reardon et al.

A growing body of evidence suggests that modern agricultural value chains effectively internalise many of the externalities that lead to inefficiency in traditional agriculture in SSA Swinnen, ; Reardon et al. The appropriate mode of organisation of the post-harvest value chain varies dramatically by crop and location, but whether it is vertical integration, coordination mechanisms through outgrower schemes or contract farming arrangements, or other forms, the emergence of new modes of linking farmers to consumers is slowly bearing fruit in African agriculture, not least of which by promoting uptake of modern inputs, innovation in natural resources management and post-harvest practices, and upgrading of quality control Reardon and Timmer, ; Swinnen, ; Reardon et al.

At the same time, the rapid expansion of telecommunications and electrification into secondary towns is stimulating robust growth in the non-farm sector that appears to have greater productivity boosting and poverty reducing effects than does rural-to-urban migration Christiaensen and Todo, Structural transformation will require accelerated expansion of downstream agricultural value chains and rural towns, as well as of non-traditional, higher-value agricultural products. Encourage the emergence of rural financial institutions and products to help African farmers and traders manage risk more efficiently.

The agricultural sector is subject to far greater risks than are other sectors, especially in SSA Hardaker et al. And the biological lags intrinsic to agricultural production, especially of higher-value perennials and livestock, create a significant delay between investment and payoff that commonly requires financial intermediation. This even holds within the year as demonstrated by the persistence of substantial excess seasonality in food prices Gilbert et al.

So whether for credit or insurance, the agricultural sector commonly needs reliable access to financial services and more so per unit value added than do other sectors. Yet the continent's under-developed financial markets, especially in rural areas, differentially depress the productivity of labour and land inputs used in agriculture and discourage investment in costly inputs, like fertilisers or improved seeds, that might increase the risk farmers face Dercon and Christiaensen, ; Barrett and Carter, Furthermore, when combined with the economies of scale intrinsic to financial products, the small scale of most SSA farms compounds the disadvantage of the agricultural sector Carter, ; Besley, Build rural human capital through improved preventive and curative health care and primary and secondary education systems that ensure a healthy and able workforce.

Urban bias in the provision of such public goods has led to a concentration of the lowest ability workers in agriculture, which some analysts hypothesise accounts for the stark observed sector gaps in labour productivity Lagakos and Waugh, Furthermore, the intergenerational transmission of education and health status from parents to adult children is a well-established empirical regularity worldwide that tends to reproduce low agricultural labour productivity over time within rural communities Ahlburg, ; Black et al. Quite apart from the intrinsic benefits of improved current well-being, direct health and nutrition interventions among pregnant and lactating women and their young children offer well-documented high long-run returns, including in adult labour productivity of affected children Casasnovas et al.

A workforce with limited human capital has limited ability to innovate, to effectively deploy new technologies the effectiveness of which depends in part on skill, or to take advantage of emergent market opportunities. Rural nutrition, health and education investments are therefore essential complements to each of the other policy priorities discussed above. We know from the development experiences of other regions of the world that rapid structural transformation from a poor agrarian economy to a high-income industrial one is feasible and can bring with it rapid, mass exodus from extreme poverty.

Real agricultural output growth rates are accelerating in SSA, nearly doubling from the s rate so that per capita output and agricultural labour productivity are growing again, helping reduce rural poverty rates and stimulate inclusive economic growth. Uptake of modern agricultural inputs, in particular inorganic fertilisers, improved seed and agro-chemicals, has increased sharply in several areas in the region, and modern agricultural value chains are likewise emerging.

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