Economic Growth

3 ways to transform agriculture in Africa

A Malawian man carries food aid distributed by the United Nations World Food Progamme (WFP) through maize fields in Mzumazi village near the capital Lilongwe, February 3, 2016.

Image: REUTERS/Mike Hutchings

Ibrahim Mayaki
CEO, New Partnership for Africa’s Development (NEPAD)
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Agriculture, Food and Beverage

This article is part of: World Economic Forum on Africa

The economic outlook for Sub-Saharan Africa for 2016 gives room for cautious optimism. A 4.7% increase in GDP across the region in 2016 has been higher than expected. However, the World Bank warns that low commodity prices and high borrowing costs, combined with security issues in some areas, will continue to affect growth rates. To overcome a historic dependence on oil and mining revenues, African economies must continue to diversify into other sectors – particularly those that can provide jobs to a restless and growing young population.

Sustaining economic growth will require fiscal discipline, productivity improvements, infrastructure improvements, increased regional trade, and greater focus on stimulating and supporting innovation. All stakeholders – including government, donors and the private sector – must align and target their investments towards a shared goal of sustainable and inclusive growth.

While an absolute increase in investment is important in almost all sectors, in many of those sectors, there is an untapped margin of potential economic impact to be had from applying existing funds in a more targeted and coordinated way. A major opportunity for increasing growth through a “smart” and coordinated approach can be found in the agricultural sector. Agriculture today accounts for 32% of GDP in Africa and is the sector that offers greatest potential for poverty reduction and job creation, particularly among vulnerable rural populations and urban dwellers with limited job opportunities. Growth generated by agriculture in sub-Saharan Africa is estimated to be 11 times more effective in reducing poverty than GDP growth in other sectors – a vital multiplier given that 65% of the continent’s labour force is engaged in agriculture. Yet the sector has suffered sustained neglect and, as a result, Africa has gone from being an exporter of agricultural products in the 1960s to a net importer of agricultural and food products today.

The past 10 years have seen significant improvements in coordinated activity at national, regional and continental level to boost agricultural productivity and contribution to economic growth. The Comprehensive Africa Agricultural Development Program (CAADP), launched in 2003, has driven commitments by 42 African governments to increase public spending on agriculture. As a result, 14 of the 42 member states of the African Union have signed up to CAADP and have met or exceeded a national investment target of 10% of public resources into agriculture. But Africa has not achieved the second CAADP target, of a 6% increase in agricultural GDP. In fact, the annual average agricultural GDP growth rate decreased slightly from 6.2% in 1995-2003 to 5.1% in 2003-2012. And while the share of intraregional trade has almost doubled over the past 20 years, it still only accounts for 3.5% of the region’s GDP. The 2014 Malabo Declaration, signed by African governments, aims to address this, with a bold target of tripling intra-African trade of agricultural and food products and services by 2025.

Increasing GDP growth will bring both food security and job opportunities to the continent, and requires a coordinated effort between the public and private sectors. Public-sector investment must be targeted to reduce real and perceived business risk, enable financing and improve infrastructure in order to attract investors. Currently, prohibitive lending rates are stunting the growth of small-to-medium-sized agribusinesses (SMEs), which have the potential to be the backbone of sub-Saharan agricultural economies.

We must innovate to break this cycle and accelerate the agricultural transformation under way in many African countries. We need to design new models for investment financing to achieve a structural transformation in the agricultural sector. In particular, we need to engage the private sector. A historic focus on public investment resulted in a financial dependency to which only donors could respond. We need a mix of public, private-sector and development financing, and as a continent we must demonstrate that we are proactive in injecting our own resources into agriculture.

Achieving the transformation we seek will only come if we demonstrate stronger leadership and accountability. Specifically:

1. Heads of state must demonstrate vision, champion agriculture and lend their leadership to national agricultural plans and multistakeholder platforms to drive agricultural transformation.

2. Greater alignment, accountability, and measurement of progress on agricultural targets: The CAADP Implementation Strategy and Roadmap, signed off by heads of state in 2014, provides a framework for measuring progress against country goals, but it needs national leadership to ensure implementation and to respond swiftly to gaps. Many countries are currently reviewing their National Agriculture and Food Security Investment Plan and others should be encouraged to do the same. Agricultural development plans must be linked to national development plans, something that has not happened in some countries in the past. Too many policies are agreed upon but then not implemented effectively on the ground. We need a predictable, reliable and functioning policy environment if we are to attract greater private-sector investment. Too often, improved policies are agreed but not fully implemented. The first decade of CAADP has delivered a key lesson that improving this track record will require strengthening government capacity for administering policy at regional and local levels.

3. Strong frameworks for collaboration and mutual accountability between the government, private sector, development partners and other CAADP actors: A number of proven models for public-private sector collaboration have emerged at national and continental level and we need to build on and scale these initiatives. One example is Grow Africa, a partnership co-founded in 2011 by the African Union Commission, the NEPAD Agency and the World Economic Forum as an African-owned, country-led, market-based platform for cross-sector collaboration to increase inclusive and responsible investment in African agriculture. Now hosted by the NEPAD Agency following an initial incubation at the World Economic Forum, Grow Africa has helped generate a private-sector investment commitment to agriculture of over $10 billion. Of that committed investment, $2.5 billion has been implemented between 2013 and 2015, benefiting more than 10 million smallholder farmers and creating over 88,000 jobs.

Equally promising is the emergence of multistakeholder platforms focused on specific commodity markets or clustered around specific geographic areas. “Agro-pole” models that target public sector policy instruments and spending to particular geographic area, making the area attractive to private sector companies, investors and workers, have been applied successfully in other industries and geographies – think of Silicon Valley. These approaches are now being adapted to the agricultural sector in some countries.

Much progress has been made in the past decade. Governments, the private sector and donors have proven they can work together. To realize agriculture’s potential at a critical time in most African economies, we must now work smarter, reviewing and improving the partnership structures that have brought us to where we are today.

This article is part of our Africa series. You can read more here.

The World Economic Forum on Africa is taking place in Kigali, Rwanda from 11 to 13 May.

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