|A past conference to spur agribusiness in Africa. Photo courtesy|
Over the next 20 years, Africa needs to boost agricultural productivity as recommended by the Comprehensive African Agricultural Development Programme (CAADP). Currently, most of the agricultural production growth in Africa stems from increases in land area under exploitation rather than from increases in efficiency. This trend is not sustainable and needs to be replaced by an increase in productivity fuelled by adoption of best agricultural practices, improved infrastructure (irrigation, energy, mechanization), value adding processing and linkage to growth markets. Both farming and agro-industries need to undergo profound structural transformations in order to meet these objectives.
The transformation of agricultural raw materials into industrial products depends increasingly on the capacity of African entrepreneurs to participate and compete in global, regional and local value chains. Accordingly, African agribusiness value chains will have to adapt to changing market conditions, continuously improve efficiency and strive to meet consumer requirements in a competitive global trade system.
Improving agricultural productivity goes hand in hand with employment-generating industrial structural change. As industrialization gains pace agriculture will benefit from increased access to cheaper industrial consumer goods as well as from the growing availability of industrial products such as machinery, fertilizers, improved farming technologies, construction, transportation, better and cheaper seeds and other industrial inputs. The result is not only an overall rise in agricultural productivity and output growth, but also the possibility of increasing incomes and savings in rural areas. The enlarged market provides additional stimulus for continuing industrial growth which feeds back into unremitting agricultural upgrading that results in new agricultural inputs for industry produced more efficiently, with a higher quality and at lower costs than before.
Improving agricultural productivity requires a substantial, well-coordinated flow of resources from a wide range of stakeholders. Farmers and traders, suppliers of fertilizers, pesticides and seeds, rural energy service companies, transporters, traders and processors, providers of technology or rural finance and, at the end of the chain, domestic and foreign buyers all take independent decisions in their resource allocation processes; they must be guided by strong coordination signals in the form of clear and predictable public policies, as well as adequate physical and institutional infrastructures.
Africa enjoys trade preferences in OECD countries but lacks trade capacity to fully exploit them. Opportunities exist in higher differentiated products aiming at niche markets. African domestic and regional markets, as well as emerging markets show signs of being able to nurture the growth of African agro-industries but an enabling policy environment and proactive negotiations with trading partner countries are essential prerequisites.
High performance agribusiness value chains need to be based on processes that guarantee the highest product quality in a challenging global marketplace. Africa needs new learning and innovation systems involving regional cooperation, new types of partnerships between farmers, sellers, investors and researchers, and the right incentives and public actions that crowd-in rather than crowd-out private investment.
Private agribusiness development can be promoted through created competitiveness within the framework of inherited comparative advantage and a business-friendly environment, while building on policy reforms that aim at creating the conditions for enterprises to achieve international competitiveness.
The existence of a reliable and appropriate infrastructure system is essential for any meaningful agro-industrial development. Africa needs to make strategic investments in transport infrastructure, access to energy and water, ICTs and management efficiency in order for agribusiness to thrive, reduce transaction costs, promote openness and integration of economies, while facilitating labour mobility. There are opportunities for attracting and leveraging investment in infrastructure and energy, including new forms of project financing such as carbon finance, climate change adaptation funds, microfinance facilities, public-private partnerships, bilateral funds, and increasingly private equity funds.
In a close partnership with the Food and Agriculture Organization (FAO) and the International Fund for Agricultural Development (IFAD), UNIDO has launched the Accelerated Agribusiness and Agro-industries Development Initiative or 3ADI programme to promote value addition to agricultural commodities, with the added value being realized in domestic markets and through global supply networks. This initiative was endorsed by the High-Level Conference on the Development of Agribusiness and Agro-industry in Africa in Abuja, Nigeria in March 2010, and is now operational in a first group of 12 countries (Afghanistan, the Comoros Islands, Democratic Republic of Congo, Ghana, Haiti, Liberia, Madagascar, Nigeria, Rwanda, Sierra Leone, Sudan and Tanzania).
UNIDO’s research shows that value added and employment in the food and beverages, textiles, wearing and apparel, wood and wood products and paper and printing industries grows much more rapidly than GDP up to around USD 5000 per capita (constant 2005 PPP).
There is also potential for entry into the renewable energy industries, in particular bio-fuels, and parts of the wind and solar equipment manufacturing industries. Employment generation based on industrial structural change and related improvement of agricultural productivity is, however, threatened by Africa’s vulnerability to climate change.
According to the International Panel for Climate Change (IPCC), Africa is the most vulnerable continent to climate change and climate variability; and the situation is compounded by the region’s low adaptive capacity. Climate change experts project that most of the continent will experience a temperature rise which is very likely larger than the global mean annual warming, reduced average annual rainfall and increased aridity and droughts. Hence, substantive efficiency gains in the use of scarce resources, water and energy inputs will be paramount to protect job creation efforts from the impact of climate change.
Emerging industrial enterprises in Africa should adopt business strategies where they look to maximize resource efficiency and cleaner production. More simply, they should adopt “three Rs” strategies – Reduce, Recycle, Reuse. This requires them to first maximize the efficiency with which they use their energy and raw materials, adopting cleaner production, pollution prevention, green productivity or similar approaches. Enterprises must also maximize the recycling and reuse of the remaining wastes they generate; increased efficiency will not eliminate all wastage. In some cases, enterprises can recycle and reuse their wastes themselves, but often it will be others who recycle and/or reuse them.
The UN Secretary-General's Sustainable Energy for All initiative has already been focusing on mobilizing commitments towards three objectives, all to be achieved by 2030 – ensuring energy access, doubling energy efficiency, and doubling the share of renewable energy. To date more than 50 Governments from Africa, Asia, Latin America, and Small Islands Developing States have engaged with the initiative and are developing energy saving plans and programmes. Businesses and investors have committed over $50 billion to achieve the initiative's three objectives. Tens of billions of dollars have been committed by other key stakeholders – governments, multilateral development banks, international and civil society organizations – to catalyze action in support of the initiative.
The coming decades will see a surge in Africa’s labour force. If current demographic trends continue, the continent’s labour force will be 1 billion strong by 2040, making it the largest in the world, surpassing both China and India. Droughts, especially in rural areas, will accelerate the process of migration into cities, increase urbanization and strain the socioeconomic conditions there.
Without decisive action towards economic diversification, improvements in agricultural productivity and increased resources, water and energy efficiency, the creation of ‘decent’ employment opportunities to address the fast growing population and urbanization trends will not be possible. A green industrial policy, while focusing on the generation of new productive activity ensures social inclusiveness and due respect for the environment, can put Africa on a virtuous growth path. Governments need to introduce mechanisms comprised of appropriate incentives, disincentives and regulations to attract investments in the desired manufacturing areas and in much needed economic and physical infrastructure.
Innovation and technological change aimed at generating new products, enhancing the efficiency of production processes and improving land yield are necessary. Appropriate skills and educational training programmes must be developed and fostered to match specific industry demands. Sound financial instruments need to be in place to fund these efforts.
To conclude, I strongly believe that fostering industrial structural change is a necessary condition to address the “jobless growth” that Africa has experienced in recent years.
By Dr. Kandeh K. Yumkella
Director-General of UNIDO.