Agro-allied Industrialization for Africa’s Inclusive Growth

Published on 19th January 2017

Ending poverty and overcoming hunger and food insecurity permanently come first and second, respectively, in the sustainable development goals (SDGs) endorsed in September 2015 by un member states. This commitment is also stressed by the African Union agenda 2063 that recognizes the right of all Africans to be well-nourished and lead healthy and productive lives. Furthermore, the Comprehensive Africa Agricultural Development Programme (CAADP), as well as the June 2014 Malabo declaration, highlight that a structural transformation of African agriculture is central to growth and poverty eradication on the continent. Consistent with these goals, agriculture and industrialization are at the heart of the work by the African Development Bank (AfDB), the United Nations Economic Commission for Africa (ECA) and the United Nations Development Programme (UNDP) and their vision and long-term strategy for a prospered and inclusive Africa.

 

Global experiences suggest that the attainment of food security requires high and sustained growth, underpinned by enhanced agriculture productivity and a sustainable structural change that includes the broader engagement of people. In particular, African countries need to revisit their agricultural policies and practices, while paving the way for an agro-allied industrial development.

 

Challenges and opportunities

 

Despite the overall macroeconomic growth and improved governance enjoyed broadly across the continent, Africa still has the highest rates of both poverty and hunger in the world. Out of about 795 million people suffering from chronic undernourishment globally, 230 million live in Africa; resulting in the highest prevalence of undernourishment worldwide, at around 20%.1 even in abundant regions, food shortages can happen according to the period of the year, mostly due to poor conservation techniques or post-harvest losses. In sub-Saharan Africa, up to 150 kgs of food produced per person is lost every year; and depending on the crop, between 15% and 35% of food may be lost before it even leaves the field.

 

How can Africa feed Africa, and the rest of the world? A partial response appears straightforward: Africa needs to increase food production away from subsistence production and weak productivity. There is little justification that Africa, which has about 2/3 of all the arable land left in the world, is unable to feed herself; spending around us$ 35 billion per year on food imports, putting additional strain on scarce foreign exchange reserves. In addition to increasing food supplies, Africa needs to better manage and integrate the entire food chain from the farm to storage, transport, processing and marketing. In the current policy and research environment, there is significant momentum behind developing and promoting the agricultural sector as a catalyst to industrialization. Developing industrial agri-businesses would raise productivity in the sector and ultimately support economic growth and structural transformation by enabling the labor force to move from the agriculture sector into manufacturing and services.

 

 

A comprehensive transformation of the agriculture sector in Africa towards agro-allied industrialization requires investments in technology and innovation in order to improve the productivity of land and especially labor (e.g. new tools, improved seed, water control, fertilizers) including innovation in the commercialization of agriculture products. Farmers should be given incentives to adopt new technologies by making them affordable, to raise their productivity and expand their output. Land reforms would not only increase production scale but also enhance security of tenure and thus encourage investment, as well as adequate insurance and financial instruments suited to the agricultural production cycle that would support the adoption of technological innovations and expand the use of intermediate inputs, agricultural extension services, and appropriate pricing mechanisms.

 

More globally, structural transformation requires that industry be leveraged in the agriculture sector. Further efforts are necessary to encourage the development of large commercial farmers and to connect them with small-scale farmers through mutually beneficial contract farming (out-grower schemes) such as to support larger agriculture production in an inclusive way. Agribusiness initiatives will constantly seek value addition to agriculture products to be better connected with regional and global agriculture value chains. To enter into contract with agribusiness farmers and get the guarantee to supply leading firms, smaller-scale farmers will also get the incentives to meet required production standards within the value chain. Ultimately, an agro-allied industrialization will enhance the efficiency and value addition in the agriculture sector by connecting farmers to markets. In the form of skills and capital to produce in larger quantity while meeting higher quality standards, it will facilitate commercialization of Africa’s agriculture through more effective integration in agriculture value chains.

 

Providing adequate institutional and business environment as well as supporting trade finance are also key in encouraging private sector participation and investment in the agro-business industry and raising the comparative advantage of exporters in this sector. Ultimately, agro-allied industrialization is expected to reduce the export of raw material and diversify national economies in Africa. Developing competitive trade services through the provision of infrastructure and financing will support large-scale farmers in their marketing and export activities.

 

Developing an agro-allied industrialization in Africa requires to advance an inclusive growth agenda given that half of the labor force in the continent works in the agriculture sector in rural areas, of which 80 percent are smallholder farmers and a significant share are female workers. land reform, better tailored and more accessible financing and insurance schemes are necessary for small-scale farmers not only to raise productivity but also to provide the most vulnerable with mitigation measures and enhance their resilience to the growing risks related to climate, market and political shocks. Land access based on customary rights, in particular, disadvantage women and favor unequal distribution of the arable land.

 

There remains significant research and policy gaps regarding the pathways that would lead to such transformations with the view to alleviate high poverty rates in rural spaces, smooth transitory income, and enable food insecure households to meet their food and nutritional needs as well as link smallholder farmers to larger agro-business firms. It is also important to recognize the key role played by women through gender-specific policies as a core strategy. In this regard, adequate policies are needed to overcome multiple market failures and imperfections and to improve an inclusive access to modern inputs, labor, land, finance, and other agricultural factors of production and markets in order to enable a dual structural transformation of agriculture and industry.

 

Last but not least, Africa must endorse a green agriculture to industrialize in a sustainable way, in order to avoid long run stagnation in crop production and rising cost of inputs. Governments need to establish a sound regulatory and institutional framework to take advantage of technology in promoting a green agriculture. Information and communication technology, for instance, increasingly support in a green and sustainable way the diffusion of market information, production knowledge and geographical information among the various stakeholders in the agriculture sector. Developing skills in biotechnology would also improve yields and make them more resistant to weather shocks while ensuring health and environmental safety. Besides to larger scale agriculture production, further efforts should be devoted to the improvement of water management in such a way as to intensify irrigation to reduce Africa’s dependence on rain-fed agriculture while strengthening resilience to climate change.

 

Courtesy: African Economic Conference.


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