With more than 60% of its 1.166 billion people living in rural areas, Africa’s economy is inherently dependent on agriculture. More than 32% of the continent’s gross domestic product comes from the sector.
However, agricultural productivity still remains far from developed world standards. Over 90% of agriculture depends on rainfall, with no artificial irrigation aid. The techniques used to cultivate the soil are still far behind from what has been adopted in Asia and Americas, lacking not only irrigation, but also fertilisers, pesticides and access to high-yield seeds. Agriculture in Africa also experiences basic infrastructural problems such as access to markets and financing.
Singapore is proving to be an engaged ally in the process of changing this reality. Some big players in the agricultural sector with their headquarters in Singapore, are investing heavily in Africa. Technology and skills are being transferred to smallholder farmers and the large-scale producers are cooperating, playing a fair game that will help develop the sector and make it more sustainable.
Agriculture in Africa: An overview
In Africa, agriculture accounts for two thirds of livelihoods and food accounts for two thirds of the household budgets of poor people. It makes up a very important part of the lives of African people, but in spite of it, it apparently receives very little attention from the governments.
The low productivity levels of agriculture in Africa have resulted in a worrisome scenario: it does not meet the growing demand for food from urban centres. The region is increasingly dependent on food imports. For a continent with such a vast area, a booming young population and tropical climate, it is surprising that Africa is not a net exporter of agricultural products. In the 1970s, Africa provided 8% of the world’s total agricultural exports. Today this number has dropped to a negligible 2%.
Africa spent US$35bn on food imports (excluding fish) in 2011, only 5% of it related to trading within the continent. An increase in productivity, matched with the right set of policies and investment, could revert this situation. Africa could replace these imports with their own produce, which would in turn reduce poverty, enhance food and nutrition security, and provide sustainable growth to the respective societies.
A broader economic transformation is necessary to shift the current paradigm facing agriculture in Africa. In most of the cases, urbanization and economic growth have resulted in new opportunities for local agricultural producers. However, in Africa, this share of the market mainly belongs to foreign companies. Imports of food staples have been rising sharply, and domestic agriculture has so far failed to increase supply in response. Raising productivity in agriculture is vital to transformative growth, not just because it has the potential to expand markets by displacing imports, but also because agricultural growth is twice as effective in reducing poverty as growth in non-agricultural sectors.
How does agricultural development trigger economic growth?
Agricultural growth was the precursor to the industrial revolutions that spread across the temperate world, from England in the mid 18th century, to Japan in the late 19th century. At that time, a better understanding of the use of soil and techniques, such as irrigation, use of horsepower in the fields, and seed selection, improved crop yields. Consequently, livestock could be better fed during winter times, increasing the size of herds. These changes in agriculture made it possible to feed all the people attracted to the industrial centres as factory workers, triggering the industrial revolution and leading to higher economic growth.
More recently, we see examples of economic transformation linking better agricultural productivity to industrial growth in countries such as China, India, and Vietnam.
In the modern world, the cycle of economic growth resulting from agriculture development, is somewhat more complex than what was observed at the beginning of the industrial revolution. First, as income grows, demand for non-food items grows while demand for most agricultural products decreases as a percentage of total consumer spending. Consumers start spending more money on non-essential products, while spending on food flattens. This imbalance increases the price of non-food items relative to food prices, causing resources like labour and capital to move from agriculture to more remunerative uses in other sectors.
As economic development unfolds, education levels grow across populations. The formal education and complex skills acquired through schooling are largely required in the non-agricultural sectors. With increasing education levels, an economy sees its working force in the fields being replaced by machines and a better use of the soil and resources. Large-scale corporate farms replace small-scale family farms. In the long run, the value of farm production typically grows slower than does aggregate income, or GDP.
Over time, the agricultural sector gives up land to urban expansion, industrial and services sectors use (including recreational and tourism activities), and increasingly also for purposes of environmental conservation. That is, in a nutshell, the history of Singapore. The lack of land, however, resulted in an extreme version of the scenario and basically all the output of agricultural sector was replaced by imports.
In larger countries, these shifts can reach a balance, with a highly productive agricultural sector that provides food to a thriving urban area.
Agricultural growth in Africa
The reality of agricultural development in Africa is still far from ideal. In sub-Saharan Africa, the growth rate of agricultural GDP per capita was close to zero during the early 1970s, reaching negative figures in some years. This changed in the 1980s, when agricultural GDP growth reached 2.3% per year, increasing to 3.8% a year from 2000 to 2005. However, this increment was mainly due to an expansion in farm land, and not in agricultural productivity. African farm yields are among the lowest in the world. However, some countries have experienced a strong GDP growth in agriculture, such as Zambia, Liberia, Mozambique and Ethiopia.
Although there is a strong link between agricultural growth and decreases in poverty, the connection is not that simple. An example of this is Zambia, which experienced a vast increase in maize yields from 2006 to 2011, but did not see a reduction in poverty. Underlying inequalities and government policy explain the discrepancy. The gains in productivity in Zambia were mainly attributed to large scale fertiliser subsidies to large farms. Small farms, with areas below one hectare, received only an average of 7% of the subsidy.
On the positive side, there are two examples where agricultural growth did drive a decrease in poverty – Ethiopia and Rwanda. According to the World Bank, poverty in Ethiopia dropped by 33% since 2000, with an agricultural GDP growth of near 10% per year being the main driver.
Rwanda’s strategy was to focus its production on staple crops. While export crops typically have higher value, staple crops have a larger potential to replace imported food, which points to a promising avenue for growth that reduces poverty.
How can African countries improve their agricultural sector and use it as an engine of economic growth? The strategy will depend on each individual country, but there are a few common measures that, when put together, certainly increase the chances of a country to ignite a virtuous circle of growth fueled by agriculture.