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This blog is maintained by Shanta Devarajan, the Chief Economist of the Africa Region at the World Bank.

Agriculture

Some (Possibly Heretical) Thoughts on Agriculture

Submitted by Shanta on Wed, 2009-10-21 08:22

Since the publication of the 2008 World Development Report, there has been a vigorous discussion in the development community about agriculture; today’s publication of the World Bank’s Agriculture Action Plan is a milestone in that process.  To stimulate further discussion on the subject, here are some thoughts from a garden-variety economist.

1. The oft-quoted statement, “GDP growth originating in agriculture is about four times more effective in raising incomes of extremely poor people than GDP growth originating from other sectors,” is an arithmetical point, not an economic point.  It simply reflects the fact that 75 percent of the world’s poor depend on agriculture for their livelihoods.

Why We Work in Development

Submitted by Shanta on Fri, 2009-10-09 09:20

A visual reminder of why many of us work in development:

The schoolchildren in this picture are first- and second-graders in the Democratic Republic of Congo. They're holding their new textbooks, given to them as part of a project that distributed some 14 million free textbooks to private and public schools across the country. 

After the photo was taken, the teachers tried to take the books back to put them in the classrooms for safekeeping.  The kids refused. For many of them, this was the first time they had held a book in their hands--and they weren't about to let go of them. The Minister of Education (seen in the photo with my colleague Marie-Francoise Mary-Nelly), wanting to give the kids a chance to enjoy their new textbooks, let them keep them.

Your Comments on Africa's Successes

Submitted by Shanta on Wed, 2009-10-07 10:58

The African Successes post has generated a vigorous exchange of ideas.  I appreciate receiving your comments on the study, your suggestions for success stories, and your views on development approaches that have worked and those that have not.  

Many of you felt, as I do, that we need to highlight Africa’s recent successes.   Your responses voiced strong support for a focus on education, knowledge and dissemination, health, private-sector development, agriculture (irrigation and fertilizer), community-level development, governance, infrastructure, and information and communication technology.  

African Successes

Submitted by Shanta on Thu, 2009-09-17 11:44

In recent years, a broad swath of African countries has begun to show a remarkable dynamism.  From Mozambique’s impressive growth rate (averaging 8% p.a. for more than a decade) to Kenya’s emergence as a major global supplier of cut flowers, from M-pesa’s mobile phone-based cash transfers to KickStart’s low-cost irrigation technology for small-holder farmers, and from Rwanda’s gorilla tourism to Lagos City’s Bus Rapid Transit system, Africa is seeing a dramatic transformation.  This favorable trend is spurred by, among other things, stronger leadership, better governance, an improving business climate, innovation, market-based solutions, a more involved citizenry, and an increasing reliance on home-grown solutions.  More and more, Africans are driving African development. 

The global economic crisis of 2008-09 threatens to undermine the optimism that Africa can harness this dynamism for long-lasting development.  In light of this, it might be useful to re-visit recent achievements.  The African Successes study aims to do just that.

The study will identify a wide range of development successes (see list), from which around 20 cases will be selected for in-depth study.  The analysis of each successful experience will evaluate the following: (1) the drivers of success—what has worked and why; (2) the sustainability of the successful outcome(s); and (3) the potential for scaling up successful experiences.  African success stories offer valuable insights and practical lessons to other countries in the region. 

I welcome your comments and suggestions for success stories. Click here to see the list of what we have come up with so far.

A political and potential food crisis in Niger?

Submitted by Shanta on Wed, 2009-07-22 11:00

The New York Times recently reported on the political crisis in Niger, where the President’s dismissal of the Constitutional Court (which had ruled against his proposal to abolish term limits) is being contested by the main political parties, civil society and lawmakers. The attached note by my colleague Amadou Ibrahim suggests that the situation could be even worse. As the international community (whose aid finances about 45 percent of Niger’s budget) focuses on the political deadlock, early estimates are that this year’s rainfall will be weak. With most Nigeriens making their living from agricultural production and about 25 percent of them already food insecure, a shortfall in food production coupled with the political turmoil could threaten the lives of millions of people.

Impact of the Global Financial Crisis on Zambia

Submitted by Julio Revilla on Tue, 2008-12-30 08:50

The direct financial effects of the global financial crisis have so far been limited due to Zambia’s reliance in domestic funding and limited exposure to external credit lines. However, the central bank has increased interest rates sharply as a result of portfolio outflows.

The largest affect has been the sharp fall in global copper prices. Copper exports, which accounted for almost 80 percent of total exports in 2007, have played a major role in sustaining Zambia’s growth, averaging close to 6 percent in the last five years. The fall of copper prices has already resulted in a significant depreciation of the domestic currency and more than doubled the external current account deficit in 2008. Lower copper prices have also contributed to weakening the fiscal position due to the government relying heavily on increased tax revenues (including a windfall tax) introduced in April.

As the economy slows down, second round effects are expected to negatively impact not only the financial sector but also the rest of the economy. Lack of infrastructure development (roads and energy) is likely to reduce growth of non-traditional export sectors in agriculture which could benefit from the exchange rate depreciation.

Fertilizer Subsidies in Malawi

Submitted by Shanta on Wed, 2008-12-17 10:17

At a recent AERC research workshop in Nairobi, I made a comment about African governments’ not spending enough money on public goods, and spending too much on private goods such as fertilizers. The comment seemed to have struck a nerve. Several people in the audience pointed out that, in Malawi, fertilizer subsidies have increased cereal production, so government spending on fertilizers was not such a bad thing. Going beyond the general arguments that these fertilizer subsidies often don’t reach farmers (they’re stolen by middlemen) and that they benefit large (and hence less poor) farmers more, I suggested that even the Malawi case is not clear-cut. 

As Maggie McMillan points out, it was improved seeds and the relaxation of farmers’ credit constraints that contributed most to the improved yield in Malawi: “Low fertilizer use is indeed one of the Africa’s most vexing challenges. But subsidizing is only a band-aid, masking its high cost and low productivity without sustaining growth. Such band-aids can be useful, but they can also be a distraction, drawing attention away from the interventions needed for large-scale improvements."

How to grow the private sector in Africa

Submitted by Shanta on Mon, 2008-11-10 13:47

I gave the Jerome A.Chazen lecture at Columbia Business School the other day. The gist of my talk was that:

  • Despite relatively rapid economic growth, private investment in Africa is still relatively low
  • The proximate reasons are poor infrastructure, weak skills and a host of policy and institutional impediments (such as business regulations and trade restrictions.
  • Underlying each of these proximate reasons is some government failure. Transport infrastructure, for instance, is constrained by poor regulation that generates monopoly profits for trucking companies but keeps Africa’s transport prices the highest in the world; poor skills derive from nearly dysfunctional tertiary education systems; and many of the regulations are difficult to remove for political reasons. The few private-sector success stories in Africa (Kenya horticulture, Lesotho garments, Rwanda tourism) all got around these government failures; they have not spread economy-wide.
  • The key to enhanced private sector growth in Africa, therefore, is government leadership that removes the underlying obstacles to infrastructure, skills development and entrepreneurship.

There was a lively discussion after the lecture, although I got the impression that most of the audience was broadly sympathetic to my approach. I wonder if the same is true of readers of this blog.

A Mozambique Paradox

Submitted by Shanta on Mon, 2008-10-27 08:57

There is widespread consensus that financial development is critical to economic growth, globally, and in Africa. Yet Mozambique, a country with very low levels of financial development (in a recent survey, only 13 percent of firms had obtained credit from the banking sector, rural credit is almost nonexistent), registered a GDP growth rate of over 8 percent a year over the last decade.

On a recent visit to Mozambique, I tried to understand this apparent paradox, but ended up with even more puzzles. A group of prominent bankers said the problem was that enterprises lacked managerial and accounting skills, which is why they didn’t want to lend to them. They insisted that subsidizing credit will not solve this problem. In a separate meeting, one of the most successful entrepreneurs in Mozambique said that even he has trouble getting credit; he needs to put up his factories as collateral, and even then it takes about seven months. Finally, the government’s plan to stimulate agricultural production includes a program of credit subsidies to farmers to buy tractors and other inputs.

So, while everybody seems to agree that access to finance is a constraint (which begs the question of how Mozambique grew so fast), there are different views on how to relax that constraint. I look forward to your comments and suggestions.