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Some (Possibly Heretical) Thoughts on Agriculture

Shanta Devarajan's picture

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.

 

2. The key to reducing poverty is agricultural productivity growth.  This is different from agricultural growth.  In most countries that have grown and reduced poverty significantly, agricultural productivity (output per unit of land, for instance) grew, while agriculture’s share in GDP fell.


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3. Why has agricultural productivity not grown rapidly in Africa and South Asia?  Some people claim it’s because the international community neglected agriculture for decades.  While there is some truth to this claim, I also find that many government interventions in agriculture have worked against productivity increases, rather than for it.  The canonical example is the large array of subsidies (water, power, fertilizers, and other inputs) we observe in both regions, which are aimed at helping poor farmers, but end up inducing the wrong product mix (growing cotton, a water-intensive crop, in Maharashtra, which is practically a desert), deplete environmental assets and, most importantly, crowd out necessary spending on infrastructure.  Even the apparent success of the fertilizer subsidy in Malawi is being contested.

4. If government interventions have backfired in the past, how do we know that this time will be different?  I hear a lot of discussion about “smart subsidies,” but I don’t hear enough about how this new generation of interventions will address the fundamental problem with these interventions:  political capture.  Most of these subsidies failed to help poor farmers because they got captured by other interest groups (including large-scale farmers).  These interest groups were powerful enough to block attempts at reform. 

5. Along the same vein, I am puzzled by the rule-of-thumb that, in Africa, at least 10 percent of public expenditure should be for agriculture.  My agriculturalist friends tell me that there are huge problems with the productivity of public spending in agriculture.  So why should we advocate an increase in this spending?  It reminds me of the Woody Allen joke about two people eating at a restaurant.  One says, “The food in this restaurant is terrible.”  The other responds, “Yes, and the portions are so small.”

6. Perhaps the best way to ensure that interventions are productive is to make sure that voters are better informed about their benefits and costs.  And how can we do that?  We can start by a discussion on blogs like this one!

Comments

It's truly nice to see the first string of macroeconomic interest at the Bank thinking about agriculture again, and sincere thanks to Shanta for taking the time to lay it out---but possible heresy? Let me rise to the bait. Some comments, following Shanta's numbering: 1) “Agricultural growth contributes 2 to 4 times as much to poverty alleviation as other forms or growth is an arithmetical point, not an economic one (paraphrased)” Maybe it does follow largely from the fact that 75% or the world's very poor are rural, and most of these are engaged in farming for at least part of their meagre livelihoods. The fact that agricultural spending had fallen to 4 % of ODA globally and of public expenditure in Africa at the time of World Development Report (WDR) 2008 suggests a stunning lack of arithmetical congruence at the very least. Further, much of the current discussion is about Africa, where WDR 2008 makes a compelling case that agriculture is vital for growth (unlike most of South Asia, as well as poverty alleviation (like most of South Asia). The proportional size of the sector and high transfer and transaction costs for agriculture in a good chunk of Africa are consistent with an economic view that significant numbers of rural areas in Africa, housing lots of very poor people, are demand constrained (a counter-heresy?). That is to say, there are underemployed resources because no one has any money locally to buy anything, and local products are not competitive price-wise outside the local region. When money comes into these areas (as pension payments or sales of tradable products from within to outside the local area), and it is widely distributed to consumers in the zones in question, some of these underemployed resources are brought into production to produce the things that these now slightly richer poor people consume. If these consumer items are demand-constrained nontradables like services, locally processed foods, local bricks and mats for construction, etc, this produces a multiplier effect for agricultural growth. These effects have been widely observed in Africa for both pension trucks and export crops. The latter has the advantage over the former that it is economically sustainable and does not create fiscal deficits. The entry point then is to promote the supply of (agricultural) tradables in these zones for sale outside the local area. 2) I agree absolutely with Shanta that the key is to invest in agricultural productivity growth. But following the logic in (1), it should be targeted in the first instance to tradable items (stuff that can be sold and not rot by the wayside or is not dependent on constrained local demand). Second, there is a bigger economic kick to smallholder productivity increases than for large farms if that means—as it probably does—that the income benefits of productivity increases for smallholders are more widely spread to poor consumers. Productivity increase on both large and small farms benefit all through lower food prices, but the distribution of income side is critical when demand-constrained areas are a problem. 3) The pernicious nature of the subsidy syndrome of using public good resources for private goods that Shanta alludes to is absolutely correct, and in fact given significant treatment in WDR 2008. Helping Governments use “smart subsidies”, as in Rwanda during the food price crisis say, is a different beast, provided the caveats of targeting, exit strategy, cost accounting, and transparency are followed. 4) (see above) 5) Woody Allen and public expenditures: good fun, but the serious message is that WDR 2008 calls for both “more” and “better” public expenditures. It is great to see serious prospects for “more”, but we all need to work on the “better”. Unfortunately, it is probably easier (not to say easy) to fund-raise for “more” , than to get donors to do the less glamorous job of building human capacity and institutions for “better”. 6) Democracy and “better” agricultural interventions--absolutely! --and at all levels, especially community empowerment to improve the targeting, design, delivery, and use of interventions.

Submitted by Anonymous on
Hi Shanta, I think if the WorldBank will stop sending their own poeple down to Africa in the name of consultancy to spend the little money they lend to Africa to be used for Agriculture productivity .These are used to pay bills in five star Hotels and three meals and snacks with expensive drinks for these consultants.In this situation the leaders also take their share whereby the poor farmer in the remote village does not get access to the 'FUNDS' if even little that cannot buy seeds and fertilizer.The consultant does not even want to go to that remotest village to see what is on the ground. But it is always writen the WorldBank has given aid,grant or loan to so so.. African country for Agriculture Production. I always say I love the Ethiopians for their courage though they are poor they are not greedy for money which will in turn drain all their reserves to make them poorer. Alice Dawson

Submitted by Apurva Sanghi on
Dear Shanta Congrats on a wonderful and thought-provoking post. In my experience, in addition to mixing arithmetic with economics, I find that many of us continue to get mix other equally important things such as stocks vs. flows; accounting / financial costs vs. economic costs and so on. I hope you do a post on just these issues at some point. While I agree with most of what you said, one minor quibble I have is related to your point 3 that the "fiscal space" so created by reducing subsidies should be spent on infra. I say this because a) whether more needs to be spent on infra vs. on other sectors, is likely to be highly context / country specific. In some cases, additional resources would have a bigger bang for the buck from paying down debt; in others it could be in social or other sectors and so on. And b) even if it were infra, one could argue that there too poor public (government and donor) interventions are arguably biased towards new, greenfield projects rather than routine, less glamorous, operations and maintenance, which is often ignored. Anyway, as I said, it's a minor quibble, and I look forward to reading more such interesting posts. Best regards, Apurva

Submitted by Hans Determeyer on
Dear Shanta, Thanks for the pleasantly sharp and down-to-earth observations. Indeed, for a more successful rural development in Africa, information servicing may be one of the key elements where we can improve considerably. This was also one of the key themes at the CTA conference in Brussels, last week, where the role of the media in rural development was discussed by more than 200 rural development specialists from around the globe. ICTs create impressive progress in access to and exchange of information for those operating in the more urbanized regions. Considering the oral-literate aspect, in rural environments most probably radio will remain a key channel for access to information for years to come. Interestingly, being so near its target group and in combination with text messaging, rural radio shows good potential to become much more interactive with the audiences in which it is rooted, in a relatively simple and lo-tech way. Thus, rural radio has potential to actually improve the quality of information offered by mixing it with feedback from those who actually toil the earth: meaning generations of experience. This, however, moves the problem to the next point: how to make two-way information servicing and information processing by rural radio more sustainable and more professional? The medium suffers from a vicious circle type of dilemma. There is no money, so competent staff is difficult to retain, so quality cannot easily grow or be maintained, so its SME investment value does not flourish, so there will be no investor interested, so there is no et cetera. For small and medium sized media, access to capital for investment and to working capital is very limited, if not zero. Subsidy and donation is more often than not their finance base, a dependency base. An entrepreneurial spirit is often there, certainly, but not necessarily always in terms of management, marketing or administration. Yet, these are true SMEs, even though they may not see themselves as such. In the information era these are even KEY-SMEs, to be cherished! Governments, however, rarely support the SME media sector with dedicated development policies (was this a euphemism?) and commercial entertainment radio makes competition tough. Managerial capacity may be limited, access to training for a more professional and entrepreneurial set-up may be limited, yet one finds thousands of such initiatives thriving around the world. They are thriving in terms of enthusiasm, in terms of rooting in its listenership, in terms of added value for rural and remote communities. So, let's make a point of supporting these essential actors in rural information servicing and processing. Not with subsidy, but with structural access to capital coupled with subsidized business development services. The models have been developed and tested. We can learn from KBR68H in Indonesia, SAMDEF in the SADC region, Red TV in Peru, MDLF. For more than ten years we see successful loans issued to media houses in developing countries. It can work and it deserves scaling up! We challenge the World Bank to adjust its telescope and catch sight of information servicing on the ground - a sector that needs dedicated financial services and better, more stimulating national policies and constructive rather than constraining regulation. We need the Bank's support in convincing governments that this SME media sector is essential to successful rural development. Their information services - often in local languages - are so essential, that policies promoting rural media may be considered pre-conditional to aid delivery. Hans Determeyer - manager media finance mechanisms Free Voice - support to media in development - The Netherlands

Dear Shanta: I am amazed by your daring admission that Ending Poverty or creating wealth is the only solution to African's problem with poverty. Poverty Reduction is a voodu science designed to starve Africans for a long time to come. Did you see European Union Agricultural Policy being developed on reducing poverty? For that matter is the Green Revolution in India based on increasing productivity or ending poverty? It is interesting at last you seem to have got the idea, that wealth creation and building prosperity is the only solution to impending abject poverty. How can you reduce poverty? Can you really quantify poverty at the level where you can show you can reduce it. Why not eliminate it with creating wealth and prosperity? The old and outdated approach by the World Bank and IMF to postpone prosperity by reducing poverty is a bankrupt ideology that has no evidence based science but a rather cruel way of keeping Africans starving. The latest work by Dr Gebissa Ejeta of Purdue University and the World Food Prize for 2009 indicate that if African Farmers are enabled with technology and are allowed to begin farming in a commercial way with increased cooperatives and the like, they will improve their productivity and eventual wealth creation. The current system of micro-farming based subsistance farming is a recipe for disaster. So, more than the farming technology, it is the Macro-Economics and lack of investment in Commercial Farming that is making poverty a substance of interest and perpetual failure by the Bank and IMF and similar bodies who do not seem to approach the problem with evidence based science. All their structural adjustment and and conditionality is nothing but voodu science being played out by disconnected and callous economists and their supportive World Bank Governors and Donors. it is time to look at the research carefully, and most importantly listen to the local governments and farmers on what works for them. For once let Washington and the Economist listen to the farmers and science. Please read the attahed interesting story about the work of Dr Gebissa Ejea for your additional information. Belai H Jesus, MD, MPH www.globalbelai7.blogspot.com Globalbelai7@gmail.com Ethiopian Sorghum Breeder Wins 2009 World Food Prize By Steve Baragona Washington 15 October 2009 Baragona Report - Download (MP3) Baragona Report - Listen (MP3) The World Food Prize is the top international award for individuals who have increased the quality, quantity, or availability of food in the world The 2009 World Food Prize has been awarded to Gebisa Ejeta, an Ethiopian-born plant scientist at Purdue University. The private, $250,000 award -- presented at ceremonies in Des Moines, Iowa, October 15th -- is given annually to people who have helped address the world's food needs. This year's prize honors Ejeta's life-long work to improve the production of sorghum, one of the world's most important grain crops. It also honors his efforts to take his discoveries beyond the lab -- to the farmers who need them the most. Desire to help others rooted in his own childhood poverty Ejeta is one of those success stories that show the difference an education -- and a motivated mother -- can make. Ejeta grew up in a one-room thatched hut in rural Ethiopia. But he says his mother had other plans for him. "She didn't care much for the lifestyle in the community that we lived in," Ejita recalls. "And for some strange reason, this woman was able to see that through education one can get out of this drudgery and get to a better life." So she found opportunities for Ejeta to study, and a place to stay, in a neighboring town, a 20-kilometer walk away. Ejeta studied. He excelled. And now he is being honored for his life's work helping others rise out of poverty. Lowell Hardin is an emeritus professor at Purdue University who has known Ejeta for 25 years. "Because he grew up in very, very modest circumstances -- a single mother in a remote village in Ethiopia -- he knew poverty," Hardin says. "He knew hunger. And when he was fortunate enough to get an education thanks to his mother's pushing, he decided he was going to apply his talents in this direction." Research efforts focused on threats to African food crops Gebisa Ejeta received World Food Prize for his efforts to improve sorghum production Ejeta applied his talents to fighting a weed called Striga, or witchweed, which threatens crops that feed more than 100 million people across sub-Saharan Africa. Ejeta says the parasitic weed can ruin fields of sorghum, a major staple in hot, dry regions of Africa. "If you grow a crop that is susceptible to infection by the parasite," he says, "you just basically don't have any chance for growing a crop if your soil is contaminated. And most of these soils are getting contaminated." Before Ejeta took up the challenge, researchers hadn't had much success controlling the weed. Its seeds can lie dormant in the soil for decades. But Ejeta and his team at Purdue University discovered the chemical signals produced by the sorghum plant that tell the Striga seeds to wake up -- that a victim is available. They then found sorghum varieties that didn't produce the signals, and bred a line of Striga-resistant plants that thrived in a broad range of African growing conditions. These new varieties produced up to four times more grain than local types, even in drought-plagued areas. Making sure African farmers benefit directly from his research But Ejeta knew the research breakthrough was just the beginning. Once the new variety was developed in 1994, he worked with non-profit groups to distribute eight tons of seed to farmers in twelve African nations. That's typical of Gebisa Ejeta, according to his colleague at Purdue, Mitch Tuinstra. "One of the most important things about Gebisa's work is that he always carries it to the next level," Tuinstra says. "Which is, 'How do I translate the products of this research into technologies that empower and strengthen farmers in Africa?'" Ejeta's new varieties of sorghum resist drought and the weed Striga Ejeta has always understood the importance of getting technology into the hands of African farmers. Just out of graduate school, Ejeta bred a high-yielding, drought-tolerant variety of sorghum. When the new hybrid variety was introduced in 1983, Ejeta says farmers were thrilled to find it yielded more than double what traditional varieties produced. "They thought it was fantastic that they were getting this kind of performance with this hybrid," he says. "And so, the initial response was, 'How can we get seed?'" That is a critical question: Who will produce and deliver high-yielding seeds to farmers who need them, when there is no viable seed industry? Ejeta was able to work with Sudanese farmers' cooperatives to scale up production of his drought-resistant sorghum. But much of Africa still lacks a seed industry to get improved varieties to farmers. And farmers often don't have access to markets to sell the products of their improved harvests. So today, Ejeta is working to develop the market from the ground up. For example, along with local partners he connects brewers, bakers, and flour millers with farmers growing the improved sorghum. By working along the entire chain, from farmers' seeds to consumers' plates, his work is helping to lift people out of poverty - and providing a powerful weapon in the war on hunger.

Submitted by Tony Cisse on
I would like to draw your attention to a similar success story from the Vetiver International Blogspot (http://vetivernetinternational.blogspot.com/2009/10/food-security-in-africa-we-dont-need.html), which also deals with innovative solutions in increasing crop yield from Ethiopia Friday, October 23, 2009 Food Security in Africa - "We Don't Need Your Money, But We Need Your Technology" by Dick Grimshaw (TVNI) "We Don't Need Your Money, But We Need Your Technology". This was the response I got when I told an Ethiopian friend that TVNI didn't have any spare cash to hand out. How refreshing this was coming from one of the world's poorer nations. Of course they needed funds to help promote the technology, but for once the emphasis was on the technology and not the money. Since then TVNI and Ethiopia have formed a useful partnership in the promotion of the Vetiver System. The results are impressive, Ethiopia is giving serious priority to accelerating the use of VS in its Food Security programs. A recent story on our website reflects just how one of the many thousands farmers have benefitted. "The Vetiver Man of Tulube" (http://www.vetiver.org/ETH_Vetiver%20Man%20o%20f%20Tulube.pdf) increased his maize yield by four fold in this year of drought through VS application and associated technologies. Another farmer Hassan Ali has achieved similar results. VS was the key, allowing benefits from fertilizer and other practices to be optimized. Until users, planners, developers and aid givers realize that unless one has a system that will greatly reduce rainfall runoff and at the same time keep fertile soil in place, significant and sustainable agricultural production increases that equate to long term food security will not be possible. The Vetiver System will do this relatively efficiently, at low cost, and without the need for high tech and costly support. Huge sums of money are being pumped into agricultural research from international development agencies and large foundations, mostly with good intentions, but with slow outcomes, that are often not effective because the basic needs of tropical rainfed agriculture - soil moisture and fertility maintenance - are absent. Tens of millions of dollars go to developing huge river basin and watershed plans, creating detailed maps and plans that never come to fruition or even get started; hiring armies of administrators, surveyors, engineers, etc who write detailed and exhaustive reports that mainly benefit the consulting companies that provide the input, and highly selected contractors. In the mean time generations come and go and the basic poverty of Africa remains. It is a disgrace. It is sad to see agencies like the World Bank and USAID turning their backs to small and relative simple investments (and the cost of supporting and promoting them) in favor of moving huge sums of loan and grant money that has little immediate impact on the farming communities of Africa. I don't want to blow TVNI's horn too loudly, but what this small group of closely connected volunteers around the world has achieved through a technology transfer and support system that focuses on a simple and "green" technology, that even the least educated can understand, is out of all proportion to the wide scale and significant results that have been achieved. Africa needs more "technology" that itself can handle with confidence and achievement - this is what thousands of Ethiopian farmers and their support institutions have done over the past few years and what they continues to do with success. They own the technology, they know it works, and there is an excitement in its use and the results that are achieved. Many Ethiopians and others around the world are becoming passionate about the Vetiver System because it is so simple, it works, and they don't have to wait a lifetime for the benefits. When there is passion then we know there must be something right and compelling in what is being done. I take my hat off to "The Vetiver Man of Tulube" and to the many others like Hassan Ali - simple decent farmers who have led their families and communities to a better life.

Dear Shanta: Can I ask you why not eliminate poverty with time tested means of wealth creation? Why attempt poverty when you can eliminate it. Can we have a discussion on how to build wealth in Africa by ensuring that Farmers get appropriate price for their products. For instance Ethiopian Coffee considered speciality and premium coffee costs only $1.00 per pound at the Farmers shop or cooperatives in Ethiopia. The same coffee is processed and sold in US markets at price ranging from @5 to $125 depending on the quality and Commodity Exchange System. The Ethiopian farmer who produces the coffee gets less than $1.00 whereas the rent seeking middle men reap the profit to the tune of $125. You can apply the same analogy across all African Farmers produce. So, it is the Market and especially the criminal New York Commodity Exchange Ceners and four or so large Coffee traders who are creating the artificial poverty. Can you see how wealth creation should the onls solution to eliminate poverty. Try fair and free markets and regulations. I am sure President Obama can understand this better than the World Bank and IMF economists who do not get it. All the same, your attempt is great but I feel it is so obvious and you do not need all those exotic graphs to show that wealth creation and market valuation are the real source of prosperity! Would you have the courage to admit this or are you going to keep on charting your economic data which by the way needs statistical validation for accuracy and implications! Thank you Belai Jesus, MD, MPH Global Strategic Enterprises 4 Peace & Prosperity www.globalbelai4u.blogspot.com

This subject is really very simple if you have experienced doing business in Africa. First, nobody ever speaks the truth when commerce or advancement of the lives of the people are concerned. Corruption is rampant and it must be stopped first, from the top down. Second, if Africa continues to use toxic poisons in agriculture as it does now then everything will get worse. The solution is sustainable agriculture and every product must be vented to ensure that it is 100% environmentally friendly and not hazardous to the people and the entire infrastructure and population. This is imperative. Third, qualify all suppliers since every company now is jumping on the environmental bandwagon and claiming their products to sustainable which of course is a pure joke. Why should the Africans be paying this price. We should all be helping them and protecting them from the greed of their own as well as the greed of unscrupulous western suppliers.

Submitted by Nour on
I would like to make a distinction between large scale farmer and small farmers in one part and show also the difference between irrigation farming and cultivation under rain. One has first to deal with the way how the land is appropriated? In Mauritania for example for many generation the agriculture was a way of life to peasants living by the valley. Most of them using poor and using rudimentary tools for growing subsistence crops. As soon as the Manantally and Djama dams were built, we assist at an arrival of new large scale farmers who were new to the fields with money and connection with the credit system. Some of them could be traders, failed entrepreneurs in others field or simply civil servants who want to set up a new venture and most of them are the people whose dealing with International financial donors and designing also the law of the land and how to distribute them.(See how the conflict of interest are intermingling here) Besides their often the one who are in the front end of the supply system in terms of equipments and inputs. The mechanization of the sector was already flawed by the overpricing of the equipments that makes it impossible for the farm to be profitable( selling twenty times the price of a machine compare to its international price.) They are the ones who also would often try to cultivate unfit types of crops for the soil in their farms like planting peanuts in a heavy soil. With regard to the payment of their credit they will the first to default on their commitment because they were doing it casually compare to relative default for the small farmers who faced mostly lack of transformation, conservation and transportation for their crops. That is why some after toiling all season to plant and reap their crop are having hard time to sell it to the one who can buy it at market value due to lack of transportation and conservation. You will find farmers dumping their crop or selling it at vile price to the same profiteers who can have means of transportation and take double advantages of the peasant in both ends of the transaction. The new ways of improving this situation should be to let those who are cultivating the soil regroups in association for bargaining power to buy or lease theirs equipments among themselves and have a way to buy in bulk their improved inputs(seeds, fertilizers etc...). The role of the state would be to help in the roads construction and help farmers in selecting their seeds, crops and how to better use their soil. It would be also beneficial for those who have the means to invest in the harvesting equipments. Most of all since peasants from both side of the river are using the same crops and harvesting at the same time a regional cooperation would be needed to create transformation plant with regard to tomatoes, rice for exportation. Unfortunately the new trend that is emerging is foreign investor from far away are dispossessing the farmer of their lands and making them simple laborers of crops destined for exportation when there is not enough substantial food for the indigenous. This should the paramount question that international donor ought to be talking about. I would be tackling next time the irrigation system versus agriculture under rain. Thank you for bringing this topic alive. Nour

Submitted by Thomas Sommerhalter on
Dear Mr Derajavan Situation is quite diversified in Africa. I will only talk about the Sahel region which I know best. In the Sahel we had the last 40 years a number of phenomenon explaining low productivity: Productivity was going down due to: - Lower rainfall than the period before; - Very little investments because it was cheaper, easier and technically simpler to crop new land and there was little capital available anyway; - Increased cropping of less fertile land; - Land degradation; - Not enough land for too many farmers (in Niger evidence shows that in densely populated rural areas –for galloping demographie of 3+% - 2/3 of rural families have less than 2ha of land for rainfed agriculture which is extremely little who are thus poor and and can does not invest. - Lack of alternative income generation options keeps people in non productive agricultural micro-enterprises creating a de-investment cycle - There are limited options to increase production in drylands but even these have only been disseminated and taken up in a very limited scale (after the end of the world bank “train and visit programs” there are practically no more extension systems existing these days) No there are people promoting large scale agricultural expansion in the Savanna areas. This is possible, with lots of fertilizer and other investment but will lead to heavy deforestation. This in term will even more jeopardize climate patters in the Sahel… not to speak about the effects of globally changing climate. Overall subsidizes played a very little role as there have not been many in the Sahel. Thomas Sommerhalter

Submitted by Anonymous on
It IS really nice of an economist to think of the falling standards of agriculturists. Though, i being an Engineer will not understand so much of economics, but I do understand that subsidies might have done more harm to real farmers and the larger population that consumes the product. Subsidies might have helped the bigger farmers who in fact are sort of businessman, manufacturers of chemical fertilsers etc., If one could collect data on the amount of subsidy and real improvement in lifestyles of real farmers, it may reveal the facts. The most benefited person in agriculture is the middleman. The world needs to think of a system where the correct price is paid to the farmer. The farmer may be getting only 20% of the sale price. The challenge is to give more to farmer and reduce the cost of chain from farmer to end user. It also needs to be examined whether using chemical fertilizers has really helped mankind or lead to more health problems like orthoposis and hence now going back to organic products- if so then why are we continuing with subsidy on chemical fertilizers- let the yield be less but safe for health.

Submitted by Anonymous on
Dear Shanta It IS really nice of an economist to think of the falling standards of agriculturists. Though, i being an Engineer will not understand so much of economics, but I do understand that subsidies might have done more harm to real farmers and the larger population that consumes the product. Subsidies might have helped the bigger farmers who in fact are sort of businessman, manufacturers of chemical fertilsers etc., If one could collect data on the amount of subsidy and real improvement in lifestyles of real farmers, it may reveal the facts. The most benefited person in agriculture is the middleman. The world needs to think of a system where the correct price is paid to the farmer. The farmer may be getting only 20% of the sale price. The challenge is to give more to farmer and reduce the cost of chain from farmer to end user. It also needs to be examined whether using chemical fertilizers has really helped mankind or lead to more health problems like orthoposis and hence now going back to organic products- if so then why are we continuing with subsidy on chemical fertilizers- let the yield be less but safe for health.

Agriculture is the backbone of every african economy, especially in the sab-saharan africa, and more than 60% of the african population depend on agriculture for their basic need. Given these points, on my honest opinion, at least 10% of public expenditure should be for agriculture.If government and international intervention has backfired in the past, this is because of :  Exteriority of project, that is, insufficient environmental approach which does not takes into consideration the realities of the local milieu, and application of inadequate development models which is evident of the lack of adequate knowledge about the real conditions of the environment.  Isolation of project in relation to, the national economy, the environment and limited time.  Inflexibility and regidity of project arising from initiators of the projects not taking into consideration changes in the agraria systems Best regards sanguv simon peter fomonyuy yaounde Cameroon http://petersanguv.blogspot.com

Submitted by Carlos Oya on
All these are very important questions and I would like to share some views that may contrast a bit with some conventional wisdom. I am in fact somewhat puzzled by some of the comments made in this blog and will be brief by throwing some general questions, whose answer might helpstir some substantive debate: Question 1: How did successful agricultural exporters (countries) achieve their success (notably in parts of Latin America and East Asia)? Was it through voters telling governments what they need? What sorts of interventions were conducive to agricultural transformations New Agricultural Countries? In East Asia (quite apart from land reform)? In Netherlands? Denmark? In South Africa? In Northeast Brazil? etc etc. And I hope the response to this is not a simple catch-all argument that 'Africa is different'. Question 2: What is the main difference between agricultural sectors in many SSA countries and the most dynamics parts of Asia? Democracy? 'Smart subsidies'? Or the proportion of cultivated land under irrigation? Or the intensity of fertilizer use (how was achieved there)? Or the reduction in market risk and volatility faced by producers? Question 3: Priority focus on smallholder productivity? "there is a bigger economic kick to smallholder productivity increases than for large farms if that means—as it probably does—that the income benefits of productivity increases for smallholders are more widely spread to poor consumers." This well-known demand/consumer linkage unfortunately ignores the importance of employment linkages. If the kind of large-scale farming promoted is labour intensive (horticulture, tea, etc.) and requires increasing proportions of non-casual labour (due to skill needs and so on), why wouldn't the wage income generated create the same positive spillover effects? Of course this should not be an either or but all too often it is argued that all efforts must focus on smallholder productivity. This assumes that a) the little wage employment smallholders create is decent and that family members (women and children -!-) are better off employed at home. Question 4: if many of the classic fertiliser subsidy interventions were widespread and costly (precisely because intended to spread to masses of smallholders through government agencies and NGOs) why do I always hear this ad hoc hypothesis that large-scale farmers captured them? Where is the evidence in Malawi, for example? Who are these large-scale farmers? Why not 'captured' by sections of the a differentiated smallholder peasantry (more plausible if there is such capture)? Why not captured by the same dynamic traders that liberalization has intended to promote? The key question is whether a broad fertiliser subsidy policy for 'all' farmers in the context of scarce resources is a better option (opportunity cost) than an ambitious public investment plan to significantly increase irrigation infrastructure in suitable areas and for suitable crops (especially those that display much higher labour intensities). I think generally these debates and fora would benefit from: a) more learnings from history (and not just the immediate recent history); b) a more holistic agrarian political economy approach - centred not on market vs government failures but on the sorts of factors that historically determine changes in agrarian structures and social relations that then spur technological adoption, competition and (market or non-market) compulsion to increase productivity; c) less reliance on static and a-historical 'problem-solving' approaches to development problems. Some problems require generations of interventions, long maturity, trial-error, and cannot be solved in the course of short cycles of donor-driven projects. Hence the political economy of steady increasing resource mobilization (domestically or through foreign aid) for substantial state interventions remains a central issue. And, by the way, I am a human being but not sure if 3+6 = 9...

Submitted by Jacqueline on
There hasn't been much discussion here on the role and affect of food aid on agricultural development. Food aid began as a response to the cases of food insecurity around the world. Program food aid and food aid provided for an extended time period causes damage to local production in recipient countries because they dump surplus food in their markets at low prices. Local production is hampered because locals cannot compete against such reduced prices. As the livelihoods in many of the recipient countries are dependent on some form of agriculture, this has detrimental effects on their means of survival. Farmers who cannot fairly participate in the market lose their main source of income, thus unable to support their family’s basic needs, one of which is food. Furthermore, it affects commercial imports, another way that country’s can meet their demand for food. Trade is the means for the international distribution of food. With food aid provided at lower prices, commercial importers can no longer compete and must find alternative markets. In addressing the current hunger crisis on the continent, long term sustainable food security requires the investment in agriculture, not further reliance on food aid or charitable donations. Initially, money to support agricultural development should come from the conversion of the money that goes into the logistics and coordination of food aid and importing food. However, alternate funding will most likely be needed. Increasing agricultural development to countries suffering from food insecurity will increase production; therefore, increasing the amount of food available and the capacity to purchase this food all within their own borders. Furthermore, in conjunction with the other components of development assistance, poorer nations will improve food security, empower them to help themselves, and decrease their need for foreign aid. Currently, Africa’s population increases disproportionally higher than food production. In fact, food is among the highest products for import. For Kenya and Tanzania, food aid constituted two-thirds of imports in the 1990s. To just realize the basic development goals, agriculture and economic growth have to increase. But for this to be achievable, cultivated land area must be doubled, yet additional potential environmental costs. The amount of food imports is also dependent on food production in exporting nations which may fluctuate with climate change. To achieve food security, Africa must find ways to increase agricultural production and simultaneously with sustainable economic growth.

If most of the countries in Africa are to attempt to use Agriculture as a vehicle to fight poverty then agriculture should be tailored holistically to ensure livelihood security of poor communities dependent on agriculture for economic survival: that would include investment in improving transportation; electricity distribution; banking; provision of technical capacity building to increase agricultural production and productivity; Establishment of small cooperative group; Development of Micro-credit of finance; Institutional capacity building of local government and private sector and Improve the market structure. It is also assisting farmers by providing technical assistance on areas of crop production, animal husbandry and provide loans that can support the agro-economic activities. An element of participatory identification of the suitable crop varieties and identification of agro-ecological zones and type of soils to enable communities produce crops that actually contribute to economic sustainability, not just produce for export.

Submitted by G.Raballand on
Dear Shanta, I read your blog entry on agriculture and found it very interesting. But if we go even further, would agriculture productivity increase significantly, would poverty reduce significantly? I am not really sure. Indeed, there are growing evidence that in rural areas, people go out from poverty by working outside agriculture. Most farms in Africa are around 1 hectare for at least 6-10 people. Let's assume production would be multiplied by 4-5 times, would it be enough to go out from poverty (assuming farmers would sell at the "town or capital" price despite the fact they would not fully load a truck)? In most cases, when you produce cash crop with a low ratio value per kilo, it may be actually difficult to exit poverty. You most probably recall S.Dercon's exercise of tracking people from rural areas in Tanzania and what he found out is that the best way to go out from poverty is to... move/migrate. Then, is it really worth to subsidize agriculture when we know that no matter the amount of investments, they will probably not move out of poverty (unless land consolidation/land reform happens)? As long as agricultural production and productivity do not increase dramatically change (large plots for a small numer of farmers), poverty could probably prevail in many areas in SSA. It may be difficult to transplant the trend, which happened in Europe or in the US but, like you know, more than 50 years ago, employment agriculture, for example, in France, was more than 20% with average plots of a couple of hectares and limited mechanization ; now, this employment is around 5% with much larger plots and mechanized agriculture (it has probably some impact on environment). But, if the objective is poverty reduction, increased productivity on a one hectare plot may not be the solution... education for migration (to small towns/cities) may be more appropriate. Would not the WDR 2009 on economic geography be the answer to the WDR 2008?... To fight poverty, the best way could be to move out from agriculture by moving at some stage to small agglomerations? Agriculture is not an "economic" activity as such; it is usually the way to survive by prodiving food in rural areas. That is also why, the surplus to sell will never be large enough on a one hectare plot because the first function of the plot is to provide food (and sell the not-consumed part). We increasingly see that when people in rural areas start to combine food (from the plot) and incomes coming from other activities, such as services, it is how they are more prone to move out from poverty.

Submitted by Andre Joaquim Melo on
Shanta's suggestion in point 6. is surely worthy reflection, and I would like to add that the task is huge. I have worked among rural populations on projects that anchored on Agriculture in Zambia. I have interacted with lots of Agricultural officers: Policy makers, executives, implementers, evaluators, mention them, and learned a lot about how things are done in the sector. I tried to relate rural communities that are only served by government programs to those that are, in addition, served by agencies such as UNHCR, WFP and other NGOs like the one I worked for. I found that both types were equally "malnourished" in terms of benefits drawn from the programs, though each one had unique strengths and potential for good subsistence Agriculture. Agriculture, like many other socioeconomic drivers the world over, is not immune from "flippers." These are people/entities who take advantage of programs specially financed to improve the socioeconomic welfare of the less privileged of society to make huge profits out it regardless of its durability/sustainability. In many cases these are people/entities who have access to the kind of information and money not readily available or before it gets to the public, and they have considerable influence on the political/bureaucratic/civic system. They greatly reduce the portion of the program's resources that finally get to the intended target. As such, implementation at the most basic level ends up in mediocrity, and then we know the kind of results. Personally, I am an advocate of funding projects at the basic/grass root levels of implementation of government programs or other partnerships in Africa. This allows for cross-checks among actors/stakeholders including the final beneficiaries/target communities, adequate information to the targets about the program, to the officers about the community and the involved mutual costs and benefits of the program. This will most probably reduce the dead weight loss in all the resources as well as intentional misappropriation of resources, thus, improving the quality of results. This might look like a simplistic, theoretical ideology, but it can give way to a comprehensive framework that, if well implemented, can yield real, beneficial and sustainable socioeconomic results among many rural African communities.

As an avid reader of your posts Shanta, especially in Africa, the recent advent of mass land acquisitions in Africa, the latest in the DR Congo by Agri-Sa, the South African Agriculture union. In relation to poverty reduction, with bigger farmers and their capital inputs, they will indeed become more productive, but the smaller farmers without those inputs cannot be expected to become more productive, and they will be undercut by the cheaper produce by the land investors, leaving them with no livelihood, and thus condemning them to poverty. I think we may see a situation as we have seen in banking, there will be fewer and larger food producers, a concentration of all the investment for them, and not much left for anyone else, I don't see how most of those employed in agriculture will benefit when larger land owners keep the benefits to themselves and only give cheaper food prices, but no income to the smaller land owners. I'd appreciate any comments or replies to this idea, also check my website where I wrote on this topic nearly a fortnight ago. Regards Stanley. www.developmentafrique.com

Submitted by Thilak Ranaweera on

It was interesting to read Shanta’s "heretical" thoughts and others that he provoked. While appreciating most of the comments made, a little reflection leads one to realize how difficult it can be to generalize about Africa’s agriculture growth performance and prospects. In this context, I would like to think a little bit about Kenya’s (in fact, East Africa’s may be more appropriate, but I do not think that I know enough) horticulture sector. I do not attempt to be comprehensive: just to give a few background notes about Kenya’s horticulture in the larger picture about its agriculture and growth. I would like to emphasize that these are random thoughts and not a rigorous examination of the subject.

There appears to be plenty to learn here for the foreign investors, the local/domestic partners, governments, aid agencies, academia, and the rest. However, appearances can be deceptive. Whether these lessons can be useful to rest of Africa is of course an open question. Perhaps, each country needs to find its own approach that works best given its context in the global economy (something closer to what Rodrick said, of course in the context of overall growth).

Kenyan horticulture is by no means a homogeneous sector. One can possibly see two faces of this sector. First, there is the export sector: glamorized, attention grabbing. Then, there is the domestic food and vegetables sector: hardly ever mentioned in serious discourse. Export horticulture covers a large number of fresh farm products that can be broadly classified as fruits, vegetables and cut flowers. At present, fruits and vegetables and fresh cut flowers are air freighted daily to various destinations around the world. If we forget for the moment, the adverse effects of the recent global crisis, the civil disturbances of early 2008, and the current drought, it is clear that the export horticulture sector had done remarkably well over the years.

The recent successes in Kenya’s horticulture exports can be explained by several usual suspects: history, comparative advantage, favorable external environment, institutions, economic and political stability (largely!). The story of horticulture, however, probably clouds the bigger story of agriculture and rural life in Kenya.

History seems to have played a positive role in the establishment and subsequent development of the export horticulture sector in Kenya. Apparently, export horticultural production in Kenya had started during the Second World War for the purpose of supplying food to the Allied Forces based in East Africa.

In the post-war era, the external environment had been largely in Kenya’s favor for the development of the export sector. In more recent years, horticultural exports of Kenya had competed with other exporters around the world perhaps aided by the duty free market access to the European Union. The preferential tariff regime with the European Union came to a close in December 31st 2007 and is replaced by negotiated reciprocal trade regime under Economic Partnership Agreements (EPA). The interim Framework Economic Partnership Agreement (FEPA) has been initialled with the Eastern African Community (EAC) and the European Commission in November 2007 was a step in the direction of a comprehensive Economic Partnership Agreement, for which negotiations are ongoing. FEPA provides the EAC member states duty free, quota free access to the European Union market as of 1 January 2008. These provisions effectively grant Kenya an access to the European Union equal to Least Developed Countries (LDCs).

In the past two decades, notwithstanding the mounting competition from Colombia, Ecuador, Israel, Zimbabwe, Zambia and Uganda, horticulture has become one of the biggest foreign exchange earners for Kenya (third highest after tea and tourism).

Some numbers may be helpful to understand the picture.

Export volume has grown substantially in recent years.

In 2008, export earnings from horticulture amounted to more than US$760 million compared to over US$200 million in 2000.

The relative share of horticulture in total exports seemed to have marginally increased over recent years (vis-à-vis tea for example).

Available national accounts data do not facilitate separation of horticulture sector growth. Perhaps the crops and horticulture sector data (CRPHOR line in the graph below) is indicative. Crops subsector includes tea and coffee. In general, there is a close correlation between overall agriculture growth and crops and horticulture growth. One must remember, however, the horticulture sector reported here consists of production for both export and domestic consumption.

One key factor here is that over a considerable period of time in the recent past, Kenya seems to have exploited well the comparative advantages it has in horticulture. Kenya has varied ecological zones (based on varying altitudes), which allow diverse agricultural activities. The tropical and temperate climatic conditions, which allow year-round production, are a primary factor that supports Kenya's rise in the fresh produce exports. Other factors include fertile soils and a relatively competitive labor force with good education and technical background. To meet stringent product quality requirements of markets such as the EU, exporters have brought in state-of- the-art technology. In addition, reliable air links (with two international airports) have facilitated easy transportation of fresh produce to foreign countries. Some of the bulky produce has been handled at the Port of Mombasa. However, the current road network must be a significant constraint to the speed of transportation of products to the export outlet.

Perhaps, factor productivity even in the export crops sector needs to be viewed in the background of the heterogeneity of the operations. Farms specializing in horticultural crops for export use irrigation extensively although the sector as a whole relies mainly on rainfall. The sub-sectors are characterized by a tremendous diversity: in terms of farm size, variety of crops, and geographical location of production. Farm sizes range from large-scale estates (with substantial investments in irrigation and high level use of inputs, hired labor and skilled management) to small-scale farms (usually under one acre). It would appear that the large farms are highly capital intensive, while the same may not be true of the other farms in the export crops sector. In short, productivity is as much a very complex issue as the sector itself.

Until the recent global crisis, there appears to have been a steady demand for horticultural products of Kenya. The demand comes from a number of diverse sources. Among the developed countries, The European Union (EU) is the principal importer of Kenyan products. The Netherlands imports the bulk of flowers for sale through the auction system. Britain, Germany, The Netherlands and France are the major importers of fruits and vegetables. Also, the Middle East market is an important outlet for Kenyan fruits. Other importing countries include Saudi Arabia and South Africa, Sweden, Italy, Switzerland and France.

On the institutional side, the domestic production and marketing setups had been largely beneficial over the years. Export horticulture in Kenya is essentially controlled by the private sector consisting of large and small-scale farmers and exporters scattered across the country. Nonetheless, the government seems to have helped in creating a regulatory and supportive environment that facilitates rather than impedes export promotion. It is said that over the years, the Government has made minimal intervention in the export horticulture sector. Some observers give credit for the good performance of the sector to the non-interference approach of the government. They argue that this approach has encouraged autonomy in production and marketing decisions thus fostering significant local private initiatives and dynamism within the sector. In the current institutional setup, Kenya has two export platforms, which target export businesses (Manufacturing Under Bond (MUB), and the Export Processing Zone (EPZ)} and a generalized and flexible export support program that provides import duty exemptions for imported inputs into the production of exports and duty free goods for the domestic market (called TREO – Tax Remission for Export Office).

Under the Agriculture Act in 1967, the government set up the Horticultural Crops Development Authority (HCDA). The objective here was to develop and regulate the sector. HCDA offers technical and marketing services to various stakeholders in the sector. A recent count estimates that over 60 companies are engaged in the supply of fresh vegetables, fruits and cut flowers both for export and domestic consumption. Technical and marketing support to the companies are provided through Fresh Produce Exporters Associations of Kenya (FPEAK). In addition, it is said that the companies assist each other in technical and marketing matters. Similarly, the Flower Council of Kenya (KFC) is another agency that supports and lobbies on behalf of the flower growers and exporters.

Other factors that may have contributed to the success of the export horticulture sector in Kenya may include:

  • taking advantage of spin-off opportunities from tourism (cheaper cargo transportation costs)
  • at least until recently, a relatively stable, liberal macroeconomic policy environment (favoring foreign investment and international trade)
  • linking smallholders to high-value export markets
  • investment in irrigation( important spillover effects).

In the recent past, big bucks coming from abroad have grabbed the headlines for the export agriculture sector and may in fact have pushed to the background the domestic horticulture sector. There had been little said about the latter. However, with well over 38 million (1968 estimate) mouths to feed, it can easily be seen that domestic fruit and vegetable production and marketing must surely be a very important ingredient of agriculture growth in particular and gdp growth in general. Indeed, exports probably constitute only a relatively small fraction of Kenya’s overall horticultural sector. Available estimates for the past decade show that over 90% of all fruit and vegetable production was consumed domestically, and the domestic market accounted for over 90% of the total growth in volume of fruit and vegetable production. It is interesting to note less than 2% of smallholders produce for exports while over 90% of smallholder farmers produce horticultural products for domestic consumption. While the significant growth in the export horticulture contributed to increased rural incomes and reduced rural poverty, the more substantial impact would have come from what happened in the domestic horticulture in Kenya. It can be surmised that the latter has relatively more potent backward and forward linkages that would determine growth and poverty reduction in the country. Since the attention of this note is on horticulture, we have not attempted to highlight the roles that other agriculture sectors (such as animal husbandry). Undoubtedly, a realistic evaluation of the poverty impacts has to take all other sectors into consideration.

What this points to is that in the immediate future, given Kenya’s population growth and food demand, the domestic market for horticultural products would appear to demand considerable attention. In consideration of a proper balance with exports side, apparently something needs to be done to help the struggling smallholders to encourage exporting. In this regard, assessing the competitiveness of local production and marketing arrangements vis-à-vis neighboring countries (especially Tanzania, Uganda, Ethiopia) probably assumes high priority. As can be seen, the issues here can be quite complex.

While writing this note, I came across the "Update from Waso Village, Kenya" in Sam Stanyaki’s blog (see WB website, Oct 26, 2006). Talking about the severity of the recent drought, a young samburu says:

"I have learnt a very hard lesson. I have seen many suffering - animals and people too. Our community land is becoming smaller day by day. Soon we will find no space for grazing and bringing up children. As a young samburu, it is very difficult to part ways with my cattle rearing tradition. But I have no option but to try to do other things than keeping cattle."

Few weeks ago, I travelled across southern Kenya and northern Tanzania, which under the severe drought there looked like a dust bowl that is inhospitable to human and animal habitat. Having seen how the Mazai and Samburu live, I could relate to their current plight. The young samburu reminds us about something more important. Statistics may say one story, but real life could be something quite different. Perhaps, growth and development is about uncovering those bigger stories and providing help to suffering humanity in a country: rather than focusing on the statistical artifacts that mask those stories.

Submitted by Anonymous on
Great stuff, couldn't agree with your points more - refreshing to hear this from a high profile economist such as yourself. Chris Becker

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