Is Africa a Future Agricultural Giant?
A New Role for the Private Sector in African agriculture
By Patrick Sevaistre, Associate Research Fellow at the Thomas More Institute
The latest food crisis in Africa was rooted in varied causes that included the hyper-volatility of prices in international agricultural exchanges, the weakness of the local production and stocks as well as poverty. Among these grounds, the chronic lack of investment in agriculture from governments and the international community (international organizations)1 played a significant part. As a result, agriculture currently remains largely underdeveloped throughout the African continent.
Yet, as highlighted in an article by Patrick Sevaistre, Former Director of the OECD Assistance Program to the Private Sector Development and Associate Research Fellow at the Thomas More Institute, Africa commands all the required resources to yield what is needed to feed its population. Under the title “Is Africa a future agricultural giant? A new role for the private Sector on African Agriculture”, the October 13, 2009 article2 thus advocates a consolidated and more confident responsibility for the private sector, whose investment capabilities will be tapped for to support African governments in redeveloping their agricultural activities.
However, this rallying of private sector resources––already implemented in certain countries as shown by land buybacks3––does not exempts public authorities from implementing strong policies to supervise the private sector intervention and regulate markets, in particular risks generated by price hyper-volatility. We highly recommend reading this article, which repeatedly insists on such viewpoint. Paul-Florent Montfort, Analyst, momagri
The 2008 soaring international food prices has brought attention to the major weaknesses of some African countries, in particular those strongly relying on food imports, and highlighted the vulnerability of agricultural activities that are still represented in many countries by small subsistence farming noted for low productivity and lack of competitiveness. It explains that, taking advantage of low sea shipping costs and available financing due to low interest rates and wealthy countries’ subsidies for their food surplus, African nations, going from an administrative and interventionist vision to a total absence of vision for agriculture, very often opted to import food products rather than produce locally. Yet, if Africa still remains the world’s only region that is a net importer of food products, the continent has sufficient resources (in manpower, land and water) to produce enough food to feed the whole African population. That is the reason why the recent food crisis might represent an opportunity for countries that were badly affected to finally become aware of the urgency to return agriculture to the heart of their economic development.
One can agree with this assumption, since the economic crisis is generating the start of joint rallying from public decision-makers and main financial backers in support of agriculture. All took diverse initiatives, which were marked by some lack of coordination. At the same time, we are observing an increased participation of private players (companies, foundations, investment funds) in agriculture through direct investment or assistance to development projects and/or programs.
We did note this situation at the latest G-8 Summit, when major financial backers did commit to speed up the recovery of agriculture in the poorest countries rather than grant food subsidies. Thus, significant financing is, or will be, made available to revitalize African agriculture, but such funds might be underused unless an auspicious economic, institutional, political and legal environment is instigated by African nations to bring about massive investment from the private sector in agriculture. All the more so, since public financing will not be adequate to allow African agriculture to meet the extensive challenges it is currently confronted to. Among these, is first and foremost the need to meet the increasing food demand tied to the current steep population growth.
The other challenge is building up the competitiveness of agricultural export to contribute more efficiently to the global trade system and draw all the benefits from improved access to OECD markets to cut trade imbalance between Northern and Southern nations.
Although not irreconcilable, these challenges must be met by overcoming several restrictions that are related to one another, among which we can list:
- The over centralizing system and weak interest conferred to agriculture by African governments over the past decades have led most of their countries to experience an extremely severe agrarian and rural crisis, whose consequences are already surfacing through numerous aspects: decreased purchasing power and standard of living, increasing malnutrition, capital dilution of farms and the eclipse of agricultural know-how to the benefit of an exodus to urban centers, growing top soil erosion, etc…
- The deterioration of climatic conditions typified by reduced rainfall and the aggravation of various phenomena (temperature hikes and floods for instance), which are probably generated by the global climate change.
- The lack of security for rights of access and use of soil and natural resources in countries and regions where land is still not subjected to private land appropriations (in Western Africa and Central Africa).
- The increased energy consumption caused by stepped up agricultural productivity (equipment operations, irrigation systems, transformation, conservation, transportation and storage of agricultural products, etc).
- The significant nature of rural poverty, which curbs the adoption of innovative measures for investment, and often intensifies an excessive exploitation of natural resources and causes social unrest, increased rural exodus as well as substantial migration abroad…
- The growing and unmet needs for public goods (agronomic research, infrastructures, public services, education, training, information, technical support…) that nations are not capable of fulfilling.
- The absence of synergy between traditional farming and export crops, as well as the inadequate integration of family farming with effective product cultivation.
- The increased exposure of producers to market risks (inter- or intra-annual price variations), whether they concern products for national or regional markets or those for export.
To overcome these hurdles, African nations must devise coherent public strategies and policies to significantly boost agricultural production, while curbing the deterioration of natural resources. With a view toward increased foreign aid for agriculture, they must achieve the most effective management of these funds, since the issue currently deals with gaining the best possible synergy between the supply of public goods and private, national and international investment.
Such action presupposes that governments implement new public policies based on fine-tuned negotiations in various areas, such as land regulations, agronomic research, availability of credit, tariff protection, mechanisms to fight price volatility and manage risks, reinforcement of agricultural organizations (development of cooperative farming that was until now seldom promoted by countries), creation of regional markets, training, etc… It also presupposes tackling the bottlenecks caused by infrastructures, logistical operations and lack of regional integration, the competitiveness factors including energy, shortage of financial services providers and transformers, as well as the scarcity of long-term financing in local currencies.
To finance these infrastructures, the private sector must perform as a driving force to reach innovative solutions in the area of public/private partnerships (PPP) that include governments, private players and financial backers, provided that an incentive framework is implemented to assist these partnerships and allow commitments from the private sector to compensate for the failures of governments in providing agriculture with such crucial infrastructures.
To be heard by governments and financial backers, the private sector must get organized and define its guidelines on the conditions to revitalize agriculture in Africa, and must steer clear of platitudes and preconceived ideas. It must also separate truth from fiction, simplified facts from distorted ones, and avoid snap judgments on several burning issues that condition the future of African agriculture, particularly concerning agricultural market protection, biofuel (…), the link between commercial crops for export and family sustenance farming, as well as sustainable development policies… The private sector’s contribution to economic development is indeed a key issue. An empowered private sector has shown that both its proficiency and expertise can effectively serve economic development in their operating zones.
For instance, are we aware that the Groupe SOMDIAA––an investor in sugar production in Cameroon and Congo––is today the CEMAC (Communauté Econonmique et Monétaire de l’Afrique Centrale) zone’s largest private electricity provider? Do we know that in the Cameroonian area where it operates its banana plantations, the Compagnie Fruitière––the Africa-Caribbean-Pacific (ACP) zone largest fruit grower––organizes the access to electric power, contributes to strengthening the local education system with financing for public schools and construction of schools facilities as well as provides road maintenance and household waste collection?
In fact, everyone knows that private businesses are better equipped to size up the investment need for a project and are operating with more modern and responsive management methods. This bolsters the achievements of the private sector, which can play a role of driving belt between African governments and financial backers to release the growth potential of African agriculture.
More generally, the private sector must convince African decision makers that agriculture provides them with a huge potential to fight poverty and stem North/South trade disparities and that they need to protect such potential to give their crops the place they deserve, just as in Brazil, which became an agricultural giant in only two decades.
1 According to the FAO, investment in agriculture dropped to 3 percent from 17 percent of global investment between 1980 and 2006, while the population grew by 80 billion people yearly during the same period. Likewise, the World Bank’s investment loans for agriculture in Africa totaled $2.8 billion, or 8 percent of the total investment loans granted by the World Bank to the region. (As stated in the December 14, 2007 survey “The World Bank assistance for the development of agriculture in Africa” conducted by the World Bank Independent Evaluation Group).
2 http://institut-thomas-more.org/showNews/378
3 Please consult momagri’s September 14, 2009 article “Regulating large-scale agricultural land acquisitions and leases”. www.momagri.org/UK/Focus-on-issues/Regulating-large-scale-agricultural-land-acquisitions-and-leases_543.html
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