The key to growing Africa's economies - African Business Magazine
The key to growing Africa’s economies

The key to growing Africa’s economies

African governments have once again committed to spending 10% of their national budgets to agriculture. But what is different this time around?

When they met in Malabo this June, African heads of state made a familiar statement: agriculture matters. The outcome of the African Union meeting was a reaffirmation of countries’ commitment to allocating 10% of their national budgets to agriculture, alongside a raft of objectives ranging from climate change adaptation to women’s empowerment.

This Comprehensive African Agriculture Development Programme, or CAADP, builds on a decade-old promise by AU member states to emphasise agriculture in their budgets. With a few exceptions, this has not happened.

Since 2003, when the 10% commitment was first articulated, only 10 countries have met it. Enthusiasm for agricultural transformation in national governments and international development finance institutions has waxed and waned for years, competing with other priorities.

Even the 2014 CAADP agenda remains unfinished – countries are yet to agree on exactly what can be counted in the 10% allocation. “I think there are lots of things that are really different now from 10 years ago,” says Michael Hailu, president of the Technical Centre for Agricultural and Rural Cooperation (CTA).

‘More importantly I think there is a lot of interest from the private sector. Even the major agribusiness companies are interested, and some are investing in Africa’

“There is some degree of accountability and commitment at the policy level, and of course heads of state met just recently and adopted a whole agricultural transformation agenda. More importantly I think there is a lot of interest from the private sector. Even the major agribusiness companies are interested, and some are investing in Africa.”

“Fixing” agriculture has often seemed like a panacea for sub-Saharan Africa’s ills. While the crippling famines in the Horn of Africa and the Sahel in the 1980s and ’90s have for the most part disappeared from television screens around the world, food security is still a major concern for African governments.

Urbanisation, climate change and population growth all threaten the global balance of supply and demand. Many African countries are still heavily reliant on expensive imports, meaning that they are exposed to fluctuations in international markets that are outside of their control. This import dependence has damaging effects on countries’ balance of payments and on inflation. Currency fluctuations can drive up the price of food for consumers, leading to hardship and social tension.

Africa rising?

Although the continent’s economies have been undergoing sustained growth for the past decade, barring a few blips, demographic pressures have begun to take the gloss off the ‘Africa Rising’ narrative.

Millions of young people will be entering the workforce over the next decade, requiring productive jobs. Poverty reduction in much of the continent has lagged behind economic growth, and wealth has become concentrated among urban elites. Income inequality and unemployment are ultimately drags on growth and create the conditions for political instability.

Agriculture remains the largest source of employment across sub-Saharan Africa. Although commercial-scale farming is increasingly taking root, smallholdings make up the bulk of cultivated land, with farmers operating at or just above subsistence level. In the most part, these farmers lack access to inputs, such as improved seeds and fertilisers, which would increase their yields.

They are often disconnected from their end markets, either consuming locally or selling at the farm gate to middlemen. Rural infrastructure is weak, meaning that farmers struggle to move their product, while warehouse facilities are lacking and wastage is common.

This limits farmers’ earnings, preventing them from reinvesting in inputs. Without clear cashflow or assets to offer as collateral, loan finance is difficult to obtain, and few commercial banks actively operate in rural areas.

Even marginal improvements in smallholders’ productivity have an impact across a broad spectrum of development indicators, making agriculture a vital lever on African economic and social progress.

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Written by Peter Guest

Peter is a journalist, specialising in reportage and investigative feature writing. Having reported from more than 30 countries around the world, mainly in Africa, the Middle East and East Asia, for publications including the Wall Street Journal, the Financial Times, WIRED, the Guardian and African Business Magazine. In 2008, he was the editor for the Financial Times Ltd’s This is Africa magazine. He works as a political and economic analyst for professional services firms—including the Economist Intelligence Unit—and a number of private, public and non-profit bodies.

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