public agricultural investment and rural finance in africa
DESCRIPTION
An overview of the need for investment in agriculture (especially for rural areas)TRANSCRIPT
Public agricultural investment and rural finance in Africa
Emmanuel TambiFARA Secretariat Accra, Ghana
Outline
• Introduction
• Performance of African economies
• Why public spending is important for agriculture and AR&D
• CAADP and public spending in agriculture
• Relevance to rural finance and conclusion
African economies show good signs of progress
• High-growth economies
• Between 2000 and 2010, GDP grew at 5.6% per year, topping 7% in 2002, 2004 and 2007
Ghana
Zimbabwe
Rwanda
Liberia
Eq. Guinea
Ethiopia
Nigeria
Moza
mbique
DR Congo
Zambia
Gabon
Tanzania
Sierra
Leone
ChinaIndia
Brazil
0
5
10
15
20
25
2011 2012
% R
eal G
DP
grow
th
Source: Data from CIA World Factbook
Agricultural productivity lags behind other regions of the world
• Most of economic growth not coming from agriculture
• Agricultural output increased by 2.5% per year on average in the last 40 years
1971 1981 1991 2001 20080
50
100
150
200
250
300
350
400 Gross agricultural output index
Agric total factor productivity index
• Agricultural total factor productivity increased by 0.75% per year only between 1961 and 2008
Agricultural productivity lags behind other regions of the world
• Negative TFP growth in Central Africa
• Five countries have TFP growth rates > 1%: Benin, Kenya, Malawi, Swaziland, Zambia
Central
Eastern
Southern
Weste
rn
SS Africa
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
Average TFP growth in Africa, 1961 - 2008 (% per year)
BeninKenya
Malawi
South Africa
Swaziland
Zambia0
0.40.81.21.62
Average TFP growth rates > 1% (1961 – 2008)
Source: ASTI/IFPRI, 2011
o Increase in agricultural output has come from land expansion rather than intensification
Increase in production
‘88 – ‘08
Acreage effect
Yield effect
Interaction effect
Rice 11.8m t 68% 18% 14%
Maize 17.2m t 50% 39% 11%
• Yields of strategic crops are 2 times lower than in other developing regions of the world
• Cereal yields average 1.5 tons/ha compared to 3.5 tons/ha in Asia
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0
1
2
3
4
5
6
7 Cereal yields (tons/ha)
Africa Asia EuropeNorth America South America World
• Yields of roots and tubers average 9.2 tons/ha compared to 17.6 tons/ha in Asia
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0
5
10
15
20
25
30
35
40
45
Yields of roots and tubers (tons/ha)
Africa Asia Europe North America South America World
Several factors are responsible
• Smallholder rain-fed agriculture (economies of scale?)
• Irrigation
• Low input use (fertilizer, seeds, )
• Infrastructure
• Mechanization• Low levels
of spending in agric.
Importance of public spending in agriculture
• Public spending in agriculture and AR&D is critical
o Productivity
o Rural household income
o Rural consumption
o Hunger & poverty reduction
Importance of public spending in agriculture
• Public spending in agriculture, rural roads and rural education has large positive effect on growth and poverty reduction
Ghana Tanzania Uganda China India Thailand-202468
1012141618
Returns to agric Returns to roads Returns to educSource: IFPRI, 2009
LCU
Importance of public spending in agriculture
Public spending in agricultural research has positive economic returns
• Investment in national & international agricultural research has significant and direct effect on productivity
• Research-to-TFP elasticities
o National (NAR) = 0.0394
o International (CGIAR) = 0.0403
• Facilitates development, dissemination and uptake of new technologies
Importance of public spending in agriculture
• Public spending in agricultural research has positive economic returns
• One US$ invested in AR&D yields US$3 on average
Benefit-cost ratio
IRR (NAR) IRR (CGIAR)
Sub-Saharan Africa (31 countries)
3.1 23.8 29.3
Large economies (AgGDP > $4b)
4.6 34.0 40.8
Midsize economies (AgGDP $1 – 4b)
2.9 23.6 28.9
Small economies (AgGDP < $1b) Fuglie & Rada, 2011
1.8 12.9 17.0
Global public and private spending on research and development - 2009 = US$1.11 Trillion
(Pardey & Beddow, 2013)
S-S Africa spends US$11 billion on R and D
Developed Countries less USA 46%USA 33%China 13%Brazil 2%India 2%S. Am. & Pacific less Brazil 1%Asia & Pacific less China & India 1%Mid East & N. Africa 1%Sub-Saharan Africa 1% Total 100
Developed Countries less USAUSA
China
Asia & Pacific less China
India
Brazil
Mid East and N. Africa
Sub-Saharan Africa
Global public food & agricultural R & D spending2009 = US$33.7 billion (Pardey & Beddow, 2013)
S-S Africa spends US$2 billion on food and agric R and D
Developed Countries less USA 35%USA 13%China 19%India 7%Sub-Saharan Africa 6%Brazil 5%S. Am. & Pacific less Brazil 5%Asia & Pacific less China & India 5%Mid East & N. Africa 5% Total 100%
Developed Countries less USAUSA
China
Asia & Pacific less China
India
Brazil
Mid East and N. Africa
Sub-Saharan Africa
Intensity of investment in AR&D (AR&D spending/AgGDP)
1971-75 1976-80 1981-85 1986-90 1991-95 1996-2000
2001-2005
20080
0.10.20.30.40.50.60.70.8
Source of data: IFPRI, 2011
US$
• Africa spends $0.6 per $100 AgGDP
• Lower than NEPAD target of $1.00 per $100
CAADP and public spending in agriculture
• Maputo Declaration:
o 6% agricultural growth per annum (FAAP: assumes a 4.2% growth in TFP)
o Allocation of 10% national budget to agriculture
• Number of countries endorsing CAADP framework is increasing
o 30 Compacts signed
o 26 Investment plans developed
o 22 Business meetings organized
CAADP and public spending in agriculture
1-Mar-0
7
1-Jul-0
7
1-Nov-07
1-Mar-0
8
1-Jul-0
8
1-Nov-08
1-Mar-0
9
1-Jul-0
9
1-Nov-09
1-Mar-1
0
1-Jul-1
0
1-Nov-10
1-Mar-1
1
1-Jul-1
1
1-Nov-11
1-Mar-1
2
1-Jul-1
2
1-Nov-12
0
5
10
15
20
25
30
35
Country Compacts
Investment Plans
Business Meetings
No of
countries
Endorsement of CAADP gained momentum in 2009
CAADP and public spending in agriculture
Country support to agriculture is increasing. So far,
• 7 countries have surpassed the 10% target
• 13 countries allocate 5 – 10% to agriculture
• Remaining countries allocate less than 5%
> 10% 5 – 10%
Burkina Faso Benin
Cape Verde Eq. Guinea
Chad Gambia
Ethiopia Ghana
Mali Guinea
Malawi Kenya
Niger Lesotho
Madagascar
Mozambique
Senegal
Sudan
Tunisia
Zimbabwe
CAADP and public spending in agriculture
Global support to agriculture is also increasing
• L’Aquila (Italy) Joint Statement on Global Food Security, July 2009 G8 Summit
• US$22 billion to agriculture
• G20 meeting (Pittsburgh) – Scale-up US assistance to agriculture
• Feed the Future (FTF) support to 12 countries
• GAFSP Trust Fund – support to 11 countries
• Joint Africa-EU Strategy support
FTF GAFSP
Ethiopia Burundi
Ghana Ethiopia
Kenya Gambia
Liberia Liberia
Malawi Malawi
Mali Niger
Mozambique Rwanda
Rwanda Senegal
Senegal Sierra Leone
Tanzania Tanzania
Uganda Togo
Zambia
CAADP and public spending in agriculture
Funding support received from GAFSP ranges from US$22m to US$50m per country
Tanzania
Gambia
Burundi
Niger
Togo
Malawi
Senega
l
Liberia
Rwanda
S. Le
one
Ethiopia
0
10
20
30
40
50
60
Funding support received from the GAFSP Trust Fund
US$
mill
ions
CAADP and public spending in agriculture
Donor support to AR&D in Africa (CGIAR and CAADP) 2011
• Over US$300 million through CGIAR
• About US$100 million through CAADP Pillar IV
0
50
100
150
200
250
300
350
Relevance to rural finance and conclusion
Increased public spending enhances agricultural and rural finance
• Facilitates smallholder farmer access to rural finance
• Catalyzes agricultural value chain finance
• Promotes financial linkages between agriculture and agribusiness
• Mitigates agricultural finance risk
• Stimulates growth of other sectors and fosters economic growth
• Creates economic opportunities for rural people
Thank You