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African agriculture and productivity

By Augustine Langyintuo

Alliance for a Green Revolution in Africa (AGRA), Eden Square, Block 1, 5th

Floor, PO

Box 66773, 00800 Westlands, Nairobi, Kenya. Tel: +254-20 3675 309, E-mail:

Alangyintuo@agra-alliance.org.

Paper presented at the Sharing Knowledge across the Mediterranean (6) Conference, Villa

Bighi, Malta, 5 – 8 May 2011

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African agriculture and productivity

1. Introduction

In Africa, agriculture is the main stay of the economies, accounting for over 45 percent of

regional gross domestic product (GDP) and nearly 60 percent of export earnings. For the 76

percent of the 987 million Africans living in rural areas and employed in agriculture (FAO,

2009), the performance of the agricultural sector can mean a difference between improved

livelihoods and staying trapped in hunger and poverty. It is estimated that increasing agricultural

productivity by 10 percent can reduce poverty by 4 percent in the short run and 19 percent in the

long run (FAO, 2010). Yet agricultural productivity growth in Africa has been disappointingly

low (Fig. 1 and Fig. 2). Average cereal yields are below 1 ton per ha, far below the global

average of over 4 tons per ha. While food production per person in Asia almost doubled between

the early 1960s and the mid-2000s in Africa it has been decreasing over the past three or more

decades (Fig. 3) at rates lower than the population growth rates. At the same time cereal imports

into Africa have increased from under 5 million tonnes a year in the early 1960s to over 50

million tonnes by the mid-2000s.

Fig. 1: Cereal production over time

Source: FAOSTATS (2010)

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Fig. 2: Cereal productivity over time

Source: FAOSTATS (2010)

Fig. 3: Per capita cereal production in east, western and Southern Africa

Source: FAOSTATS (2010)

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As a consequence, around 50 percent of Africans have been living on less than $1.25 per day

(World Bank, 2009) and the number of poor people, in absolute terms, has nearly doubled, from

200 million in 1981 to 380 million in 2005 (Chen & Ravallion 2007). A staggering 265 million

are undernourished (FAO, 2009).

To reduce poverty and hunger among millions of Africans, therefore, many African governments

have embraced improving agricultural productivity a major goal of their development policies

but how best to achieve that remains a challenge. This paper examines some of the major

challenges to increased productivity growth in Africa and suggests policy interventions that have

the potential of driving positive change. The rest of the paper is organized as follows: The next

section presents the major challenges to increased agricultural productivity. Section 3 discusses

some policy interventions that have a potential of driving change while the concluding remarks

are in Section 4.

2. Challenges to increased productivity

The well-known contribution of technological change to agricultural productivity and rural

transformation in developing countries documented by Arndt, et al. (1977) sometimes by-passes

some rural populations due to institutional and technical constraints. In Africa aggregate food

production increases have been observed in pockets mainly through expansion of cultivated area

and not necessarily through technical change. This contrasts sharply to the experience of Asia

where rapid uptake of improved agricultural technologies especially high yielding wheat and rice

varieties, fertilizers and irrigation ensured food production increases. Additionally, public sector

support via subsidies drove down the unit cost for production inputs, raised land and labour

productivities, fuelled adoption of technologies in high potential areas initially, and then in

marginal areas where rate of returns to green revolution technologies became much higher

(Hazell and Ramasamy, 1991).

The main reasons for the poor performance of agricultural productivity in Africa have been a

combination of low use of improved agricultural technologies (mainly seeds and fertilizers),

historical factors such as structural adjustment, poorly developed markets, lack of political

support and decline in global support to agriculture among others. These factors are examined in

the following sections of the paper.

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2.1 Limited use of improved crop cultivars

In many sub-Saharan African countries, significant progress has been made developing improved

crop varieties, especially for maize, rice, cassava and pigeon peas which have the potential of

unlocking productivity growth in African agriculture because they have yield potentials of 4 – 6

tons per ha compared to less than 1 ton per ha for the traditional varieties. Unfortunately, the

adoption of improved seeds continues to lag behind in Africa compared to other developing and

developed regions (Tripp, 1998). Recent data from Langyintuo et al (2010) suggest that the

adoption rates for maize, one of the most important food crops in Africa, is very low for many

countries, especially those in western Africa (Table 1). At the regional level, adoption rate in

terms of area is estimated at 28 percent, which still leaves over 12 million hectare of maize area

planted to traditional, unimproved varieties. Similar low adoption and diffusion rates are

observed for NERICA rice (Table 2).

Table 1: Adoption rate of improved maize varieties in selected countries in Africa

Country Area(million ha) Seed demand (1000 t) Adoption rate (% of area)

Ethiopia 1.7 42 19

Kenya 1.6 39 72

Tanzania 2.6 64 18

Uganda 0.7 17 35

Angola 0.8 19 5

Malawi 1.4 35 22

Mozambique 1.2 30 11

Zambia 0.6 14 73

Zimbabwe 1.4 34 80

Benin 0.7 16 Na

Ghana 0.7 19 1

Mali 0.3 8 0.3

Nigeria 3.6 89 5

Total 17.3 427 28

Source: Langyintuo et al (2010)

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Table 2: Adoption rates for NERICA rice varieties

Country Diffusion rate ( percent of

farmers)

Adoption rate ( percent of

farmers)

Cote d‟Ivoire 9 4

Guinea 39 23

Benin 26 18

Nigeria - 30

Source: Diagne (Undated)

A combination of policy and technical problems has continued to hinder the supply and demand

for improved seeds in Africa. As far back in the 1970s, most African governments and

development agencies recognized the critical role of improved seeds in agricultural

transformation, but limited their investments in the seed sector to parastatals (Maredia and

Howard, 2006). These agencies were often bureaucratic, inefficient, and subject to volatile

government budget restrictions (Bay, 1998). This hindered the growth of the seed sector and

consequently deprived farmers the benefits of genetic improvements.

In the past two decades most governments deregulated the seed sectors leading to an increased

participation of private seed companies, local, regional and multinational. Nevertheless, a

number of institutional and policy bottlenecks still hinder the expansion and smooth functioning

of the seed sector as documented by Langyintuo et al (2010).

Firstly, the variety release procedures in some countries tend to take several years between the

development of the variety and its eventual release (up to 6 years in some cases) with financial

and economic implications for both the seed companies and the farmers. In addition, there is lack

of coordinated and harmonized variety release system which would allow for simultaneous

release of varieties across countries to enhance regional spill over of benefits of new varieties.

Secondly, although private seed companies have been encouraged to participate in the seed

industry, in some countries they have been deprived of access to foundation seed of publicly

developed germplasm which they need to produce certified seeds for farmers. It is common for

governments to monopolize the production and distribution of the foundation seeds through

parastatals. Consequently, private seed companies operate below capacity and are unable to

effectively meet farmers‟ demands for certified seed.

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Thirdly, most seed companies lack capital to finance seed production and processing equipment.

Finally, while several countries have signed on to harmonized seed laws and regulations, these

are rarely implemented at the country levels. Many countries do not have plant variety protection

laws that would assure seed companies of their control of intellectual property rights over

released varieties, especially for the open pollinated crops and hybrids (Langyintuo, 2010; Tripp

and Rohrbach, 2001).

Until these constraints are addressed, the contribution of improved seed to productivity growth

will continue to be undermined. Urgent policy interventions are therefore necessary to enhance

the performance of the seed sector.

2.2 Limited use of fertilizers

The use of fertilizer in Africa can be regarded as the lowest in the world, averaging only 8 kg per

ha with a range of less than 1 kg/ha in Uganda and DRC to about 48 kg/ha in Zimbabwe (Fig. 4)

compared with 96 kg/ha and 101 kg/ha in Southeast Asia and South Asia, respectively (Morris et

al., 2007), and over 145 kg per ha in the developed world (World Bank, 2006). Some

environmentalists argue that high level of use of fertilizers creates environmental problems in

developed countries. In Africa, on the other hand, it is the limited use of fertilizers that create

environmental degradation through soil mining and clearing of forest land to expand farms in an

attempt to increase production to feed a burgeoning population. It has been estimated that in

Africa, 4 percent - 12 percent of GDP is lost from environmental degradation, 85 percent of this

from soil erosion, nutrient loss and changes in crops (Olsen and Barry, 2003).

For business minded farmers, output price plays a significant role in investment, as well as the

ratio between output and input prices. Poorly developed markets, high transport costs, and low

and variable output prices have remained as against more rapid increase in prices for agricultural

inputs. Because most of the crops grown my farmers are staples and non-tradable while

fertilizers are imported, currency devaluation often increase the price of fertilizers several times

above output prices. Consequently, the value-to-cost ratio for fertilizer use has declined creating

a disincentive to the use of fertilizers. At the same time, governments‟ ability to procure and

supply food has been curtailed.

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In other words, the low use of fertilizers among African farmers reflects a mix of underlying

challenges of binding capital constraints, deep poverty, and poor infrastructure. At the heart of

this is the lack of provision of support to smallholder farmers. Table 3 gives a clear indication of

the loss opportunity to increase crop productivity due to lack of support to farmers to access

fertilizers and improved seed.

Fig. 4: Intensity of fertilizer use in selected countries in Africa

Source: FAOSTAT (2003)

Table 3: Actual and potential yield of selected crops

Crop

On-farm yield

(t/ha)

Potential yield

(t/ha)

Yield gap

( percent)

Maize 1.5 7 376

Millet 1.8 5 186

Beans 0.5 3 512

Sweet potato 4.5 30 564

Cassava 12.7 50 293

Bananas 4.6 35 668

Source: Source: FAOSTAT and NARO, 2006/07

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To reverse this trend, African leaders convened an Africa fertilizer Summit in Abuja, Nigeria in

2006 and declared that “Given the strategic importance of fertilizer in achieving the African

Green Revolution to end hunger, the African Union Member States resolve to increase the level

of use of fertilizer from the current average of 8 kilograms per hectare to an average of at least

50 kilograms per hectare by 2015”. It is too early to assess but progress in achieving the Abuja

declaration is not phenomenal.

2.3 Poorly developed inputs and outputs markets

One of the major outcomes of the World Bank sponsored structural adjustment was the

liberalization of markets where state marketing agencies were privatized, disbanded or reformed

(Doward, Kydd and Poulton, 1998). These reforms had negative consequences on agricultural

development on the African continent. In a comprehensive review of reforms and their effects on

agricultural input and output markets, Kherallah et al., (2002) noted that economic growth in

Africa, especially in agriculture, had stagnated, or declined, consistent with the general

consensus that reforms have failed to spur agricultural growth (Spencer and Badiane, 1995;

Eicher, 1999; World Bank, 2006).

In general, poorly developed input and output markets raise transaction costs for farmers and

make it difficult to access improved seeds, fertilizers and other agricultural inputs. In addition,

high tariff and non-tariff barriers reduce intraregional trade flows leading to greater price

volatility. More open intra-regional trade between African countries offers important

opportunities to exploit differences in comparative advantage, achieves greater scale economies

in marketing and helps stabilize food supplies in the face of adverse weather events at country

levels. Yet a World Bank 2008 report indicated that “Africa is the world‟s second most trade-

restrictive region (after South Asia), … have among the world‟s fewest and weakest services

trade liberalization commitments, …and neocolonial relationships continue to dominate trade

ties”.

In addition to the poorly developed regional and local markets is the problem of limited access to

the world market. Africa accounts for less than 2 percent of global trade although many African

economies depend on exports of primary commodities, whose prices on the world market have

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declined drastically due to the global crisis (Arieff, et al., 2009)1. United States, the European

Union, and China cumulatively count for nearly 70 percent of African trade, and given that they

are the hardest hit by the recession there are shifts in their demand patterns to the disadvantage of

Africa. African exporters are suffering from the decrease in global demand. For example, total

exports to the United States from all 41 countries eligible for trade benefits under the African

Growth and Opportunity Act (AGOA)2 declined by 63 percent in the first half of 2009. African

countries are thus exporting less on average, and at lower prices, than a year ago. Global trade

could drop even further if countries react to the economic crisis by enacting additional trade

barriers (Siddiqi, 2009). Some analysts fear that policies aimed at encouraging trade with Africa

such as AGOA, the European Union‟s “Everything But Arms” program, or the Doha

Development Round of the World Trade Organization - could be threatened by political

pressures to become more isolationist (Moss, 2009). The tightening of international credit

markets is also expected to render it more difficult for African countries to access trade finance

(Dorsey, 2009).

2.4 Political will to support agriculture

Weak political will to support agriculture and the overall global decline in support for agriculture

have also been seen as critical elements preventing agricultural productivity growth in

Africa. This appears to be changing with the adoption of the Comprehensive African

Agricultural Development Program (CAADP) by African governments. Africa‟s Heads of State

have committed to invest at least 10 percent of their national budgets agriculture in order to raise

agricultural productivity to at least 6 percent and relieve the poverty and hunger of rural people

as well as increase food production that will tend to bring down the cost of food imports (Maputo

2003). While many of these pledges have yet to be realized, Fig. 5 suggests that some individual

countries have made substantial increases in their spending on agriculture (e.g. Burkina Faso,

Niger, Guinea, Senegal, Malawi, Ethiopia, Mali, and Ghana).

1 The price slump in oil and many mineral commodities, combined with decreased external demand, dealt a severe

blow to the region: oil and other mineral fuels represented 68 percent of African exports to the world by value in 2008; ores, slag and ash about 14 percent; and precious stones about 4 percent.

2 The African Growth and Opportunity Act (AGOA) is a U.S. trade reference program, which begun in 2000 (P.L. 106-

2000. AGOA provides certain goods from Sub-Saharan Africa duty-free access to the U.S. market. AGOA extends preferential treatment to imports from eligible countries that are pursuing market reform measures.

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The recent decision by the G8 to expand support to agriculture in Africa, with promised support

of $15 billion, is a positive development and could be viewed as a reversal of the declining trend

in official development assistance (ODA) witnessed lately (Fig. 6). The challenge is where to

focus these new investments. Given years of underinvestment in critical public goods, a

significant share of these investments should go into the provision of support for agricultural

research and extension, rural roads, energy, infrastructure and irrigation, all of which are critical

for stimulating growth. Concentrating ODA funds on public goods will free up domestic

resources to focus on providing support to smallholder farmers to take advantage of new

agricultural technologies to raise agricultural productivity.

Fig. 5: Government expenditure on agriculture

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Fig. 6: Official development assistance to agriculture in Africa

2.5 Structural adjustment in Africa

Initiated in the 1980s by the World Bank and the IMF, structural adjustment was designed to

reduce the role of government, cut back on public sector expenditures, improve balance of

payments, reduce government deficits, enhance macroeconomic performance and help African

countries to achieve higher economic growth rates. The key elements of the policy reform

included macroeconomic reforms, privatization of government agencies, liberalizations of

markets, removal of the government from the agricultural markets, and elimination of subsidies.

The effects of these market-led approaches continue to be a source of much debate. Because the

policy reforms devalued currencies, reduced taxation on agriculture and raised producer prices

(Kherellah et al, 2002), they are widely believed that this generated significant positive benefits

for farmers selling traditional export crops like coffee and cocoa. But for smallholder farmers

producing staple foods for domestic markets, the net effect of the structural adjustment has been

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largely negative as exemplified by the collapse of the hybrid maize green revolution in eastern

and southern Africa mentioned above. Competition from low cost and often subsidized food

imports, reduced access to credit at affordable rates, and the removal of input subsidies has led to

a dramatic reduction in the adoption of modern crop varieties and fertilizers. In several cases,

farmers, who had earlier adopted modern varieties, discontinued the uses of modern varieties and

chemical fertilizers (Kosura and Karugia, 2005). Poverty and food insecurity have increased

since structural adjustment as farmers are unable to afford seeds and fertilizers.

2.6 Access to finance

Agriculture is the most predominant activity in African economies yet less than 3% of

total commercial bank lending goes into the agricultural sector in Africa (Figure 7).

Financial institutions have not been inclined to lend to the sector for a variety of reasons,

including: 1) high transaction costs for service providers due to the remoteness of the

clients and heterogeneity among communities and farms; 2) dispersed demand for

financial services; 3) the lag between investment needs and expected revenues; 4) lack of

usable collateral; 5) high covariant risks due to variable rainfall, lack of irrigation and

pests and diseases; 6) small size of farms and of individual transactions; 7)

underdeveloped communication and transportation infrastructure; and 8) weather and

price risks. As a consequence, farmers are unable to invest in improved technologies to

increase crop productivity.

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Figure 7: Agricultural Lending as Share of Agricultural GDP in Selected African

Countries

3. Policy support needed to improve productivity

3.1 Support to African farmers

In the past, subsidies were proven to be beneficial in increasing crop productivity and

consequently farm household welfare. Impressive improvements in maize productivity were

demonstrated in Kenya, Zimbabwe, and Zambia during the 1980s when subsidies were available

to farmers (Eicher et al., 1997). Cereal crop output in Ethiopia dramatically increased over the

past decade (FAO, 2008). Several other studies have shown the potential of input subsidies in

accelerating crop production (Crawford et al., 2003). However, these positive results were

generally not sustained with the advent of donor driven structural adjustment and the dismantling

of government-supported institutions and subsidies.

Presently very few countries (Kenya, Tanzania, Malawi, Nigeria, Ghana, Uganda and Zambia)

support farmers. Existing literature suggests that most of the countries are attempting to model

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their support programs in line with the Malawian one hailed to be the most successful of them

all, although it also has its own weaknesses: not least the administrative bottlenecks, leakages

and budgetary constraints. Below is a brief examination of the Malawian inputs support program.

Building on earlier experiences of distributing seed and fertiliser, mainly for maize, from

2005/06 the government of Malawi embarked on a national programme of subsidised seeds and

fertiliser much to the consternation of some donors. In 2006/07 two million seed and three

million fertiliser vouchers were distributed to targeted households. The vouchers allowed

recipients to buy two 50 kg bags of fertiliser at what was then 28 percent of full cost. In total

175,000 tonnes of fertiliser and 4,500 tonnes of improved maize seed were distributed at a cost

of US$91 million. Since the introduction of the subsidies maize production has increased

remarkably and by 2006 was above the amount needed to satisfy domestic consumption (Table

4). In 2008 and 2009 the maize harvest was again increased, estimated to reach 3.77 million

tonnes for 2009, giving a surplus over domestic requirements of 1.32 million tonnes

(Nyekanyeka and Daudi (2009). While some of the production increase in the last four years may

be the result of favourable rains, it would be hard to deny the impact of the subsidies. From a 43

percent national food deficit in 2005, Malawi achieved a 53 percent surplus in 2007, some of

which was exported to neighboring countries (Denning et al., 2009).

Financing of the subsidies may be done through re-prioritization of government expenditure in

favor of agriculture can be the starting point of support to farmers. Under the Malawi input

subsidy program, the budgetary allocation, representing less than seven percent of the 2005–

2006 national budget (US$5/person/year), supplemented in 2006–2007 by donor support (less

than US$1/person/year), is a remarkably small price to pay for achieving national food self-

sufficiency and widespread household food security. By comparison, the cost of importing food

in 2004–2005 was US$110 million (about US$8 per person). Donor aid to Malawi in 2005 was

US$578 million or about US$44 per person (World Bank, 2008). In 2006, the United States

spent US$1.2 billion in food aid for Africa, but only $60 million on agricultural development

there (CIGAD, 2009).

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Table 4: Impact of the subsidy program on the production of maize in Malawi

Crop season

Maize production

(with subsidy) (MT)

National maize

requirement (MT)

Surplus production

(percent of

requirement)

1998/1999 2,245,824 1,760,000 28

1999/2000 2,290,018 1,820,000 26

2000/2001 1,589,437 1,894,000 -16

2001/2002 1,485,272 1,928,000 -23

2002/2003 1,983,440 2,036,000 -3

2003/2004 1,608,349 2,059,000 -22

2004/2005 1,225,234 2,115,000 -42

2005/2006 2,611,486 2,208,000 18

2006/2007 3,444,655 2,400,000 44

2007/2008 2,777,438 2,400,000 16

2008/2009 3,767,408 2,400,000 57

2009/2010 3,419,409 2,410,000 42

Source: Nyekanyeka and Daudi (2009); FAOSTATS (2010)

A paradigm shift in development aid to Africa can be a panacea for support to African farmers.

Supporting inputs rather than output subsidies, such as food aid, makes economic sense although

political will to take action would provide the foundation for change (Denning et al, 2009). This

is well articulated by Sanchez (2009) who suggested that development partners‟ policies should

“shift from prioritizing food aid to providing poor farmers with access to training, markets and to

farm inputs such as fertilizer and improved seed” arguing that such strategies are cheaper, allow

farmers to grow food to feed themselves, sell the surplus and diversify into high-value crops,

livestock and tree products. Additionally, they create sustainable exit from the poverty trap,

thereby decreasing the requirement for aid.

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Furthermore, results from the Millennium Villages project implemented under the MDG in

hunger hot spots across Africa, which provide farmers with access to fertilizers, improved seed,

technical support and markets and following a national „smart‟ subsidy programme for fertilizer

and hybrid seed in Malawi, average maize yields increased from 0.8 to 2.0 tonnes per hectare in

two years (Denning et al. 2009). The fertilizer and improved seed required to produce an

additional tonne of maize grain under the project cost an average of $135 (at April 2008 prices),

six times less than through food aid. Purchasing that same tonne of maize locally - in an African

country or a neighboring countries - costs approximately $320 but importing a tonne of maize

under food aid from USA would cost US$815 (Denning et al, 2009; Sanchez, 2009).

It is important not to lose sight of the institutional arrangements that make or break a well-

designed support program. Whereas the Malawian experience with subsidies appears to be an

overwhelming success in terms of productivity increases, the Zambian experience seems

worrying based on recent data on subsidy costs and productivity (Fig. 8). It is generally believed

that poor targeting, delays in input distribution, limited private sector participation in

procurement and distribution, poor fertilizer utilization by small scale farmers, and inconsistency

of policy implementation are to blame (personal communication).

Fig. 8: maize production and subsidy regimes under the Zambian experience

Sources: Personal communication; FAOTATS (2010)

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3.2 Interlocked Markets for Credit and Value Chain Financing

Interlinked markets for inputs, outputs and credit can help to overcome missing markets in the

supply of credit to farmers for purchasing improved seeds and fertilizers (Poulton et al, 1998).

Marketing boards for cash crops have traditionally provided seeds and fertilizers to farmers on

credit and purchased back the produce from farmers at a guaranteed price after deducting the

cost of inputs. Under this arrangement outputs, inputs and credit are all interlocked in one

transaction (Jayne et al., 2002; Poulton et al 1998). Several studies have reviewed the

contributions of such interlocking transactions (Poulton et al, 1998; Govereh et al 1999).

Farmers growing cash crops have been known to receive fertilizers for these crops which they

also use on their food crops. Such spill-over effects have helped to raise and sustain cotton and

maize crop production in the Sahel (Dione, 1991).

There are many advantages to interlocked credit market arrangements. The risk of default is low

since the cost of inputs is deducted before the farmers receive payments for their delivered

produce. Monitoring and supervision costs are also reduced since the input loan is delivered in

kind to farmers to be applied on their crops. However, where farmers engage in side selling of

their produce at harvest, monitoring costs and defaults may rise, unless there are strict contract

enforcement rules. The cost of inputs may also be reduced under interlocked systems since

farmers‟ demand for inputs are aggregated and ordered in bulk.

3.3 Credit Guarantee Schemes

A principal reason why banks don‟t lend to agriculture is perceived high risks. To encourage

banks to lend to agriculture, credit guarantees have been used. By covering part of the default

risk, a lender‟s risk is lowered – guarantees secure repayment of all or part of the loan in case of

default (Levitsky, 1997). Credit guarantees are useful in addressing challenges faced by farmers,

especially those linked to insufficient collateral and poor credit history. Therefore, credit

guarantee schemes can improve loan terms and facilitate access to formal credit. Additionally, by

allowing loans to be made to borrowers that otherwise would have been excluded from the

lending market, farmers and SMEs would be able to establish a repayment reputation in future

(De Gobbi, 2002).

19

4. Concluding remarks

Agriculture is the main stay of the economies of African states yet agricultural productivity

growth in Africa has been disappointingly low perpetuating hunger and poverty especially

among the rural and urban poor. The main reasons for the poor performance of agricultural

productivity in Africa have been a combination of low use of improved agricultural technologies

(mainly seeds and fertilizers), historical factors such as structural adjustment, poorly developed

markets, lack of political support and decline in global support to agriculture among others.

While arguing for smart input subsidies to enhance agricultural growth and trade in Africa, this

paper recognizes the critical role of political will and a paradigm shift in the administration of

development assistance, away from costly food aid to more efficient and sustainable inputs

support programs in making the change happen. In addition, it is argued that implementing risk

sharing instruments to leverage commercial bank credit into agriculture can be a viable option to

capitalize the sector and subsequently improve productivity.

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