Agriculture in Development of Select African Countries

Key Findings of Five Country Studies

CUTS Geneva Resource CentreCUTS Geneva Resource Centre

INTRODUCTION

BRIEF SYNTHESIS OF FIVE COUNTRY STUDIES

Agriculture

Trade

THEMES AND MAIN RECOMMENDATIONS

Structure of the presentationStructure of the presentation

CUTS GENEVA RESOURCE CENTRE

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Introduction

For more than 25 years, CUTS International pursues research-based advocacy to promote consumer sovereignty with social justice and equality within and across borders.

In 2008, CUTS Geneva Resource Centre started functioning to promote a pro-trade, pro-equity credible Southern voice in the Geneva trade and development community.

CUTS GRC aims to provide services that would bridge the gap between capitals and Geneva on trade-related issues.

At the same time it also launched its flagship three-year project entitled “Fostering Equity and Accountability in the Trading System (FEATS)” .

THE FEATS PROJECTTHE FEATS PROJECT

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Introduction

Fostering Equity & Accountability in the Trading System

Objectives

Enhancing positive linkages between Trade and Development in Africa

Advocacy with trade officials by establishing two-way linkages between activities in Geneva and Project Countries

Generating a more coherent and pro-trade for development voice in trade policy making and implementation.

Introduction THE FEATS PROJECT

Two-phase project

Phase One: research on policy making processes role of stakeholders at the national level

Phase Two: research on country-specific issues related to trade in agriculture in the

overall context of development constraints and objectives today’s presentation is based on the findings from these studies

Introduction THE FEATS PROJECT (Cont’d)

Agriculture is key to inclusive growth and development: increase investment to improve productivity adopt and implement holistic and balanced policies

Trade can play an important role for inclusive development through agriculture:

reform international trade in agriculture and promote formal regional trade urgently address trade facilitation constraints

Stakeholder involvement and capacity building is a must prioritise capacity building of small farmers and traders Encourage multi-stakeholder consultations and coordination

IntroductionKEY MESSAGES

LINKING TRADE & AGRICULTURE IN SELECT AFRICAN COUNTRIES

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Introduction

The project was undertaken in LLCs Malawi, Uganda and Zambia, and non-LLCs Kenya and Tanzania.

In all the five countries, agriculture constitutes a substantial portion of the economy. Its role is crucial for food security, livelihoods and poverty reduction.

Therefore, strategies and policy interventions aimed at inclusive development should give precedence to the agriculture sector.

From the1990’s, these countries implemented trade liberalization measures, with mixed success.

LINKING TRADE & AGRICULTURE IN SELECT AFRICAN COUNTRIES

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Introduction

However, if well managed, trade can be a powerful instrument for growth and poverty reduction, as well as a tool to correct imbalances between areas of surplus and areas of deficit.

Therefore, by increasing opportunities and expanding markets, trade has a direct impact on competitiveness, productivity and livelihoods.

Research Findings from the Five Country Studies

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nsBrief Country AnalysisMAIN ECONOMIC INDICATORS

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nsBrief Country AnalysisMAIN ECONOMIC INDICATORS

Last decade witnessed good GDP growth rates with some variations across countries and between the first and second half of the decade.

Growth attributed to higher commodity prices, growing exports volumes, macro-economic policies, FDI and debt relief among others.

Although there are variations among them (e.g. in per capita GNI and population size), poverty is widespread in all project countries.

Agriculture

PRODUCTIVITY

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nsAgriculture in LLCs

In landlocked Zambia, Malawi and Uganda, the study focused on agricultural productivity, livelihoods, and trade.

Zambia, Malawi and Uganda

PRODUCTIVITY (Con’d)

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Findings:

Heavily dependent on Agriculture, making the sector critical for overall economic development.

Some strengths, e.g. availability of land, comparative advantage in many Ag. Products, and large scope for improving agricultural productivity.

However, there are constraints such as infrastructure, economic policies, legal frameworks and cultural attributes affecting agricultural productivity and production.


PRODUCTIVITY (Con’d)

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Factors Affecting Agricultural Productivity:

Limited availability and poor quality of inputs used.

Only a limited segment of Ag. production is carried out on commercial

basis.

Land tenure system


FOOD SECURITY

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nsAgriculture in Non-LLCs

In non-landlocked Kenya and Tanzania the study focused on regional trade and food security

Kenya and Tanzania

FOOD SECURITY (cont’d)

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nsAgriculture in Non-LLCsKenya and Tanzania

Both countries face the challenge of Food Insecurity.

(Data indicates that Food Insecurity in these countries is linked to poverty.)

FOOD SECURITY (Cont’d)

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Three key elements widely agreed as necessary for food security:

Availability of enough food

Access to the available food

Stability of availability and access

Kenya and Tanzania


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A number of factors responsible for this situation, that can be categorized as follows:

Economic

Environmental

Political and Institutional


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FACTORS REASONS IMPACTSLow food production • small plots of land

• low input use • plant diseases • low investment • Short rainfall season • Insufficient market information Less band fluctuating availability and access to

food

Limited availability of food at household level

• Sale of a great portion of what they produce to meet other needs

• Exacerbated by volatility in food prices

Fragmented and insufficient market

• Barriers to trade, e.g. NTBs, SPS.• High transport cost and poor

storage• Poor infrastructure and trade links

between producer areas and consumer markets

ECONOMIC


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FACTORS REASONS IMPACTSRepeated crop losses • Continued maize planting in Agro ecology

suitable for sorghum, millets, peas etc.

• Chronic food insecurity in rainfall marginal areas

• Limited income for Ag. labourers during droughts

• Limited investment in flood prone areas

Limited vegetation regeneration

• Degradation in both pastoral and marginal agricultural areas

Small proportion of rainfall appropriately used

• High run off and poor water storage

Droughts and Floods • Increased frequency and severity

ENVIRONMENTAL


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nsAgriculture in Non-LLCsA case study of Kenya and Tanzania

FACTORS REASONS IMPACTSWeak Public and Private institutions

• Limited resources• Limited investment in agriculture and few

safety nets to protect farmers from natural and man-made disastersShortcomings in

Policy Framework

• Wrong prioritisation • Abrupt changes• Lack of full implementation

POLITICAL AND INSTITUTIONAL

FOOD SECURITY (Con’d)

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Trade impacts on food security, either:

Positively Negatively

Allows imports of staple food products at affordable prices.

Increases livelihood options and hence enhances food security

Heavily subsidized food production can depress international food prices, discouraging investment in food production in small countries.

Additionally, trade liberalization measures adopted by small developing countries leads to immediate increase in imports, thus worsening balance of payments

Kenya and Tanzania

INTERNATIONAL TRADE PROFILE OF PROJECT COUNTRIES

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Trade

INTERNATIONAL TRADE PROFILE OF PROJECT COUNTRIES (Cont’d)

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Trade

Project countries significantly integrated into the world economy if measured by the share of imports/exports in their respective GDPs.

Hence they need to focus more on improving the contribution of trade to growth.

Major exports mostly agricultural commodities except for Zambia (dependent on mineral commodity exports)

INTERNATIONAL TRADE PROFILE OF PROJECT COUNTRIES (Cont’d)

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Trade

Dependence on primary commodity exports exposes them to declining terms of trade and price shocks.

Diversification in export markets is a positive development because:

Traditional European partners are growing much slower than Asian markets

Diversified export markets provide some cushion against shocks in individual markets.

All project countries run unsustainably high levels of current account deficits due to imports being much higher than exports, which can lead to macro economic instability.

PROFILE OF PROJECT COUNTRIES

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Agricultural Trade

PROFILE OF PROJECT COUNTRIES (Cont’d)

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Agricultural Trade

The share of agricultural exports in total substantially decreased between 2000 and 2006, but it still forms the bulk of exports in these countries (1/3 for Kenya, Uganda and Tanzania in 2006)

Similarly, share of agricultural imports in total has decreased in the period for four project countries (almost doubled in Uganda)

PROFILE OF PROJECT COUNTRIES (Cont’d)

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Agricultural Trade

While Ag. Exports are mostly cash crops, Ag. Imports are mostly food products.

Possible positive impact on FS if exports generate greater purchasing power and if imports reach food deficit areas.

Possible positive impact on livelihood if returns on export-oriented production are higher and evenly distributed.

REGIONAL TRADE IN AGRICULTURE

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Agricultural Trade

Potential of Regional Trade

creating larger markets and reducing dependence on traditional export markets

improving production and productivity

reducing the trading costs through facilitated regional trade infrastructure

development

improving food security by enabling movement from surplus to deficit areas

within the region

REGIONAL TRADE IN AGRICULTURE (Cont’d)

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Agricultural Trade

Production and regulatory constraints to regional trade

Over dependence on single primary commodities

Exports mostly geared for markets outside Africa

Production of similar Ag. outputs, not complementary for trade between themselves

Poor Infrastructure a key bottleneck for intra-regional trade

Lack of harmonized regulations

Non-Tariff Barriers remain in the region: 1/3 of Africa’s imports face NTBs, higher than OECD and Fast Growing Economies.


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Agricultural Trade

Lack of an enabling agriculture business environment

Virtual absence of production, financing and marketing channels among businesses in Africa

Imperfect and/or asymmetric information on opportunities for businesses in African Markets

Multiple currencies and convertibility problems


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Agricultural Trade

80% of regional agricultural trade in East Africa is informal.

Reasons

Restrictive policies such as import tariffs, quotas, exchange controls etc.

Legal requirements for Trade in Agriculture and in food products, e.g. compliance with SPS and Livestock Clearance Certificate.

Delays at the border and corruption


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Agricultural Trade

Implications of informal trade

Positive: increases business activities and enhances income and employment for poor households in the border regions, and allows movement of food products from surplus to deficit areas in the region

Negative: no incentives to invest in formal economy, compromises implementation of health safety and environmental standards, and erodes government revenues

LANDLOCKEDNESS AND TRADE FACILITATION

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Trade for LLCs

Constraints to trade specific to LLCs

The major determinant for trade in the case of LLCs is the cost of transportation, resulting from distance to the sea and inadequate infrastructure. Landlocked LDCs spend almost double the percentage of their export earnings for transport than the average developing country

Due to “price takers” in the international market, high transportation costs reduce producers’ incomes and discourage them from investing and trading.

Ag. products are perishable, requiring faster and efficient transportation

LANDLOCKEDNESS AND TRADE FACILITATION (cont’d)

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Trade for LLCs

Constraints to trade specific to LLCs

Neighbors are not strong enough economically to enable project LLCs to expand their markets

Project countries are not rich to generate enough domestic demand, nor they are resource rich.

Recommendations

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1. Recognize agriculture as key to inclusive growth and development

Prioritize agriculture development through policies at the national, regional and international levels, with enhanced support from IGOs, RECs, donors, etc.

Increase government expenditure on agriculture (at least 10% of annual budget)

CSOs should identify and promote an enabling environment for private sector led and farmer friendly agricultural development

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2. Improve agricultural productivity

Strengthen governmental efforts in the sector, e.g. farm input subsidies, promotion of

organic manure, infrastructure etc.

Promote Farmer-Private sector collaborations through Out-Grower Schemes (OGS)

Encourage small-holder participation in cash-crop farming

Create collaboration networks involving researchers, extension services and farmers

towards productivity improvements.

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3. Promote formal regional trade

Government should encourage formal trade by reducing tariff and non-tariff barriersclamping down illegal paymentsharmonizing SPS and food safety standards at the regional level

The secretariats of RECs should disseminate information and knowledge regarding the regional market

Cooperation between regional farmer/trader organisations

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4. Urgently address trade facilitation issues in landlocked countries

Strengthen border transit efficiencyUpgrade facilities, e.g. customs infrastructure, transportation systems, etc.Facilitate interconnections between countries at the regional level

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ns5. Develop and implement holistic, balanced and specific government policies and strategies

How to implement it

Governments should adopt comprehensive and balanced trade and agriculture policies that are inter-linked, tackling bottlenecks of trade and distribution mechanisms

Set up farm service centers to address farmers’ needs: inputs, machinery, etc.

Improve warehouse facilities to better manage harvests and food insecurity issues

Ensure fair trade between farmers and sponsors of Out-Grower Schemes (OGS)

Facilitate commercialization of small-scale farmers by building their capacities

Establish security enabling smallholders to access credits

Invest in irrigation technology

Coordinate activities of donors to ensure effective and efficient use of funds

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6. Educate and build capacity of small farmers and traders

Strength research extension services to farmers in order to improve agricultural productivity

Other stakeholders, such as REC secretariats, private sector, donors and CSOs should assist the governments educate farmers and traders and disseminate information widely

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7. Encourage multi-stakeholder consultations and coordination

Close collaboration between the ministries of agriculture and trade to bridge the gaps between trade, rural livelihoods, agriculture and food security issues

Farmers and traders should be involved in policy making and implementing processes through formal consultative mechanisms

Farmer/trade regional organisations (e.g., EAGC) should take the responsibilities of honest brokers at the regional level

Establish national and regional consultative and coordination mechanisms

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ns8. Define a more positive role for donors in the host and home countries

Donor assistance should shift to land and labour productivity improvements

Donors should collaborate in the implementation of agriculture-related projects, e.g. corridors in Africa

Lobby their governments to reduce entry barriers for imports from project countries

Encourage MNCs from their home countries to take on corporate social responsibilities

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9. CSOs as important partners in these endeavours

CSOs should strengthen research and information dissemination to all stakeholders

Lobby for domestic policies to promote welfare of small-scale farmers

Build international networks among project countries

Lobby for the creation of bodies that act as fair arbiters between farmers and agribusiness orgs

Lobby for increased government spending on poverty reducing oriented agricultural projects

Design programs targeted at sensitizing the farmers on the commercial side of agriculture

Other stakeholders, e.g. governments, REC secretariats and donors should recognize the importance of CSOs for inclusive development of agriculture through trade

Thank You !

Questions ?

Agriculture in Development of Select African Countries

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