Awakening the Sleeping Giant:Prospects for Commercial Agriculture

in Sub-Saharan Africa

High-level Seminar for Policy Makers: Broad-based Development

through Economic Transformation and Job Creation

9-11 February 2011Maputo, Mozambique

Recent study from

World Bankand FAO

Study objectiveTo promote the growth of commercial agriculture in Africa in ways that contribute to broad-based poverty reduction

Analytical approachThe study explored the feasibility of restoring international agricultural competitiveness and growth in Africa through the identification of key products, production and marketing systems that could stimulate development of competitive commercial agriculture

Brazilian CerradoPre-1970: Remote region,

poor soils, low population, stagnant agriculture

1970s, 80s: Transformation led by public investments in R&D, infrastructure, credit; emphasis on large-scale systems

Post-1990: Private sector-led boom built on exports (soybeans, maize, cotton, cattle)

Northeast ThailandPre-1960: Remote region, poor

soils, subsistence agriculture, high poverty levels

1970s, 80s: Transformation led by pursuit of cassava export opportunity; public support for private sector; emphasis on small-scale systems

Post-1990: Further intensification and diversification; falling poverty

Study focusAgro-climatic zone Guinea Savannah

Case study countriesMozambique, Nigeria, Zambia

Target commoditiesCassava, cotton, maize, rice,

soybeans, sugar

African Guinea Savannah • 800 - 1,100 mm rainfall• 150 - 220 days season• 7 million km2 total area• 0.5 million km2 cropped• 3 cropping systems:

Cereal - root cropRoot cropMaize mixed

Key issues for analysisRole played by • Research and extension• Infrastructure• Finance• Business climate• Human capital• Government policies

Macro policies improving in Africa

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0

1

2

3

4

5

6

7

8

9

10

BrazilMozambiqueNigeriaThailandZambia

Mac

roec

onom

ic s

core

And agricultural exports less taxed

1965–69 1970–74 1975–79 1980–84 1985–89 1990–94 1995–99 2001–04-70

-60

-50

-40

-30

-20

-10

0

10

20

Nom

inal

rate

of a

ssis

tanc

e (p

erce

nt)

Nigeria

Zambia

Brazil

Thailand

Mozambique

Value chain analysis: Production

Value chain analysis: Processing

Value chain analysis: Transport and storage

Value chain analysis: Exports / Import substitution

Brazil Thailand Mozambique Nigeria Zambia0

20

40

60

80

100

120

140

1601971–75

2004–06

Example of cassava

Farm-level productivity lower in AfricaCa

ssav

a yi

eld

(t/h

a)

But shipment values similar

FAM ECF FAM ECF LCF FAM ECF LCF ECFMozambique Nigeria Zambia Thailand

0

10

20

30

40

50

60

70

80

90

100

Example of cassava

Ship

men

t val

ue (U

S$/t

)

1. Farm-level production costs in Africa are often low compared to other regions

2. Africa’s producers are generally competitive in domestic markets

3. Africa’s producers are generally not competitive in global markets

Value Chain Analysis Results

4. Regional markets offer most promising opportunities for expansion over the short to medium term

5. Competitiveness of African countries is undermined by inefficiencies in domestic logistics

6. Smallholders have a critical role to play as source of competitiveness in Africa

Value Chain Analysis Results

Scale of production

Literature: Small farms more productive

Why have large farms survived?

Privileged treatment:• Land access• Tax treatment• Input and output subsidies• Infrastructure

Farm size and commercial agriculture: Is bigger necessarily better?

Foreign Direct Investment in big farms

Major opportunities… …with significant risks• Fills a huge investment gap• Transfer of technology and

know-how• Export development• New industries (biofuels)• Employment generation• Opening of remote regions

• Lack of attention to existing land users

• Asset stripping and speculation

• Negative environmental impacts (forests)

• Risks of highly unequal agrarian structure

• Governance

Alternativesto large farms

Realization of scale economies

• Contract farming with smallholders

• Machine hire services by the private sector

• Effective producer organizations

Scale of productionBottom line• Little evidence to suggest that large-scale farming

models are necessary or even particularly promising for Africa

• Smallholder-led commercialization likely to lead to more inclusive growth, with greater backward and forward linkages

Bright prospects for Africa

Five principal factors1. Rapid growth and strong demand prospects 2. Better domestic policy environments 3. Improved business

climate 4. Increased incentives

to invest in agriculture 5. New technologies

for production andprocessing

Needed interventions1. Policy reforms• No backsliding on macro policies• Eliminate remaining taxation of agriculture• Reform / modernize land policies

2. Investments• Research• Education• Infrastructure

3. Institutional changes• Make markets work better for smallholders• Improve access to finance

Social and environmental issuesSocial impacts

management• Land tenure• Farm size• Technology choice

Environmental impacts management

• Soil fertility• Water quality and quantity• Tradeoffs: intensification vs.

extensification

The road aheadGrounds for cautious optimism,

but many constraints remain…• Start with bulk commodities• Target domestic and regional markets• Reduce logistics costs• Pay attention to

land management• Pay attention to

environmental issues• Make the necessary

public investments• Engage the private sector