Cautiously Optimistic Outlook for African Agriculture
Several mega-trends will shape Africa’s agricultural sector in the coming decade, says Chapter 2 of the OECD-FAO Agricultural Outlook 2016-2025, released last week. These include rapid population growth and urbanization, the growth of non-farm employment, unequal income growth distribution and the rise of Africa’s middle class, and increased access to new technologies and information. While the region’s agricultural outlook is generally positive, the report states, how policymakers address these trends will truly determine the trajectory of the sector.
Africa’s agricultural sector has seen some growth in recent decades, at least in terms of value. According to the OECD, the total value of the agricultural sector, in USD, increased by 130 percent between 1990 and 2013, with the value of crops (particularly maize) accounting for almost 85 percent of the region’s total agricultural value.
This growth, however, has been driven more by expansion in area dedicated to agriculture and intensification of cropping systems than by improvements in agricultural productivity, says the report. For example, continuous cropping is being used in many countries, meaning that crops are not being rotated and land is no longer being left fallow between planting seasons. In addition, much of the region’s underutilized land is concentrated in a few countries, is under forest cover, and/or is located in remote locations without market access. All of these factors make Africa’s current land-driven agricultural expansion unsustainable.
At the same time, increased food production is crucial for the region. According to the report, Africa south of the Sahara is predicted to reach a population of 2.1 billion by 2050, an estimated 22 percent of the global population. Since 1990, SSA’s population has grown by 96 percent, compared to average global population growth of 38 percent. This exploding population has also resulted in some unique demographics in Africa – more than 60 percent of the region’s population is under the age of 25, and the country’s urban population has expanded from 27 percent in 1990 to 38 percent in 2015. At the same time, SSA’s rural population also continues to grow in absolute numbers.
This combined rural-urban growth is particularly important for the agricultural sector. According to the report, agriculture still makes up the primary livelihood for 25 percent of the region’s urban population. This means that enhancing the sector’s productivity has significant potential to improve both rural and urban livelihoods, as well as to stimulate demand and job opportunities in off-farm employment through multiplier effects as a result of gains in agricultural productivity. For example, as productivity increases and agriculture becomes increasingly commercialized (and less subsistence-based), new jobs may be created in the food assembly, wholesaling, processing, and retailing stages of the food value chain.
The report also highlights unequal income growth as a major factor constraining the region’s agricultural growth. There is some evidence that overall incomes, and the middle class, is rising in SSA; the African Development Bank reported that the share of the region’s population considered middle class grew from 27 percent in 1990 to 34 percent in 2010. However, of that 34 percent , roughly 60 percent had per capita daily consumption of only US $2-4; this is at the very lower limit of what the African Development Bank defines as middle class, meaning these people are barely out of the “poor” category and are at risk of falling back into poverty very easily.
In addition, SSA still has some of the highest income inequality rates in the world. According to a 2012 report from the African Development Bank, The poor (<$2/day) account for 60.8% of those who live on less than US $2 per day) account for 60.8 percent of Africa's population and hold 36.5 percent of the region’s total income; the rich (those who live on more than US $20 per day) account for 4.8 percent of the population and 18.8 percent of total income. This uneven distribution of wealth slows the further growth of the middle class, limiting the number of consumers with the financial means to purchase more diverse, nutritious foods and constraining growth in the demand for food. If income growth continues to be concentrated in only a narrow segment of society, this could also diminish the income multiplier effects discussed previously that would otherwise stimulate off-farm job growth.
The report argues that perhaps the largest challenge facing the region’s agricultural sector is weak infrastructure and low technological adoption. For example, poor transportation networks prevent rural households from accessing markets, leading to higher post-harvest losses and constraining the efficient distribution of important agricultural inputs like seeds and fertilizers. Costly and lengthy transportation from farm to market also increases the cost of food. Improving transportation networks would thus benefit both producers and consumers. Similarly, the uptake of improved farm practices, such as irrigation, remains low in the region. Increasing access to and use of efficient irrigation systems would help farmers throughout the region address the challenges posed by climate change (including drought and higher temperatures).
Overall, Africa’s agricultural sector faces a complex set of challenges, but also some significant opportunities. In fact, the report concludes relatively optimistically – it predicts that total agricultural production will rise by 2.6 percent per year through 2025. In addition, the expansion of area dedicated to farmland is expected to slow during this same period, suggesting that agricultural growth will instead be driven by improvements in productivity. Several factors will play into this increased productivity, including increased technology adoption and the continued integration of smallholder farmers into the agricultural value chain.
Achieving this projected growth, however, will require strategic investment by both the public and the private sectors, as well as the creation of an effective political enabling environment that promotes private sector investment and job creation. Only by properly addressing the megatrends discussed in the report – both their challenges and their opportunities – will policymakers be able to effectively transform Africa’s agricultural sector into a sustainable, inclusive economic driver.
By: Sara Gustafson, IFPRI