Collier, a distinguished economist and author of the award-winning book “The Bottom Billion”, was direct in his opening remarks.
“Smallholder agriculture has been a persistent productivity disaster for Africa,” said Collier. “Despite a huge land area to population ratio and higher proportion of its labor force engaged in food production, Africa is still not able to feed itself. The smallholder business model of the last 50 years is fundamentally flawed…maybe it is time for a Plan B.”
African agricultural productivity remains astoundingly low and stagnant at about $500 per person per year. His solution: debunk the ‘myth of the efficient peasant’ and rural romanticism and support commercial agriculture and urban growth.
Commercial agriculture reaps economies of scale that provide advantages often beyond reach for smallholder farmers yet are critical to agricultural production in Africa—risk finance, liquidity, technology, logistics, and knowledge of markets. Collier points to the success of Brazil and Thailand—two emerging economies that differ in scale of commercial organization, but have become major agricultural exporting countries.
Byerlee, a renowned economist and director of the 2008 World Development Report, agreed with Collier that commercial agriculture is likely Africa’s future, but that market-oriented smallholder farmers will play the lead role.
“We have much to learn from emerging business models,” said Byerlee. “Smallholders and agribusiness have complementary assets that can contribute to commercial agriculture, and states and investors must help facilitate smallholder inclusion in these models.”
Byerlee noted that the choice between small-scale or large-scale production models depend on transaction costs and type of commodity, and are context specific. Small- to medium scale production is best suited to most types of products in Africa especially food staples and many labor intensive products (e.g, diary). This follows the example of Thailand that not only has succeeded in food production but alone exports more than the value of all sub-Saharan Africa. Value chains that require stronger coordination with processing and shipping (e.g., sugar and palm oil), demand market standards (e.g, export horticulture) or are taking pioneering risks (e.g., new crops in new areas) may be better suited for large-scale production. Benefits may still be large if they create good jobs—a major challenge for Africa’s future.
Where to invest in Africa’s future?
"Young Africans are voting with their feet in droves to leave smallholder agriculture because it is impoverishing and boring, “ said Collier. “The economic tragedy for Africa is that cities haven’t been the engines of economic opportunity and wage employment.”
Collier argued investments in cities over agriculture are needed to prepare for an urban future and must be done quickly due to one dangerous fact—climate change.
“Climate change is the train coming down the tracks and it is already happening in Africa,” warned Collier. “The continuing deterioration of African agriculture is already set in stone. The last 50 years of carbon emissions are going to continue to devastate Africa’s climate over the next 50 years.”
Collier fears climate change will shift Africa’s competitive advantage in agriculture to Northern Eurasia and North America. Therefore, limited investment dollars must shift to cities which are more climate resilient. Byerlee disagrees.
“There is overwhelming and convincing evidence that agricultural growth is important for poverty reduction and food security,” said Byerlee. “Look at the Green Revolution in Asia and the institutional reforms in China in the early 1980s.”
The 2008 World Development Report also found GDP growth from agriculture benefits the income of the poor two to four times more than GDP growth from non-agriculture. So why isn’t this working for sub-Saharan Africa?
Byerlee points to Africa’s history of poor macroeconomic policies that have disadvantaged African farmers. Smallholder farmers have traditionally been taxed at high levels (as much as 50 percent 20 years ago before liberalization programs started kicking in). Rates have come down dramatically to 15-20 percent, but are still significantly higher than other countries.
“African states must level the playing field,” said Byerlee.
Government investment in public goods at four percent of agricultural GDP still lags behind that enjoyed by most other countries. That is less than half of what has been spent in Asia over the last couple of decades where investment in core public goods, R&D, rural roads, and irrigation have really made a difference.
Access to land and finance must also improve to support the growth of smallholder agribusiness. This especially includes secure, low cost, and transferrable land rights to allow efficient smallholders to expand.
Greater investment is also needed in technology and information. Research and development in Africa have been traditionally underfunded and understaffed. Despite involvement of agricultural research groups such as CGIAR over the last 40 years, only 35 percent of food crop area is planted to improved varieties. Smallholder farmers also often lack business development skills and access to primary education – a critical constraint to growth.Reasons for optimism
Many of these macropolicies are slowing changing, and that makes Collier and Byerlee hopeful.
“After four decades in sub-Saharan Africa I feel optimistic about Africa’s food systems and future,” said Byerlee. “I see exciting opportunities in terms of market growth, private interest, and improved policies.”
Yields in Africa are low, but there is room for significant improvement. The continent is home to potentially 240 million hectares of uncultivated land and less then 20 percent of irrigation potential has been tapped.
African agricultural systems are transforming rapidly in response to rising rates of income growth, urbanization, and shifts in demand for high value and processed food, and feed for livestock. Higher food prices are incentivizing farmers to enter the market and increasing farmer income. Regional markets now accounting for only 5-10% of trade have much potential to expand, and Byerlee projects the value of African urban food markets to quadruple over the next 20 years.
Renewed investment in Africa is another reason for optimism. After decades of declining support donor agencies are refocusing their efforts on supporting agricultural development in Africa. Private sector investment, ranging from local to foreign investors, is also increasing. Collier spoke of the value pioneer commercial investors are bringing to unused and underutilized, but arable lands in Africa. These larger investors are better able to internalize the benefits of infrastructure supply while creating jobs and opening new markets.
The spur in foreign investment has drawn some fire from opponents worried about ‘land grabbing’. Collier and Byerlee both pointed out the need to differentiate between commercial investors and land speculators. The latter are being scrutinized, and for good reason.
Land speculators are leasing huge tracts of land over long time horizons and banking on the land’s option value if there is a big spike in food prices. This takes potentially arable land out of near-term production and out of the hands of local communities. Byerlee suggests governments impose controls on how rapidly the land is developed as one way of managing this problem.
What will a successful African food system look like in 2050?
"African peasantry as we know it today will not be preserved," projects Collier.
“If commercialization is successful most Africans will live in big coastal cities like the US and Europe,” said Collier. “Most of the remaining rural population will move to the hinterland of the big cities, because profitable agriculture will be selling into the big cities from close vicinity."
He envisions a mixture of different types of commercial agriculture ranging from consolidated family farms as is the norm in the US to large-scale enterprises as seen Brazil, but agriculture will not employ a lot of people. He sees an opportunity for commercial agriculture to piggyback off the infrastructure put in place by extractive natural resource companies.
Byerlee foresees Africa headed down a path similar to Thailand where a more egalitarian, smallholder commercial farmer model dominates (2-5 hectares). Large-scale farming has a legacy of failure in Africa, he said. He sees better prospects for large-scale irrigated rice and perhaps oil palm. Oil palm was actually an African crop prior to moving primarily to Malaysia and Indonesia. The value of South East Asian exports of palm oil is now greater than all agricultural exports from sub-Saharan Africa. In fact, Africa now imports $3.5 billion in palm oil.
“With billions of dollars at stake, big Asian companies are investing in Africa with the potential to create millions of jobs,” said Byerlee. “Oil palm could be a really big opportunity to transform African agriculture in the humid tropics, but state support is needed to facilitate inclusion of smallholders and safeguard social and environmental standards."
Africa has the natural resources to become a major player in the global agricultural export market and to bring down its alarmingly high malnutrition and poverty rates. What’s needed now is the political will, guidance, and investment to make that happen.