New publication from World Bank & FA O 2010 Africa CAADP Forum Azalaï Hotel, Ouagadougou

1. New publication from World Bank & FAO 2010 Africa CAADP Forum Azalaï Hotel, Ouagadougou October 4, 2010

2. Three worlds of agriculture 80% 20% 0 0 50% 100% Agriculturebasedcountries Mainly SS-Africa 417 million rural people Agriculture’s share in growth 1990-2005 Transformingcountries Mainly Asia, MENA 2.2 billion rural people Urbanizedcountries Mainly Latin America 255 million rural people Rural poor/total poor, 2002

3. Improved opportunities • From 2000-15, demand for food in Africa projected to double High value, labor intensive products for external, regional and domestic markets offer strong growth opportunities Projected cereal deficit Sub Saharan Africa Developing country exports

4. Remaining challenges • Policies to: • Reduce remaining distortions, discriminatory taxation • Make smallholders competitive, build markets • Improve subsistence and reduce risks • Facilitate exit from agriculture through employment elsewhere • Recognize heterogeneity • Multisectoral: think beyond agriculture • Work regionally to expand markets and reach economies of scale • Reinvest (particularly in technology and infrastructure)

5. But Questions Remain Can Africa compete? (Skeptics cite soils, agro-ecology, location, infrastructure) Can small farms compete? Go for exports? Or look closer to home? Can Africa pick up the pace, overcome history of missed opportunities in agriculture?

6. Recent study from World Bank & FAO

7. African Guinea Savannah • 800 - 1,100 mm rainfall • 150 - 220 days season • 600 million ha total area • 400 million ha suitable for agriculture, but less than 10% currently cropped • One of the largest underused agricultural land reserve in the world • 3 cropping systems: • Cereal - root crop • Root crop • Maize mixed

8. Brazilian Cerrado Pre-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); reduced poverty

9. Northeast Thailand Pre-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

10. In Africa Case study countries Mozambique, Nigeria, Zambia Target commodities Cassava, cotton, maize, rice, soybeans, sugar

11. Farm-level production costs in Africa are often low compared to other regions • Africa’s producers are generally competitive in domestic markets • Africa’s producers are generally not competitive in global markets

12. Regional markets offer most promising opportunities for expansion over the short to medium term • Competitiveness of African countries is undermined by inefficiencies in domestic logistics, residual taxation • Smallholders have a critical role to play as source of competitiveness in Africa

13. Scale of production Farm size and commercial agriculture: Is bigger necessarily better? Literature: Small farms more productive Large farms have historically enjoyed privileged treatment: • Land access • Tax treatment • Input and output subsidies • Infrastructure

14. Scale of production Bigger can sometimes be better Scale economies in processing • “Plantation crops” where contract farming with small producers is too difficult Crops with stringent quality requirements • Need for backward traceability, standards Low population density areas (mechanization) • Where immigration is politically infeasible, internal migration slow, and contract hire services do not emerge

15. With increased FDI, some new farms are really big • Sime Darby (oil palm)—Malaysia, Indonesia and with > 600 K ha (220 k planned in Liberia) • Cosan (sugar-ethanol)—Brazil with >300k ha and 300k ha of contract growers • El Tejar (grains)—Argentina/Brazil 600k ha • Ivolga (grains)—Russia > 650 k ha • Fibria (pulp)—Brazil > 500 k ha Eucalyptus • operational units usually 5-20 k ha

16. …with significant risks FDI in Big Farms: Opportunity and Risk A major opportunity… Fills a huge investment gap Transfer of technology and know-how (but not much for staples) 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

17. Smallholders can realize scale economies • Contract farming with smallholders • Machine hire services by the private sector • Effective producer organizations Smallholders can and do compete.

18. Bright prospects for Africa • Rapid growth and strong demand prospects • Better domestic macroeconomic policy • Interest of private sector • Increased public investment • New technologiesfor production andprocessing

19. Constraints to be overcome Compared to Brazil and Thailand • Tougher international competition • Exogenous shocks (HIV/AIDS, climate change, global markets) • Residual impediments in investment climate • Financing gap: national funds not enough • Less social cohesion, political stability, and administrative capacity

20. Received Wisdom: Macroeconomic management better, sectoral policy improved in developing countries. True for macroeconomic management, but recent work calls into question whether agricultural sectoral policy has improved enough in Africa.

21. Distortions to Agricultural Incentives:Trends, & ProspectsKym Anderson & Will Masters • Better macro management and uneven progress on sectoral policy. Lots of room for improvement • Many African countries reinvesting in agriculture are pouring water into leaky pails • Increased investment, but continued taxation • Poor incentives reduce returns to investment • Taxing exports, protecting import substitutes • Net effect neutral, but damage on both sides • Relevant to studies of competitiveness and value chains

22. Net taxation of agriculture reduced most in Asia, less in Africa

23. Africa must move, and fast. • Grounds for cautious optimism, but sobering history of missed opportunities. • Not investment or policy: both • Gradually reduce implicit taxes where possible • Target growth in domestic and regional demand • Prioritize logistics spatially • Reduce regional trade barriers • Address land issues • Environment, climate • New technologies • Engage the private sector

24. Niger farmers have turned back the encroaching desert in one generation--5 million ha of desert land reclaimed ( WDR 2010)

25. Downloads Main report http://siteresources.worldbank.org/INTARD/Resources/sleeping_giant.pdf Policy Brief http://siteresources.worldbank.org/EXTARD/Resources/336681-1231508336979/SleepingGiantFinal.pdf