Owing to a combination of adverse factors, African countries have lost their dominance of the several commodities markets to better-organised players.
“They have been overtaken by countries in Asia (especially India, China, Thailand, Malaysia and Vietnam) and South America (especially Brazil) that are better able to meet consumer demand.
Increasing the production of ÔÇö and export revenues from ÔÇöagricultural goods entail developing production and processing capacities and marketing channels and outlets. On this score, African agricultural and agribusiness systems from production to the markets need to be re-engineered, financed and upgraded so that it will become more productive, valuable to the consumer, and competitive in the global agricultural markets,” says an African Development Bank report titled “Agricultural Value Chain Financing (AVCF) and Development for Enhanced Export Competitiveness.”
This is indeed bad news for a continent where agriculture is the main export revenue source for many African countries and the largest income generator for their populations. An estimated 70 percent of Africa’s population depends on agriculture for full-time employment, and many others rely on agriculture for part of their household income. About one billion people live in Africa and some 200 million of them live with food insecurity. The bank says that while economic growth in Sub-Saharan Africa (SSA) has averaged close to 3 percent over the past 25 years, per capita growth for the SSA population dependent on agriculture has been less than 1 percent over the last two decades compared to 2 percent per annum in Asia and nearly 3 percent in Latin America.
“Farmers have been working harder, more people have taken up farming, but productivity has not increased. Most of the agricultural growth in SSA is related to increasing the land area under exploitation rather than to increases in productivity. At current rates, it is estimated that Africa will be able to feed less than half its population by 2015,” AfDB says.
The end result has been that while international agricultural trade has been growing very rapidly, Africa has not taken full advantage of this growth.
The value of food trade alone has increased by 50 percent over the past 10 years. This increase was a result of inflation as well as overall growth in global business flows. However, agricultural export performance in most African countries has not matched the economic growth records over the past decade.
“Overall, the continent is not benefiting from global tariff reductions
that the World Trade Organization is promoting,” says the report, noting in another part that since 1960, trade in SSA has grown at three-quarters of the world’s rate and at only about half of Asia’s rate and that its share in world trade fell from 7-8 percent in the 1960s to 3-4 percent in the 2010s.
AfDB says that without market knowledge, particular expertise, and competitive products and services, SSA will essentially fail to take advantage of the potentially high benefits of global markets and the increases in global trade flows. Additionally, SSA’s economies that are unable to claim a more significant share of global trade will find it difficult to achieve the sustainable, and accelerated growth rates that are necessary to reach the Millennium Development Goals (MDGs) and significantly reduce poverty on the continent. African governments have themselves not been too helpful because, as the report observes, they “often do not give agriculture a high priority and tend to view rural areas as sources of political and economic patronage rather than as a focus for development efforts.”
One development effort the bank recommends is physical infrastructure because in Africa, a typical farmer is five hours away from the market area and transport costs are among the highest in the world – as much as 77 percent of the value of exports.
“Africa could focus on these vital levers of growth early on the presence of infrastructure itself incentivises investments and establishes good value chains. Affordable physical infrastructure is, in fact, a major source of competitiveness in agricultural value chains,” the bank says.
The report stresses the need for African countries to increase the quality and sophistication of African goods and services, implement regulatory reforms to take full advantage of global markets, and introduce cost-effective measures for structural adjustments and regional imbalances.