African Agriculture Budget Reform Initiative: Policy Challenges in Global Context

1. Collaborative Africa Budget Reform Initiative The Policy Challenge for African Agriculture

2. Global Context • Development theory based on diversification & industrialisation • Donors neglected agriculture since 1970s (MFI moved to rural development, CGIAR reduced profile …) • Limits to growth ignored, until turn of century when climate and water constraints raised profile (egFAO, IWMI, WDR 2008) • Some rethinking of development theories (eg Lipton 2005) • World food crisis 2008. ‘Perfect Storm’. Food-energy-water-climate nexus • Debate about pro-poor growth and agriculture (IFPRI)

3. Production

4. Sources of Increase in Production

5. Productivity: Yields

6. Productivity: Labour

7. Constraints • Water • Inputs • Machinery • Farm practices: new green revolution, conservation agriculture • Research and extension (and private involvement in this) • Land rights (private .v. strengthening communal) • Women’s role • Ability to expand area • Infrastructure, especially roads • Labour supply, especially with HIV/AIDS • Markets and financial services

8. African Response CAADP (2003) arising out of NEPAD (land/water management, market access, food supply and hunger, research) • Growth target of 6% • Public expenditure target of 10% • CAADP Compacts and Investment Plans in 30+ countries AfDB’s Africa Food Crisis Response Framework and Agriculture Sector Strategy (2010) SADC’s Regional Indicative Strategic Development Plan, with agriculture as one of 4 pillars ECOWAS Common Agricultural Policy Many African countries now have agricultural strategies

9. CAADP Targets Growth target of 6% Public expenditure target 10% of total public expenditure to agriculture

10. Public Agriculture Spending

11. Investment in Agriculture • Agricultural capital stock per worker is $2200 for Africa, $1700 for S Asia, $1300 for E Asia (especially low for China), $16500 for Latin America and $90,000 for developed • Agriculture has the highest share of total investment in the world (ie 13.9%, compared with 9.7% for Asia, 6.2% for Latin America and former CIS and 1.9% for developed countries) • For all developing countries 78% of agri investment is private on-farm investment, government is 19%, ODA is 2% and FDI 1% • But FDI is growing. Investment funds have a stock of 7% of agri private investment

12. Market Opportunities

13. Smallholder .v. Commercial • Commercial often promoted because considered likely to grow fastest and often contributes to exports • But linkages are less good for commercial, so multiplier effects and poverty reduction is lower • Compromises can work – especially outgrower schemes • Commercial may give higher returns per dollar and per person, but not necessarily higher per hectare or per litre of water • Smallholders can produce higher quality (eg coffee)

14. Subsidies • Washington consensus worried by: • Crowding out of private development and undermining markets • Heavy and unpredictable demands on public finance • Difficulty of targeting benefits to poor • Risk of giving incentives that embed inefficient practices • Evaluations of subsidies show some benefits and mixed conclusions • So recent rethink of this consensus, provided that • Clear objectives and rules, to create market confidence • Packages adapted to local conditions • Complemented by other support • Procurement through the market to avoiding undermining it

15. Water • Water likely to be the most limiting natural resource • Over 70% of global water use is for agriculture and use in increasing by 50% every 20 years • Only 4% of African land is irrigated • Lots of scope for improved efficiency of water use • Techniques for improving soil moisture (eg conservation agriculture, but also water harvesting) • Improvements in managing water rights • Groundwater opportunities • Improving efficiency within irrigation systems • Often said that irrigation gives poor returns in Africa, but this is questioned in recent studies

16. Energy

17. Climate Change: the Challenge • African farmers amongst the most vulnerable in the world • Risks include: • Temperatures going above crop tolerance thresholds • Droughts and floods (most dramatic) • More unpredictable rainfall patterns (possibly most impact) • Average rainfall trends more mixed (N&S drier, E&W mixed), with some parts (Sahel?) getting wetter • Global analysis suggests rural incomes could be over 10% lower by 2050, with a 2oC temperature rise • But also suggests that there are good options for adaptation: • Improving soil moisture (CA, water harvesting, groundwater …) • Crop varietal improvement • Livestock • Disaster early warning

18. Climate Change: the Response • Difficulties of modelling risks and so of refining response • International modelling improving (eg on extreme events) • Large agri-impact models expensive, time-consuming and done abroad • Rapid modelling options may be more useful • NAPAs were first national response, but criticised for ‘shopping list’ approach (no strategy; only new actions; no funding limit, disconnected from national systems) • NAPAs being superseded by NAPs addressing these issues • Green Climate Fund potentially huge, and suppose to use country systems, but no agreement on modality and most African countries will struggle to show capacity to implement and supervise • Lots of CC projects but very varied, poor coordination and lots of TA

19. Land and Acquisition

20. Evidence Based Policy Formation • CBA still done on many projects, though less important now • Research and extension. Often very high, depending on adoption rates. • Livestock. Some examples of BCR of 1.8 to 2.6, for large programmes. • Irrigation. Strong for large scheme rehab. Others depend on yields, prices. • Market development. Some examples of very high returns. • Subsidies. Difficult to analyse. • Rural roads. Long traditions, but not often applied. • Logframes and results-based management growing • Poverty and Social Impact Analysis focuses on poverty • IFPRI Modelling of agri policy impact (linkages with other sectors) • Is the evidence used in policy or project formation? Difficult link. • SWAps use indicators, but PROAGRI shows the problems

21. In Summary …Key Challenges and Dialogue Points • Should we be looking for new ‘green revolution’ farm techniques (conservation agriculture, drought resistant seeds, new approaches to irrigation …) or just supporting good farming across existing techniques. • Are input subsidies an efficient way of promoting new techniques? • How to intervene in markets to reduce price variability, whilst also promoting market development. • Establishing the right values for water and for energy to ensure efficient production choices and avoid food price rises. • Does private or communal land ownership give greatest security and protection from displacement? • Whether smallholder or commercial agriculture make the highest contribution to development and poverty reduction.