Agriculture remains engine for economies growth in Africa

30 Aug, 2019 - 00:08 0 Views
Agriculture remains engine for economies growth in Africa

eBusiness Weekly

Luke W. Gumbo

Agriculture remains the engine for growth for many economies in Africa and Zimbabwe is no exception. Agriculture contributes 15-18 percent of Gross Domestic Product (GDP) in the Zimbabwean economy.

In addition, it contributes over 40 percent of national export earnings and 60 percent of raw materials to agro-industries. Over 70 percent of the population derives its livelihoods from the agricultural sector both in the rural areas and peri urban areas.

Following the reorganisation of productive land wherein the land was democratised, production patterns in the country assumed a wholly new pattern where smallholder farmers increasingly began to make vital contributions to the productions of the country’s main crops.

While the A2 model, commercial and large-scale models continue to under-perform their potential due to a myriad of reasons, not least the absence of a liquid asset transfer system to unlock bank finance, the smallholder has punched above his weight against the odds. For their part larger landholdings have struggled. Lack of finance capital for many has meant they have not got off the ground and some have significant areas of under-utilised land, with infrastructure in disrepair.

Despite the woeful lack of adequate and timely support, the smallholders have done reasonably well. Most are producing surpluses and reinvesting in their farms. Around an estimated two thirds have produced more food than just for subsistence in nearly all years.

No-where is this in more evidence than the tobacco industry, where a relatively efficient management system allied to an industrious farming community buoyed by a market-based pricing system has seen the industry break production records with 2018 production reported to be 250 million kg and grower revenue of US$559 million.

Much of this success has been achieved on the back of significant buy in and participation by the small-holder farming community.

Similar stories of success have been recorded in cereals like maize and cotton when conditions have permitted. It would be apt to contextualise this success just to give perspective to the improbability behind it and also explode the myth that the smallholder community and indeed much of the rural areas can at best be viewed as subsistence communities.

Much of the poverty and low productivity of the communal areas are due to past government policies of racially segregated land apportionment under which Africans were restricted to the agriculturally more marginal parts of the country. The denial to African farmers of access to credit facilities and marketing services, inadequate provision of adequate services, remoteness in relation to national markets and poor transport infrastructure among other problems in the past make their present efforts even more impressive.

Against these odds post land reform, the smallholder farmer has become the vital cog in the food and nutrition chain in the country.

This out-sized performance is not restricted to crops only but even in the livestock sector, the small-holder has carried the load.

Beef production is primarily drawn from the rural community, in excess of 80 percent, poultry production is 65 percent driven by independent smallholder producers.

It is important for all stakeholders to recognise these successes, investigate their roots so as to recreate these conditions across the board. The capacity to succeed is resident within these communities. The differentiator has, especially if you take the tobacco industry and poultry production system under consideration, the market-based system in place, albeit with its modifications has provided a sound basis upon which the success in these industries has been achieved.

Borrowing from Winston Churchill when he was quoted in a speech, “democracy is the worst form of government, except for all those others that have been tried,” the same can be argued for the market system.

A case can be made as I am indeed stating that the farmer requires that opportunity be made available, he needs no guarantee of success. The market system puts the farmer and his ability to supply the market efficiently at the centrer of activity.

A market based system aligns incentives in accordance to the demand of the service and good. It also ensures, through a proper pricing mechanism, that efficient and prompt transmission of information to all stakeholders is made.

Inefficiencies can be attended to within the scope of the value gained through resolution of those issues. A market system also matches risk and reward down to cell level, a system that encourages responsible management of resources, in much the same way a vehicle owned at household level is often managed better than a car owned by the whole community.

A near market system as seen in the tobacco industry has laid the platform for equitable taxation, provision of research and innovation all within the ecosystem of the value generated by the production of tobacco. Policy makers should be fascinated by the manner in which the industry has been able to create such value and the framework that has made that value possible.

Contrasted with present government interventions within the agriculture, it appears that the feedback loop on how these policies impact the rest of society is either muted or not used in the calibration of future policies affecting the industries.

Take the Presidential Input Scheme, an unequivocally noble initiative and as a welfare scheme, an intervention any responsible government can be expected to roll out. But supporting 1,8 million households in a population of 13 million in a bumper harvest year can be argued to be unsustainable.

Command Agriculture can be operated as a revolving fund as opposed to an annual withdrawal from the fiscus.

This will lessen the fiscal allocation to a sector that under a dominant organising principle such as the market system can actually be net positive to the rest of the economy.

Alternatively, fiscal allocation to agriculture can then be shifted to infrastructure development such as rapid development of irrigation systems that are needed and research and development efforts.

A vibrant and growing agricultural sector will reduce the need to import basic food requirements, alleviating pressure on the exchange rate, while exports from the agricultural sector will also increase the countries exchange reserves.

Properly organised, it will also deal a significant blow to the unemployment nightmare the country is presently experiencing.

Beyond that, the economic transformation experienced in Asian countries such as Taiwan, South Korea and Japan has been told as a triumph of industrialisation.

Little told in the mainstream media is the role agriculture played in setting the stage for industrialisation in those countries.

In particular the role of what they term highly labour intensive farming households, which in our case would be smallholder farming. Focusing on maximising output through an emphasis on higher yields much progress was achieved.


Luke Gumbo is an economist and financial analyst. His views are personal and in no way represent any of the institutions he is associated with.


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