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Thursday, November 13, 2014

Unlocking the Power of Africa’s Smallholder Agriculture

Africa accounts for 60 percent of the world’s arable, uncultivated land, according to a report published by McKinsey Global Institute in 2010. The FAO has shown that cereal yields in Africa are currently less than 50 percent of those in Asia or South America. Such low productivity is largely attributable to the current state of smallholder farming.

It is estimated that about 75 percent of all farmland in Africa is less than 2 hectares in size. Nearly 70 percent of Africa’s population lives in the rural areas where they depend exclusively on agriculture as farmers and/or laborers for their livelihoods. A large percentage of these smallholder farmers are women.

A World Bank report published in 2011 estimated that the global food price spikes in 2008 pushed 44 million people below the poverty line, most of them in developing countries. According to Oxfam International, poor people in developing countries spend 50-80 percent of their income on food. Over 90 percent of Africans who live on less than $1.25 a day also happen to own and live on small farms.

As the green revolution in Asia showed, the potential of smallholder development can be realized. But conditions have changed. Now smallholders face higher transaction costs and have to cope with the fact that agricultural research is biased towards large-scale production. This raises new challenges in small farm development. On the other hand, higher prices of staple foods present opportunities for farmers.

India and China have similar proportions of small farms as Africa, but have achieved significantly higher productivity. Despite the success of smallholder farmers in Asia, who fueled the green revolution, there is skepticism that East Africa’s smallholders can replicate this model and deliver agricultural transformation and improve livelihoods among rural smallholder farmer.

It is argued that for agricultural growth to gain traction, Africa’s agricultural and labor productivity will have to increase massively, requiring vast proportions of smallholder farmers to move out of out of the farm. High productivity of modern agriculture is associated with high technology, intense capital input and market linkages, and hence higher capacity to compete aggressively in factor markets, including land, labor and capital. However, these factors are not appropriate for the smallholder farm model. While there is a strong poverty-based case for trying to assist smallholder farmers, the agenda for African agricultural growth should be to introduce commercial agriculture on a competitive basis.

Why is it that with all our research, technology and innovation, managerial capability and investment capacity, we are unable to make even a modest contribution to the pervasive problem of poverty, hunger and malnutrition in the smallholder farm families in sub Saharan Africa? We must learn from successes and failures of the past.

Doing more of the same by refurbishing the solutions of the past – development aid, nongovernmental organizations, training and visit, farmer field schools, international agricultural research organizations – is vital and has a critical role to play, but has not addressed the problem of low productivity, hunger and poverty among millions of smallholder farm households.
Paul Collier has argued that having the single most important sector of Africa’s economies almost exclusively managed by reluctant micro-entrepreneurs – smallholder farmers – is a recipe for continued divergence Africa’s from global agricultural productivity. But in the logic of the timeless wisdom of C.K. Prahalad, we must stop thinking of smallholder farmers as victims or as a burden as start recognizing them as resilient and creative entrepreneurs and value-conscious consumers.

What would be the defining characteristics of agriculture over the next half century if Africa were to converge on the performance of the Asia and Latin America?

I argue for a focus on small and medium sized enterprises (SME) agribusiness. But harnessing Africa’s agricultural potential requires talented managers and entrepreneurs that can attract capital, apply technical expertise to develop profitable SME agribusinesses. Moreover, serving SME agribusiness sector will demand innovations in technology, services and business models. Africa’s large youth population provides a ready pool from which to develop talented entrepreneurs and managers who will drive the growth of African agriculture.

Those of us in the research, education, policy, development and business community can be a positive force in making this a reality by using our resources to build the capabilities of the African SME agribusiness sector to generate economic growth and achieve food and nutritional security. 

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