Let's make agriculture cool again

© Stephan Gladieu / World Bank

Governments around the world are looking for economic growth and job creation. African economies are no exception, with increasing recognition that growth has to be built on a more diversified economic structure in order to make a lasting contribution to development. For even though Africa has weathered the fall in commodity prices better than the pessimists predicted, the instability of commodity dependence remains a reality.

In their pursuit of growth and diversification, African economies should consider transforming the discourse from a focus on industrialisation to a broader one centred on value addition in agriculture, manufacturing and services. There is no one size fits all approach to value addition. It is worth analysing whether the well-established post-1950s path to development - moving people and resources out of low-productivity subsistence work, especially farming, and into more productive activities in modern manufacturing and ultimately services - is still the optimum approach to job and wealth creation.

This doesn't mean that African governments should give up on manufacturing and trade. In fact, as China moves up the value chain, there is much potential to attract labour-intensive light manufacturing, as is already happening in countries as varied as Ethiopia and Madagascar. What it does mean is that African governments, partner countries and multinational companies should do more to encourage investment not just in export-oriented manufacturing, but also in services, innovation and agri-processing. This involves investing in the 'framework of trade': from improving policies and physical infrastructure to lowering production and trade costs, fostering better business links to regional and international buyers and ensuring ready availability of financing for small and medium-sized enterprises (SMEs).

Agriculture deserves particular attention, because it accounts for around 60% of the labour force in Africa - more than 70% in countries like Liberia and Guinea. And it employs the vast majority of women, especially in sectors such as coffee and tea. Many African smallholder farmers did not share in the 'green revolution' productivity gains driven by modern seeds and techniques, irrigation, and greater fertilizer use in Asia and Latin America in the 1960s. In sub-Saharan Africa, irrigation still reaches only a small share of arable land, and the wide variety of staple crops - from teff in Ethiopia to cassava, yams, millet, and maize elsewhere - means that crop strain innovation is a taller task than in Asia where wheat and rice dominate.

Efforts are ongoing to close the yield gaps in African farming by overcoming limited irrigation and other inputs, low-yield seeds, inadequate storage, weak climate resilience, and uncompetitive access to local - let alone international - markets. Initial results are promising. Success could be transformative: with half the world's uncultivated arable land, and relatively underused renewable water resources, Africa should be at the heart of feeding the 2.5 billion new mouths - many of them African - the global population is projected to add by 2050.

Yet substantially higher productivity will mean that far fewer women and men will be needed to till the soil itself. And people likely won't be able to walk off the farm and into low-skilled urban manufacturing jobs as they might have done half a century ago in Spain and Korea. The risk is that many people will end up languishing in low-productivity informal service sector work.

The goal, then, must be to transform today's subsistence agriculture into tomorrow's agro-processing. Agricultural production, transformation, and related activities like branding, marketing and logistics could become alternative drivers of value addition and the creation of decent jobs.

While tariffs and distortionary subsidies in developed countries have long discouraged investment and value addition in agriculture in Africa, the playing field has significantly changed. Trade reforms and booming South-South and regional trade opportunities have opened new avenues. There is no intrinsic reason African countries should be importing, rather than exporting, basic staples like rice or higher value products like frozen chicken, cooking oil, or instant noodles.

But for agro-based industries to 'jumpstart economic transformation', challenges must be overcome at every step of the value chain. Farmers will need much better access to finance, electricity, technology, and irrigation. Agro-industry will need to expand both 'downstream', which is to say in processing, and in 'upstream' input-related activities. Health, safety, and sustainability standards - both public and private - will need to be met. And crucially, small-scale farmers, and SMEs, instead of only selling locally in low-income communities, will need to connect to more productive regional and international value chains. None of this is straightforward, and constraints on agro-industry vary from one crop or location to the next.

But the payoffs make it worth trying.

In Uganda, for example, the International Trade Centre has connected coffee farmers with traders and roasters looking for particular taste characteristics. The resulting long-term contracts and knowledge-sharing have resulted in improved productivity and quality, and a substantial increase in farm-gate prices. Finance management counsellors were trained to assist farmers' associations to raise working capital to purchase members' coffee and sell it on in bulk, enabling farmers to get higher prices than what they could have negotiated on an individual basis. This approach - addressing weak points in the value chain and building connections to foreign buyers - has fostered more processing and higher incomes in the Ghanaian yam sector, the Caribbean coconut industry, and for cassava farmers in Fiji.

Steadily growing demand from African consumers has confirmed that late management guru C. K. Prahalad was right a decade ago when he urged global businesses to seek out the fortune at 'the bottom of the pyramid'. The challenge now is to fully harness the entrepreneurial energies of the bottom of the pyramid as producers.

In Africa, agro-industry must feature more prominently in the structural transformation process. Harvard science and technology expert Calestous Juma has argued that agriculture is more knowledge-intensive than manufacturing, and offers great opportunities for technological learning. There are solid grounds to believe this learning could spill over into other sectors.

The UNCTAD XIV conference in Nairobi this month provides a valuable opportunity for national governments, investors, and the international community to think about how to develop the sustainable agribusiness value chain in Africa. It is time we made agriculture 'cool' for new generations, by making it more rewarding.