Africa Rising? Historical perspectives and the impact of covid-19
foodFIRST deep dive session July 1, 2020
On the 1st of July, foodFIRST in collaboration with the Netherlands Food Partnership (NFP) organized a deep-dive session on Africa Rising? Historical perspectives and the impact of covid-19. The session the third session in our geopolitical series and builds upon the insights of the previous two sessions. Africa’s economic development model was explored and endogenous growth, food supply and agricultural development were investigated as potential critical economic drivers. Questions were discussed concerning how can, beyond the covid-19 pandemic, leapfrog Africa’s development model through policy interventions? A framing of Africa’s specific economic development model and the repositioning of Africa in the new global order was discussed as an introduction of our eminent speaker prof. dr. Ewout Frankema, Professor and Chair of Rural and Environmental History at Wageningen University and Research (WUR). Frans Verberne, Director of Food & Business Knowledge Platform, fulfilled the role of moderator for this session.
The session was held digitally and was divided into three parts. The first part dealt with historical perspectives that sketched a picture of the development path for sub-Saharan Africa. The second part zoomed into how agricultural productivity growth can uplift the development of the region. The final part presented several policy implications that can be applied by the stakeholders who were present during this ‘Vijverbergsessie’. All three parts were followed by a lively discussion. The objective of this session was to explore how can we support various critical economic drivers to leapfrog Africa’s development model beyond the covid-19 crisis. Ewout Frankema clearly explained this by inter alia laying out historical perspectives and by presenting economic data.
1. Historical perspectives on the development of sub-Saharan Africa
Professor Frankema opened the session with a clear statement. The United Nations’ SDG Goal 1: no poverty by 2030, is not feasible and a more realistic target should be set. Estimation of the World Bank suggests that (extreme) poverty in the world could not be eradicated before 2085. To eradicate extreme poverty in Africa by 2030, the pace of poverty reduction must go up from 1.2 to 2.4 per cent points per year. To compare: China’s poverty rate fell from 88 per cent in 1981 to 2 per cent in 2013. This is a 2.7 per cent points decline per annum, with a 1 per cent rate of population growth. In contrast, population growth rates in Africa are over two per cent now. So, the challenge for Africa is even greater without considering other contextual differences that set China apart from Africa and the rest of the world. Instead, the UN should adopt a more realistic model based on historical data; we need to be realistic on the time it takes to eradicate poverty. Poverty eradication strategies have a temporal component, so it is valuable to set realistic targets for transitions.
Frankema discussed the current revenue models for sub-Saharan Africa. The region has a comparative advantage with tropical cash-crops since the 19th century. And, from the 20th century onwards, this export package has been diversified with mineral wealth, in particular oil. However, this was predicated on low labour-resource/land ratios. Due to accelerating population growth that development path is shutting down; many economies cannot live off these revenues. Another 20th-century trend is that household resilience strategies are diversifying from mainly agrarian-based to rural-urban income differences. People are flocking into cities where they live in largely self-sustaining urban agglomerates. But these cities do not produce food. There is perhaps only one route to generate new revenue or jobs which is a shift towards ‘industrialization’. However, Africa cannot simply follow the export-led Asian development model. Africa needs to follow a development path that is suited for its needs.
Discussion following the first part mainly focused on whether industrialization and an export-led growth model would lift African countries out of poverty and how governance is a determent for African growth. To have sound market-driven development, state-driven development is vital. The state must design institutions to create an environment in which markets can function well. According to Frankema, African States must step in more. Agricultural development means declining labour usage in the agricultural sector, there need to be alternatives in other sectors (rural or urban), and this has to be guided by state planning. In the case of Africa, industrialization should be catered to domestic integrated markets, instead of global markets. A primary example of the need for domestic integrated markets is the service sector of sub-Saharan Africa that is rapidly growing.
2. What are the agricultural productivity growth opportunities for sub-Saharan Africa?
During the second part, Ewout Frankema has highlighted that sub-Saharan Africa’s food import dependence, of mainly cereals (rice and wheat) and oil crops, is on the rise. In 2011, imported food already consisted of 20 per cent of the total caloric intake of Africans. This phenomenon is problematic for Africa’s growth for numerous reasons. Firstly, it erodes scarce foreign reserves and it even increases debt positions. Secondly, there are still large yield gaps which result in missed opportunities. Thirdly, on a geopolitical level, it makes African economies dependent. Fourth, African population growth compounds import-dependency and adds pressure to reverse the trend. And lastly, there are yet no viable alternative revenue models. Imported food is attractive because, historically, global staple food prices have become relatively cheap in comparison to other commodities. African food is still too expensive, perhaps not the production side, but certainly when you add to trade, transportation, and transaction costs. The current key barrier is weak market integration. Addition barriers include the remoteness of smallholder farmers, high transportation costs, high trade costs (information asymmetries), lack of extension services, limited human capacity (education), lack of quality inputs and little investment capital e.g., smallholders. Stronger rural-urban linkages and market integration are key to overcoming this. We need a transition in the agricultural sector that raises productivity, but ultimately this will be followed by a net outflow of labour out of the agricultural sector. This is the first policy dilemma that needs a transition without distortion: what would be the alternative employment scheme for Africa and how can economic policy be coupled with social policy?
During the discussion segment of the second part, other barriers to agricultural productivity growth were mentioned such as issues with storage and distribution. And the point was raised that we should look at the development of the agricultural sector with a holistic view and consider the whole value chain. Furthermore, an agricultural transition also includes a continent-wide African market integration. The African Continental Free Trade Area (AfCFTA) could play an important role in lifting protectionism within the continent. Frankema urges policymakers to support this process. However, due to covid-19, the implementation of AfCFTA is postponed.
3. Policy implications and covid-19
Lastly, but maybe the most important part of the day, was the discussion on the policy implications against the backdrop of the covid-19 pandemic. Professor Frankema shared a few of his recommendations with everyone and specified on what level it should be undertaken. For instance, as highlighted throughout the presentation, market integration within and between African countries are crucial for the shift of becoming more food independent and increasing industrialization. Therefore, supporting the AfCFTA, on both a Dutch or an EU level, can be an important step for continental market integration and trade. Furthermore, a transition to market integration would lead to new distortions. One solution would be protectionism on the outer borders of the African market and the other strategy would be setting a social security system in place. This would also require an integrated approach to family planning or the reproductive rights of women, especially considering the rapid population growth of the continent. Besides, choosing the right policy level, Netherlands versus EU, is important. To approach the African Union, an integrated EU approach is desirable, especially when it considers trade negotiations, migration pacts or infrastructural investments in Africa. The Netherlands, as an important global food and agricultural leader, could support agro-technology on a more national or local level. Lastly, Frankema ended with a few words on the impact of covid-19 on the continent. There are large variations in the approach of states. Frankema worries about the economic implications of the measures that have been taken to combat the corona pandemic. There are signs of food market distortions and hunger could result in a new poverty shock. The biggest long-term effect could be a collapse of world market prices for African export commodities and balance of payment problems or fiscal imbalances which would lead to unsustainable debt.
During the final discussion following the third part of the presentation, the argument was made that we not only have to look at government to solve issues but that we should also involve and invest in the private sector. In policy, there should be room to ensure that the private sector can do its function with regard to corporate social responsibility. There was also a comment made that covid-19 restarted the debate on the sensemaking of global social security for the poorest people. Also, the question was raised whether the African continent can design inclusive policies and how we should go about that. Frankema responded that during this presentation, he focused mainly on the policy implication on the side of the Netherlands and the EU. A future session that would dive deeper into the policy implication on the African side, the challenges and the possibilities would be desirable. This could be discussed, for example, during the follow-up of the report of the Task Force for Rural Africa.
The session was held digitally and was divided into three parts. The first part dealt with historical perspectives that sketched a picture of the development path for sub-Saharan Africa. The second part zoomed into how agricultural productivity growth can uplift the development of the region. The final part presented several policy implications that can be applied by the stakeholders who were present during this ‘Vijverbergsessie’. All three parts were followed by a lively discussion. The objective of this session was to explore how can we support various critical economic drivers to leapfrog Africa’s development model beyond the covid-19 crisis. Ewout Frankema clearly explained this by inter alia laying out historical perspectives and by presenting economic data.
1. Historical perspectives on the development of sub-Saharan Africa
Professor Frankema opened the session with a clear statement. The United Nations’ SDG Goal 1: no poverty by 2030, is not feasible and a more realistic target should be set. Estimation of the World Bank suggests that (extreme) poverty in the world could not be eradicated before 2085. To eradicate extreme poverty in Africa by 2030, the pace of poverty reduction must go up from 1.2 to 2.4 per cent points per year. To compare: China’s poverty rate fell from 88 per cent in 1981 to 2 per cent in 2013. This is a 2.7 per cent points decline per annum, with a 1 per cent rate of population growth. In contrast, population growth rates in Africa are over two per cent now. So, the challenge for Africa is even greater without considering other contextual differences that set China apart from Africa and the rest of the world. Instead, the UN should adopt a more realistic model based on historical data; we need to be realistic on the time it takes to eradicate poverty. Poverty eradication strategies have a temporal component, so it is valuable to set realistic targets for transitions.
Frankema discussed the current revenue models for sub-Saharan Africa. The region has a comparative advantage with tropical cash-crops since the 19th century. And, from the 20th century onwards, this export package has been diversified with mineral wealth, in particular oil. However, this was predicated on low labour-resource/land ratios. Due to accelerating population growth that development path is shutting down; many economies cannot live off these revenues. Another 20th-century trend is that household resilience strategies are diversifying from mainly agrarian-based to rural-urban income differences. People are flocking into cities where they live in largely self-sustaining urban agglomerates. But these cities do not produce food. There is perhaps only one route to generate new revenue or jobs which is a shift towards ‘industrialization’. However, Africa cannot simply follow the export-led Asian development model. Africa needs to follow a development path that is suited for its needs.
Discussion following the first part mainly focused on whether industrialization and an export-led growth model would lift African countries out of poverty and how governance is a determent for African growth. To have sound market-driven development, state-driven development is vital. The state must design institutions to create an environment in which markets can function well. According to Frankema, African States must step in more. Agricultural development means declining labour usage in the agricultural sector, there need to be alternatives in other sectors (rural or urban), and this has to be guided by state planning. In the case of Africa, industrialization should be catered to domestic integrated markets, instead of global markets. A primary example of the need for domestic integrated markets is the service sector of sub-Saharan Africa that is rapidly growing.
2. What are the agricultural productivity growth opportunities for sub-Saharan Africa?
During the second part, Ewout Frankema has highlighted that sub-Saharan Africa’s food import dependence, of mainly cereals (rice and wheat) and oil crops, is on the rise. In 2011, imported food already consisted of 20 per cent of the total caloric intake of Africans. This phenomenon is problematic for Africa’s growth for numerous reasons. Firstly, it erodes scarce foreign reserves and it even increases debt positions. Secondly, there are still large yield gaps which result in missed opportunities. Thirdly, on a geopolitical level, it makes African economies dependent. Fourth, African population growth compounds import-dependency and adds pressure to reverse the trend. And lastly, there are yet no viable alternative revenue models. Imported food is attractive because, historically, global staple food prices have become relatively cheap in comparison to other commodities. African food is still too expensive, perhaps not the production side, but certainly when you add to trade, transportation, and transaction costs. The current key barrier is weak market integration. Addition barriers include the remoteness of smallholder farmers, high transportation costs, high trade costs (information asymmetries), lack of extension services, limited human capacity (education), lack of quality inputs and little investment capital e.g., smallholders. Stronger rural-urban linkages and market integration are key to overcoming this. We need a transition in the agricultural sector that raises productivity, but ultimately this will be followed by a net outflow of labour out of the agricultural sector. This is the first policy dilemma that needs a transition without distortion: what would be the alternative employment scheme for Africa and how can economic policy be coupled with social policy?
During the discussion segment of the second part, other barriers to agricultural productivity growth were mentioned such as issues with storage and distribution. And the point was raised that we should look at the development of the agricultural sector with a holistic view and consider the whole value chain. Furthermore, an agricultural transition also includes a continent-wide African market integration. The African Continental Free Trade Area (AfCFTA) could play an important role in lifting protectionism within the continent. Frankema urges policymakers to support this process. However, due to covid-19, the implementation of AfCFTA is postponed.
3. Policy implications and covid-19
Lastly, but maybe the most important part of the day, was the discussion on the policy implications against the backdrop of the covid-19 pandemic. Professor Frankema shared a few of his recommendations with everyone and specified on what level it should be undertaken. For instance, as highlighted throughout the presentation, market integration within and between African countries are crucial for the shift of becoming more food independent and increasing industrialization. Therefore, supporting the AfCFTA, on both a Dutch or an EU level, can be an important step for continental market integration and trade. Furthermore, a transition to market integration would lead to new distortions. One solution would be protectionism on the outer borders of the African market and the other strategy would be setting a social security system in place. This would also require an integrated approach to family planning or the reproductive rights of women, especially considering the rapid population growth of the continent. Besides, choosing the right policy level, Netherlands versus EU, is important. To approach the African Union, an integrated EU approach is desirable, especially when it considers trade negotiations, migration pacts or infrastructural investments in Africa. The Netherlands, as an important global food and agricultural leader, could support agro-technology on a more national or local level. Lastly, Frankema ended with a few words on the impact of covid-19 on the continent. There are large variations in the approach of states. Frankema worries about the economic implications of the measures that have been taken to combat the corona pandemic. There are signs of food market distortions and hunger could result in a new poverty shock. The biggest long-term effect could be a collapse of world market prices for African export commodities and balance of payment problems or fiscal imbalances which would lead to unsustainable debt.
During the final discussion following the third part of the presentation, the argument was made that we not only have to look at government to solve issues but that we should also involve and invest in the private sector. In policy, there should be room to ensure that the private sector can do its function with regard to corporate social responsibility. There was also a comment made that covid-19 restarted the debate on the sensemaking of global social security for the poorest people. Also, the question was raised whether the African continent can design inclusive policies and how we should go about that. Frankema responded that during this presentation, he focused mainly on the policy implication on the side of the Netherlands and the EU. A future session that would dive deeper into the policy implication on the African side, the challenges and the possibilities would be desirable. This could be discussed, for example, during the follow-up of the report of the Task Force for Rural Africa.
