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Recent Trends in Investments in Agriculture in
Africa
Babatunde Omilola
ReSAKSS Africa-wide Coordinator, IFPRI
CORAF General Assembly
May 24-29, 2010
Cotonou, Benin Republic
Outline of Presentation
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Introduction
Enabling environment
CAADP implementation process
Tracking commitments and spending
Agricultural growth performance
Agricultural trade performance
Poverty, hunger and food and nutrition security
Investment-growth-poverty linkages
Conclusions
Introduction: Enabling environment
• Agriculture is crucial for development in Africa
– Mostly rural, at least 70% of workforce engaged in the
sector
• Yet over last 20 years, support to the sector has
declined
– Partly the outcome of SAPs, declining share in aid and
government budgets, etc.
• Recent developments have recognized agriculture’s
role in development
– WDR 2008
– Donor pledges made at G8 summit in L’Aquila
– Maputo Declaration  CAADP
CAADP Implementation Process
• Formulated in 2003 under auspices of AUC and
NEPAD
• Since initiation, dozens of countries have begun
the implementation process and 18 have held
Roundtables (RT) and signed country compacts
• 2 countries – Rwanda and Togo – have held postcompact investment and review meetings
• Primary focus is now shifting from the RTs and
compacts to the post-compact implementation
process
CAADP Implementation Process: Status (updated April 20, 2010)
Cameroon,
DRC, Egypt,
Libya, Tanzania
Zimbabwe,
Mauritius
1. Government
appoints Focal Point(s)
2. REC and
Government launch
process
3. Country Steering
and Technical
Committee
4. Cabinet Memo and
Endorsement
8. Elaboration of
detailed investment
plans
7. Roundtable Signing
of Compact
6. Drafting of Country
CAADP Compact
5. Stocktaking,
Growth, Invest.
Analysis
Ethiopia,
Ghana,
Liberia,
9. Post compact
review meeting and
validation of
investment plans
Rwanda,
Togo
Benin, Burundi, Cape Verde,
Gambia, Malawi, Mali, Niger,
Nigeria, Senegal, Sierra Leone,
Swaziland, Uganda
10. Agreement on
financing plan,
financing instruments,
and annual review
mechanism
Burkina Faso, Guinea-Bissau,
Guinea, Kenya, Zambia
Comoros, Cote
d’Ivoire, Djibouti,
Madagascar,
Seychelles, Sudan
11. Operational design
and other technical
studies and
assessment for
program execution
12. Execution of new
investment programs
14. Second annual
review meeting
13. First annual review
meeting
Public agricultural spending and commitments:
Agriculture spending as a share of total spending
At least 10 percent
Burkina Faso
Ethiopia1
Ghana3
Guinea
Malawi2
Mali
Niger
Senegal2
5 percent to less than 10
percent
Chad2
Gambia2
Mauritania3
Namibia2
Sao Tome and Principe2
Sudan2
Togo
Tunisia3
Zimbabwe2
Less than 5 percent
Angola2
Benin
Botswana2
Burundi2
Cameroon3
Central African Republic2
Comoros4
Congo, Dem. Republic2
Congo, Republic3
Cote d'Ivoire2
Djibouti2
Egypt3
Guinea Bissau2
Kenya1
Lesotho2
Liberia1
Madagascar2
Mauritius
Morocco3
Mozambique2
Nigeria
Rwanda3
Seychelles
Sierra Leone3
Swaziland2
Tanzania
Uganda
Zambia2
Sources: Based on ReSAKSS data collected from various national government sources and
IMF 2009.
Notes: 1. Estimate for 2009; 2. 2007; 3. 2006; 4. 2005; 5. 2004
• CAADP Target = 10% of
total expenditures
allocated to agriculture
sector
• Africa as a whole has
not met 10% target
– Since 1980, the annual
average has been
between 4 and 6%
• 8 countries have met
the target
• 9 are spending between
5 and 10%
• While 28 are spending
less than 5
Public agricultural spending and commitments:
Agriculture spending as a share of agriculture GDP
At least 10 percent
Botswana1
Zambia
Zimbabwe
5 percent to less
than 10 percent
Burkina Faso
Egypt
Ethiopia
Less than 5 percent
Benin2
Cameroon
Cote d’Ivoire1
Mali
Ghana
Niger
Kenya
Malawi
Nigeria1
Rwanda
Togo1
Uganda
Sources: Based on ReSAKSS data collected from various national government
sources and IMF 2009.
Notes: 1. 2007; 2. 2008.
• An alternative measure
that weighs the size of the
sector in the overall
economy when comparing
across countries
• Compared to Asia, Africa
agricultural spending
under this measure is low
– Asia spends 8-10% on
average compared to 5-7%
in Africa
• Only 3 countries exceed
the 10% mark
Share of reporting countries (%)
…But the share of countries meeting the
10% target recently been increasing
70
60
50
40
30
20
10
0
2002
2003
More than 10%
2004
2005
5%-10%
2006
2007
2008
Less than 5%
Sources: Based on ReSAKSS data collected from various national government
sources and IMF 2009.
• In 2003, only 5.9% of
African countries
were spending at
least 10% of their
total budget
allocations on
agriculture
• This figure increased
to 15.2% in 2007 and
to 35.7% in 2008
Disaggregation of agriculture
expenditures: West Africa (WA)
– In WA, the Sahelian
countries (which largely
spend on investments
rather than recurrent),
funding primarily comes
from ODA/external sources
– Whereas the coastal
countries’ agricultural
spending mostly comes
from internal sources
Breakdown of agricultural expenditure by source of funding in selected
West African countries (average 2003-2007)
Share of agircultural expenditures (%)
• What is the source of
most agricultural
funding?
100
90
80
70
60
50
40
30
20
10
0
From internal sources
From external sources
Source : ReSAKSS 2010 data collection from various national government
sources.
Disaggregation of agriculture
expenditures: West Africa (WA)
• How are the agricultural
expenditures spent?
• Only in Burkina Faso and
Mali is irrigation heavily
favored
• R&D spending is limited in
all countries
Research and
Development
90
Share of total agriculture expenditure (%)
– Subsectors: most countries
in WA spend on the crop
production subsector
rather than livestock or
fisheries and forestry
– Function: varies by country
(see chart)
100
80
Other
70
60
Non
Disaggregated
50
Irrigation
40
30
Inputs and
Equipment
20
Extension
10
0
Ghana
Benin
Togo Burkina
Faso
Mali
Admistration
Source: ReSAKSS data collection from various national
government sources.
Resource efficiency
– This means that up to 52% of
budgeted resources for agriculture
were not being spent.
– In contrast, in recent years, both
countries have overspent the
budgeted amount.
140
Ratio of actual to budgeted agriculture expenditures
(%)
• Resource efficiency can be
measured by the investment gap
ratio = ratio of actual spending to
budgeted spending
• Best practice is a maximum of 3%
discrepancy between budgeted
and actual (=97% investment gap
ratio)
• From 2000 to 2004/5, Nigeria and
Malawi (figure) had poor budget
execution, within a range of 48 to
85%.
120
100
80
60
40
20
0
2000
2001
Nigeria
2002
2003
Malawi
2004
2005
2006
2007
PEFA target
Sources: Mogues et al. 2008; Njiwa et al. 2008; Govereh et al.
2009.
Note: The PEFA target is considered the threshold below which
the investment gap ratio indicates underutilization of funds. It is
set at 97 percent.
Donor spending on African agriculture
•
•
Chart Source: Organization for Economic Cooperation and Development (OECD) 2009.
Emergency food aid
Development food aid/food security
2,500
2,040
2,592
Agriculture and rural development
1,704
2,000 2,103
2,034
1,906
2,2861,596
1,439
1,9991,433
1,837
1,688 764
1,500
1,000
378
500
242
894
692
618
750
625
688
668
549
0
2000
2001
2002
2003
2004
2005
2006
60,000
50,000
12
Share of ODA allocated to agriculture (%)
40,000
10
8
30,000
20,000
2007
6
Total ODA
commitments
4
ODA commitments to agriculture
10,000
2
0
0
Share of ODA to agriculture (%)
•
3,000
Constant 2007 US$ (millions)
•
In Africa as a whole, donor
spending for agriculture as a
share of total donor spending
saw a consistent decline, from
an average of 15% between
1980 and 1995 to 12% between
2000 and 2002.
In 2006, the ratio had declined
to about 4%.
Total ODA for agriculture in SubSaharan Africa has hovered at
US$1 billion a year since the
1990s.
In comparison, the share of ODA
spent on aid for emergencies
has doubled and, in actual
dollars, has more than
quadrupled during the same
period.
Although investment in
agriculture has increased in
recent years, a large and
increasing share is still devoted
to short-term food aid
interventions
Constant 2007 US$ (millions)
•
Agricultural performance
10
8
6
4
2
0
-2
GDP
Agriculture GDP
CAADP target for agriculture GDP
Source: World Bank 2009.
Note: 2009 GDP estimates are from International Monetary Fund (IMF) 2009.
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
-4
1993
–
All regions saw an increase in average agricultural growth rates from approximately 3.0% in the 1990s to 2008,
although Southern Africa has seen the most dramatic increase with a current agriculture GDP growth rate of 7.1%
West Africa and East and Central Africa’s recent agriculture growth is also positive at 4.3 and 4.8%, respectively.
1992
–
1991
•
1990
•
Although agricultural performance varies within and across African countries, recent trends
indicate an increase in agricultural GDP growth at the continental and regional levels
SSA’s agriculture GDP growth rate increased from an annual average of 3.0% in the 1990s and
2000s to 5.3% in 2008
A similar trend can be observed at the regional level
Average annual growth rates (%)
•
Agriculture GDP annual growth rate (%)
Agriculture GDP growth and CAADP
30
25
20
15
10
5
0
-5
-10
-15
-20
2008
CAADP Target
Source: ReSAKSS calculations based on World Bank 2009.
•
•
The CAADP agriculture GDP growth rate target is 6%
In 2008, ten countries met the CAADP’s 6% target:
– Angola, Ethiopia, Mali, Mozambique, Namibia, Niger, Rwanda, Senegal, Tanzania, and Uganda.
•
•
Nineteen other countries attained moderate agricultural GDP growth rates of
between 3 and 6 percent.
In the same year, eight countries experienced negative growth in their agriculture
sectors.
Agricultural trade performance
35
30
20
15
10
5
Imports
Source: FAOSTAT 2010.
Exports
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
0
1980
US$ billion
25
• Sub-Saharan Africa has
been a net food
importer since the
1980s.
• In 2007, the value of
the region’s trade
deficit started to
increase as a result of
higher food prices.
Agricultural trade performance by regions:
A snapshot of COMESA and ECOWAS
COMESA Region
•
•
•
•
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
Both the imports and exports of agricultural raw
materials have increased over time in nominal
value for the COMESA region
But, the region has been exporting and importing
relatively less agricultural products compared to
non-agricultural products
Exports of cash crops (tobacco, tea, coffee,
vegetables) have increased in value since 2000
Imports of wheat, maize and palm oil also
increased since 2000
The coverage rate (ag imports to ag exports)
varies for the region from year to year
Agricultural
exports (US$)
Agricultural
imports (US$)
Net exports
(US$)
945,426,069
892,311,614
1,085,743,413
1,424,042,407
1,745,443,839
1,521,101,002
1,528,029,010
2,056,217,333
2,451,807,257
1,007,971,576
912,441,887
897,860,082
951,961,782
1,067,728,616
1,401,474,548
1,675,221,277
1,933,331,954
2,804,033,755
-62,545,507
-20,130,273
187,883,331
472,080,625
677,715,222
119,626,453
-147,192,267
122,885,379
-352,226,499
Source: COMESA 2010.
Share of ag.
Exports in
total exports
(%)
6.77
6.88
3.13
3.08
3.06
2.02
1.54
1.96
1.58
Share of ag.
Imports in
total
imports (%)
3.37
3.18
1.97
2.17
2.15
2.06
2.16
2.01
1.85
•
•
•
Agricultural exports account for a large
share of total exports in WA countries with
low or no mineral resources (e.g., ~80-90%
in Benin, Burkina Faso, Gambia…)
Only 1/3 of countries are able to cover
their agriculture imports by their
agriculture exports
This ratio has been declining due to higher
prices of food imports
Ratio of agricultural imports to
agricultural exports (%)
•
ECOWAS Region
400
350
300
250
200
150
100
50
0
2003-2007
2008
Target
Source: ReSAKSS data collected from various national government sources.
Poverty, Hunger and Food and
Nutrition Security: MDG1
• The continent as a whole is not on track to achieving
the first MDG of halving hunger and poverty by 2015
• ReSAKSS estimates use a simple “business as usual”
linear projections based on previous growth rates to
estimate current hunger and poverty rates
• These are compared to yearly benchmark rates that are
required to meet MDG1 (halving the 1990 rates by
2015) to determine if a region/country is “on track” or
not
• According to these estimations, current child
underweight prevalence stands at 29.3% for SSA and
current poverty is at 38.6%, both of which are higher
than their benchmark rates
Which countries are “on track”?
•There are 2 components to MDG1: hunger and poverty
•Great progress has been made in many countries that are meeting one or the other,
but only one – Ghana – is currently meeting both
Burkina Faso
Cameroon
C. African Rep.
Egypt
Ethiopia
Guinea
Kenya
Lesotho
Mali
Senegal
Swaziland
Tanzania
Countries on track towards
halving poverty by 2015
Ghana
Countries on track
towards achieving
MDG1
Algeria
Angola
Benin
Botswana
Burundi
Gambia
Guinea Bissau
Mauritania
Namibia
Sao Tome &
Principe
Countries on track towards
halving hunger by 2015
Poverty, Hunger and Food and Nutrition Security:
The Global Hunger Index (GHI)
• The index is an average of
– The percentage of the population that is
undernourished
– The percentage of children that are underweight
– The under-5 mortality rate
• Captures intra-household food security
• Countries with GHIs higher than 20 are
considered to have “alarming” rates of hunger
50
45
40
35
30
25
20
15
10
5
0
Tunisia
Algeria
Egypt
Morocco
Mauritius
Gabon
South Africa
Swaziland
Ghana
Lesotho
Botswana
Namibia
Cote d'Ivoire
Uganda
Mauritania
Congo, Rep.
Benin
Senegal
Cameroon
Guinea
Nigeria
Malawi
Gambia
Mali
Sudan
Kenya
Burkina Faso
Zimbabwe
Tanzania
Djibouti
Guinea Bissau
Togo
Liberia
Mozambique
Angola
Rwanda
Zambia
Comoros
Central Af. Rep.
Madagascar
Niger
Ethiopia
Chad
Sierra Leone
Eritrea
Burundi
Congo, Dem. Rep.
Global Hunger Index
Poverty, Hunger and Food and Nutrition Security:
The Global Hunger Index (GHI)
1990
2009
Alarming
Source: IFPRI 2010.
• The majority of countries in Africa have seen a decline in their GHIs from
1990 to 2009 (improvement in hunger)
– In the COMESA region, 2/3 of countries saw a decline
– In SADC, nearly every country except for DRC and Zimbabwe saw a decline or
leveling off of GHIs
– In ECOWAS, 10 out of 14 countries saw a decline
• Despite these reductions, all regions have multiple countries which remain
above the alarming level
Investment-Growth-Poverty Linkages
• Does growth, spurred by investment, lead to
poverty reduction?
– This is the theory behind much of the CAADP
agenda (that higher agriculture expenditures will
lead to agriculture growth and poverty reduction)
– In practice, higher overall economic growth has
not always translated into poverty/hunger
reduction
Investment-Growth-Poverty Linkages
• Of the 13 countries on track for the poverty MDG1 target, 6 are
also meeting the 10% spending target, and 4 are meeting the 6%
agricultural GDP growth target
•3 of which are meeting both CAADP targets – Ethiopia, Mali and Senegal
•Of the 10 countries on track for the hunger MDG1 target, 2 are
meeting the 6% agriculture GDP growth target
Countries meeting
10% spending target
Burkina Faso
Ethiopia
Ghana
Guinea
Malawi
Mali
Niger
Senegal
Countries meeting 6%
agriculture growth
target
Angola
Ethiopia
Mali
Mozambique
Namibia
Niger
Rwanda
Senegal
Tanzania
Uganda
Countries meeting
poverty MDG1 target
Burkina Faso
Cameroon
C. African Rep.
Egypt
Ethiopia
Ghana
Guinea
Kenya
Lesotho
Mali
Senegal
Swaziland
Tanzania
Countries meeting
hunger MDG1 target
Algeria
Angola
Benin
Botswana
Burundi
Gambia
Guinea Bissau
Mauritania
Namibia
Sao Tome and Principe
Investment-Growth-Poverty Linkages
• Badiane and Ulimwengu propose 2 measures for
tracking this: poverty overhang and growth
deficit
– They compare the rate of poverty reduction to that of
growth
– When a country’s growth rate is less than that
required for maintaining the pace of poverty
reduction the country is said to be experiencing a
growth deficit.
– Where the rate of poverty reduction is slower than
that of GDP growth the country is said to be
experiencing a poverty overhang.
Investment-Growth-Poverty Linkages in West Africa
This column indicates the increase, in
percentage points, which has to occur
in GDP growth if the country’s pace of
poverty reduction in the 1990-2005
period is to be maintained
Growth Deficit
Benin
This column indicates the extent, in
percentage, by which the poverty rate
should have been lowered given the
country’s growth rate in the 19902005 period
Poverty Overhang
Less than 2.5
Burkina Faso
Greater than 20 – 30
Cape Verde
2.5 – 5
Cote d'Ivoire
Gambia
Less than 2.5
Less than 2.5
Ghana
Guinea
Less than 2.5
Less than 2.5
Guinea Bissau
Less than 2.5
Liberia
Greater than 30 – 40
Mali
Niger
Greater than 10 – 20
Greater than 50
Nigeria
Greater than 40 – 50
Senegal
Greater than 10 – 20
Sierra Leone
Greater than 30 – 40
Togo
Greater than 20 – 30
Growth (%) required for achieving MDG1 or
6% Agriculture Growth
GDP
Agric GDP
Agric Funding
Most Propoor sub-sectors
Growth
Growth
Growth
5.1
13.1
7.9
Food crops
3.2
7.1
9.1
Livestock
5.4
2.6
11.2
Food crops
20.3
5
14.4
4.2
27
19.1
Cereals
Staple,
forestry
40.5
26
27
Food crops (rice, cassava
and others)
7.2
12.5
8.2
Food crops and livestock
4
11
11.5
12
11.1
24
livestock
Cereals
5.7
6.8
7.6
Food crops
7.2
5.5
10
Cassava, rice
4.3
9.6
35.4
Food crops
fishery
and
Sources: Badiane and Ulimwengu, forthcoming and IFPRI CAADP analyses (see ReSAKSS WP series).
Investment-Growth-Poverty Linkages
in West Africa
• Among the West African countries experiencing a poverty
overhang, the worst case is found in Niger where the poverty
rate should have been lower than half of its current rate given
the country’s growth rate between 1990 and 2005.
• The countries with the lowest overhang are Senegal and Mali
where it has a value of greater than 10 to 20.
• The success of CAADP implementation is particularly critical
for countries experiencing poverty overhang in the sense that
it can bring about the necessary increase in agriculture
funding and agriculture GDP needed to appreciably improve
the pace of poverty reduction.
• Analysis carried out by IFPRI, ReSAKSS WA and their
collaborators indicates that agriculture growth rates ranging
from 2.6% (in Cape Verde) to 26% (in Liberia) would be
needed to achieve MDG1 by 2015 in 12 countries.
Conclusions
• Increased attention to agriculture’s role is evident
in donor and government pledges
• Yet this has been slow to translate into increased
spending (8 countries meeting 10% target)
• Agricultural policies and programs must now take
into consideration the complex combinations of
factors such as more volatile food markets and
prices, market distortions, and climate change
• The next phase of CAADP (post-compact) will
emphasize these factors as investment plans are
laid out in more detail
More information…
• Is available in the detailed draft of the
Comprehensive M&E Report for CAADP
• A shorter, summarized version is available in the
ReSAKSS 2009 Annual Trends and Outlook Report
– online at
http://www.resakss.org/index.php?pdf=42774
• All published CAADP analyses, briefs, brochures
and signed compacts are available at
www.resakss.org
Thank you!