Achieving agricultural transformation
Following on from our previous two agricultural articles: Agriculture in Africa: Achieving 20/20/20 Vision and The New Vision for Agriculture, we take a look at achieving agricultural transformation in Africa. Under the umbrella of the World Economic Forum in Africa and the central focus of “Develing on Africa’s Promise”, we discuss the agricultural sector and the shift that is taking place.
Agricultural transformation is about individual farms shifting from highly diversified, subsistence-oriented production towards more specialised, market-oriented production. This involves a greater reliance on input and output delivery systems and increased integration of agriculture with other sectors of the economy.
In an environment where there is chronic hunger derived from low real incomes, the challenge is to raise incomes and lower food and related costs. Amongst other things, this means moving away from subsistence-oriented household-level production towards an integrated economy based on greater specialisation, exchange, technology and the capturing of economies of scale.
It also means educating farmers, many of whom are women, in creating strategies for their farms that take growth and collaboration with others into consideration.
The six success factors in a transformation effort
A number of pioneering cases across the world have revealed six essential success factors in a collaborative, large-scale transformation effort. According to The World Economic Forum’s Guide, “Putting the New Vision for Agriculture into Action: A Transformation is Happening”, these are:
- Leadership and alignment of stakeholders around shared goals
- A clear strategy and priorities for implementing the transformation
- An investment and entrepreneurship pipeline
- Enabling hard and soft infrastructure policies and investments
- Catalytic financing and risk management solutions and
- Robust mechanisms and institutions for delivery, implementation and durability.
Africa’s infrastructure deficit: an impediment to growth
Weak infrastructure is a major impediment to growth, creating a barrier between farmers and consumers and reducing market opportunities and incentives for investing in farm productivity. Leveraging and shaping infrastructure expansion for agricultural development is vital. “Hard” infrastructure includes roads, ports, power grids, irrigation systems and ICT, in which improvements have an immediate impact on food security through income.
Improved infrastructure along the supply chain – for example more efficient shipping, temperature-controlled distribution, improved storage and packaging – can make a substantial difference to overall productivity.
“Soft” infrastructure includes elements such as regulation, land tenure, information services, extension systems and skills, all of which contribute to the generally enabling or disabling environment in a particular agricultural context. Investing in soft infrastructure investment can be a significant catalyst for change.
Agricultural transformation: a long-term commitment
Unfortunately agricultural transformation is slow and requires long-term loans and funding commitments. Sustaining such investment depends on the development of a strong agricultural finance sector that addresses industry structure, incentives, capabilities and regulation.
Financing and risk management are other major riders in agricultural investment. The WEF Guide suggests
[building] a package of instruments – grants, guarantees, patient capital and commercial money combined – to finance the capital costs of the transformation. The various instruments should be mutually enabling, for example, using crop insurance or financial guarantees as collateral to get banks to lend money, or using donor funding and patient capital to co-invest with private investors to improve a project’s access to capital through public private partnerships”.
If hindsight is always 20/20, in the case of African agriculture foresight must surely be 20/20/20. Let’s hope the encouraging examples of agricultural transformation spur the rest of the region on to look at its economy with new eyes.
About David Okwara
Africa, Africa challenges, Africa opportunities, agricultural transformation, agriculture, co-investment, development, economic growth, efficiency, empowerment, energy and power, entrepreneurship, ICT, infrastructure, investment, KPMG Africa, long-term commitment, New Vision, power grids, PPPs, private investors, productivity, project financing, public-private partnerships, supply chain, transformation