Conclusions and Recommendations

Author(s)

Peter Hazell (Independent Researcher), Jane Njuguna (Alliance for a Green Revolution in Africa)

Original document here

Introduction

Chapters in this report find that an inclusive transformation has the potential to help:

• Make Africa more food secure by 2050
• Create many more productive jobs in agriculture and the food system more widely, helping to avoid a premature exit of workers from agriculture to low productivity jobs in urban centers
• Create the types of jobs that are attractive to Africa’s growing population of young workers
• Reduce poverty by improving the incomes of smallholders and wage workers, and keeping food prices down• Provide consumers with more nutritious foods.

To seize these new opportunities, Africa’s smallholder farmers need to grow as businesses, and for this they need business rather than welfare support. They will need access to improved technologies and natural resource management practices, knowledge, modern inputs (like seeds, fertilizers and machinery), financial services, and markets, and secure access to land and water. Many smallholders will also require help acquiring the necessary knowledge and skills to become successful farm business entrepreneurs, especially women and young farmers. Managing market and climate risk is also a growing challenge for many small farms and, in addition to insurance and access to safety nets, they need to develop resilient farming systems. If SMEs are to prosper along value chains, then they too may need support.

Enabling Policies and Investments

Recommendation 1: Improve the business environment for the agri-food system

Most macroeconomic, trade, and agriculture sector policy distortions were successfully pared back as part of the structural adjustment programs in the 1980s and 1990s. Yet Africa still lags on its business environment for the private sector, and further reforms are still needed. For the agribusiness system this includes reforming regulations and licensing requirements that impede the establishment or expansion of new enterprises; improving contract law and enforcement processes; improving regulations for financial and insurance services; improving land policies so that farmers have secure access to their land and agribusinesses can acquire land for building purposes; regulating input markets (e.g., seeds, fertilizers, pesticides and veterinary medicines) to ensure minimum quality and safety standards; and regulating agricultural and food markets to ensure minimum food safety and quality standards.

Recommendation 2: Strengthen the public institutions that serve the agri-food system

The ability to design, implement and evaluate policy reforms and public sector investments and interventions hinges critically on the capabilities of the many public institutions that serve the agri-food system. The capabilities of many of these institutions are still weak in many African countries, and they need to be strengthened as a matter of some urgency. This includes institutional reforms in agricultural research and technology development, agricultural extension, agricultural training and higher education, agricultural technical services delivery systems, and in the agencies that undertake multisectoral agricultural planning, coordination and mutual accountability.

Recommendation 3: Free up regional trade in agricultural products The domestic agricultural markets of most African countries are too small to absorb any rapid and sustained increase in agricultural output, and greater freedom to trade regionally would help maintain farm gate prices. Regional trade can also be an important buffer to offset production shortfalls in any one country, helping stabilize prices for consumers. However, more open regional trade can be a mixed blessing if not supported by stable and predictable rules-based policies for handling national food crises.

Recommendation 4: Governments need to increase their investments in agriculture and rural infrastructure in line with their 10% commitment to CAADP

On average, African countries are still only about half way to achieving their Comprehensive Africa Agriculture Development Programme (CAADP) goal of investing 10% of their total budgets in agriculture. Cost–benefit studies show that most countries are seriously underinvesting in irrigation systems, farm to market roads, storage facilities, ICT, rural electrification, and agricultural research and development (R&D) and extension for small farms. Priority should also be given to infrastructure investment that favors linkages between rural areas and secondary cities and towns, including improved wholesale markets in those cities and towns linked by information flows to improved rural assembly markets. Enabling Policies and Investment

Engaging with the Private Sector

Recommendation 5: Smallholder farmers need to be better organized to link to modern value chains

If smallholders are going to be integrated into modern value chains at scale, then they need to be organized into producer organizations that have the technical, commercial and financial resources necessary to position their members as credible business partners to agribusinesses. While cooperatives have attempted to play similar intermediary roles in the past, new types of producer organizations and business models will be required. This will require better and more coordinated support from the public and private sectors, particularly in building up appropriate technical, commercial and organizational skills.

Recommendation 6: Government should engage in innovative partnerships with the private sector to commercialize more smallholders and SMEs

Given the constraints holding back many small farms and SMEs from commercial success, there is need for more innovative and targeted interventions to help them. These might include public–private partnerships to help deliver financial services and insurance to small farms, and organizing small farms into groups for marketing purposes. Some non-governmental organizations (NGOs) are very effective at assisting by playing intermediary roles, but their costs need to be covered in what is essentially a “setting-up” subsidy. SMEs also need support as many have trouble accessing credit, and lack business management skills. These constraints can be overcome through setting up investment funds and training programs to support networks of SMEs.

Special emphasis should be given to training and encouraging entrepreneurship among women and young people. Recommendation 7: Recognize the diversity of smallholder farmers and target different kinds of assistance to those who are not going to prosper as commercial farmersAfrica’s small farms are diverse and face varying livelihood prospects depending on their own assets and aspirations, as well as their regional and country contexts. Few “one-size-fits-all” policies exist for assisting small farms, and hence this diversity cannot be ignored. Agricultural assistance aimed at commercializing more small farms needs to be targeted to those farm households that have viable farm business prospects and capabilities.

Alternative types of assistance are needed for the others if resources are not to be wasted, or farm households misled into unsustainable livelihood strategies. The ability to segment small farms and identify them on the ground for targeting purposes has become important. Therefore new lines of research using recently available farm household panel data sets, and spatially referenced data and geographic information system (GIS) techniques can facilitate targeting in small farm assistance programs and projects.

Finance

Recommendation 8: Governments need to support the nance sector to fill an important gap in meeting the financial needs of commercially-oriented small farms

As with recommendation 7, the diversity of small farms needs to be recognized because different types of farm households need different types of financial services, and they are likely to be provided by different types of financial institutions. There is an important gap in the financial services available to commercially-oriented smallholder farms, which needs to be filled as part of the inclusive transformation agenda. In addition to enabling regulations and policies for the finance sector, targeted interventions like credit guarantees, matching grant schemes, agricultural insurance, warehouse finance, etc. can help leverage financial services for commercial farms, either directly or through value chain financing.

Recommendation 9: Establish consistent and clear standards and guidelines to support the growth of digital finance and its further application in the agriculture sector

Digital finance has shown great potential for promoting financial inclusion and agricultural finance by providing a wide spectrum of financial services, ranging from credit, saving, insurance and value chain finance through digital initiatives. Regulatory frameworks need to support continuous innovation of the market without imposing overly restrictive entry and operations requirements, while at the same time managing potential risks to ensure customer protection.

Recommendation 10: Develop information systems that can facilitate the design and provision of agriculture financial services

Critical information includes climate data for agricultural insurance and information on business transactions between producers and buyers for value chain financing. In view of increasing demand for high value and processed food products, basic data on agribusiness SMEs could also help financial institutions to analyze them and provide suitable financial services and products. The establishment of agro-climatic information systems assists financial institutions, insurance companies, policy makers, agribusinesses and farmers to better assess risks, design the right products to address them, and make the necessary investments to promote improved resilience of agriculture to climate risks.

Recommendation 11: Governments should invest in and scale up technologies and policies that contribute to sustainable intensification practices and resilient farming systems

Commercializing smallholder farms and linking them to modern value chains can help increase their incomes and assets, and hence strengthen their reserves for coping with risk. But it also exposes them to new financial, production, and marketing risks. There are many things farmers can do to add greater resilience to their livelihoods, such as crop and income diversification, making risk-reducing investments like irrigation, and adopting climate smart farming practices. Policy makers can assist by investing in R&D on climate smart agriculture, promoting the development of weather-based agricultural insurance, facilitating the more widespread availability of rural credit and other financial services, and maintaining adequate rural safety nets.Recommendation

12: Governments need to support the transformation of the agri-food system with policies that can help manage climate and market induced shocks

Production shocks have repercussions along value chains, affecting the supply and prices of foods, the viability of many SMEs, and the welfare of many poor people. To build greater resilience into national food systems, governments should also consider policies that can help stabilize national food supplies and prices, such as maintaining an adequate national food reserve for emergencies, freeing up food markets to greater regional and international trade, and buying up surplus food in low price years for school feeding programs

Implementation

Recommendation 13: In implementing agricultural strategies, focus on some initial first movers as an entry point to gain early traction and impact

Given the practical realties of weak public institutions and sparse infrastructure in many countries, a first mover strategy that prioritizes specifc segments of the agri-food system for early development can make a lot of sense. These might range from a carefully prioritized national agricultural transformation agenda (as in Ethiopia and Rwanda), to the targeted development of specific value chains, to spatial initiatives like agro-corridors, agro-clusters, agro-industrial parks, and agro-based special economic zones. First mover approaches provide platforms that enable relevant public and private sector players to come together to better serve groups of smallholder farms, while enabling public and private investments in infrastructure and supporting services to achieve critical levels.

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