Themicroloanfoundation's Blog


Is Agriculture a way out of poverty?
May 12, 2010, 10:55 am
Filed under: Uncategorized

http://www.reliefweb.int/rw/rwb.nsf/db900SID/DNEO-857HLV?OpenDocument&RSS20=02

IFAD has released another policy paper arguing that agricultural investments (particularly in smallholders) are key to poverty reduction in Africa. The key points here tend to hinge on the fact that smallholder farmers produce 80% of food consumed on the continent and that somewhere around 80% of Africans are employed in the rural sector (this includes small holder farming, wage labour and the informal economy).

Labour concentration in agriculture has changed little over the course of the past 40 years in Africa. It has, for the most part, stayed above or around 80% for most countries since the 1960s. Yet Agriculture’s contribution to GDP for most African countries has dropped from an average of 2/3 to approximately 1/3 currently. So we have a situation where agriculture’s contribution is overshadowed by other sources of foreign exchange and revenue. Essentially, the agrarian question of capital has been answered but the question of labour remains a mystery.

Given this historical backdrop, is it possible for Agriculture to be the backbone of poverty reduction? It is hard to argue in its favour when agriculture’s contribution to GDP has so steadily dropped over the years. However, what alot of commentators fail to understand is that the agricultural sector (particularly with smallholders) supports a vast rural non-farm economy. Input consumption, particularly in fertilizer and improved seed provides linkages to industrial processing and rural micro-enterprises employ growing numbers of people. It is this non-farm economy that has picked up much of the falling contributions from agriculture in rural areas. Non-farm earnings in rural areas are often five times higher than farm earnings. Yet agriculture, being a backbone of employment and food security is still at the centre of the non-farm economy. Furthermore, Datt and Ravallion’s 2002 World Bank study found that agricultural growth in India was twice as effective in reducing poverty than any other sector.

Nonetheless, one shouldn’t get too misty-eyed at agriculture’s prospects. The fact is that agricultural growth alone won’t have a significant impact if the poorest sectors are not targeted. Typically, agricultural investments in Africa have targeted agribusiness. While these businesses do employ large numbers of wage workers, the benefits of investment are skewed and often heighten inequality. The idea of agricultural growth “trickling down” its benefits has yet to prove its worth in Africa. In the later 2000’s, Ethiopia had one of the highest agricultural growth spurts in Eastern Africa. Nonetheless, poverty reduction was completely stalled throughout the period. Public investment needs to target the poorest of farmers who would normally be left out by private sector growth alone. Provision of inputs, particularly credit, is key here. Given the reform fever that’s starting to infect the World Bank and IMF (at least in rhetoric), let’s hope that some more attention from the development community gets put at the grass roots.

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