This impact case study looks at what has been achieved by a DEGRP project examining the effects of domestic agricultural market structure on poverty and economic growth in sub-Saharan Africa.
Led by the African Center for Economic Transformation, Ghana, the project played an important role in drawing attention towards the domestic constraints affecting the sub-Saharan African agriculture sector, as well as attracting funding for further research into the issue.
Structural transformation – defined as the transition of an economy from natural resource-based activities towards manufacturing and services – is a key priority for many sub-Saharan African countries. Economic diversification to complement primary activities like agriculture and mining has historically helped many countries all over the world boost their economic growth and pull themselves out of poverty.
It is generally assumed that a country’s agricultural sector can facilitate this transition. A productive and dynamic agricultural sector, the thinking goes, provides affordable food and other raw materials to help support the transformation process, while releasing labour and capital for other sectors.
Yet in many sub-Saharan African countries, the agriculture sector is underperforming. Although Africa possesses 60% of the world’s uncultivated arable land, and a huge number of Africans are employed in agriculture, the sub-Saharan agriculture sector has so far largely failed to fulfil its potential. In fact, the continent overall is a net importer of food.
The DEGRP research
In response to this issue, researchers from the African Center for Economic Transformation (ACET), a pan-African think tank based in Ghana, decided to investigate possible domestic issues preventing the sub-Saharan agricultural sector from fulfilling its potential, with a focus on Ethiopia, Ghana, Tanzania, Uganda, Madagascar, Malawi, and Zambia.
Their hypothesis was that while much research looks at the external conditions that might be limiting the sector’s performance, such as trade liberalisation and globalisation, it is also likely that domestic factors – such as non-competitive behaviour in the supply chain and poor national institutions and infrastructure – are partially responsible, and therefore in need of further exploration.
The team employed a range of methods to test this hypothesis, including: mapping the supply chains for a variety of both cash crops and staple food crops in each country; studying the constraints faced by smallholders at the farm level; and feeding data from these first two steps into a model in order to simulate the interplay between and combined effects of various types of domestic factors under different conditions.
The research revealed that solutions aimed at improving problems within the domestic market – such as deregulation and policies to boost competition along supply chains – would only have limited effects on farmers’ incomes, and ultimately wellbeing, given the many constraints affecting productivity and marketing of produce in Africa.
The team’s recommendation, based on these findings, is that a range of complementary agricultural policies are needed to achieve a dynamic sector capable of supporting economic growth and transformation. These could include policies to improve infrastructure; policies to improve access to cheaper and better-quality agricultural inputs such as seeds and fertiliser; and policies to boost access to agricultural knowledge or credit. Making these types of changes, they argued, would likely enhance farmers’ incomes and overall welfare even without the addition of changes to domestic market structure.
The project's impact
Interaction with policymakers during the project revealed to the research team that there is a high demand for more ‘deep dive’ studies into domestic constraints to agricultural sector development.
On the back of this feedback, and equipped with increased knowledge and skills on the subject, ACET sought out and won over US$1.4million of new funding from the Bill & Melinda Gates Foundation to produce further studies on agricultural value chains, using the same simulation model they developed for their DEGRP project. With this funding, they undertook 20 in-depth studies across five countries – Burkina Faso, Ghana, Kenya, Tanzania, and Uganda – with the aim of exploring how value chains can be upgraded to support the emergence of strong agro-processing sectors; and enhancing understanding of how smallholder farmers can be linked to these sectors.
Since then, ACET’s policy and advisory team has used the combined results of these research projects as part of a push to promote an agenda of agricultural transformation in Africa, incorporating them into its forthcoming 2017 African Transformation Report, which showcases ACET’s findings on agriculture’s role in Africa’s economic transformation.
At the local level, the project team also helped build the capacity of ACET researchers involved in the project, providing training to both research and field assistants.