Prospects for inclusive rural growth?

David Neves, Senior Researcher at Institute for Poverty, Land and Agrarian Studies (PLAAS) shares key findings and policy recommendations from DEGRP project, Space, markets and employment in agricultural development from Southern Africa (SMEAD), led by Professor Andries du Toit.

The research was presented at a high profile event on 23 June 2015 which brought together key policy makers from five southern African countries, members of parliament, academics, representatives of regional organisations, FAO (Food and Agriculture Organization of the United Nations) and DFID (Department for International Development).

 

The Rural Non-Farm Economy (RNFE)

SMEAD workshop, June 2015

SMEAD workshop, June 2015

Recent research suggests the networks and forms of agricultural development that support a vibrant and inclusive Rural Non-Farm Economy (RNFE), are generally associated with four high level characteristics:

  • The ‘density’ (number & proximity) of networks:  Networks with large numbers of linked activities (often in close proximity), are more likely to support the RNFE, in part through agglomeration effects and lower transaction costs.

  • The degree of enterprises’ ‘local embeddedness’: The RNFE is frequently strengthened when entrepreneurs,  markets and marketing arrangements are locally socially embedded.  This typically is influenced by institutions (both formal and informal), various social, cultural and even political affinities between actors, and the existence of an enabling regulatory context.

  • The degree of external ‘connectedness’:  Under favourable conditions, linkages to (often metropolitan) output markets, downstream from agriculture serve to support rural employment.  In contrast, external connection into highly concentrated upstream input markets (e.g. seed, agrochemicals) are more likely to lead to the leakage of income out of the local RNFE.

  • The extent of inequality and local power dynamics: The RNFE’s ability to support forms of inclusive growth, reduce vulnerability and support pathways out of poverty is undermined by social inequality, and highly skewed social power relations.

These findings and others were presented at a high profile dissemination workshop on 23 June 2015 —the culmination of the DEGRP-funded Space Markets and Employment in Agricultural Development (SMEAD) project.  Held in Pretoria, delegates included policy makers, researchers, civil society actors, along with regional organisations and members of Parliament from six Southern African countries.  They considered the prospects of agricultural development contributing to inclusive and pro-poor growth.  Presentation of the research was followed by wide ranging discussion of the precise policy implications. 

The Project

Stephen Morrison

Stephen Morrison

The SMEAD project examined three countries (Malawi, South Africa and Zimbabwe) and sought to understand how agriculture shapes the rural-non-farm economy (RNFE), including its degree of inclusiveness.  Supporting rural employment and livelihoods, it was argued, demands attention not only to agricultural production but also the spatial characteristics and nature of agriculture’s forward and backward linkages.  The in-depth country case studies reveal contrasting agrarian landscapes.  

In Malawi the majority of working adults in the rural economy are involved in subsistence and small commercial farming.  While the commercial estate sector, occupies a quarter of the arable land, and produces approximately 90% of exports. 

South Africa, presents almost the opposite scenario.  Agriculture is dominated by large scale commercial farming, whereas large numbers of people involved in semi-subsistence farming are marginal. Moreover agriculture is often disconnected from local rural economies: upstream and downstream connections bypass many local communities, exacerbating the exclusion and marginalisation of their residents. 

Finally Zimbabwe, following its bruising ‘fast-track land reform’ process, presents an intermediate case.   Its historical agrarian dualism of large and small scale agriculture has been replaced by a diverse range of farms sizes, along with a preponderance of linkages and rural enterprises.

Recommendations

Strategies for creating a resilient and diverse RNFE are varied, and often specific to the individual country contexts.  Yet in general, they ought to promote agricultural linkages that are spatially dense, socially embedded, externally connected to (at least) downstream markets, and be careful to avoid elite capture or exclusionary dynamics.  

The workshop considered and discussed some of the following policy recommendations in detail:

  • Consider the scale of agriculture supported. Large scale agriculture is often ill-suited to promoting beneficial local linkages or stimulating the RNFE. Instead small scale farmers are much more likely to spend, invest and consume locally, thereby sustaining linkages that support local entrepreneurs.  This underscores the importance of addressing issues pertaining to small scale farmers including land and agrarian reform, along with addressing constraints on small farmers access to vertically integrated value chains and distant markets.

  • Support and strengthen local markets.  Related to the previous point, a vital factor in the health of the RNFE is the presence of a diversity of informal and independent ‘entrepreneurs’ in local markets.  These are often vital to smaller farmers, and promote rich and diverse forward and even backward linkages.  Supporting the development of local markets, market infrastructure, and remedying market failures, are all potential courses of action.
     
  • Address value chains and corporate chain supermarket dominance.  Concentrated output markets are increasingly organised in vertically integrated value chains, which tend to exacerbate dynamics of marginalisation and exclusion.  This is most evident in South Africa, but incipient across the entire region.  There is a need to address the adverse consequences of rural ‘supermarketisation’ that sucks money out of rural areas.  Policy levers include retail regulation, and improving smaller players access to markets and distribution systems.
     
  • Invest in infrastructure and agricultural finance.  A paucity of rural infrastructure is a constraint, particularly in Malawi and Zimbabwe.  Greater investments in roads, energy and communications networks, markets and depots are required.  Specific recommendations around financing included the need to move beyond individual farmer financing, towards public provisioning including, for example, promoting adaptive seed (through public sector germplasm).
     
  • Don’t overlook other linkages.  The RNFE isn’t sustained exclusively by market connections with agriculture: increasingly agriculture is secondary to other sources of livelihood making.  Mounting evidence shows the importance of other (often overlooked) distributive systems such as remittances, public sector salaries and state cash transfers (South Africa) and subsidies (Malawi) in supporting the RNFE.

These policy findings suggest not only some potential avenues of policy action, but also the prevailing constraints on the ability of agricultural development to contribute to the larger Rural Non-Farm Economy.  Yet attention to these dynamics is crucial if agriculture is to contribute to pro-poor and inclusive forms of growth.