Globe and Mail: Importance of African Agriculture for Ending Extreme Poverty

Yesterday The Globe and Mail published a short piece I recently wrote on the importance of boosting African smallholder agriculture as a key element of any global effort to end extreme poverty.  The Globe ran the piece under the title, “To end poverty worldwide, fix African agriculture first.”  This reproduced a post I wrote originally for the ForumBlog a couple of weeks ago, under the title “Ending extreme poverty in Africa by 2030.”  Full text pasted below.


To end poverty worldwide, fix African agriculture first

The public chorus to eliminate extreme poverty by 2030 now includes US President Barack Obama, World Bank President Jim Yong Kim and Bono. The backdrop is extremely promising since the developing world has already cut the share of people living below US$1.25 a day by half since 1990. At a consistent rate of progress, the other half could well cross the line in another 20 years too.

But, as my colleague Laurence Chandy and Brookings co-authors have recently pointed out, the distance to crossing the US$ 1.25 line varies tremendously by region. Most of China has already crossed the US$ 1.25 threshold and India has a huge share of its population poised to make the leap next. Sub-Saharan Africa has the farthest to go, despite recent progress, since a large proportion of its population still lives so far below US$ 1.25 per day, often at half that level of income.

Most of Africa’s poorest people live on small farms in rural areas, so those places will likely form the final frontier of the global quest to end extreme poverty. Although fast-growing cities have gained attention for their role in fighting poverty, including in the World Bank’s latest Global Monitoring Report, it is increases in rural productivity, especially agriculture, that are typically a fundamental driver of the urbanization process.Watch Full Movie Streaming Online and Download

There are grounds for optimism. Growing academic evidence highlights agriculture’s unique role in helping to reduce extreme poverty. For example, an important 2011 paper by economists Luc Christiaensen, Lionel Demery and Jesper Kuhl shows that agriculture is roughly three times more effective at reducing extreme poverty than non-agricultural sectors.

There has also been a global renaissance of attention on the need for an African Green Revolution, driven by both public and private investments in a manner that respects local community structures. The World Economic Forum’s Grow Africa initiative, which convened last week in Cape Town, offers a potential high-impact platform, bringing together investors and governments to launch practical joint strategies at scale.

Complementary investments in transport infrastructure, irrigation, farmer credit and input support systems (e.g. for fertilizer and seeds) were essential to Asia’s 20th century green revolutions that laid the foundation for that region’s subsequent economic breakthroughs. The same basic approach, updated for today’s social and environmental realities, can help to ensure Africa’s long-term economic success is equally, if not more, robust. The sooner the process starts, the faster the world gets to the finish line on extreme poverty.

An International Credit Facility for African Smallholder Staple Farmers

Early last year I wrote a 3-page concept note proposing “An International Credit Facility to Support Commercialization of African Smallholder Staple Crop Farmers”  This would be a mechanism to tackle the “missing rural middle” of African farmer finance.

It would target staple crop farmers, rather than cash crop farmers, who typically have much greater access to capital, for many reasons.  (It is also the same mechanism cited in a recent blog post for Rio+20.)

The basic idea is as follows:

A systematic financing mechanism is needed to address the “missing middle” of rural Africa, whereby smallholder farmers can coordinate to access “patient capital” loans of perhaps $25,000-$100,000 at a time. This mechanism should be focused on making capital available in the context of a broader ecosystem of business support and agricultural extension services that help farmers identify market opportunities based on agronomic comparative advantage, then develop business plans, introduce new farming techniques, and implement successful marketing programs. Importantly, the complementary services are not a substitute for the patient capital itself. The financing facility would focus on neither pure public subsidy nor pure private capital. Instead it would focus on covering the risk-adjustment component of private loans.

The cost would be roughly $5 billion per year of public finance to leverage roughly $25 billion per year of private capital.

I wrote this as an input to a working group that was chaired by Mthuli Ncube, chief economist of the African Development Bank, and which included people like Nancy Birdsall of CGD.  Everyone in the group seemed to support the idea, but in the busy-ness of life we didn’t have a chance to spend more time on it.  As a minimum step I thought it worth posting the note online here.