Africa Needs a Green Revolution
In the early 1960s and 1970s, GDP per capita in Sub-Saharan Africa was almost identical to that of East Asia. But over the last few decades, there has been a notable divergence between the two regions. Today, most economies in Sub-Saharan Africa are still characterized as low income and dominated by rural populations, while countries in East Asia have heavily industrialized and their incomes have risen dramatically.
Grain cleaning and storage unit in northern Mozambique. Photo credit: The TWA Rural Development Corporation
China’s transformation was particularly impressive. The years of hardship and hunger of the Mao era (1949-1976) now seem like a distant nightmare. China has emerged as one the world’s most powerful countries and has all but eradicated poverty across the country, raising its GDP per capita from USD 318 in 1990 to almost USD 10,000 today.
In the top chart, a comparison of the evolution of annual per capital GDP between the US and China (Source: World Bank). In 1990, Chinese per capita GDP was USD 318, equivalent to less than a dollar a day. Over 66% of China’s population (1.14 billion people) lived below the poverty line of USD 1.90 a day. By 2015, that value had dropped to 1.4%. In the bottom chart, the annual per capita GDP (USD) of Sub-Saharan Africa and East Asia & Pacific since 1960 (Source: World Bank). In 2018, Sub-Saharan per capita GDP was USD 1,586, equivalent to USD 4.34 a day.
Chinese GDP per Capita in 1990 was USD 318, less than a dollar a day. Today it is almost USD 10,000.
In 2018, Sub-Saharan Africa GDP per Capita was USD 1,586. That is USD 4,34 a day.
Agriculture was the backbone for growth in East Asia, laying the foundation for its industrialization.
In Africa, spending on agriculture has been paltry at best
There have been various explanations for the development divergence between Sub-Saharan Africa and East Asia ranging from geography to climate. One of the most compelling is the variation between the two regions with regards to investment in rural development and agriculture.
In the map above, the distribution of the production of fresh vegetables (tonnes) in 2018. From the 298 million tonnes produced worldwide, 87% was grown in Asia vs 7% produced in Africa. (Source: FAO, Leaflet, @OpenStreetMap, @CartoDB)
In the 1970s, East Asian countries such as Malaysia and Indonesia were spending over a quarter of their development budgets on agriculture even as they were on the path towards industrialization. China was no different, experiencing an unprecedented green revolution that transformed it into one of the world’s largest producers of fruit and vegetables.
In the above chart, the leading producers of fresh vegetables in 2018 (tonnes). China (Mainland) alone grew 58% of the world’s total production, followed by India with 12%. Nigeria, the only African representative on the list, grew 3% of the total fresh vegetable production
In contrast, Nigeria spent a measly 6% of its development budget on agriculture during the same period, choosing instead to invest revenues from oil windfalls on industrial development projects.
Spending patterns in Africa have barely changed since then. Even with a joint pledge by African governments to raise spending on agriculture to 10% in 2003, average budgetary allocations to agriculture have fallen from 3.66% in 2001 to 2.3% in 2017. The result is that the productivity of African agriculture continues to lag behind that of other regions.
Investing in agriculture has far reaching effects
Such meagre growth in agricultural productivity has far reaching effects. Take food security. Across Africa a total of 31 countries continue to rely on external assistance for food. Even in Kenya, widely considered to be one of Africa’s lions, a staggering 3.1 million people, 6.0%, are estimated to be severely food insecure.
What’s more, given that the majority of Africans depend on farming for income, flat productivity in agriculture has severe implications for economic growth— i.e. lower incomes for farmers means lower consumption, which in turn means lower demand for non-agricultural products. Indeed, empirical studies have shown that a USD 1 increase in agriculture income, through some form of investment or innovation, has the potential to raise national income by USD 1.5. In short, to accelerate poverty reduction at a broader scale across Africa and to foster inclusive economic growth, more strategic investment in agriculture will be imperative.
A maize field in North Mozambique. Photo Credit: The TWA Rural Development Corporation
Start with infrastructure. Only a little over 13 million hectares (6% of the total cultivated area) across Africa are equipped with irrigation, with the majority of farmers still dependent on seasonal rains for their harvests. In Asia by comparison, 37% of cultivated land is equipped with irrigation. It is estimated that investment in irrigation has the potential to improve agricultural productivity in Africa by at least 50%.
Supply is also a persistent problem. On the demand side, a dearth of credit financing makes acquiring much needed inputs such as fertilizer and seeds challenging for farmers. And on the supply side, fragmented transport and regional export chains, and a lack of investment in basic storage keeps costs high.
Addressing gaps in infrastructure, supply chain and in credit requires committed involvement and co-ordination between local communities, governments, multilaterals, private companies and investors. At ThirdWay Africa, impacting and improving Africa’s agricultural capacity is one of our primary drivers. We have supported numerous agribusinesses across Indian Ocean Africa to raise capital for growth and expansion.
The ThirdWay Rural Development Corporation
More recently, we launched the ThirdWay Africa Rural Development Corporation, a permanent capital vehicle with a focus on sustainable rural development. Our initial investment was in Wanza Farms, a 2,500-hectare soybean and maize farm in Mozambique. This investment is in line with our philosophy on rural development, which focusses on the development of large nucleus farms to create catalytic benefits for small farmers and the broader community, while also achieving strong financial returns for investors.
In the graphic above, a representation of the ThirdWay Rural Development Corporation's investment philosophy
Indeed, at the ThirdWay Rural Development Corporation we believe long-term commercial success is dependent on win-win partnership structures between investors and local communities. There are four pillars that underpin this strategy (see here for more detailed information):
Fostering outgrower schemes to bring income security to small farmers
Investing in training and education for small farmers to support sustainable farming practices to prevent land degradation and deforestation
Supporting the formalization of community land rights to ensure trust and transparency between investors and the community
Investing in infrastructure, such as irrigation canals, to improve annual yields for all farms under cultivation
Africa can be the breadbasket for the world
Africa is currently a net-importer of food and is projected to have a food import bill of USD 110 billion by 2025. Without drastic change, average households will continue to suffer from undernourishment, food insecurity and poverty. The ongoing COVID pandemic, which has already disrupted agricultural supply chains, further highlights the need for drastic improvement in managing food security across the continent.
Given its large endowments of fertile land (200 million hectares of uncultivated arable land) and vast water resources, there is no reason why Africa cannot change this state of affairs. In fact, beyond securing self-sufficiency in food production, Africa has the potential to be the breadbasket for the world.
At ThirdWay Africa, we firmly believe in the future of African agriculture and are committed to the realization of a sustained green revolution across the continent.