What investments are needed to reach the SADC-RISDP and CAADP goals in Southern Africa?

IFPRI

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE 5/6/2009

What Investments are needed to reach the SADC-RISDP and

CAADP goals in Southern Africa?

Babatunde Omilola

The Southern Africa Regional Conference on Agriculture

Theme: Agriculture-led Development for Southern Africa: Strategic

Investment Priorities for Halving Hunger and Poverty by 2015

Grand Palm Hotel, Gaborone, Botswana

December 8-9, 2008

IFPRI

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Introduction: Importance of knowing resource flows and

investments required to meet key SADC-RISDP and CAADP Goals

African governments and their development

partners need to know:

» how to sufficiently invest their available resources in key

productive sectors such as agriculture, education, health,

transport, communications, energy, etc to achieve desired

goals

» How and under what conditions should resources be

allocated in order to have maximum impact

» In agriculture, that is closely related to key RISDP and

CAADP Goals: which types of sub-sectors of agriculture

should investments target (e.g., research, extension,

subsidies, credit, infrastructure such as irrigation, feeder

roads, etc)

IFPRI

Introduction-Contd.

Impact projections of agricultural growth, food security

and poverty reduction should be based on strategic analysis

regarding investment expenditures and priorities to answer

the following:

» Could greater or better distributed outcomes and impacts be obtained by reconfiguring investment portfolios?

» What are the different types of investments that can lead to greater and more sustainable growth as well as greater and better distributed outcomes and impacts?

» Based on these, what new targets must be set and the levels of investments?

» Which types of sub-sectors of agriculture should investments target?

IFPRI

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Outline of Presentation

1. Key SADC-RISDP and

CAADP GoalsPart 1

Part 22. Recent Trends of Public

Investments in Agriculture in

the SADC region

Part 3 3. Investment Requirements for

Achieving key SADC-RISDP

and CAADP Goals

IFPRI

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Part 1

Key SADC-RISDP and

CAADP Goals

CAADP-RISDP, CAADP and MDG 1 have key shared goals and

targets for addressing poverty, food insecurity and hunger issues

IFPRI

Key SADC-RISDP Goals

Achieving a GDP growth of at least 7% a year and halve the proportion

of the population living on less than US$1 per day between 1990 and

2015.

Doubling cropland under irrigation from 3.5% to 7% as a percentage

of the total by 2015.

Increasing fertilizer consumption from 44.6 kilograms per hectare

((kg/ha) of arable land to 65 kg/ha of arable land by 2015 (world

average is 98.8 kg/ha).

Increasing cereal yield in kg/ha hectare from an average of 1,392 to

2,000 (world average) by 2015

Doubling the adoption rate of proven technologies such as improved

seed varieties, management of water and land by 2015

Increasing the daily per capita dietary energy and protein intake from

2,160 kilocalories (kcal) to 2,700 kcal and 49g to 68g respectively by

2015.

Halving the proportion of people who suffer from hunger by 2015.

IFPRI

Key CAADP Goals and Principles

» CAADP has revived interest in African agriculture

» Strategic framework for agriculture-led growth to

attain MDG 1

» Dedication of at least 10 percent of public

expenditure of each African country to agriculture

and rural development by 2008

» Attainment of an average annual growth rate of 6

percent in agriculture.

» Four main pillars to guide public investments

IFPRI

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Linkage of Public Investment to the key SADC-RISDP

and CAADP Goal of Poverty Reduction

Agricultural Production

Other Exogenous Variables

-Population Growth

-Agroecological Conditions

-Urban Growth

-Macro and Trade Policies

-Asset (Land) Distribution

Poverty

Food Prices

Wages Nonfarm Employment/migration

Finance

-Political

-Economic

-Governance

Total Government Spending

Allocation: Education/Health, Infrastructure/technology, Targeted Programs

Spending Outcome: Education/Health, Infrastructure, Technology

Efficacy

-Governance

Non-farm Production

Targeted Programs

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Part 2Recent Trends of Public

Investments in Agriculture in

Southern Africa

IFPRI

Current Status of Achieving key Goal of Poverty Reduction

IFPRI

Average Annual Change in Poverty Rates in Southern Africa

IFPRI

Current Level of Public Investment in Agriculture in Southern Africa

IFPRI

Agricultural Spending in LDCs

1994 1998 2004 1994 1998 2004 1994 1998 2004

West Africa 1.5 1.7 3.2 3.0 2.9 3.4 2.1 1.8 3.1

Southern Africa 4.2 4.8 4.9 2.7 2.6 2.4 14.3 13.9 15.1

SSA 7.4 7.6 10.1 3.2 2.8 2.9 5.5 4.7 5.7

Africa 12.7 13.2 17.5 3.7 3.5 3.7 6.9 6.0 7.2

Asia 122.38 141.61 220.6 10.1 7.72 5.53 8.43 8.14 10.8

LAC 19.19 17.68 23.7 3.41 3.25 2.82 11.02 9.72 11.8

Agriculture as a

share of AgGDP, %

Agriculture

Expenditure, 2000

international dollars,

Agriculture as a

share of Total

Expenditure, %

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Public Spending for Agriculture in Africa

IFPRI

Share of Agricultural ODA in Total ODA to SSA

Share of Agricultural ODA in Total ODA, All Donors

(1980-2005)

0

5

10

15

20

25

30

1980 1985 1990 1995 2000 2005

Pe

rce

nt

(%)

Source: OECD database, 2007

IFPRI

Share of ODA spending in total agricultural spending

Aid Dependency: ODA Spending as % of Total Spending for Ag

0% 20% 40% 60% 80% 100%

Niger

Mozambique

Rwanda

Uganda

Tanzania

Ghana

Guinea

Chad

Senegal

Guinea-Bissau

Malawi

Mali

Gambia, The

Burundi

Cameroon

Madagascar

Ethiopia

Zambia

Benin

Kenya

Burkina Faso

Cote d'Ivoire

Zimbabwe

Nigeria

Source: OECD database and IFPRI public expenditures database (work in progress)

IFPRI

Composition of Agricultural Spending: The Case of Zambia

Personnel Emoluments

20%

Operational funds

11%

Irrigation Development

3%

Infrastructure

2%

Food Security Pack &

EDRP

12%

Food Reserve Agency

Maize Marketing

15%

Fertilizer Support Program

37%Source: ReSAKSS-SA, MACO (Zambia), MSU (Zambia)

Example of Zambia’s 2005 Budget

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Part 3Investment Requirements

for Achieving key SADC-

RISDP and CAADP Goals

Evidence based on agricultural growth-poverty and growth-expenditure elasticities to

estimate investments required

IFPRI

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Returns to Investments in Sub-Saharan Africa

Elasticity (% change in TFP per 1%

change in spending)

Marginal returns(% change in TFP per 1

billion US$ increase in spending)

Agriculture 0.0152 9.0

Transport and communication

0.0094 6.0

Benin, Nin-Pratt and Radriamamonjy, 2007

IFPRI

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Agricultural Growth and Investment Requirements for Achieving Key SADC-RISDP and CAADP Goals in Africa

Elasticity (% change in TFP per 1%

change in spending)

Marginal returns(% change in TFP per 1

billion US$ increase in spending)

Agriculture 0.0152 9.0

Transport and communication

0.0094 6.0

Source: Fan et al., 2008

IFPRI

Concluding Remarks

Higher level of investments in long-term impact areas such as

infrastructure (roads and transportation), extension, agricultural R&D,

market information systems, postharvest handling facilities and

agricultural inputs

Most countries need to increase agricultural spending by 20-30 percent

per year

Required investments should be based on past progress in achieving key

SADC-RISDP and CAADP Goals and the role of agriculture in the

overall economy

Increasing investment in agriculture is not enough, how increased

investments in agriculture is allocated to different subsectors is very

crucial. Hence, better systems for tracking investments are critical

IFPRI

Concluding Remarks

Although overall ODA spending on African agriculture has risen, most

of it are allocated to emergency humanitarian aid

The agricultural sector is under-funded, and is lagging far behind its

Asian and Latin American counterparts

Sequencing and targeting of available investments and donor

coordination are critical, and enabling institutional environment is

important

Although evidence indicate that investments in agricultural research and

extension, rural infrastructure and rural education have the greatest

impact on achieving key RISDP and CAADP Goals, investment

prioritization should be based on the particular context of each country.

This is because there is no common definition of agricultural spending.

IFPRI

Thank You