Africa’s current growth has sparked a heated debate over its sources and sustainability.
Some argue that growth across Africa is fundamentally a result of rising commodity prices and that if these prices were to collapse, so too would Africa’s growth rates. Others lament the so-called de-industrialisation of Africa. They worry that without a vibrant manufacturing sector, unemployment will remain high and the economies of Africa will not catch up to the more advanced countries of the world. Finally, some warn that youth unemployment could lead to an ‘Arab Spring’ in sub-Saharan Africa. Taken together, one could conclude that recent success will be short lived. But these observations fail to account for a quiet revolution taking place in Africa, which provides good reason for cautious optimism about the continent’s economic progress.
This phenomenon includes a substantial decline in the share of the labour force engaged in agriculture, an unprecedented increase in the numbers of rural children in secondary school, significant improvements in governance and a rise in agricultural productivity. For now, the revolution remains quiet, because the synergies between these various developments are only just starting to be realised.
A decline in the agricultural labour force may seem like an odd harbinger of a green revolution, but it is an important trend. Agriculture in Africa has traditionally had extremely low labour productivity, while moving out of the sector has been associated with increased living standards for millions of people.
Even more striking are the changes taking place among Africa’s youth – particularly the rural young, who are moving to occupations that raise their living standards. But the biggest shift is the increased share of the rural young remaining in school from an average of 24 percent to 48 percent over the past decade. Notably, the increase is the largest for rural females.
It is no accident that these structural changes have coincided with an overall increase in the quality of governance in Africa. According to the International Food Policy Research Institute (IFPRI), rural people in Africa vote more often than their urban counterparts and overwhelmingly vote for the incumbent, whereas urban residents tend to be much more supportive of the opposition. As education and living standards in rural areas improves, it will become increasingly difficult for incumbents to buy these votes.
The US Department of Agriculture reports that for the first time in decades, total factor productivity growth in Africa is rising. Progress is slow at roughly 1 percent per year, but this is the first time in decades that agricultural productivity growth has been positive. Increasing political competition across the continent is a strong empirical predictor of this rise, while the emergence of electoral competition has altered political incentives, resulting in both sectoral and macroeconomic policy reforms that benefit farmers.
This is of critical importance because, paradoxically, the hope for the ‘modernisation’ of Africa that will bring formal sector jobs needed to sustain productivity growth lies in the agricultural sector.
Consider some of the recent investments in labour intensive manufacturing. Chinese, Indian and European investment is pouring into Ethiopia’s leather sector, with fruit processing in Ghana generating interest among Indian and European investors. The US and Switzerland are investing in cashew processing in Mozambique. While access to relatively cheap labour is an attraction, it is not the primary reason for these investments; it is access to high quality raw materials.
A recent survey of foreign investors in leather processing and manufacturing finds the single most important reason for investment in Ethiopia’s leather sector is the country’s potential to produce some of the highest quality leather in the world. Yet this potential is yet to be realised due to the disorganised nature of the livestock industry and traditional practices that make much of the hides unsuitable as raw materials. The result is that many firms currently import up to two thirds of the hides which they later convert into shoes, gloves and bags for export.
The lesson is clear: additional investments in the livestock sector have the potential to create more formal jobs in the leather industry, while at the same time providing opportunities for poor, rural populations. Such investments could happen relatively quickly, leading to much needed structural economic change on the continent.
African governments have come together to form a compact – the Comprehensive African Agricultural Development Programme – which commits them to spending more of their budgets on agriculture. The World Bank and IFPRI are working with governments across the continent to catalogue the myriad of informal property rights systems in place for greater transparency and to provide more tenure security to farmers. The CGIAR and others are working with African researchers to develop new seed varieties. Crucially, African governments are investing more in rural infrastructure.
But there is a lot more that could be done to transform the agricultural sector more quickly. With luck and more pressure from an increasingly educated population, policies that promote faster productivity growth in agriculture could be the key to the modernisation of Africa.
Credit : Margaret Mc Millan is a Senior Research Fellow at IFPRI,a Professor of Economics at Tufts University