To succeed, African countries must narrow their focus and target high-impact projects.
African agriculture is at a turning point,
and a long-awaited “green revolution” may be within reach. Many of the
continent’s governments are adopting market-friendly policies and
committing more resources to the sector. Traditional big-donor countries
are increasing their expenditures on agriculture, while China and
Brazil are also beginning to contribute to the effort. African’s
agriculture’s private-sector investment is rising rapidly (see sidebar
“Sizing Africa’s agricultural opportunity”). High, volatile food prices
underline the importance of such development efforts and create not only
pressure but also political space for policy makers to act.
Sidebar
Sizing Africa’s agricultural opportunity
But investing these additional resources wisely and fulfilling
Africa’s agricultural promise will require better national planning.
Work is under way to facilitate such improvements: for example, the
African Union’s Comprehensive Africa Agriculture Development Programme
(CAADP) aims “to help countries critically review their own situations
and identify investment opportunities with optimal impact and returns.”
Introducing cost-effective agricultural development plans will be a
challenge, however. To succeed, they will have to address multiple
technical hurdles in the context of limited human resources, corruption,
political pressures, shifting priorities, and inadequate infrastructure
(see sidebar “Chinese agriculture: A model for Africa?”).
Sidebar
Chinese agriculture: A model for Africa?
In recent years, McKinsey has worked on the planning and
implementation of agricultural development in more than ten African
countries, across the public, private, and social sectors. We have
codified insights from this work into four lessons: aim for narrower,
higher-impact projects; pay more attention to the final market for
agricultural goods; assure clear roles for the private sector; and think
about implementation from the start. We offer these lessons to move the
issue of African agricultural development beyond the question “what”
and toward the “who” and the “how.”
In this related video interactive, three McKinsey experts discuss
what it will take to create a “green revolution” in Africa. Explore the
interactive to hear their thoughts or download a PDF of the transcript.
Transforming African agriculture
Three McKinsey experts discuss what it will take to create a “green revolution.”
Focus on higher-impact initiatives
Many country plans are broad and diffuse, attempting to cover
multiple regions and sectors without devoting sufficient resources to
the effort. Liberia’s agricultural-sector investment plan, for example,
has 21 initiatives across multiple subsectors, with three to six
activities per initiative. This approach would be a management challenge
for any organization, but especially for one in a postconflict country
striving to rebuild basic public services and relying on significant
support from donors. Almost all CAADP country plans set targets for
productivity and output, but they do not always present these targets in
a way governments can deliver, such as kilometers of road to construct,
the number (and location) of warehouses to build, or the number of
commercial farms to establish.
Governments should therefore make their plans as targeted and
explicit as possible. They can concentrate investment on a value chain
(all economic activity, from inputs to market, associated with a crop),
on a “breadbasket” region positioned for large productivity increases,
or on an infrastructure corridor. Countries could move sequentially,
learning from success in one region or sector before spreading
investments to others.
Morocco, for example, shifted its focus about four years ago from
supporting staples to investing in a few high-value crops that could
accelerate GDP growth while raising income for smallholder farmers. The
country is more than halfway to its target of converting 300,000
hectares
of land from cereal to citrus-fruit and tomato cultivation, among other
high-value crops. Another success story comes from Ethiopia, which
decided in the 1990s to invest in sesame and cut flowers for export.
Close collaboration between the government and the private sector
enabled strong year-on-year export growth in an otherwise stagnant
agricultural sector. Oilseeds and flowers are Ethiopia’s fastest-growing
exports, the latest statistics show.
A breadbasket approach concentrates investment in a particular
geographical area. In the 1970s, Brazil’s Cerrado region, for example,
began investing in infrastructure, agricultural research, and soil
recuperation. Several African countries are adapting this model to
existing agricultural areas and emphasizing smallholders. Mali, for
example, is considering a pilot breadbasket program for its Sikasso
region. The initiative aims to raise cereal production by 60 percent
through a combination of yield increases and limited expansion onto new
land. There will also be strong support for export development, new
roads and warehouses, and measures for climate mitigation and adaptation
(such as water harvesting and locally adapted drought-resistant seed).
Another approach is an agricultural-development corridor, in which
commercial farms and facilities for storage and processing are
concentrated around a major infrastructure project. Two such corridors
are under way: one linking the port of Beira, in Mozambique, with Malawi
and Zambia; the other connecting southern Tanzania to Dar es Salaam
along the TAZARA Railway. In both cases, private investors in mining and
infrastructure provided the impetus, supported by governments that want
to develop neglected regions of their countries.
Develop markets to complement supply measures
Most agricultural-development plans focus on supply side
interventions, such as improved seed and fertilizers. Many pay too
little attention to the demand side—the place where the increased
production will ultimately go. Unless the planners know the answer to
this critical question, that increase will probably fail to produce
economic gains and will make it hard to carry on with the program.
Once the subsistence requirements of the producers’ families and
local communities have been met, there are three main sources of demand:
export markets (international and regional), domestic urban markets,
and food processing. In Morocco, the government helped facilitate the
export of high-value crops to Europe through a combination of technical
assistance, economic and political measures (such as helping growers to
meet European farm certification requirements), and an agreement with
the European Union to expand tariff-free access for Moroccan producers.
In Ghana, the government plans to create a staple-crop breadbasket in
the Northern Region to supply more rice and maize to urban markets,
which currently rely on imports.
Food processing is attractive to many governments because it is both a
source of demand for agricultural products and a job creator. For
export goods, downstream processing may be discouraged by US and
European tariff regimes, which favor raw over processed goods. African
countries can, however, counter this problem by cutting their export
taxes on those goods. Côte d’Ivoire and Ghana have used this approach to
increase their share of cocoa processed in country to 40 to 50 percent
today, from less than 10 percent in 2000. Meanwhile, as African
countries urbanize, processing for domestic use will become more
attractive. The challenge is to ensure that quality standards and
infrastructure—especially power—make the industry competitive.
Reliable domestic sources of demand are particularly important in
countries where poor transport connections or a lack of comparative
advantages constrain the ability to export. In Ethiopia, for example,
improved seed and good weather led to a surge in maize production in
2002. Farmers couldn’t sell the surplus, however: the country had little
export infrastructure, while high domestic-transport costs and low
purchasing power made it uneconomic to move the maize to cities or
regions with food shortages. Maize prices eventually fell by more than
50 percent, forcing farmers to let the crop rot in the fields. The
government’s goal of doubling cereal production will therefore require
substantial investment in transport, storage, and processing.
Create clear roles for the private sector
Governments cannot succeed alone. The evidence suggests that
agricultural-development programs also require the active engagement of
private agents such as farmers or farmers’ organizations, input
suppliers, warehouse operators, buyers, and traders, including
international trading companies. Development programs often overlook or
disdain agri-dealers and other middlemen, yet they perform essential
coordination work—for instance, linking small farmers to markets or
providing inputs appropriate for local soil conditions. Governments and
donors rarely have the local knowledge or capacity for these jobs. Also,
international trading companies can not only contribute technologies
and management skills but are also major buyers. Private investment in
infrastructure, such as mines and ports, may play a role in agricultural
development, too.
Relying on private-sector agents such as input suppliers, buyers, or
both has several advantages. They typically have access to capital and
organizational know-how. In a competitive market, they must learn
quickly to survive and make money. Private-sector agents can also link
smallholder farmers to markets effectively. Large “nucleus” farmers,
agri-dealers, and warehouse operators can market the output of many
smallholders at once, reaping economies of scale that give smallholders
better prices than they could get on their own. A similar service could
be provided by farmers’ groups—in some cultures, they have a record of
success; elsewhere, private-sector entrepreneurs have a better one.
In Morocco, for example, the government has developed an aggregation
program for smallholders. The program revolves around a nucleus farm,
with 50 hectares of land leased by the government to a commercial farmer
who makes a commitment to work with surrounding smallholders through an
“outgrower” program. Outgrowing means that the commercial farmer
facilitates access to inputs (such as bank loans, seed, and advisory
services) for the smallholders, in return for the right to market their
output. Morocco created an agricultural-development agency to encourage
and direct these investments and manage the contracts. One of the
government’s key roles has been ensuring equity in the relationship
between outgrowers and nucleus farmers. More than 30 aggregation
partnerships have been launched since the program began, two years ago.
Bringing the private sector into the picture is no quick fix for
agricultural development: often, when the government’s capacity is weak,
so too is that of the private and social sectors (including
cooperatives and other farmer’s organizations). In the past, governments
used this argument to justify bypassing the private sector. When the
government of Malawi launched its voucher-based fertilizer subsidy, in
2005, for example, farmers could redeem the vouchers only at government
distribution centers. The result was a diminution of the role of private
agri-dealers and the eventual closure of some dealer locations.
Ultimately, the private sector can develop capacity only if its
incentives are aligned with the government’s strategy and those of the
sector’s agricultural customers.
Design implementation into the strategy
To carry out an agricultural-development strategy, government
officials must work with farmers and the private sector across
departments, from the central ministry to extension workers. Since most
African countries face capacity constraints, governments must design
clear, simple strategies. They can reduce the number of agents they use
by working with aggregators, such as nucleus farmers in Morocco, who in
turn deal directly with smallholders.
Effective implementation starts with assigning responsibilities
clearly. At the central-government level, the relevant agency has three
main tasks: managing agricultural programs within its own organization,
coordination with other parts of the government and with donors and the
private and social sectors, and monitoring the progress of the strategy,
intervening as necessary. Each country has different institutions and
capacities, so there is no universal solution. What the agencies
actually do is more important than which part of government they are in.
One approach is to assign implementation to the department that
developed the strategy—typically, a ministry of agriculture—investing in
capacity and bringing in outside experts as needed. This approach can
make use of existing institutions without undermining them. The downside
is that it’s difficult to change the culture of large institutions,
both public and private, to deliver the impact required. Since
capacity-building projects in Africa have a mixed record, using existing
capacity may be best when the strategy involves strengthening or
expanding a program that the government has already shown it can
administer.
Another approach is to set up a special delivery unit to guide
implementation. This may be appropriate if the government decides that
capacity in an existing ministry is low or feels that the strategy is so
innovative it would be better to create a unit with an explicit
mandate. Such a unit is rarely in charge of programs but sets targets,
tracks progress, and solves coordination problems. It may well drain
capacity from other government departments as it typically offers more
attractive salaries and interesting work. Yet it can also build capacity
within the government: rotations, secondments, and placements spread
its way of working to other departments. Morocco, for instance, created
the Agency for Agricultural Development with a specific mandate to
establish public–private partnerships for high-value crops. Other
aspects of the government’s strategy remain the responsibility of a
restructured ministry of agriculture, whose budget has risen to $1.4
billion a year, from about $800 million.
Several other countries are considering the delivery-unit model to
promote agricultural transformation. These units would serve as a
contact point for government and donor organizations, track the progress
of critical initiatives, and intermediate between public and private
entities.
Given the capacity constraints most African countries face, our
central message is that to succeed, agricultural-development plans must
be less ambitious and more targeted. They will differ for each country,
so a uniform implementation isn’t possible. But agricultural development
comes to life when government, working with all interested parties,
pursues selected initiatives that have identified sources of demand and
appropriate enabling investments supervised by a nimble implementing
authority.
