Category: Agriculture

Warehousing African development

Amazon has built a trillion dollar business around them, farmers around the world rely on them, modern healthcare would be crippled without them, the manufacturing industry needs them to smooth out production and demand cycles and global trade needs them to work. They aren’t glamorous like railways and airports, nor are they as fulfilling for donors who prefer to build schools or fund feeding programs, but warehousing is critical to modern societies and economies and they will be crucial for the development of African economies.

Warehouses won’t make living conditions or livelihoods better by themselves, but they are a crucial enabler for things that will. What’s needed from African governments isn’t money or infrastructure, but rather the right set of policies that will enable businesses and individuals to build, and use warehouse facilities as they see fit, to the benefit of their businesses, communities, and the wider economy.

More than storage

Most people do not spend much time thinking about warehouses let alone their transformative power. To most of us, warehouses are just storage, inert spaces where goods and commodities are kept either in transit or until they are needed. I thought the same until I learned the role that certified warehouses (warehouses certified by the government or other trusted actor) and storage play in making the world that we live in. Which got me thinking about the role that certified warehouses could play in Africa’s development on several fronts.

Agriculture

The Food and Agriculture Organisation of the UN estimates that sub-Saharan Africa loses about 20 % of its cereals, 40%-50% of its tubers, fruits and vegetables, 27% of its oilseeds, meat, and milk, and 33% of its fish, to post-harvest losses. This is millions of dollars of lost income for African farmers and it is enough food to feed at least 48 million people, equivalent to the population of Angola, Zimbabwe, Swaziland, Namibia, and Malawi all together.[1] A significant contributor to this phenomenon is the lack of adequate and suitable storage for agricultural goods. This forces African farmers to sell whatever produce they can at whatever rates they can get (the much hated farmgate price) or simply to let their produce go to waste if they can’t find a buyer.

Available (within reasonable distance), affordable (reasonably priced) and suitable (the facilities can store perishables goods appropriately), could cut post-harvest losses dramatically, simply by giving farmers somewhere to store their produce. Thus at the most basic level, proper storage ensures adequate food supply and food security. In addition, it could significantly improve farmer incomes as they will be able to store produce and search for the best prices rather than be forced to take whatever is given to them.

However, certified storage can do a lot more than simply bolster food supplies, farm incomes and cut losses. Certified storage can open the door to farmers gaining access to credit, having produce in a certified warehouse is an asset that farmers can use collateral for credit. Smallholder farmers produce almost 70% of food consumed on the continent, an improvement in their productivity would impact on poverty and living standards throughout Africa (something I cover in more detail here).  Providing smallholder farmers with access to credit is essential to unlocking long-term, sustainable gains in African agriculture. Without credit, farmers cannot afford inputs such as quality seed and fertilizer, they cannot purchase or rent tools that increase efficiency and reduce labour costs, they cannot afford training and support services. Certified storage can be the key to unlocking agricultural credit, as financial institutions will have collateral which they can sell if the farmer defaults, and farmers will not be rendered destitute as their primary asset, their land, will not be taken away as collateral. Furthermore, it could allow farmers access to financial instruments that farmers in the west have long had access to such as hedging (locking in a price for the next harvest) and providing themselves with some security.

The third thing certified warehouses can do for African agriculture is enable commodity exchanges, depositing agricultural produce in certified warehouses will allow that produce to be listed on commodity exchanges and traded, enabling farmers to sell their produce to buyers anywhere in their country, region, or even continent, and allowing consumers (through large purchases like millers and supermarkets) a larger selection of producers to buy from and thus a better chance of getting better prices.

Trade

Trade (both domestic and international) relies on finance, specifically trade finance. Formally its where banks and financial institutions provide credit, hedges, guarantees, and increasingly complex structured products to companies and people buying and selling goods across borders. On the informal scale, it’s the trader who borrows a bit of money (usually on a mobile lending platform) which he uses to buy produce or some other goods, which they then take to market and sell at a profit, paying back the loan with interest and keeping their profit margin. Fundamentally, both formal and informal, trade finance relies on trust. A key issue that hampers trade finance and thus trade across the continent is the lack of trust within the African trade ecosystem.

For instance, financial institutions (both big banks and mobile lenders) do not trust warehousing facilities and are thus unwilling to lend with those goods as security. Thus, financial institutions add a significant risk premium (high interest) to their financing which traders are unable to pay, or the few facilities that are trusted can charge exorbitant rates thus raising the cost of trade. Certified warehouses which issue verified receipts of the goods deposited in their warehouse could fill this gap and get rid of this hurdle to trade on the African continent because in the rest of the world this is precisely what certified warehouses do. Like in agriculture, having a place where you can store your goods verified by a trusted actor will kickstart trade by enabling their crucial lubricant, credit.

Healthcare

Markets and economics aren’t the only benefactors of proper warehouses. Pharmaceuticals are volatile things, they are carefully engineered chemical substances which need to be kept at stable temperatures and conditions. They need what’s called a cold chain, which is a series of refrigerated production, storage, and distribution facilities and capabilities. Refrigerated storage is a key link in that chain, as it would allow government and health systems to store medicines, smoothing out distribution chains, making public health campaigns (like vaccination drives) easier and allow health authorities to plan for contingencies, for instance, stocking vital medicines for a possible Ebola breakout. Storage isn’t just about commerce it’s a key enabler for health systems as well.

Warehousing policy

If storage is a key enabler in a number of developmentally key areas the question becomes what’s needed. The first thing that comes to my mind is to stay away from the solution that so many governments on the continent have tried, government-owned and operated storage facilities. Particularly in Africa they have become magnets for corruption and are often neglected to the point that it’s not worth storing anything in them.

The bare minimum that is needed from government is a legally enforceable framework that does two key things. First, it must put in place a trusted regulator who is able to certify warehouses. To be trusted it cannot simply be another government entity it must incorporate stakeholders from the private sector like the stock exchange, trusted multilateral institutions like the AfDB or TDB, independent bodies like central banks and industry associations to ensure that when it does issue a certificate everyone from farmers to banks will trust them. This regulator must have legally enforceable repercussions for those who violate standards and regulations set by the regulatory authority. Trust is not just about having someone in charge whom you have confidence in, it’s the certainty that when the rules are violated, for instance, someone’s goods are stored improperly, that those responsible are in fact held responsible, in this instance all affected parties are compensated.

Second, is that governments must get out of the way and encourage innovation, particularly in agriculture. Where to this day, far too many African governments maintain outdated systems of produce boards whom farmers are compelled to sell to, and control prices and maintain substandard storage facilities.

Third, is to ensure that small farmers are accounted for in any warehousing policy, e.g having a requirement that warehouses devote a certain percentage of their storage space to small farmers, or cater for small farmers at a discounted price (e.g tax-free storage for small farmers)

In an ideal world, African government would go beyond putting in place a trusted regulator and getting out of the way of farmers, they would actively encourage the building the storage facilities. This could take a number of forms that again do not require significant taxpayer investment such as:

  • Making land available to warehouse developers in agricultural areas to ensure that farmers have access to storage facilities.
  • Allow goods in transit held in certified warehouses to be held tax free, to help the free movement of goods, development of commodities markets and encourage trade.
  • Set standards for databases and goods tracking so that all stakeholders will be able to track goods through the certified storage system, thus bringing more trust into the system.
  • Make available guarantees or funding to groups of smallholder farmers enabling them to build their own suitable storage facilities and engage in the market without fear of being taken advantage of.
  • Give tax incentives to developers willing to invest in cold-chain suitable storage facilities that could benefit the health system.
  • Take a holistic view of warehousing aligning it with other development efforts, such as ensuring that rural roads lead to warehouse sites, that electricity, mobile networks, and data cables reach warehouse sites

Conclusion

It may seem odd to focus on something as mundane as warehouses and storage. Unlike other development policies like universal healthcare, infrastructure or police it is not grand and flashy. However, not all of development policy is grand and flashy, often times to make the big things like agricultural reform, universal healthcare or intra-African trade possible, it requires investment in the mundane things, like a policy and regulatory framework for certified warehouses. Proper and certified storage is an enabler for a number of key developmental goals, my hope is that policymakers are aware of this, that if they want the new railways and roads, they are rushing to build across the continent to work and spur a new era of growth and trade they will require humble storage facilities, certifiably trusted and available to all.

[1] http://www.fao.org/africa/news/detail-news/en/c/445333/

Genetically modified crops can work for Africa, but only if Africa owns it.

“Sixty per cent of the world’s arable land available today is in Africa. All efforts to feed the world — not just to feed Africa, but to feed the world — in the next decade or more are going to focus on Africa. Which means Africa has to do it right and have the scientific basis not to mess it up.” – Calestous Juma

Genetically Modified Organisms (GMO) are a topic that provokes spirited debate between its detractors and proponents. One side insists that GM crops offer a second green revolution to a continent with persistent food security problems, and governments and people should just get over their reservations and embrace them. The other side warns of dire ecological, economic, health and neo-colonial consequences if Africa allows its crops to come under the control of the corporate mono-culturalists for whom profit is their sole goal with the apparent concern around the health and well-being of Africans and their environment being PR at best.

This is not a black and white issue. Both sides have valid viewpoints. GM crops do have the potential to be highly beneficial to African farmers and enhance the food security and health of millions around the continent. However, the practices of the corporations that make, distribute and are lobbying for GM crops are disturbing. Furthermore, the concerns for people’s health and ecological sustainability should not be dismissed but addressed with data and testing.

Like the debate around GM crops, Africa does not face a black and white choice of refusal or submission GM crops and the companies that make them. Africa can chart a different path, with a policy that puts African farmers, food security and innovation at its heart. Africa can tap into the potential benefits of GM crops, driven by the needs of its farmers and innovations of scientists without having to give our agricultural future to the profit motives of foreign multinational Agri-corps. For that to happen, GM policy in Africa would have to be based around the ideals of public ownership, accountability and collaboration.

 

Potential and pitfalls

When dealing with the topic it is crucial that a proper definition of GMO’s be used. With that in mind I will use the WHO definition of “Organisms (i.e. plants, animals or microorganisms) in which the genetic material (DNA) has been altered in a way that does not occur naturally by mating and/or natural recombination… It allows selected individual genes to be transferred from one organism into another, also between nonrelated species.” [1]. People have been altering crops and animals for millennia, through techniques such as selective breeding. What makes GM different is that we are altering the blueprints of the organism, its DNA, to add or remove characteristics that we may like or dislike. This is a potentially powerful technology and it is unsurprising that it provokes such strong feelings.

The Potential – Higher, healthier yields with less inputs

By inserting desirable traits into the genes of plants, there are a number of advantageous properties that could be given to plants.

First are the yields farmers get, which genetic modification can significantly increase through several avenues. Plants can be modified to be resistant to bacterial, viral or fungal diseases as well as pests, reducing the number of crops farmers loose to these scourges. In addition, plants can be given genes that allow them to withstand environmental stresses. For instance, as rains become less consistent it would be a great benefit to have crops that can withstand periods of drought or heavy rains. With climate change causing shifting weather patterns resilient crops will be critical.

The second great benefit is health, and this come about in two forms. GM crops that can be made naturally resistant to pests and infections require less pesticide, herbicide, fungicide etc. This is healthy for the farmers who would handle less chemicals, healthier for consumers as less chemical use means less of these substances being ingested, and its better for the environment as there are fewer of these chemicals getting into the wider environment and having adverse effects (e.g. water run off into rivers and lakes that causes fish deaths and algal blooms). The second possible health benefit of GM is nutritional. Through genetic modification the nutritional value of the plant can be enhanced. An example of this is yellow rice which has been modified to produce Vitamin A in order to prevent Vitamin A deficiency in children which can cause blindness.

The third broad benefit is an offshoot of the other two. By modifying plants to require less pesticide, herbicide, fungicides and fertiliser, you reduce the inputs necessary for farming. In a continent where, expensive farm inputs such as fertiliser and pesticides are a constant burden for farmers, reducing the amount of inputs required while sustaining or improving yields would give farmers a leg up without having to resort to expensive subsidies or government programs as we do now.

The Pitfalls

However, GMO’s are not all rosy. First, is the reality that “life finds a way”. Try as we may eventually GM crops will mix with and reproduce with indigenous crops. What effect will this have on the farmers who have chosen not to grow GM crops, what characteristics will these crops have, and if the GM crops are patented will they be forced to pay royalties.

Which brings us to the second issue, and in my mind the most crucial. Corporate control. Currently GM crops are largely a corporate creation, patented and controlled by large agricultural biotech corporations whose prime motivation is profit and not the interests of African farmers and consumers. Companies like Monsanto develop crops to be compatible with their own herbicide so that you only get good yields when used in conjunction with their other products. In addition, such crops tend to have terminator seeds. The seeds produced by the plants are sterile and thus farmers must purchase new seeds every year guaranteeing the company a revenue stream. Furthermore, the patents that these corporations have on these crops blocks innovation, evolution and adaption forcing farmers into farming in a specific way.

The third question is one of safety. Do we know enough about GM crops and their impacts on the environment and human health to be confident enough to allow them into the market? Do we have the systems regulations and facilities to test these crops to ensure their safety?

GMO’s with an African (policy) flavour

The answer to the issues presented by GMO’s both their potential and pitfalls, is not to completely ban them or allow agro-chemical industry free reign in the continent. What is needed is good policy. Good policy on GMO’s in Africa would consist of three elements. The first is public ownership and accountability. A major problem with GM crops is their corporate nature. The only way to ensure that GMO’s would be beneficial to Africa is to strip the profit motive from their research, design, testing and regulation. And the only way to do that is public ownership. This brings us to the second element, accountability. There is a lot of mistrust around GMO’s, the motives behind them, their ecological and health impacts and their use. The only way to assuage these concerns is transparency. No for-profit corporation will be transparent about commercially sensitive information such as its own GMO’s, but public institutions can be transparent and can be designed to be so, by incorporating stakeholders and their concerns into their design and decision-making structures to ensure that those concerns are met. The third element is collaboration. If GMO’s are truly going to be beneficial to Africa it will require collaboration on two levels. First between stakeholders within the agricultural industry, research scientists, farmers, environmentalists, doctors, consumers will all need to come together to guide the development of GM crops for the African context. A context in which small farmers are the vast majority of farmers, where climate change and changing weather patterns are making farming harder and where growing populations require more agricultural productivity to feed them. The second level is internationally. No single African country has the ability to set up and sustainably fund institutions that can design, develop, test and disseminate GM crops over the long term. However, together they could do so. The ability to pool funding, expertise, and facilities only makes sense, especially as many African countries face similar agricultural challenges and most staple and commercial crops are grown across multiple countries.

African GMO’s

GMO’s need not be a threat to Africa, they could be an opportunity. However, in their current corporate dominated form they do pose a threat. They threaten to yoke African agriculture to the profit motives of multinational Agri-biotech companies, who are not accountable to the African public or governments.

As Calestous Juma urged, Africa must do agriculture right, and to do that we have to embrace and own the science. Since Fritz Haber and Carl Bosch invented the Haber-Bosch Process in the early 20th century that allowed the production of fertiliser on an industrial scale, to Norman Borlaug and short stalk wheat in the 60s and 70s that saved millions from famine, science in agriculture is how we have fed the world. If we are to feed and develop Africa we must embrace science as part of the solution, and GMO’s as part of that. Smart policy, that is public, transparent, accountable and collaborative, would help ensure that Africa owns its GMO’s and its own agricultural destiny.

[1] http://www.who.int/foodsafety/areas_work/food-technology/faq-genetically-modified-food/en/

Africa’s Development Begins with Agriculture

 

“It is time to change the way we think. Farmers are not the cause of Africa’s poverty; they are a potential solution. They are key to creating the future envisioned by the SDGs.” — Kofi Annan, former UN Secretary General

The development narrative in Africa is dominated by two key strategies. The first is massive infrastructure investment and development and the second is big top down policies broadly seeking to achieve the Sustainable Development Goal’s (SDG’s). Neither of these two strategies are inherently wrong, Africa needs infrastructure to ease and stimulate commerce, trade, industry and to make people’s lives easier. In addition, the SDG’s are laudable and the goals they seek to achieve would undoubtedly make millions of lives better. However, this approach has reinforced a problematic issue in Africa’s economic story, the failure to put agriculture first. Agriculture, in particular small holder farming was and remains the largest economic sector on the continent, thus its development or lack of has a significant impact on the development trajectory of the continent. The policies and strategies adopted by many African governments at independence (and that many governments still profess today) saw smallholder agriculture as secondary to industry and were in many cases hostile to small farmers. In doing so, the core of the African economy and its engine of development was undermined. In Asia the opposite approach was taken came agricultural transformation took place before industrialisation providing the foundation of the Asian miracle. In a previous post on reimagining industrialisation I urged that we start seeing agriculture as industry, which would not only need African countries to step back from the policies that have failed the continent for the last 50 years but enact a set of policies that would empower farmers, improve livelihoods and drive growth and development.

Why agriculture

The primary reason for focusing on agriculture is its importance on the continent. Today much as at independence, agriculture remains central to the African economy accounting for over 60 percent of jobs and a meagre quarter of the continent’s GDP. The poor performance of the sector is illustrated by the fact that 90 per cent of those living in poverty are engaged in farming,[1]. If nothing else agricultural transformation in Africa would not only benefit the most people but also those who most need help.

Agricultural transformation, which we can define as the process by which the sector evolves from being subsistence and farm focused to one that is more productive, commercialised and linked to the non-farm sectors of the economy at the core of economic development. First off increases in productivity also means GDP growth (remember that GDP is the measure of the value of everything produced within an economy). Secondly, as productivity increases so does farmer income, when most of the population is involved in agricultural production these income increases have multiple positive impacts on the wider economy. Increased income means rural populations have more cash to spend and they will most likely spend that income on more local goods and services. Increased demand for local goods and services, as Africa tries to kickstart manufacturing and other industries a local market to sustain those industries is crucial and farmers with increased incomes could provide that mass market. In addition increased agricultural income generates savings, savings are the basis of investment in an economy as it what banks use when they lend money to businesses. Third higher agricultural productivity has benefits for urban populations as well, increased productivity increases the supply of and brings down the price of food, thus bringing down the cost of living. Crucially, this pro-poor developmental stimulus performance of agriculture requires the participation of small farmers, small farmers dominate agriculture in many developing economies and it is their transformation from subsistence to market participation, productivity and income gains that are the precursor to development. This process was what happened in East Asia where the technology of the green revolution combined with supportive government policies and land reform kickstarted rural economic growth, stimulating demand for local non-farm goods and services and providing the basis for industrialisation

What happened to African agriculture?

The lack of transformation in the agricultural sector since independence has had significant impacts on development on the continent. Between 1960 and 2000 agricultural productivity grew at a paltry 0.6 per cent in sub-Saharan Africa compared to 3 percent in developing countries as a whole, this can be seen clearly in the graph below comparing African and Asian agricultural productivity.

So, what happened to African agriculture, in short bad policy. At the core of the African economy at independence and today is agriculture in particular the small-scale farmer. However rather than enacting policies that would have supported farmers, increasing productivity and its associated increases in spending and saving African governments sought to rapidly modernise their economies. In this vision of modernisation, the focus of the economy is industrial, manufacturing and urban. The policies that this view entailed placed a significant burden on the agricultural economy of African countries, where governments not only underpaid farmers for their produce, but sought to extract revenue to fund industrialisation as well as keep the cost of living down for people in urban areas who worked in those industries. The creation of state corporations whose mission was to industrialise African agriculture into large-scale commercial farming not only failed but became avenues for rent seeking and corruption. It was not long until farmers retreated from markets to subsistence farming and parallel markets. As African agriculture was pushed into crisis by bad policy, African economies lost their primary source of growth. Africa’s development failure is rooted in the failure of its agricultural sector whose origins are to be found in the agricultural policies pursued by African governments, thus overturning these policies should be the first step towards reversing that failure.

New policies for agricultural transformation

If past agricultural policy in Africa provides a handbook on what not to do, then what policies should African countries be looking at to make agriculture an engine of growth. These policies must be aimed at assisting farmers in increasing productivity and connecting them to markets so that the wider populace and economy can benefit.

  • Assisting farmers

At the core of agricultural transformation is the farmers who work the land and the first policy should be providing them with the assistance they need. Rather than telling them what to do or grow (as has been done in the past) farmer assistance should be aimed at providing farmers with the skills and tools. At the core of this would be extension services which consists of farmer support through education, support and advisory and these would include:

  • Education and advisory services on the science and technology of farming such as water and irrigation, soil types, what to consider when choosing a crop to plant, what to consider when acquiring fertiliser, certified seed and where to get it.
  • Sustainability strategies on how to maintain your soil, prevent erosion and depletion.
  • Making farmers aware of market opportunities and government programs and services which they can take advantage of.
  • Facilitating the organisation and cooperation of farmers so that they can share knowledge and skills with each other and possibly enable farmers to form cooperatives or commercial groups to gain more favourable trading terms.
  • Deploying agricultural extension officers to rural areas employed by the government who can provide ongoing advice and support to farmers.

Farmer assistance policy would be aimed building the capacities of farmers to take initiative and improve their farms how they see fit, building on the expertise provided through the training and education and the experiences of their fellow farmers. In short it is about enabling farmers to be better farmers rather than old policies which tried to dictate to farmers the right way to farm.

  • rural infrastructure

As mentioned earlier much of the continent is on an infrastructure building binge, however most of that infrastructure is big infrastructure such as powerplants, railways and highways meant to facilitate international trade and industry. However, the rural and agricultural economies also need infrastructure, namely roads and storage facilities. Rural roads will help connect farmers to a higher number of potential markets and cut transport costs for agricultural goods, which will help reduce the cost of food.

Storage is crucial, post-harvest losses (agricultural produce lost between the farm and its final destination) in Africa are significant. The Food and Agriculture Organisation of the UN estimates that “sub-Saharan Africa food losses of about 20 % for cereals, 40%-50% for tubers, fruits and vegetables, 27% for oilseeds, meat and milk, and 33% for fish, that has an expenditure evaluated at US$4 billion per year – enough to feed at least 48 million people, equivalent to the population of Angola, Zimbabwe, Swaziland, Namibia and Malawi all together.”[2] Proper, affordable and widely available storage is key to ending losses and preventing produce from rotting due to a lack of refrigeration or unsuitable storage conditions. Preventing post-harvest loss through the provision of adequate storage facilities is the simplest way to increase productivity and improve farmer incomes. Governments have multiple options available to do this such as building public storage facilities, or incentivising the private sector to invest in storage solutions

  • Embrace science and technology

In the early sixties India was on the brink of famine and in search of a solution. The ministry of agriculture invited a scientist Norman Borlaug who had been working on new high yielding strains of wheat and rice and they soon adopted new 2 “miracle” rice variety. By the 1990s rice yields per hectare had risen threefold and India had gone from near famine to one of the worlds major rice producers and exporters. This is the story of the green revolution, where new technologies and research in agricultural science were successfully transferred to practice boosting productivity particularly in Asia where like India, many countries faced the spectre of mass famine. In 1970 Norman Borlaug was awarded the Nobel Peace Prize for his work in helping to feed the world. Much like Asia in the 1960’s Africa must pursue and embrace agricultural science, with climate change and shifting weather patterns farmers around the continent are facing significant challenges. If productivity is to be maintained and improved for an ever-growing population farmers will need new tools particularly those that science can provide such as drought resistant higher yielding crops. For this to happen African governments have to put more money and effort behind the agricultural research institutes and agricultural departments in African universities to come up with the tools that African farmers can use. If African governments don’t do this someone else will and they will own the rights to those innovations, making African farmers more dependent on foreign companies. New seed varieties, and technologies funded by African governments can be sold to farmers and licensed to African companies at much lower financial cost and without the strings attached to global multinational corporations.

Agriculture as the foundation for development

If Africa’s growth failure lies in policy that marginalised agriculture, the implications of this should be clear to policy makers on a continent whose economies are still agriculturally based. If, as the World Bank puts it, Africa is to claim the 21st century[3] then African governments must realise that industrialisation is not achieved without agriculture but rather with agriculture at its centre. As East Asia’s did, Africa’s agriculture sector holds immense potential not just for growing produce but for value addition (processing and marketing of agricultural products) and stimulating the wider economy. Boosting productivity would boost incomes, savings and quality of life for most of the population and the multiplier effects could spark the very industrialisation that African leaders sought at independence and still seek today. Agriculture can drive Africa’s development, but only with the right policies, policies that place the Africa’s farmers at its centre.

[1] Africa Development Bank Group – p.11-12 https://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-Documents/Feed_Africa-Strategy-En.pdf

[2] http://www.fao.org/africa/news/detail-news/en/c/445333/

[3] http://siteresources.worldbank.org/INTAFRICA/Resources/complete.pdf