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For sustainable growth, industrial policies must embrace agri-food systems transformation.
What’s old is new again.
This is a guest post from Sarah Piccini, a Food Systems Specialist at the UN World Food Programme
Ideas rise and fall. And like 1970s crocheted tops, they inevitably come around again. In the post-war era, a generation that saw man walk on the moon also believed in the government’s ability to intervene in the economy for the good of the country. Then came stagflation, the rise of neoliberalism and disparaging comments of “picking winners.” For decades, we scoffed at government intervention for a generation – until we didn’t. Intervention is now back on the menu.
The importance of agriculture has followed a similar bumpy trajectory. Once an imperative in the 1950s and 1960s (with some Asian countries effectively leveraging it into economic growth), it slowly became a focus primarily for the international development sector, which, with the best of intentions, mostly help the poorest communities to be a little less poor.
There is much more nuance to each of these stories, but perhaps they can now come together. Industrial policies typically move resources towards heavy industry, energy and technologies (see CHIPS Act), but governments with ambitions for sustainable growth must take a new look at food and agriculture.
Food is more than farming and investing in agriculture is more than increasing the supply of food. It will require aligning with market demand and a focus on overcoming the barriers for private investment. It’s not a quick fix and governments can’t do it alone, but intentional policies to transform agri-food systems is a worthy goal - for good jobs, better nutrition and increased food security. Even the fight against climate change could benefit.
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An idea whose time has come - Industrial Policies for Agri-Food Systems.
On a continent where 20% of Africans face food insecurity and 78% cannot consistently afford a healthy diet, food security and the stability of food supplies have long been a concern. During a global summit in Rome, Jeanine Cooper, Minister of Agriculture for Liberia, stood at a podium and declared her government’s intention to flip the equation on rice consumption, from one where 75% of rice is imported to one where 75% is produced at home. Sitting nearby, representatives from Germany and Norway nodded their heads approvingly.
The global narrative has shifted once again. Policymakers are asking why Africa imports billions in food each year, when it could be creating local jobs instead? They ask how a continent with the majority of the world’s uncultivated land could be so vulnerable to global food price shocks and food insecurity. According to the IMF, staple food prices in sub-Saharan Africa increased an average of 23.9% from 2020 to 2022 – leading to an 8.5% increase in the cost of a food basket. Political tensions, loss of foreign exchange reserves, and rising national debts show that the current reliance on imports is unsustainable.
But where past efforts have focused heavily on agricultural inputs, an agri-food systems approach asks policymakers to consider all the steps from farm-to-fork. In the journey to build more labour-intensive, high-productivity economies, governments now have the opportunity to leverage a greater range of industrial policies to incentivize the production of more valuable food products – both for export as well as to feed their fast growing (and increasingly urban) domestic markets.
A caveat. None of this is to say that governments can replace all imports with domestically produced foods, nor should they try. Disruptions in food markets could have far reaching impacts – especially for the poorest communities. The focus is more to intentionally create incentives and remove barriers for local private actors to increase productivity and build competitive businesses, ideally ones that contribute to food security, jobs and nutrition.
Revolutionising food production is easier said than done.
History tells us this won’t be easy. In 2002, African Heads of State committed to allocate 10% of their national budgets to agricultural development. In the twenty years since, most governments have come nowhere close.
Decades of wavering public commitment and a focus on inputs and marketing boards, have failed to tackle important barriers to more productive agri-food systems:
Low levels of existing capacity to process/transform foods into higher value products and achieve the quality and scale that would make African companies globally competitive.
Energy. In 2019, France and Germany along used more energy than the entire African continent. Unreliable power leads to higher operating costs and low productivity.
(Un)sustainable financing at all levels – from a lack of fit-for-purpose multilateral development financing (something that is shifting as newer players like China offer alternatives) to smallholder credit markets incompletely served by microfinance institutions.
New interventionism in Agri-Food Systems - Why this time can be different.
But belief is growing that the right policy tools (in consultation with the private sector) might focus enough resources to overcome these barriers. This time might really be different. With industrial policy back on the agenda, now is the time to strike. Through exciting new agri-food systems projects, countries from across sub-Saharan African are taking their first steps towards the high productivity, labor intensive sectors they desperately need.
Public-Private-Producer Partnerships. In Nigeria, the Government has launched eight new Special Agro-Industrial Processing Zones (SAPZ). Working with the African Development Bank and IFAD, the zones will be in rural or peri-urban areas and designed to cluster together the services and infrastructure needed by companies to be competitive. Each SAPZ will focus on a unique set of value chains, highlighting those that engage small producers. For example, in Kano state, the planned SAPZ will focus on rice, tomatoes, groundnuts, and sesame, while in Ogun, it will promote cassava, rice, poultry, and fish. If developed as planned, the eight new zones should benefit 1.5 million households engaged in farming, value chains and agribusiness.
While Nigeria aims to leverage its huge domestic market to generate growth in rural communities, other governments are hoping to boost the productivity of export crops for wider economic benefit.
Cocoa Processing. In Ghana, the government announced a new ambition to process 50% of its cocoa domestically. The goal comes as part of a larger partnership between Ghana and Ivory Coast to leverage their cocoa industries (60% of world supply comes from these two countries) to alleviate poverty and further economic development. More controversial parts of the plan include harmonizing marketing prices (see COPEC), but other elements include research for improved varieties, incentives for investments in value chain upgrading, and promoting the consumption of cocoa regionally. While both Ghana and Ivory Coast remain far from domestic processing targets, new investments have come from the African Development Bank ($600m), Cargill ($13m processing expansion), and smaller players like Swiss-Ghanaian firm Koa ($3.5m facility).
Will these policies succeed where others have failed before? Only time will tell. But Africa’s past is not its future. Investing in agri-food systems is a broad-based recipe to feed a continent hungry for productivity and growth.