FINANCIAL MATTERS: Making agriculture work
Agriculture, that
ineffable bit of the domestic economy. Still rain-fed, and (I would
imagine) still managed pretty much the same way our forebears used to
before the first encounter with the Caucasian slave-trader/would-be
colonialist. In spite of this, today, agriculture accounts for
two-thirds of domestic employment (most who have a view on this put its
share of rural employment a lot higher); and almost half of domestic
annual output growth. Based on these latter numbers, policy people, and
indeed any government that wants to positively affect the lives of the
greatest number of Nigerians in the shortest time possible, cannot but
focus on the agriculture sector. China’s example since 1979 bears this
position out. Incidentally, one of the major benefits of the reforms
that have driven the rapid growth in China – the rise in rural incomes
– is a major, unrealised, goal of agriculture policy here.
Between 1978 and
1985, rural GDP grew in China on the back of the dismantling of the
agriculture collectives previously run by the Peoples’ communes.
Expectedly, post-reform, the prospects of enhanced income growth as
household earnings became contingent on each homestead’s output had
multiplier effects on the larger economy. The contract responsibility
system, which replaced the old land-ownership structure, had another
major boon: a richer countryside drove its own supply for meat, and the
increased cereal production levels required to grow the beef. According
to one source, on the strength of these reforms alone, the portion of
the population in China living below the poverty line fell during this
period by 17.86 million annually, from 250 million in 1979 to 125
million in 1985. Or, put differently, the incidence of poverty in a
country of well over a billion people, dropped to 14.8% from 31% over
the same period.
All of China’s
experience notwithstanding, and despite a lot of talk to the contrary,
we have not been able as a nation to change the fortunes of the
agriculture sector, and by extension of our rural communities. Truth be
told, government policy has not altered the fortunes of any sector of
the economy, bar the serendipitous outcomes from the GSM license
auctions. In part, this is the result of a major policy failure. To
date, government policy at all levels has focussed on setting financial
and input targets for its intervention in the sector. According to a
recent Mckinsey survey, the former targets lack the precision proper
for both monitoring and measurement, while the latter target suffers
from an even greater failing. Despite the huge government outlays on
subsidising fertilizer use on the continent, the report, “Four Lessons
for transforming African Agriculture” estimates the continent’s use of
fertilizers (24 kilogrammes per hectare) at “only one-quarter of the
world average”.
Obviously, a part
of this dismal number is because official subsidies for supply-side
inputs (fertilizers, seeds, etc.) were privatised and never got to the
intended beneficiaries. However, a larger part of the policy riddle has
been the failure of past interventions to factor in demand-side
considerations. Were policy to have succeeded in securing the increases
in agricultural output that was aimed at, where would this have ended
up? No warehouses close enough to farm gates to store extra production.
No roads to evacuate produce to consumers in the urban areas. And
lastly, the problems with power supply over the last twenty years have
limited processing possibilities. Apparently, without due thought to
demand-side responses, the increase in farm output which our
governments’ policies have aimed at over the years would probably have
failed “to produce economic gains and (would have made) it hard to
carry on with the” programmes.
Building on these
insights, Mckinsey’s four lessons turn out to be pretty obvious ones:
focusing on high-impact initiatives; developing markets to complement
supply measures, creating clear roles for the private sector in the
design and implementation of the preferred strategy, and ensuring that
implementation capacity is a key part of whatever intervention
strategies are designed.
Clearly, there is a
dialectic relationship between the theoretical basis on which
interventions in the agriculture sector are constructed, the design and
analysis of options for reaching the desired goals, and how we
eventually manage the preferred options. The problem, however is that
we have failed as a country to understand this relationship across the
entire economy; not just in the agriculture sector.
