Business

Agric Hamstrung Africa’s Economic Development

Windhoek – Poor performance of the agriculture sector poses a major impediment to Africa’s economic development and structural transformation by preventing labour from moving out of that sector into manufacturing and services, according to the Africa Competitiveness Report 2015.

The report published last year by the African Development Bank (AfDB), World Economic Forum and World Bank, says that urgent attention needs to be given to the development of agricultural value chains integration in order to boost African farmers’ benefits and create an agribusiness industry.

Furthermore, the reports alludes to the fact that although agriculture remains the biggest employer on the African continent (employing more than half of the population) its share of value-added has fallen over the past forty years, dropping from 34 percent in 1965 to just over 20 percent in 2010.

“Rather than being replaced by an expanding manufacturing sector, as the experiences in other regions would predict, this decline has largely been offset by an expanding service sector, accounting for over 50 percent of GDP,” the competitiveness report states.

It is believed that greater productivity in agriculture and trade services would boost economic growth and support structural transformation by allowing factors of production to move away from the agricultural to the service sector.

Other impediments that hamper agricultural sector performance are inadequate infrastructure, such as unreliable energy, an ineffective urban-rural road network and inefficient ports.

“Increased spending on rural infrastructure (irrigation, roads, and energy) will help reduce the continent’s dependence on rain-fed agriculture by supporting intensified irrigation, increasing resilience to climate change, and improving access to markets for intermediate inputs and agricultural produce. The availability and quality of infrastructure is also an important determinant to unlock (intra-) African trade in general and participation in regional and GVCs specifically,” says the report.

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In addition, the amount of global export from the continent remain small – around 2 percent of world trade, and exports overall remain highly focused on commodities, which makes the region vulnerable to fluctuations in commodity prices.

Hence, African countries are advised to reduce direct barriers to trade in services as well as indirect ones that result from poor regulation.

“The role of services in structural transformation must be re-examined and the link between a growing service sector and poverty reduction in Africa—and whether this a viable export sector for Africa—must be determined,” reads the report.

Beyond the poor quality of physical infrastructure and high tariffs in Africa, it is estimated that 60 to 90 percent of trade costs relate to non-tariff measures, which is exacerbated by delays and unpredictability, this while many industries rely on just- in-time production and depend on the reliability of the supply of intermediate inputs.

World Economic Forum assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity, while also assessing national competitiveness worldwide and providing a platform for dialogue between government, business and civil society about the actions required to improve economic prosperity.

The competitiveness index also measures market efficiency, financial market development, technological readiness, business sophistication and market size, among indicators.

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