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Statement by Gilbert F. Houngbo, IFAD President, at the 2017 African Caucus Economic transformation and job creation: A focus on agriculture

Location: Gaborone, Botswana

Session 1:  Agricultural Policy Foundations: Financing, Land Tenure and Markets

Mr Chairperson of the African Caucus,

Colleagues,

Ladies and gentlemen,

Thank you, Mr Chairman Matambo, for inviting me to address the distinguished representatives attending this session.

Let me give you some background. It is important to recall that growth in Africa is expected to rebound from 2.2 percent in 2016 to 3.4 per cent in 2017, if recovery in commodity prices is sustained, the global economy is strengthened and domestic macroeconomic reforms are maintained.

At the same time, we also know most of our countries in Africa continue to face challenges: enduring poverty, conflicts and insecurity, wide inequality, in addition to persistent droughts and famine.

In this context, my opinion is that there is a need for economic transformation in Africa that has never been greater, and agricultural development must be at the heart of that transformation.

Furthermore, it is vital that special attention is devoted to the continent’s smallholder farmers, who can contribute significantly to driving Africa's rural transformation. There are today 33 million smallholder farms in sub-Saharan Africa alone. These farms are responsible for up to 80 per cent of food production in some of our countries.

There is solid evidence that rural transformation can make agriculture much more productive, more remunerative and profitable, while at the same time creating millions of jobs in rural farm and off-farm occupations.

Also it is important to bear in mind that growth in agriculture has been shown to be as much as 11 times more effective in reducing poverty in sub-Saharan Africa than growth in any other sector.

So, talking about policy foundations, let me put forward a few points, firstly at the macro level: most African countries are 60 per cent rural and agriculture makes up 30 per cent of their GDP. There are policy implications. Lesson one: rural transformation has to be at the center of development strategies.

For middle-income countries (MICs) where rural contribution to GDP might be declining, still inequalities and youth are a big challenge. Policies aiming at inequality need to focus on the rural poor and the working class.

At IFAD 50 per cent of our portfolio of loans and grants is in Africa.

Talking now about the experience that we have learned in terms of what might need to be revisited or updated, in terms of policy dimensions or financially; 

It would be unfair for me to tentatively make a full list of ideas, so for discussion let me just list two or three key points. We have heard from the wonderful Mokgweetsi, the importance the policy framework contributes to investment in agriculture. We know that all things being equal, agriculture is not a natural attraction for direct or any type of investors, let alone when we consider the rural dimension and the challenges.

It is especially important at the policy framework level, linking and delinking the Government by de-risking the overall sector.

The second critical thing we have learned with regards to targeting smallholders is what one calls the ‘missing middle’ – the huge gap that exists between supply and demand for medium to longer-term financing for smallholders and small and medium-sized rural enterprises. 

There is also a pressing need to strengthen innovation in information communication technologies (ICTs) to facilitate access to credit, other financial services and market information.

Policies are also needed to leverage and optimize the power of remittances. Africans abroad today send home more than $60 billion dollars a year. Policies are needed to reduce the cost of remittance transfers and to substantially increase the disposable income for remittance-receiving families.

We need to ensure that these funds are channelled into productive investments – such as seed, fertilizer and farm equipment -- as well as being used for basic needs such as food, healthcare and sending kids to school.

Let me now touch quickly on the land tenure dimension, which is an important challenge to show you that the policy framework again creates better conditions for access to land.  

Over the years, what we have done in IFAD is to introduce a range of measures to strengthen land tenure security and access to natural resources for poor rural people. We estimate that in the past five years alone in several countries, between 37.5 million people could benefit easily from better security for land tenure.

Another dimension to this is the large-scale land acquisitions by domestic and foreign investors, which are a major obstacle for poor rural people. So it is important, working with several partners, to identify alternative business models that can strengthen secure rights to land and natural resources, and boost agricultural production and productivity.

One dimension of land is the economic empowerment of women and women’s access to productive resources in the rural sector. What we have noticed especially in the rural zone is the cultural or social challenges.

As regards markets--and I will stop there--attracting private investment into agriculture and the rural economy is vital. However, many existing rules and regulations in Africa actually serve to deter rather than encourage such investment.

In this context, there is an urgent need to: create markets by reforming the regulations that limit private investment in value chains, which will help to create the market conditions; provide public goods and foster trust-based market relationships; and promote transparent oversight by governments and society at large.

On a positive note, African economies across borders have begun to organize on the basis of trade corridors that include large agribusinesses and smallholders alike. These include the Southern Agricultural Growth Corridor of Tanzania (SAGCOT); the Access East Trade Corridor (AKL); and Rwanda’s Economic Zone, linking the Democratic Republic of the Congo, Rwanda, Tanzania and Burundi.

These enable accelerated and regulated trade of smallholder commodities in larger quantities to sophisticated, high-value buyers.

We must encourage the greater involvement of young people in rural areas. Let’s remind ourselves that 10 to 12 million young people will enter the labour market every year. We have to have policies to ensure favorable conditions for job creation for those youngsters.

Let me just finish by informing you that in addition to the specific dimensions I mentioned, we make sure that the other sectors, which might not necessarily directly link to agriculture, are relevant to make sure we move in the right direction in terms of rural transformation. We cannot transform the agriculture sector if the health sector is lagging behind, if education is lagging behind, if the access to the internet is lagging behind. That’s why it is important to keep in mind that when we talk about agricultural reform we have to put it in the context of an inclusive rural transformation.  

I thank you.