Source of Growth

Identifying region-wide options for accelerating agricultural growth and poverty reduction

The agriculture sector in the SADC region is the primary source of subsistence, employment and incomes for 65% (140 million) inhabitants of the region’s total population estimated at 215 million. Agriculture accounts for close to 8% of the region’s GDP. However, despite the importance of agriculture in SADC's economy, agriculture growth rates have been low and highly variable across the region. They average only 2.6% in the last decades, similar to the demographic growth rates of 2.5%.

Much has been written about the factors that have contributed to the poor performance of the agricultural sector in the SADC region – but the key factors sighted to have contributed most to the decline of agriculture growth include: insufficient investment in agriculture, poor access to agricultural inputs (especially fertilisers and improved seed) and markets, and low technology development and dissemination. These have resulted in limited growth in average yields of key crops and low labour productivity. Other factors that have been sighted as contributing to this decline include: the adverse climatic conditions (especially since close to 90% of the region’s agriculture is rain fed) and HIV/AIDS, both of which threaten farming households.

This situation calls for strengthening, as well as, transforming agriculture in the region so that it can stimulate the much needed economic growth. However, key questions still remain: How can higher agricultural growth rates be achieved? What are the optimal investment options to which committing larger budgets will achieve faster rates of agricultural growth than have been achieved to date and how can we ensure these investments achieve a high payoff?

There is need to identify the type of investment and policy options needed to accelerate agricultural growth and poverty reduction in Southern Africa. Agricultural investments must focus on those options that can trigger a 6% annual growth rate of agriculture and enhance the contribution of agriculture to reaching MDG1 in southern Africa from a regional perspective

There is need for a better understanding of the opportunities to leverage agricultural growth dynamics, food security and poverty alleviation through regional agricultural and non-agricultural policies and investment priorities. There is need to identify the optimal integration paths for individual countries, as well as, the challenges and opportunities that different member countries face in the process of regional integration.

SADC governments have committed to achieving a 10% contribution of their national budgets to agriculture. However, substantial uncertainty remains about what specific investments to prioritize within the sector. There is need to provide regular information on the optimal investment options for achieving the targeted 6% agricultural growth within an economy-wide and regional setting. There is need to define broad sub-sectoral priorities for agricultural investment. Governments need advice on how to maximize the returns to specific investments within the sub-sectors in order to increase productivity.

There is need to provide evidence-based answers and options to critical policy questions, in a quick, timely and relevant fashion, in order to support and inform on-going policy debates on future investment and policy alternatives at both country and regional levels. Much of the current debate on investment options at national and regional levels is being carried out with limited or insufficient analytical information about viable options and, often, the resultant decisions are less than optimal.

Strategic Activities

Identification of challenges and opportunities of regional integration for economic growth and poverty alleviation

This is aimed at determining the impacts of regional integration on agricultural and overall economic growth of southern African countries, identifying potential winners and losers of the integration process at different levels: countries, sectors, sub-sectors and households. A comprehensive analysis of growth linkages between middle and low-income countries existent in the region will be undertaken. This will involve analyzing the impact of regional trade liberalization, regional capital mobility, investment and migration on the economies of the different countries in the context of increasing economic growth in South Africa and an increasing involvement of emerging economies in the region e.g. China.

Optimal regional integration paths for different countries

This is aimed at analyzing how accelerated agricultural growth can be achieved through the removal of critical constraints and the opening the opportunities available through regional trade and markets. The types of investments and policy options that will most effectively generate economic take-off among poorer countries and accelerate poverty reduction in the context of regional integration will be identified

Assessment of alternative regional R&D strategies using a “development domain” approach

Because agricultural performance derives from and is conditioned by deeper socioeconomic and biophysical realities, there is need to analyse agricultural R&D priority alternatives using a ‘development domain approach’ in order to:

• identify institutional and policy challenges affecting the effectiveness of national agricultural research systems (NARS), input markets and extension systems in select countries in the region
• identify regional R&D investment patterns that offer the greatest potential returns to R&D in the region in terms of agricultural growth and reduced poverty and food insecurity 
• Provide recommendations and alternative priorities for a regional R&D investment strategy.

Preparing policy briefs on alternative policy and investment options for improving productivity

Policy briefs are required on key priority policy issues. The briefs are required to provide quick policy advice to inform the SADC and CAADP decision and planning calendars. Initial briefs need focus on: Input subsidies – should this be an alternative at all; irrigation – where are the success stories, profitability, and pay-offs under different scenarios; and contract farming – options for contractual arrangements for small farmers under different institutional and market arrangements

Analyzing salient features affecting the performance of regional agricultural research collaboration

There is need to capture the synergies and potential gains from regional agricultural research collaboration by analyzing the salient features affecting the performance of regional agricultural research collaboration – this - because despite on-going collaborative empirical analyses, there is still some scepticism among individual countries about the gains from this collaboration. There is need to establish an inventory of the economic, social, institutional and political factors that encourage or discourage regional collaboration in agricultural research.

Monitoring of Non-Tariff Barriers in regional agricultural trade

The main problem with inter-regional trade rests with non-tariff barriers (NTBs). The magnitude of tariff barriers is minimal because the regional economic bodies (SADC, COMESA) placed high priority in rationalizing and harmonizing trade tariffs right from inception. NTBs, however, act as trade barriers because of their very unique characteristics (non-quantifiable, difficult to characterize, as some get removed, new ones appear and with new tricks). There is need to characterize existing NTBs, determine their nature and scope of proliferation, and provide a proposal for monitoring and controlling them

Regional Trade

Strengthening regional economic linkages that offer mutual benefits across countries is an important part of development strategies in Sub-Saharan Africa, leading to economic growth and poverty reduction. Regionalism, in fact, has received increasing attention as a result of growing fears in Africa and in the international community of African marginalization in the global economy. As a result, several regional initiatives have been developed across the continent, in particular in southern Africa. The need for the creation of institutional frameworks and programs that can improve food security in the region has been central to cooperation efforts through regional schemes such as the Common Market for Eastern and Southern Africa (COMESA), the Southern Africa Development Community (SADC), and the Southern Africa Custom Union (SACU). Efforts by SADC and COMESA to establish a free trade area (FTA) and customs unions are all steps in moving toward an economic area that ultimately allows the free movement of people, goods, and services, as well as factors of production (capital and labor). Both the SADC and COMESA schemes have tried to address critical issues such as removal of tariff and non-tariff barriers; development of rules of origin; cooperation in customs administration, technical standards, and sanitary and phyto-sanitary standards; and promotion of cross-border investment.

Despite the progress being made, the region is still a long way from taking full advantage of the opportunities to further integrate and stimulate economic development. Food deficits are still an issue in the low-income countries in the region, with productivity of cereal production still below the African average. Increased investments are needed if countries are to reap greater benefits from FTAs and to further the integration process. Foreign direct investment (FDI) inflows have lagged because individual countries have small markets, weak infrastructure, and unfavorable investment climates caused by civil wars, political unrest, and currency instability. Poorly functioning markets also lead to high transaction costs. Although southern Africa has well-established transportation corridors, transport costs remain excessively high: they have been estimated to be 30–40 percent of valued added of goods sold in the subregion. Several studies consistently show that high transportation costs act as a restrictive barrier to increased trade and capital flows.

In this context, the key question is what opportunities do regional integration and cooperation offer southern African countries for growth and poverty alleviation? There are at least four areas in which southern African countries can benefit from regional integration and cooperation: (1) the economic diversity of the region, (2) regional food security, (3) regional infrastructure, and (4) trade and investment.

Exploring growth linkages and market opportunities in Southern Africa: IFPRI

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