Dear Ambassador Abebe, Honorable Ministers, Executive Directors and Advisors, Colleagues and Friends, I would like to welcome you around this table for what I hope will be a very interesting and unique sharing of knowledge on good practices in public spending in agriculture.
It is also a pleasure to have the presence of other invited guests from partner institutions with a strong commitment to agriculture on the sub-continent. I would like to acknowledge in particular the contributions of the Bill and Melinda Gates Foundation, represented today by Mr. Alan Rennison, to numerous initiatives improving evidence on what works for public expenditure in the sector, and also the International Food Policy Research Institute, represented by Mr. Ousmane Badiane, Director for Africa. IFPRI is a key partner in our agricultural work in Africa.
Our focus today is on a topic very close to my heart – agriculture in Africa. In my view, agriculture is one of the very key sectors for triggering the economic transformation that could make Africa an economic dynamo in the global economy. The paper we are discussing today analyzes agricultural public expenditures in five African countries -- Burkina Faso, Côte d'Ivoire, Ghana, Liberia and Togo.
In Africa, even more so than in other regions in the world, agricultural growth is hugely important to any effort to reduce poverty and promote shared prosperity, given its prominence in the economies of the region. Economic activity in agriculture typically accounts for 30- 40 percent of GDP and 65-70 percent of labor force – and there is global evidence that productivity improvements in this sector have a poverty impact close to 3 times that of other sectors.
Between 2010 and 2050, Sub-Saharan Africa will add 150 million more people in rural areas (a 30 percent increase), creating a real “youth dividend.” Urban job markets cannot absorb this increase, and agriculture will continue to be dominant sector of employment for years to come. We need a vibrant agricultural sector to create and safeguard these jobs.
We have recent diagnostic work carried out by the World Bank and IFPRI that provides evidence that a healthy agricultural sector can provide many paths to employment for these youth.
Some will remain on family holdings, in some cases combining work off-farm: 89 percent of rural youth currently work for their families or are self-employed, but these youths are typically poorly educated and unable to tap into their potential.
Some would leave their family farms and establish new farms of their own: but to do so they need land, capital, technologies, and advice.
Some will start businesses providing services (transport, plant protection, veterinary services, mechanized services, etc.) for new high-value agriculture. But to do this, they need technical and business skills, and capital.
And some will be employed as wage earners on commercial farms or in ancillary services. But to earn a good living in this, they need training to become skilled workers.
To take advantage of this youth dividend, we need policies and investments to create more fluid land markets, including rental markets; enhance education opportunities; help develop credit markets; and improve extension services. Each of these diverse pathways suggests priorities for public expenditures in agriculture.
In recognition that agriculture needs to become a driver for growth in Africa, you all have set a target in the Maputo Declaration to devote 10 percent of your public expenditures to agriculture, and considerable progress has been made towards reaching this goal. To date, Burkina Faso, Ethiopia, Ghana, Guinea, Malawi, Mali, Niger, and Senegal have exceeded this target.
On the other hand, I am aware that you, as finance ministers, worry whether you are getting good return from these increased budgets. Too often, the lion’s share of agricultural budgets have gone to programs that do not yield high returns, but are politically popular, such as indiscriminate input subsidies.
But there is firm evidence that there are good public investments in agriculture, which can pave the way for medium- and long-term returns and promote agricultural growth.
The Comprehensive African Agricultural Development Program (CAADP) of the African Union has made a commitment to focus on improving the quality of agricultural public investment programs. We know from global studies that for example investments in research to develop and disseminate technological innovations in agriculture yield very high rates of return. For Sub-Saharan Africa, on average each $100 invested (a one-time expenditure) in agricultural research produces future benefits each year estimated at around $35. That is a huge rate of return. We know that in their periods of high growth, economies such as Brazil, India, and China, invested heavily in agricultural research.
To illustrate this potential in another way, a recent study found that increasing the spending on national research in African countries by 7 percent per year until it is double the 2005 level would have a bigger impact on total factor productivity growth than would doubling the irrigation area.
From the Bank’s side, we are strongly committed to agriculture in Africa. Our Region has met the targets of the Bank’s Agricultural Action Plan by almost doubling our agricultural lending since the food crisis in 2008, from $700 million to $1.36 billion this past fiscal year. This is close to 40 percent of the Bank’s total lending to agriculture.
And we will continue our support to you on agriculture, including helping you meet your goals for improving the quality of your agricultural public expenditures.
Together with the Gates Foundation, we have supported CAADP by undertaking Agricultural Public Expenditure Reviews in a number of countries. By mid-2014, we will have assisted 18 African countries to complete such analyses. Our partner IFPRI is supporting you to put in place systems to monitor programs for results, which will then feed back into spending policies.
Through this forum today, we hope that you will share with us your experiences on public expenditure review processes, and what is needed to improve the quality and effectiveness of public expenditures in agriculture.
Thank you and I look forward to a stimulating discussion.