Agricultural Value Chain critical to Africa’s economy

“Though Africa lags behind in her attempt to apply innovations to its agricultural value chain, there is no reason to despair. Rather, the posture should be one of readiness to tap in global experiences,” said Mr Milli

son Narh, Second Deputy Governor of the Bank of Ghana. The value chain process encompasses the full range of activities and services required to bring a product or service from its conception to sale in its final markets whether local, national, regional or global. He explained that the value chain includes input suppliers, producers, processors and buyers. They are supported by a range of technical, business and financial service providers. Most agricultural production is increasingly integrated in value chains with forward (marketing) and backward (input supply) linkages. “International experiences have often demonstrated that the application of innovation to the agricultural value chain system can be an important tool in enhancing the performance of agricultural systems. It has been reported that agricultural innovation does not take place in a vacuum. Rather, agricultural innovation is strongest in countries and regions with highly integrated technical and economic systems able to diffuse and apply the results of new research,” Mr Narh alluded. According to him, sustained innovation in agricultural value chain depends on issues such as evolving appropriate technologies through a research system, introduction and improved access to suitable agricultural technologies and supporting services such as extension, credit and micro-insurance, and the availability of appropriate incentives for farmers and traders to integrate these new technologies and practices into their activities and investment plans. In order to further enhance our Agricultural Value Chain systems through successful innovations, he said Africa needs to focus on issues such as; establishing an Agricultural Commodity Market; setting up a Commodity Clearing House System; creating a Warehousing Receipt System; availability of storage devices to reduce or totally eliminate post harvest losses; and embracing the co-operatives concept which has emerged as the best tool to help rural small-scale producers to overcome many of the challenges that confront their activities. It also needs the provision of relevant training programmes to agricultural sector workers; availability of appropriate infrastructure to support agricultural activities; a revision of the land tenure systems to improve farmers access to arable land for productive use; the production and availability of cheap and efficient agricultural inputs; adding value to agricultural products through further processing; adequate and cheap credit resources to finance agricultural activities; and availability of market avenues (domestic and foreign) to enable farmers dispose off their produce and earn deserved income. Speaking at the 18th African Rural and Agricultural Credit Association (AFRACA) General Assembly on the theme “Enhancing the Agricultural Value Chain through Innovation”, Mr. Narh said the meeting present another opportunity for members of AFRA to set the agenda leading to the enhancement of the role of value chain in promoting sustainable and inclusive agricultural and rural development. “In my view this will ultimately guide members and policy makers in their attempt at providing food security, reduce poverty and ultimately spur on economic growth and development on our dear continent,” he added. Agriculture continues to be the economic mainstay of most African nations. National economies remain highly dependent on agriculture as a source of employment and income. For example, the Sector accounts for about 20% of Africa’s GDP, 60% of its labour force, 20% of the total merchandise exports and about half of total government tax revenue as well as provides for most of the continent’s food requirements. Agriculture is also the main source of income for 90% of rural population in Africa. According to the African Development Bank, when agriculture stimulates growth in Africa, the growth is twice as effective in reducing poverty as growth based in other sectors. Furthermore, studies have found that growth originating in the agricultural sector is two-to-four time as effective as non-agricultural growth in reducing poverty. Mr. Narh indicated that it is common knowledge that most African countries are yet to meet the criteria for a successful agricultural revolution. Agricultural productivity in Africa remains lower than in other continents, resulting in slow development of rural areas and low farmer incomes. The causal factors include bad land tenure systems, poor infrastructure, inadequate financing, market inaccessibility, inadequate processing, etc. Research conducted by some reputable international organizations as enumerated below attest to the facts stated above. For example, per capita agricultural output and productivity in the region are still low compared to the global average, with dire consequences for food security and social stability. The African Development Bank also estimates that Africa’s per capita agricultural output is only about 56 per cent of the global average. He observed that one other striking phenomenon is the gradual marginalization of Sub-Saharan Africa in international agricultural export markets. Even though Sub-Saharan Africa possesses 12 percent of the world’s arable land, the region’s share of global agricultural exports has declined gradually from almost 10 percent four decades ago to around 2 percent today. On the import side, the opposite pattern emerges. Sub-Saharan Africa is the only developing region that has seen its share of world agricultural imports increase rather than decrease. Furthermore, fiscal support for the agricultural sector from governments in Sub-Saharan Africa seems to be either low or lacking. This is contrary to the 2003 agreement by leaders of 53 AU countries in the Mozambican capital to allocate a minimum of 10 percent of their national budget to the agriculture sector to ensure food security and tame rural poverty by 2015. According to IFPRI², (2009), African public spending on agriculture accounted for 5 – 7 per cent of total national budget. Furthermore, only 7 African countries had reached or exceeded the 10 percent level. Finally, banks in the Sub-Region tend to shy away from lending to the agricultural sector, because of the perception that the sector has a very high systematic risk, despite its economic importance. For example, a five-year (2007 – 2011) review of banks’ sectoral allocation of credit performance in Ghana indicates that the agriculture share of total credit averaged just 5.1 percent.