Africa’s agriculture is characterised by low input, low output and low-value addition. Thus, ample opportunities exist for increased value addition in agriculture and regional trade on the continent. It is expected that, by moving up the value chain and developing backwards and forward linkages to the commodity sector, African countries can maximise direct and indirect effects such as job creation, environmental sustainability and social progress.
Stakeholders involved in the African agriculture and agribusiness sectors have experienced a strong resurgence of interest in promoting value addition and enhancing value chains as an approach that can help design interventions geared to adding value, lowering transaction costs, diversifying rural economies, and contribute to increasing rural household incomes across the SADC countries.
Enhancing value chain competitiveness is increasingly recognised as an effective approach to generating growth and reducing the rural poverty prevalent in the Sub-Saharan region. This is a welcome development for practitioners who have long been convinced of the need to look differently at agriculture – not just as a means of survival, but as smaller or larger commercial businesses linked to domestic and global markets – and of the need to identify and tap into new sources of potential growth and value addition in the sector.
It is believed that this renewed engagement will lead to a substantial increase in the flow of financial resources and technical assistance devoted to supporting market-driven, competitive agro-enterprises and agricultural value chains throughout the African continent.
Meanwhilst fundamental changes in international commerce and finance, including reduced transport costs, advances in telecommunications technology, and lower trade barriers, have fueled a rapid increase in global integration. International flows of goods and services, capital, technology, ideas, as well as people, offer tremendous opportunities for African nations to boost growth and reduce poverty by stimulating productivity and efficiency, providing access to new markets, and expanding the range of consumer choice.
Yet, globalisation also creates new challenges, including the need to increase the quality and sophistication of African goods and services, to make regulatory reforms designed to take full advantage of international markets and to introduce cost-effective approaches to cope with the resulting adjustment costs and regional imbalances.
The majority of sub-Saharan Africans are low-income, and often subsistence farmers. According to the World Bank, 65 percent of Africans in sub-Saharan Africa live in rural areas, whilst 75 percent of the sub-Saharan labour force works in agriculture. Sub-Saharan Africa’s share of the world’s agricultural exports remains at approximately two percent, and imports represent approximately two percent of world trade.
One of the most striking phenomena is the gradual marginalisation of sub-Saharan Africa in international agricultural export markets. Even though the area possesses 12 percent of the world’s arable land, the region’s share of global agricultural exports has declined from almost 10 percent four decades ago to around two percent today. Whilst 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 actually increase rather than decrease.
However, the trends are not all negative. In fact, several sub-Saharan African countries have recently improved their standing in terms of trade openness and taken advantage of new export opportunities. Yet within Africa, levels of trade openness fluctuate depending on geographic location, resource endowment, infrastructure quality, how enabling an environment they possess, and other factors.
Still, Africa’s exports remain dominated by primary commodities, with agricultural products approximately 20 percent. Sub-Saharan Africa has seen a sharp decline in the share of agriculture in its total exports, from over 60 percent four decades ago to around 20 percent today.
Only a few countries, such as Zambia and Kenya, have attained significant diversification of their exports, whilst the share of manufactured goods in Africa’s total exports has languished at about 30 percent, well below that of other developing regions. In addition, manufactured exports from African countries have a narrow base and low value added; often, they are semi-processed, raw materials, or products that have preferential access to industrial countries.
The high commodity prices of recent years, coupled with Asia’s rapid economic growth, have helped Africa expand its exports to Asia, which now imports 25 percent of all African exports. Whilst the growing economies of India and China alone account for 10 percent of Africa’s exports. As these countries continue to grow and demand more natural resources, African exporters may be poised to increase revenues and expand their production in concert with the Indian and Chinese economic growth models.
Without further improvements to their business environments and the competitiveness of their export commodities, many SADC countries risk being competitively trapped—selling low-skill, low-value products and services, with little chance to increase value-added share in global trade. Without market knowledge, particular expertise, or competitive products and services, entire economies will fail to take advantage of the potentially high benefits of global markets and the increases in global trade flows.
These threats and opportunities hold especially true for agriculture, the main export revenue source for many SADC countries and the largest income generator for their populations. Increasing the production of, and export revenues from, agricultural goods, therefore, entails developing the marketing channels and outlets, essential to national strategies to raise incomes and eradicate poverty in the SADC region.
Increased productivity in terms of value and profitability are the way to generate higher incomes in a sustainable manner—that is, without significantly depleting SADC’s natural resource base.
Moreover, low levels of agricultural productivity also hinder Africa’s attempts at reducing poverty. SADC’s agricultural value chains need to become more productive and competitive in the global market for agricultural goods, and its value chains need to achieve a greater value within Africa, whilst increases in competitiveness can also assist those dependent on agriculture and agribusiness in increasing their incomes and asset base.
Within Africa, there are also large disparities between countries’ average levels of productivity. Countries such as Mali, South Africa, and Zambia have achieved high levels of sustained growth over the past twenty years. Whilst others, such as Burundi, the Democratic Republic of the Congo, Liberia, and Zimbabwe, have suffered significant decreases in agricultural productivity, which may result from insecurity, conflict, climate change, and of unsound economic policies.
Productivity in terms of net value added is a crucial measure of value chain performance. Value chains encapsulating the sequence of steps, flows, investments, actors, and inter-relationships that characterise and drive the process from production to delivery of a product to the market. Raising the productivity (and efficiency) of agricultural value chains is, therefore, key to the success of sub-Saharan Africa’s rural economies and to the incomes of sub-Saharan Africa’s rural populations.
So despite the successes of many African exporters in selling to new markets, without further improvements to their business environments and to the competitiveness of their export commodities, many SADC countries risk being trapped into producing low-skill, low-value products and services, struggling to get a significant value-added share in global trade.
It follows then that raising the productivity and increasing the efficiency of agricultural value chains are basic elements to the success of SADC rural economies.