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Published On  Oct 09,  2011
   
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Non-Farm Economy Saves Rural Africa

 

 

Africa has not yet had a successful agricultural revolution and as a result the vast majority of its rural population remain trapped in poverty. Given past failures in promoting agricultural development, some African policy makers and donors are looking to the rural non-farm economy as an easier option for sparking a successful rural transformation.

This hope feeds on the successful rural transformation in China and other Asian countries where rural manufacturing and allied activities now account for the largest share of income and employment in rural areas.

To see why this may not yet work for Africa one needs to understand the dynamics of the transformation process that led Asia to where it is today. Fifty years ago Asia was predominantly rural, and most people depended on agriculture for their livelihoods. The agricultural sector was technologically stagnant and subsistence-oriented, and the rural nonfarm sector was small and geared primarily towards supplying basic services to the local populace.

The situation changed dramatically beginning in the late 1960s because of three major drivers. The first was the Green Revolution which transformed agriculture, generating higher farm incomes, less costly food, and a buoyant demand in rural areas for farm inputs, processing and marketing services, and consumer goods and services.

This led to spontaneous and rapid growth in the rural non-farm economy and rural towns, reinforced by dense populations and growing public investments in rural infrastructure. Then came a switch to export led industrialization strategies, which sparked rapid growth in industries and urban centres.

This in turn brought important spill over benefits for rural areas, generating remittances from workers who migrated to urban areas and bringing new rural non-farm opportunities as urban based industries sought to locate some of their labour intensive activities like food processing and metal fabrication to rural areas where wages were lower. Finally, market liberalization in the late 1990s unleashed the full force of markets, and brought international competition and foreign direct investment, including in rural areas.

This leveraged the growth of industries and urban centres, and reinforced backward linkages from urban to rural areas. The sequencing of these events was crucial, each leveraging the benefits of the previous ones.

The situation in Africa today is very different. There has not yet been a successful technological revolution in agriculture and despite a few bright spots, export-led manufacturing is still in its infancy and struggles to compete against China and other Asian giants. With a stagnant and low-productivity agriculture, there is little local demand to drive growth in the rural non-farm economy, and the backward links from urban centres and industries remain weak except in a few well connected areas.

Low population densities and inadequate rural infrastructure aggravate the situation. Africa has embraced market liberalization, but on its own this has not been enough to drive a rural economic transformation. In fact, without an already dynamic nonfarm economy in place, market liberalization can displace rather than strengthen much rural nonfarm activity alike imported cheap plastic and metal products displaced local artisan products.

The rural non-farm economy in Africa is only about half as important as in Asia in terms of its income and employment shares, and it is much less productive. Too often, much rural non-farm activity in Africa comprises low productivity services undertaken by the poor to supplement inadequate livelihoods obtained from farming. This contrasts sharply with the pull of new higher paying opportunities available in much of Asia’s rural non-farm economy.

What can be done? First, Africa’s rural non-farm economy needs a demand lifter to kick start growth. Some rural regions are endowed with special advantages like minerals or tourist potential, or have easy access to major urban centres, and these opportunities can offer an important alternative to agriculture.

For most rural regions, however, agriculture will have to do the initial lifting, and investments in agricultural development are a necessary precursor to development of the rural non-farm economy. In all cases, governments need to ensure that there are adequate levels of rural infrastructure, especially roads, power and communications, both to drive the initial demand lifter and to leverage the growth of the nonfarm economy. Finally, policies matter, especially the business environment, and land and labour market policies.

 

BY PETER HAZELL

Peter Hazell is visiting professor at Imperial College London. He wrote this commentary for a partnership of newspapers including Fortune, Sud Quotidien (Senegal), Les Echos du Mali (Mali), Le Républicain (Niger) and Afronline.org (Italy)

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