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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.
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