Land Affairs

Agriculture, Inequality and Economic Growth

The market place coming to a town near you.

I am not an economist. Still, I find the discussions about economic growth in Africa interesting, not least because my field of study, land, is rife with theories about how land can and can not contribute to economic growth.

A very dominant theory among decision makers in Tanzania is the one about large-scale farming, which they see as a shortcut to economic growth. I am not able to tell if they are right or not. But I am quite sure that they should start focusing on Tanzania’s small-scale farmers, if they also aim at distributing the benefits of growth equally.

I write this, because I have just read a book published by the World Bank, Yes Africa Can: Success Stories from a Dynamic Continent. It analyses the policies behind a number of development successes in Africa. Tanzania is such a success case because of macroeconomic stability. Tanzania’s economy has grown 6% on average since 1996. That is a number that would make most politicians in the rich world jealous. But Tanzania’s growth is not reducing poverty significantly.

The poverty rate in Tanzania was 38.6% in 1991, 35.6% in 2001 and 33.4% in 2007 according to this Twaweza publication. That is a very poor performance. It is hard to understand why the development has been that slow. But then, in the World Bank book one can read that Tanzania’s growth is driven mainly by services and industry. Agriculture did not contribute to growth. That is a problem, according to the authors, since most people in the country depend on agriculture: The limited contribution of agriculture - in a country whereabout three-quarters of the population resides in rural areas, where poverty is concentrated - is a concern (pp. 26-27). In other words, unless the Tanzanian politicians start focusing on improving the conditions of small-scale farmers, they are unlikely to reduce poverty levels significantly.

The book describes a couple of success cases where agriculture has contributed to economic growth. Malawi is one and Kenya the other. Their stories are quite different.

In 2005 the Malawian government, in response to severe food security difficulties, launched an input subsidy program. It provided vouchers for maize fertilizers to more than half of Malawi’s farm households and also distributed improved maize seeds and tobacco fertilizers. Subsequently, maize production is estimated to have increased by 26–60 percent, while food availability has improved and wages in the agricultural sector have increased.

The Kenyan story goes like this: around 1990, the Kenyan government liberalised the fertiliser market and donations by donors were phased out. The use of fertiliser, subsequently, doubled between 1992 and 2007. Much of the increased use was among smallholder farmers. Largely as a result of the increase in fertilizer usage, maize yields in Kenya increased 18 percent over 1997–2007.

Obviously, it must have been cheaper for the Kenyan government than for the Malawian to achieve the increase in production. That is part of the reason why the book’s authors like the Kenyan story better. Another reason is the more market-based Kenyan intervention (it is, after all, a World Bank publication).
What I find interesting about the Kenyan story is that fertiliser became much more accessible for most farmers after liberalisation. In some regions the average distance from the farm to the fertiliser seller was reduced from 15 kilometres in 1997 to around 4 kilometres in 2007. To me, the examples point to the importance of improving ordinary, small-scale farmers’ access: access to improved seeds, access to fertiliser, access to markets, etc.

It is possible, in other words, to improve agricultural growth without a narrow focus on large-scale agriculture. The measures described here are small, practical improvements, not the grand schemes, the distribution of tractors, and the focus on large-scale farming that Tanzanian decision makers tend to prefer (read a previous blog post about it here).

Small vs. Large-Scale Farming in Sub-Saharan Africa. A Verdict

Sufficiently efficient?

An implicit, but usually unstated, assumption of the current critique of new wave of land grabbing in Sub-Saharan is that small scale farming is socially more just and economically more efficient than large-scale farming. Subsequently even legal large scale land transactions are denounced as illegitimate land grabbing.

Large-scale farming, on the other hand, is preferred by many colonial and post-colonial governments alike, eager to attract investments. They believe that large-scale farming, often under the banner of ‘scientific agriculture’, is the only real shortcut to improving agriculture in their countries (see for instance  James Scott’s Seeing like State about the failures of the Ujamaa reforms and large-scale farming in Tanzania).

I have just read the Working Paper Experiences of Plantation and Large-Scale Farming in 20th Century Africa, which seeks to pass a verdict in the heated debate. Through a careful review of existing literature on large-scale farming and plantation farming from the first economic theories in the late 18th century up to scientific studies of the present the author, Peter Gibbon, concludes that both positions may be right. Previously, in the last half of the 20th century, scholars regarded small scale farmers as superior. That may be true any more, he writes, because of a combination of policy interventions and market developments:

The albeit unevenly rising productivity of LSF food and tobacco production in the settler economies from ca. 1960…relates to public interventions in the areas of credit, input supply and especially research and extension. These investments were racially skewed and costly – which in turn limited their lifespan. The high productivity characterizing LSF (Large-scale farming, ed.) production of higher value crops from the 1980s onward, in contrast, seems to have related to the advent of a new generation of investors and the establishment of new, relatively short global value chains linked to dynamic changes in demand in retail markets.

The lesson, in other words, is that adept policy makers can increase the productivity of large-scale farming. Policy makers can also influence the creation of jobs and the quality of jobs:
In short, productivity, employment generation and employment quality can all be subjected
to modification by policy – policies to support capital intensification, policies to promote farming of more labour intensive crops and policies of labour protection.

Peter Gibbon thus identifies ways to increase the benefits from large-scale farming. But he has not analysed whether similar interventions could enhance the productivity and wellbeing of small-scale farmers, who make up the majority of people in Sub-Saharan Africa. That is a shame. More attention should be devoted to supporting the activities of small-scale farmers. Not because they are more efficient, but because it will contribute to a more equitable distribution of wealth.

Land Markets

Above and below some impressions from Uganda where I am currently involved in a research project about land, land markets and economic growth. Land is increasingly becoming an investment object in many Sub-Saharan African countries. That is obviously also the case in Uganda. The photos show some of the negative consequences when land markets become too lively. I have not seen similar signs in Tanzania.

Brief on Tanzania’s Land Reform out now

I have published the Policy Brief The Forgotten Villages. Land Reform in Tanzania. Click here to download it free of charge.

Tanzania's 1999 land reform has decentralised land administration to the rural local village governments, but implementation so far has been slow and uneven. The local authorities rarely get the support they need to make it work. As a consequence, the benefits promised by the reform - economic growth and improved tenure security - do not happen.

There has already been an abundance of donor driven projects to implement the reform, but they have been short-sighted and have tended to forget the local authorities that carry out the actual implementation. Much could be achieved if higher level authorities and NGOs systematically strengthened the village authorities and enabled them to deliver their services. This would be a long-term process and more money alone would not solve the problem. But as long as this level of administration is forgotten, the land reform will not work in practice.