Is Ethiopia in the midst of a green revolution?

This is from Bachewe and co-authors in World Development:

Screen Shot 2018-03-14 at 8.34.44 AMDespite significant efforts, Africa has struggled to imitate the rapid agricultural growth that took place in Asia in the 1960s and 1970s. As a rare but important exception, Ethiopia’s agriculture sector recorded remarkable rapid growth during 2004–14. This paper explores this rapid change in the agriculture sector of this important country – the second most populous in Africa. We review the evidence on agricultural growth and decompose the contributions of modern inputs to growth using an adjusted Solow decomposition model.Screen Shot 2018-03-14 at 8.35.03 AM We also highlight the key pathways Ethiopia followed to achieve its agricultural growth. We find that land and labor use expanded significantly and total factor productivity grew by about 2.3% per year over the study period. Moreover, modern input use more than doubled, explaining some of this growth. The expansion in modern input use appears to have been driven by high government expenditures on the agriculture sector, including agricultural extension, but also by an improved road network, higher rural education levels, and favorable international and local price incentives.

The improvement in agricultural productivity was driven, in part, by deliberate state investment in agriculture:

Ethiopia is one of only four African countries to have implemented the CAADP agreement of a 10% target of annual government expenditures going to agriculture over the 2003–2013 period.

… The GoE has for a long time put agriculture at the center of its national policy priorities. The Agriculture Development Led Industrialization (ADLI) strategy was formulated in the mid-1990s to serve as a roadmap to transform smallholder agriculture in the country. Rural education and health, infrastructure, extension services, and strengthening of public agricultural research were among its top priorities.

These gains are remarkable (if we can trust the state statistical agency data used in the analysis). They are also likely not replicable in other countries across the Continent on account of the high variance in state capacity in the region.

For instance:

[while the] Comprehensive Africa Agriculture Development Programme (CAADP) proposed that African countries allocate 10 percent of their total annual budgets toward boosting agricultural productivity…, only 13 countries [have] signed the CAADP compact (Benin, Burundi, Cape Verde, Ethiopia, The Gambia, Ghana, Liberia, Mali, Niger, Nigeria, Rwanda, Sierra Leone, and Togo).

And out of these 13 only Cape Verde, Ethiopia, Ghana, and Rwanda seem like they have the capacity to translate state fiscal outlays into real productivity gains in agriculture.

Read the whole paper here.

Kenya’s Milk Consumption is the Highest in the Developing World

Last year the French company Danone (maker of Activia yogurt) bought a 40% stake in the Kenyan dairy firm Brookside, a sign of the growing importance of the dairy market in the wider eastern Africa region. But the story doesn’t end with the big household names. Smallholder farmers are also getting a piece of the dairy bonanza in Kenya:

[youtube.com/watch?v=AmlwgKeOiEA]

HT Sarora Dairies

On a related note, here is how a company in China is helping industrialize the country’s dairy sector:

A milk scandal erupted in China in 2008 when the industrial chemical melamine was found in dairy products nationwide. While many Chinese dairy companies faced huge losses or bankruptcy as a result, one small firm, Dairy United, accelerated its development. Dairy United is one of the fastest-growing and most innovative Chinese dairy producers, one that features an unusual organizational structure and business model. Unlike most corporate and cooperative dairies that purchase cows on the market, Dairy United leases dairy cows from local farmers, giving it access to its primary asset without a large up-front investment, and letting the firm grow its dairy herds with newborn heifers. In return, farmers receive fixed payments biannually, but relinquish control rights and residual claims to the firm. Thus, Dairy United’s leasing is helping transform Chinese milk production from a backyard, labor-intensive activity to a more industrialized mode of farming. The case is particularly interesting for understanding applications of agency theory in agribusiness.

That is according to a new paper in the American Journal of Agricultural Economics (which I hope chaps at the Ministry of Agriculture in Nairobi subscribe to).

Talking real development

It is an upper-middle-class, industrialized-country fiction to romanticize life on a small farm. Economic development and food security lie in industrialized agriculture, and this is why I continue being interested in agricultural value chains. My thinking on this has also been reinforced by my recent reading of Jane Jacobs’ The Economy of Cities, in which she posits that agricultural development came as a consequence of urbanization, and not the other way around.

That is Marc on his blog here.

Reading Marc’s post reminded me of my beef with anti-poverty development as it is currently practiced. For instance, the humanitarian instincts behind giving poor slum dwellers loans to start businesses may be noble, but the impact of these projects are ambiguous (Not forgetting the recent trends in Venture Capital firms making money from high interest rates on the poor).

Such projects, for the most part, serve little more than giving the poor comfort in their poverty. Yes, there are a few success stories, but for the vast majority life remains precariously close to abject destitution. Self-employment is a risk that should not be forced on those at the very bottom of the economic ladder in developing countries.

Such palliative measures should never distract from the main task of long-term job creation.

The growing disillusionment with the long-term developmental effects of micro-finance should force development experts to think of creative alternatives.

What could be an alternative?

Well, for starters it might be more beneficial to boost the capacity of banks to give loans to mid-size businesses that have the technical and managerial capacity to scale up their operations and thus create more jobs. Corporate finance in most of the developing world has no “middle class.” Nearly all the players are big firms. Mid-size firms simply cannot keep up with the high interest rates and collateral requirements. Yet these are the firms that have the potential to grow and create more jobs.

This move smells of trickle down economics, but it is not. Poverty alleviation requires massive amounts of job creation. Making the poor self-employed distracts from the bigger problems of non-industrialization and lack of formal-sector jobs.

It is also bad for political development because it provides Hirschman’s exit option for millions of economically disaffected citizens of the developing world.

Check out Blattman’s blog on a related post on NGO activism in the developing world.

Development and how to achieve it

A while back I argued for a move away form small scale, “pro-poor” development strategies to more robust development strategies aimed at economic innovation and large-scale job creation. This is not to say that micro-development should be neglected. What I am saying is that jua kali kiosks will not increase Africa’s per capita income to 10,000 USD. The most they do is enable people to cope without really changing their standard of living.

Alkags, a blog I just discovered, deals with this debate.

Aid watch also has videos from a conference at the Yale law school on development. Chris Blattman and William Easterly are some of the featured development experts. Blattman makes some interesting comments about micro-finance, industrialization (medium to large farms) and development.

Quoting Blattman: “I think we have gone too far in the pro-poor direction…… we don’t necessarily have trade-offs. Factories are pro-poor.”