Market opportunities for African agriculture: a general equilibrium examination of demand-side constraints on agricultural growth in East and Southern Africa

In today’s more integrated world economy, agricultural growth in Africa depends not only on raising productivity and increasing production, but on increasing the competitiveness of African agriculture in the global market and expanding its market opportunities within Africa. Unless demand increases, African agriculture cannot grow at a rate sufficient to reduce poverty and hunger to any substantial degree. The accelerated economic growth in Africa in recent years might offer increased opportunities for agriculture from domestic demand. This research report focuses on demand-side constraints on African agricultural growth and their implications for three broad agricultural development strategies: promoting traditional exports, developing nontraditional exports, and increasing food-staple growth. Applying a general equilibrium framework to seven East and southern African countries, the study finds that an export-led agricultural growth strategy is unlikely to generate substantial overall income growth, even though demand need not constrain rapid growth in some nontraditional exports. Increasing production of staple foods seems to offer a promising avenue for agricultural growth, given that Africa’s supply of many staple commodities does not meet its current demand. However, the report shows that increasing productivity in the grain sector without a substantial increase in market demand would cause domestic market prices to fall; as a result, farmers would lose much of the benefit of increased productivity. Thus, changes outside the farm sector itself—reduced marketing costs and more rapid growth in the nonfarm economy— are required to provide sufficient market demand to support rapid agricultural growth. In addition, to increase agricultural productivity, a second major engine of growth—increased productivity growth outside the agricultural sector—is a necessary condition for rapid economywide growth and poverty reduction. Agricultural growth can play a major role in overall growth and poverty reduction in Africa. But development strategies need to take an economywide perspective to enable agriculture to play its crucial role in growth and poverty reduction in Africa.