Agricultural Growth Linkages in Sub-Saharan Africa

The wide spread increase in rural purchasing power under the Green Revolution in Asia during the 1970s was key to increased rural employment and industrialization. Studies suggested that an extra dollar of agricultural income was typically associated with an additional $0.80 of nonagricultural income from local enterprises stimulated by the spending of farm house holds. Studies in Africa, where the Green Revolution was harder to discern, tended to be much more pessimistic. This report revisits these issues using especially detailed panel data sets on rural consumption and incomes, collected by IFPRI and collaborating national institutions for a variety of purposes during the mid to late 1980s in Burkina Faso, Niger, Senegal, Zambia, and Zimbabwe. Results suggest that house hold spending of higher rural incomes from increased exports has the potential to greatly stimulate further rural income increases, on a scale that even surpasses experience in Asia. Central to this is the claim that many of the goods and services that figure heavily in rural consumption patterns in Sub-Saharan Africa are nontradables at current transport costs and prices. These include perishable fruits, vegetables, animal products, and prepared foods, services of all kinds, local handicrafts, and some bulky local starches of too low value to bear the costs of importing or exporting. By focusing on the nontradable nature of large sectors of African rural economies, the report evokes a theme central to many of IFPRI’s fieldwork-based studies: why some development strategies are more effective at achieving both growth and poverty Alleviation than others. Sustained growth in rural incomes that is widely spread across households is shown to be an effective way to furnish the sustained additional local purchasing power necessary to promote aggregate production of non tradable items, while increasing the incomes of large numbers of poor people. The report does not deal with the interventions necessary to start growth in rural areas, other than to illustrate that it must involve bringing new external funds into localities on a recurring basis, such as would be the case from expansion of agricultural exports. The report thus also raises another major theme of IFPRI’s work, the complex role of agricultural and food policy in over all economic development. Jump-starting the production of agricultural tradable is shown to have much higher returns than thought previously, because of growth link ages. Conversely, rising food staple prices are shown to have the potential to choke off growth from demand-side link ages if the conditions for a high supply response to prices are not in place. Success in raising household incomes in rural areas will rapidly lead to greatly increased demand for wage goods such as food, many of which are nontradable in rural Africa. If increased local production is not forth coming, the relative price of these items will rise rapidly, reducing the welfare of large numbers of poor people and eventually raising production costs for the agricultural tradable that provide the engine of growth.