Africa’s Agricultural R&D Funding Rollercoaster: An Analysis of the Elements of Funding Volatility

ASTI/IFPRI-FARA Conference Working Paper 2

Despite the fact that agricultural R&D spending in SSA increased by more than 20 percent during 2001–08, overall investment levels in most countries are still well below the levels required to sustain agricultural R&D needs. In 2008, SSA invested just 0.61 percent of agricultural output on agricultural R&D, well below NEPAD’s 1-percent national R&D investment target. Agricultural R&D investment is positively associated with high returns, but these returns take time—commonly decades—to develop. Consequently, the inherent lag from the inception of research to the adoption of a new technology or the introduction of a new variety calls for sustained and stable R&D funding.
The time-series data presented in this paper, however, reveal that agricultural R&D funding in many SSA countries was far from stable during 2001–08 and that R&D spending for the region as a whole shows higher volatility compared with spending in other developing regions of the world. Agricultural R&D agencies in SSA, particularly those in the region’s low-income countries, are more dependent on funding from donors and development banks than their counterparts in other developing regions, and this type of funding has shown considerably greater volatility over the past decade compared with government funding. In a large number of SSA countries, donors fund the bulk of nonsalary-related expenditures (that is, program and operating costs and capital investments) and numerous examples show that agencies reverted into financial crisis upon the completion of large donor-funded projects, forcing institutes to cut research programs and lay off staff. Questions can therefore be raised over the long-term effectiveness and efficiency of unsustainable donor and development bank funding.
Many studies have assessed the impact of funding shocks on developing economies, concluding that volatility is costly and that it negatively effects long-term macroeconomic growth. A thorough analysis of the long-term effects of funding volatility on agricultural R&D outputs and agricultural productivity was beyond the scope of the current study and would require detailed multi-decade time-series data, which were not available. Ample anecdotal evidence, however, strongly suggests that severe fluctuations in yearly agricultural R&D funding exacerbates uncertainty at the institute level and renders long-term R&D budget, staffing, and planning decisions more difficult. Consequently, the continuity of research programs is imperiled in the short run, as is the release of new varieties and technologies in the long run.
Halting excessive volatility in yearly agricultural R&D investment levels requires a long-term commitment from national governments, donors and development banks, and the private sector. Governments have to clearly identify their long-term national R&D priorities and design relevant, focused, and coherent R&D programs accordingly. Stable and sustainable levels of government funding are key, not just to secure salaries (which are fundamentally important), but also to enable necessary nonsalary expenditures. Certain governments may want to develop reserve funds or other mechanisms to smooth spending in the face of fluctuating revenues.6 Moreover, donor and development bank funding needs to be better aligned with national priorities, and consistency and complementarities among donor programs need to be assured. Finally, mitigating the effects of any single donor’s abrupt change in aid disbursement is crucial, highlighting the need for greater funding diversification, for example, through the sale of goods and services or by attracting complementary investment from additional sources, such as the private sector. This, in turn, requires that national governments provide a more enabling policy environment for R&D. These measures are necessary to put an end to the rollercoaster that currently characterizes agricultural R&D funding in Africa.

Author: 
Gert-Jan Stads
Published date: 
2011
Publisher: 
International Food Policy Research Institute (IFPRI); and Forum for Agricultural Research in Africa (FARA)
PDF file: 
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