Setting priorities for public spending for agricultural and rural development in Africa

Setting priorities for public spending for agricultural and rural development in Africa

Shenggen Fan, Tewodaj Mogues, Samuel Benin
ifpri policy brief

Agriculture and rural development must play a central role in stimulating economic growth, reducing poverty, and improving food and nutrition security in Africa. The food price crisis of 2007–08 highlighted the dramatic implications of world neglect of agricultural development over the past two decades. The current global economic recession now underscores the need for urgent attention to measures that could promote agricultural growth in Sub-Saharan Africa.

Agriculture in Africa has not performed as well as expected during the past few decades. Agricultural growth rates in the region have increased modestly from about 2.4 percent a year in 1980–89 to 2.7 percent in 1990–99 and 3.3 percent a year since 2000.1 Only a handful of countries in Sub-Saharan Africa—Ethiopia, Mali, Mozambique, Nigeria, Senegal, and The Gambia—have surpassed the Comprehensive Africa Agriculture Development Programme (CAADP) threshold of 6 percent agricultural growth in recent years. Looking at poverty outcomes, whereas many developing regions, especially Asia and the Pacific, are on track to meet the first Millennium Development Goal (MDG 1) of halving poverty by 2015, progress in Sub-Saharan Africa has been slow. As a result, Sub-Saharan Africa is the only region of the developing world expected to have more poor people in 2015 than it did in 1990.

Public spending is one of the most direct and effective instruments that governments can use to promote agricultural growth and poverty reduction, yet public agricultural spending in Africa has historically been very low compared with that in other developing regions. In recent years many Sub-Saharan African countries have pledged to increase government support to agriculture in order to achieve the goal of 6 percent annual agricultural growth, set by the New Partnership for Africa’s Development (NEPAD) through CAADP. As part of the Maputo Declaration of 2003, African heads of state agreed to allocate 10 percent of their national budgets to agriculture. Yet many African governments are operating in an environment of scarce public resources, and so far only a few states have met these growth and spending targets.

As African governments work to increase agricultural spending and boost agricultural growth, they face a dearth of information about which types of public investments contribute the most to development goals. How should scarce resources be allocated across different sectors of the economy—such as agriculture, infrastructure, health, and education—for maximizing development outcomes? Within agriculture, how should resources be allocated among, for instance, agricultural research, extension, irrigation, and input subsidies? In some cases African countries have clear principles on how to prioritize their scarce public resources, but they often lack the information needed to operationalize these principles. Drawing mainly on case studies from Africa, but also from Asia, this brief provides insights on the contributions of different types of spending to poverty, growth, and welfare outcomes in a variety of circumstances. These circumstances include, for example, Ethiopia’s relatively large share of public spending allocated to agriculture, Nigeria’s rich natural resource endowments, Ghana’s relatively sound governance environment, Uganda’s past success in economic growth and poverty reduction, and Tanzania’s rapid transition from a planned to a market-driven economy.