"Sustaining CAADP Momentum: Growth and Investment Analysis" presented by Godfrey Bahiigwa at 10th CAADP PP Meeting Durban, South Africa March 19-21, 2014

1. IFPRI
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Sustaining CAADP Momentum:
Growth and Investment Analysis
Godfrey Bahiigwa – IFPRI/ReSAKSS
10th CAADP PP Meeting
Durban, South Africa
March 19-21, 2014

2. Where is Africa’s agriculture with CAADP@10?
 Africa’s agriculture has been growing. In the last
decade, SSA agriculture grew by 3.4% while population
grew by 2.5% => rising per capita production
 The amount of PAE for Africa as a whole increased
from about $0.39 billion on average per country in
2003 to $0.66 billion on average in 2010, representing
an average increase of 7.4 percent per year
 However, only 13 countries have surpassed the target
in any only 7 have surpassed it in more than one year
 The GHI of 2013 indicated that only 2 countries
experience extreme hunger, compared to seven in
2006

3. IFPRI
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
2006 GHI

4. 2013 GHI

5. IFPRI
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Agricultural Growth, Public Investment and Poverty
Reduction in Mozambique

6. Drivers of Agricultural Growth, 2002-12
 Agriculture is still a key sector for growth in
Mozambique
» Total GDP grew at 7% per year and agriculture accounted
for 16% of this expansion.
 Roots and cereals are the main crops
» But their GDP grew at only 1.9% and 0.8% per year,
respectively
» Their share of agricultural GDP halved in ten years
 Agricultural growth was mainly driven by
horticulture
» Grew at 12.4% per year (mainly bananas, pineapples,
onions, tomatoes)
» Horticulture accounted for 71% of all agricultural growth
» Horticulture’s share of agricultural GDP doubled over ten
years

7. Decomposing Crop Growth, 2002-12
 Reallocating land from low-value
cereals and roots to high-value
horticulture was the main source of
crop growth (64%)
» General land expansion accounted for
32%
» Land productivity gains accounted for only
4%
-20 0 20 40 60 80 100 120
All crops
Cereals
Roots
Pulses and oilseeds
Horticulture
Traditional cash crops
Contribution to crop GDP growth (%-point)
Land expansion Land reallocation Land productivity
Source: Benfica et al. (2014)

8. Summary of Growth Trends
 Positive trends
» Evidence of structural transformation during the 2000s as
land resources were reallocated towards higher-value
crops
» This was driven by foreign investors (bananas) and local
businesses (tomatoes), and so public policy may be more
important than public investments in supporting further
horticultural growth
 Less-positive trends
» Continued reliance on land expansion rather than
productivity gains
» Weak performance of major food crops (i.e., cereals and
roots), which is probably holding back national poverty
reduction
» Stronger role for public investment in food crops

9. Public Agricultural Spending
 Agriculture’s spending share has
remained fairly constant
» At about 5.5% of the total budget during
2002-2012
 There is a new, ambitious investment
plan (called PNISA)
» Doubles agriculture’s share to an average
11% during 2013-2017
Source: World Bank (2011) and Benfica et al. (2014)
5.5 5.4
13.2
12.9
10.7
9.4
8.8
3
8
13
18
2002 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Agricshareofbudget(%)
Historical agricultural spending
Business-as-usual projection
PNISA

10. PNISA’s Spending Portfolio
 Large increase over historical spending
» US$3.8 billion over five years (half of this is new spending)
» US$43 per rural inhabitant (i.e., about 7% of GDP per capita
in 2012)
 PNISA diversifies historical spending patterns
» Focus on irrigation, R&E and input subsidies
31%
31%
9%
10%
19%
PNISA spending portfolio
Irrigation
R&E
Subsidies
Other MINAG
Fisheries & roads
Source: Benfica et al. (2014)

11. Evaluating PNISA
 Benfica et al. (2014) estimate the impact of PNISA
spending on agricultural growth and poverty
reduction
 Ask two main questions:
» Is increasing in agricultural spending under PNISA
enough to achieve growth and poverty goals?
» Can outcomes be improved by altering the
investment portfolio?

12. Returns on Investments
 Results indicate that Mozambique generates low
returns on its investments compared to other
countries
» Using irrigation raises crop revenues by 8.6%, compared to
73% in Mali (Dillion 2011)
» Receiving a visit by an extension agent raises crop revenues
by 26%, compared to 67% in Uganda (Benin et al. 2011)
 Unit costs are also quite high in Mozambique:
» Irrigation: US$2,287 per hectare
» R&E: US$231 per farmer
» Subsidies: US$268 per farmer (based on Malawi’s FISP
costs)

13. Investment Scenarios, 2013-17
 Five scenarios:
» Baseline maintains recent growth and
spending trends
» Planned scenario implements PNISA (both
scale and composition)
» Others scenarios reprioritize PNISA (e.g.,
more irrigation)
0
2
4
6
8
10
12
Baseline
scenario
Planned
(PNISA)
Irrigation
scenario
R&E
scenario
Subsidies
scenario
Shareoftotalbudget(%)
Input subsidies
Research and extension
Irrigation
Other agriculture
Fisheries and rural roads
Source: Benfica et al. (2014)

14. PNISA’s Impacts
Baseline PNISA
Annual spending per farm
household
$72.8 $153.4
GDP growth rate 6.5% 7.4%
Agricultural growth rate 4.5% 7.3%
Poverty rate in 2017 44.5% 41.0%
Increase in total GDP per
dollar spent (BCR)
$1.07
People lifted above pov.
line per $1000 spent
1.7
Doubles public agricultural spending
Achieves CAADP growth target
Small positive return on investment
Doesn’t target poor, but reduces poverty

15. Reprioritizing PNISA
 Spending on R&E is the main driver of
poverty reduction
» But irrigation and subsidies are better
investments for accelerating agricultural growth
 Farm input subsidies provide a more
immediate return on investment compared
to irrigation or R&E
» Subsidies may an option for short-term growth
and poverty reduction
 Irrigation mainly benefits the South of
Mozambique, whereas R&E is better at
reaching the lagging North and Center

16. Conclusions (1)
 Mozambique did not achieve CAADP’s growth and
spending targets during 2002-12
» 4.5% agricultural growth, and 5.5% agric. Budget
share
 But there are both positive trends and some
causes for concern in the country’s recent
performance
» Evidence of a positive shift towards higher-value
horticulture (mainly driven by the private sector)
» Slow food crop growth makes rural poverty reduction
difficult (stronger role for public investment?)
» Government unveiled a new large-scale agricultural
investment program

17. Conclusions (2)
 Mozambique achieves quite low returns on its public
investments compared to other African countries
 PNISA doubles rural per capita public spending
» Overcomes low returns and exceeds CAADP 6% agric.
growth target
» Significantly reduces poverty by promoting food staples
 It will be challenging to fund such a large investment
program
» Will require an additional US$1.8 billion over five years
 Government can scale back PNISA while still
achieving its goals
» Reprioritize away irrigation, which is a third of PNISA
spending
» Focus on raising the returns to public investments

18. IFPRI
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Agricultural Growth, Public
Investment and Poverty
Reduction in Rwanda

19. Agricultural growth
 Rwanda has experienced the most rapid
agricultural growth
» 5.2% per year from 1999-2012
» 5.7 % per year from 2006-2012
 Such growth led to rapid reduction in
poverty
» Between 2005/6 and 2010/11 real per
capita income has increased by
 40% for the poorest 20% of households
 20 % for the second and third quintiles
 Less than 20 for the fourth quintile

20. Drivers of Agricultural Growth
 Agricultural growth driven mainly by the
food crops subsector
Subsectors Growth rates
Food crops 6.2
Export crops 2.9
Livestock 3.3
Others 3.0

21. Evaluating PSTA III
 Rwanda’s PSTA III has an agricultural
growth target of 8.5% percent per year
 What subsectors in agriculture will help
Rwanda achieve this growth target?
 What will be the impact on growth and
poverty reduction?
 What level of public investment is required
to achieve such growth target?

22. Annual GDP and sector GDP growth rates
0
2
4
6
8
10
12
14
GDP Agriculture Industry Services
Base Food crop led Expt crop led Livestock led All agriculture All Sectors
GDP target (Vision 2020)
Ag. GDP target (PSTA III)
• Rwanda can achieve the 6% CAADP target with additional TFP growth rate in any
or all of the subsectors
• However, the growth gap between the national growth target 8.5 and base-run is
only narrowed by additional TFP growth in food crops or in all the subsectors
• Combined growth scenario will help to achieve national growth target

23. Poverty Reduction
20
22
24
26
28
30
32
34
36
38
40
42
2013 2014 2015 2016 2017 2018 2019 2020
( percent) National Poverty Rate
base Food crop led
Expt crop led Livestock
All ag Ag+nonag
• Under the current trend, Rwanda cannot achieve the MDG goal by
2015, rather by 2020
• But if it follows combined growth scenario, it will achieve the MDG
goal (30%) by 2017
• Increasing productivity in agriculture alone reduce poverty rate to
26.5% by 2020

24. Required Public Expenditure in agriculture
Scenarios
AgGDP
growth rate
Share of required
agr. spending in
total government
spending (2020)
Initial level 5.7 5.0
Base 5.8 6.2
Food crop-led 7.5 7.4
Export crop-led 6.5 6.4
Livestock-led 6.1 6.4
Agriculture 8.4 7.7
Agr.+nonagr. 8.5 6.6
• To achieve the 8.5% agricultural growth, Rwanda needs to allocate 6.6% of
its budget to agriculture, which is higher than the historical trend (5%) but
lower than the 10% CAADP target

25. Thank You!