The future of African agriculture: Can smallholders be the answer?

Denis Drechsler 23 April 2011

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African agriculture is underperforming (Figure 1). According to the 2008 World Development Report, cereal yields in Sub-Saharan Africa have stagnated at around 1 tonne per hectare, while increasing to about 3 tonnes in the developing world as a whole. Fertiliser consumption is below 10kg per hectare, indeed the lowest rate in the world (120kg in developing countries). And merely 4% of land is irrigated, exposing African agriculture to the risks of a highly variable and increasingly changing climate (FAOSTAT). Clearly such characteristics do not provide a stable foundation to employ and feed a population that is projected to double over the next 40 years (United Nations Population Division 2008).

Figure 1. Trends in agricultural production

Source: FAOSTAT.

Why focus on smallholders?

The agricultural sector in Africa is dominated by peasant farmers, with 80% of landholdings being smaller than 2 hectares (FAO 2010). Their output levels are generally too low to generate any sizable income; low access to inputs such as fertilisers, machinery and improved seeds further curbs production volumes; and insufficient transport, storage, and marketing infrastructure limits the access of smallholders to output markets – especially those at the regional and international level.

Despite these challenges, African policymakers and development practitioners still see smallholders as the driving force of economic growth. By focusing on small-scale producers, they follow both productivity and poverty-reduction objectives.

According to the “inverse productivity” assumption, yields per hectare are negatively correlated to plot size. Especially since Sen’s seminal work on Indian agriculture (1962), small farms are believed to be more efficient, for example because they can use available resources more effectively and closely monitor production activities. However, empirical studies are inconclusive and often fail to consider large farms in the analysis. Indeed, some evidence suggests a U-shaped relationship, indicating that productivity starts rising again beyond a certain plot size (e.g. Helfand and Levine 2004).

Besides, yield per hectare might not even be the right measure to assess growth potential in today’s commercialised world. The ability to adapt new technologies, access credit, and dispose of effective links to product markets are the new keys to success in modern agriculture. According to Collier and Dercon (2009), large commercial farms have a clear advantage in all three domains.

New technologies such as improved seeds and fertilisers are important agricultural inputs independent of farm size. However, productivity growth through the adoption and efficient use of new technologies is easier for commercial producers. They can diffuse knowledge more effectively than smallholders and can test new technologies on a designated portion of their landholdings.

Access to credit is another crucial dimension as it allows farmers to make necessary investments for future growth. Although microfinance programmes might increase smallholders’ access to capital, commercial producers can tap into a wider pool of finance. Unlike smallholders, who usually operate in an informal environment, commercial producers have written records of their business operations, which increase their reliability in the eyes of potential lenders.

Finally, commercial farms have a better link to output markets, an attribute that is becoming increasingly important in a globalised world. Certain marketing opportunities, especially those across international borders, only materialise with large output levels. Even in domestic markets, the increased demand for standardised products following the “supermarket revolution” puts commercial producers at an advantage.

Fighting poverty effectively

The focus on smallholder farming is not exclusively based on efficiency considerations. Given the high poverty headcount among smallholders, it is also seen as an efficient approach to fight poverty.

Yet, support should not simply be channelled to where people are poor at present, but facilitate their transition into sectors that promise economic opportunities in the future. By preserving the status quo, investments in smallholder agriculture might actually prevent structural change that would be necessary to find sustainable solutions.

Some smallholders might be able to expand their businesses and evolve towards commercial production. Wherever this is possible, policies should assist this process by providing the necessary infrastructure and marketing environment. However, given the large number of people engaged in African agriculture, the majority of farmers will need alternative employment opportunities, either as paid workers in commercial farms or elsewhere in the economy. A clear exit strategy thus needs to be an integral part of future strategies.

Such approach will not be easy... and it might cause significant opposition. But isn’t good medicine usually bitter to the taste?

The views expressed in this column are those of the author and should not be attributed to the Food and Agriculture Organisation of the United Nations.

References

Collier, P and S Dercon (2009), “African Agriculture in 50 years: Smallholders in a Rapidly Changing World?”, Expert Paper for the FAO Conference on “How to Feed the World in 2050?”, Rome, 12-13 October.

FAO (2010), “Policies and Institutions to Support Smallholder Agriculture, Committee on Agriculture”, 23rd Session, 16-19 June, Rome: FAO.

Helfand, SM, ES Levine (2004), “Farm size and the determinants of productive efficiency in the Brazilian Centre-West”, Agricultural Economics, 31(2-3):241-249.

Sen, AK (1962), “An Aspect of Indian Agriculture”, Economic Weekly, 14.

United Nations Population Division (2008), World Population Prospects – The 2008 Revision, New York: United Nations.

World Bank (2008), World Development Report, Agriculture for Development, World Bank.

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Topics:  Development Environment

Tags:  Africa, Agriculture, smallholders

Policy Analyst at the United Nations Food and Agriculture Organization (FAO)

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