Public policies, essential to the development of agri-food sectors

Over the last ten years, the global food situation has steadily deteriorated. Since 2020, a succession of major crises (the Covid-19 pandemic, inflationary pressures linked to the post-pandemic recovery, the war in Ukraine) has exacerbated this worsening trend, and highlighted the fragility of food systems, particularly in developing countries.

Consequently, both in northern and southern countries, although it is not a new concept, there appears to be an unprecedented consensus around the objective of food sovereignty. This should not be equated with mere self-sufficiency in each country. Instead, especially in developing countries, food sovereignty means exercising greater control over food availability and stability within national (or regional) borders, without excluding recourse to imports where necessary. Reasserting the objective of food sovereignty is nonetheless a shift towards a new paradigm that questions geographical specialisation of agricultural production and the ability of international trade to ensure food availability everywhere.

In developing countries and particularly in Africa, the corollary to this shift is a call for massive investment in agriculture in order to unlock insufficiently expressed productive potential. However, there is no consensus around the methods and objectives needed to secure this necessary increase in investment in the sector: which farming models should take precedence? What are the respective roles of smallholder farming on the one hand, and large-scale agro-industrial farms on the other? What role should public investment play? How can we improve the sustainability of agriculture (in environmental, social and economic terms) while strengthening food security?

THE IMPORTANCE OF SMALLHOLDER FARMING

Smallholdings now play a major role in global agricultural production. This is particularly the case in sub-Saharan Africa, where they constitute the vast majority of farms and the biggest chunk of the private agricultural sector. Within these farms, there is major potential for gains in technical and economic performance. They are frequently diversified and have considerable capacity for adapting to contingencies, particularly economic or climate hazards.

Their development is therefore a key prerequisite for food sovereignty and current economic and demographic trends in Africa suggest they will continue to play a major role in the decades to come. Although there is a significant rural exodus, demographic forecasts indicate that rural areas will continue to experience densification. In principle, the conditions for development of the industrial and service sectors, and problems relating to their competitiveness, do not suggest any possibility of a structural transformation similar to that which took place in Europe after the Second World War. Lastly, while abundant “available land” is often used to illustrate the potential of African agriculture, this needs to be put into perspective. Indeed, in view of the need to preserve the carbon sinks constituted by African forests (primarily the Congolian rainforests) and the richest habitats in terms of biodiversity, the potential for extending agricultural land is not actually all that great. In particular, there is very little land that is not either subject to legitimate land tenure rights or already being used, under pastoral arrangements for example. The future growth of agricultural production in sub-Saharan Africa cannot therefore be achieved by developing vast, capital-intensive agro-industrial farms.

FINANCING AND STRENGTHENING SERVICES FOR AGRICULTURAL PRODUCERS

Developing smallholdings, enhancing their productivity and creating high-quality, decent and well-paid jobs is therefore essential and the availability of services to improve their technical and economic performance is the key condition for such development. Non-financial services (i.e., training, advice, research) are currently extremely poor, and funding them and improving their quality constitute major development challenges. Given their questionable solvency, small farmers cannot be considered a profitable proposition for private investors and they must therefore be able to benefit from major public funding programmes which are currently insufficient. The availability of financial services is little better (e.g., campaign or investment financing).

The agricultural sector is objectively risky as it is exposed to climate and health hazards, compounded by the fact that financial institutions often have an excessive perception of this risk due to their relative unfamiliarity with the sector. Consequently, there is little or no financing available for African agriculture. In the face of this major market failure, public policy instruments (public banks, incentives, subsidies, guarantees, etc.) also need to be harnessed.

Upstream private sectors (i.e., production and supply of inputs, seeds and equipment) as well as downstream sectors (i.e., processing, marketing, distribution) involved in agricultural production will benefit from a strengthening of the fabric of smallholder farms. More solvent farms mean more outlets for upstream businesses. Farms that are better advised, better financed, more technically efficient and more resilient to unforeseen events will be able to provide downstream businesses with the quantity, quality and stability they need. Public investment in farming units is a key factor in the development of all players across the sector.

DEVELOPING AGRI-FOOD SECTORS

This sector-based approach – especially the establishment of balanced relationships between the different players – can be part of a virtuous circle. Forging contractual arrangements between farmers (or their organisations) and downstream companies can ensure a fair distribution of added value (and risks), and secure supplies for downstream companies. The existence of such contracts makes it possible to guarantee the financing of farms by financial institutions (banks or microfinance institutions). Creating inter-professional organisations establishes a balanced framework for dialogue and negotiations and reduces imbalance in terms of information and power relationships between different industry players.

However, experience shows that balanced contractual frameworks and inter-professional organisations rarely come about in a spontaneous manner and public policies that combine regulation, incentives and mobilisation of resources dedicated to structuring the sectors are a key factor in this type of approach. The history of the cotton sectors in West and Central Africa are a case in point. Moreover, given the imbalance in terms of information and power relationships between agricultural producers and downstream companies, getting neutral third parties involved is often necessary to guarantee balanced contractual arrangements.

THE NEED FOR PUBLIC INVESTMENT

Given the specific features of the agricultural sector, the role of public policy is crucial in leveraging private investment. It is not just a matter of governments creating a business environment that is conducive to private investment. Public investment is a prerequisite for the development of smallholder farms and agribusinesses cannot replace this.

Beyond this, devising and implementing ambitious public agricultural policies is justified by the fact that this sector cannot be reduced to simply the production of foodstuffs. Agricultural activity is underpinned by natural resources, some of which cannot be privatised. Agriculture also provides numerous services (environmental and landscape maintenance services for example), most of which are unpaid. Agriculture’s crucial and strategic role in ensuring food availability and stability cannot be considered simply in terms of the production of consumer goods.

Nevertheless, agricultural policies are clearly underfunded in developing countries. Few African countries have honoured the commitments made in the 2014 Malabo Declaration, which called for 10% of public resources to be allocated to agriculture. The observatory of public support for agriculture set up by the FARM Foundation confirms the low level of support in many developing countries and highlights a paradox: support is generally lower in countries whose economies are most dependent on the agricultural sector. Now more than ever, we need stronger public agricultural policies to which development institutions need to contribute. The impact of this public investment, focused on smallholder farming, will be conducive to the development of all players in the agri-food sector.