sustainable financing of ag research asti - iaae

IAAE Symposium on Improving Returns to Agricultural Research in Sub-Saharan AfricaFoz do Iguaçu | 20 August 2012

Theme 1: Sustainable Financing of AfricanAgricultural R&D

Gert-Jan StadsASTI program | International Food Policy Research Institute

Keith Fuglie Economic Research Service | United States Department of Agriculture - the views expressed are the authors’ own and not necessarily those of ERS or the USDA.

Outline presentation

• How much and how well do African governments and donors invest in agricultural R&D?

- Options for improving efficiency of R&D investment

• Is agricultural R&D in Africa paying off?- R&D, technological change, and productivity growth

- Productivity growth and poverty reduction

• Future prospects for agricultural growth

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• Growth driven by only a few countries

• Growth not always sustainable

• Region-wide growth masks severe declines in many other (mainly francophone West African) countries

Africa’s investment challenge: Uneven growth

20% growth in SSA public agricultural R&D spending, 2000-08

Africa’s investment challenge: Fragmentation

Africa’s investment challenge: Underinvestment

• Common target: Allocation of at least 1 % of GDP to R&D• In 2008, Africa spent $0.61 for every $100 of AgGDP on

agricultural R&D• Despite an overall increase in recent years, Africa is widely

underinvesting in agricultural R&D

Africa’s investment challenge: Volatility

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• Agricultural R&D spending in Africa has been more volatile than in other regions

• Volatility more pronounced in donor-dependent low-income countries

• Stable and sustainable government funding is key, not just towards salaries but also to enable necessary nonsalary expenditures

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Africa’s investment challenge: Donor dependency

Average donor share

Spread of donor share

• Many countries are extremely dependent on donor funding and development bank loans

• Donor funding is generally short-term and ad-hoc, adding to the volatility

• Increased funding from World Bank (loans) in recent years

Funding Agricultural R&D through Commodity Levies

Current: $127 million; Potential: $500 millionCountry Product R&D

spendingIndustry

valueProduct R&D

intensityAll Public R&D

intensity

Million $PPP Million $PPP % %

Ghana Cocoa 33.25 757 4.4 0.9

Côte d’Ivoire Multiple 42.60 7,847 na 0.5

South Africa Sugar 18.59 673 2.8 2.0

Kenya Tea 3.10 369 0.8 1.3

Kenya Coffee 5.78 45 12.8 1.3

Malawi/Zimbabwe Tea 2.42 65 3.7 0.7

Mauritius Sugar 9.89 149 6.6 3.9

Tanzania Coffee 3.43 46 7.4 0.5

Tanzania Tobacco 0.06 81 0.1 0.5

Tanzania Tea 4.10 37 11.1 0.5

Uganda Coffee 4.75 228 2.1 1.2

Source: Byerlee 2011 and ASTI

Agricultural total factor productivity (TFP) has picked up, but still lags

Increase in output growth has been primarily resource-led with some rise in TFP growth

Data & Statistics

Source: Fuglie and Rada (forthcoming)

Diffusion of new agricultural technologies in SSA picked up after 1980

Source: Fuglie and Rada (forthcoming)

Policy reforms since mid-1980s improved incentives for agriculture

Source: Kym & Anderson (2008), World Bank

Drivers of agricultural TFP growth in SSA (from regression analysis)

• Technology policy– R&D investment main driver of TFP growth

• Economic reforms– Raised TFP by 5% (out of 35% growth since mid-1980s)

• Low returns to schooling– Reflect countries still in ‘traditional agriculture’

• Armed conflict stops growth• HIV/AIDS suppresses TFP growth

– 5% of population infected reduces TFP by >2%

• Road data too limited to draw inference

Source: Fuglie and Rada (forthcoming)

• Returns higher for larger countries• CGIAR complements national agricultural research investments• Aggregate impact limited by low investment

Returns to Agricultural R&D in SSA

Research System Returns to Research

B/C ratiow/ CGIAR

IRR (%)w/ CGIAR

IRR (%)w/o CGIAR

Large Nigeria, Sudan, Ethiopia, Kenya, Côte d’Ivoire, Ghana 4.4 43 36

Mid-size Uganda, Senegal, Mali Mozambique, Madagascar 2.6 29 23

Small Gabon, Burundi, Gambia, Botswana, Swaziland 1.6 17 13

CGIAR In SSA only 6.2 58 --

Source: Fuglie and Rada (forthcoming)

How does Agricultural R&D Affect Poverty?

• Poverty head count impact lower in SSA compared with other developing regions

• Poverty gap impact likely to be much larger

Relation Elasticity

Poverty head count and output -0.220

Output and R&D +0.049

Poverty head count and R&D -0.011

Source: Nin-Pratt and Fan (2010)

New Directions and Prospects for Future

Reasons for optimism

• Better macroeconomic management

• Strong demand growth• Renewed interest by

governments & donors in agriculture

• Policy reform

Reasons for pessimism

• Private sector technology transfer still low

• “Small country” problem and inefficient R&D

• African farmers still face very low incentives

Source: Binswanger (2011)

Ways of Moving Forward

• Mobilize greater government support for agricultural R&D

• Better coordinate donor support with national priorities• Promote regional cooperation• Reform policy to facilitate private-sector participation

THANK YOU