Africa mismanaged its development ways

This article appeared originally in Gulf News: link to original article

Africa imports $40 billion (Dh146.8 billion) worth of food every year. How is that even normal? Actually, how is that normal for a continent that was a net exporter of food only a few decades ago?

One would normally presume that African countries must be quite rich in agricultural land, explaining why countries are crowding into grabbing land there and investing in an underdeveloped sector. That does not seem to be the case, and Africa is far from escaping poverty and its debt trap.

Though one thing does stand the factual test, which is that Africa does possess significant amount of untapped agricultural land among other resources that are underutilised or, for one reason or another, are not allowed to prosper.

While its agriculture sector – and food production – is one example of Africa’s downfalls, it is nevertheless essential for a continent that seems stuck in a developing stage.

Countries such as Sudan with hydrocarbons and other natural resources gave up economic diversification, including into agriculture, as soon as petro and other dollars started flowing in.

Others like Sierra Leone are over-dependent on agriculture, with countries like Tunisia and Morocco exporting highly-valued commodities, including olives, coffee beans, fruits and vegetables. Kenya focuses on non-consumable exports like flowers.

That, along with ineffective domestic economic policies, has forced the continent into stagnant incomes and persistent poverty, which in turn has caught governments in a malicious debt cycle.

In this op-ed, selected root causes of poverty in Africa will be discussed as well as their association with the debt cycle that African countries find themselves trapped in. To simplify matters, the term “African countries” will be used though it doesn’t refer to all on the continent.

Many identify the 2007-08 hike in food prices as the one that destructed livelihoods and set countries back in terms of their food security and their citizens’ incomes. But that’s not true. In the early 1970s, a much worse hike in food prices was more detrimental in undermining individuals’ incomes and countries’ food security.

Not only that, it was at that time when many farmers in Africa were put out of business when their commodities were kept out of certain markets, and where food aid switched countries from producers and exporters to net importers and consumers.

An over-reliance on a specific sector to drive economic growth is a problem, but not necessarily a bad one. The problem with the latter countries, for instance, is that such over-reliance is in itself creating another issue.

Agriculture being significant for citizens’ incomes gets diluted when food prices go up for both farmers and non-farmers. For non-farmers, it curbs their purchasing power and limits their access to food, leading to a vicious cycle of undernourishment, stunting of high growth, increased rates of poverty, and so on.

Farmers are faced with two scenarios. The first has them selling their food instead of consuming it to be able to buy other necessary items for the household, which is quite reasonable if market conditions are favourable. The second, and more problematic, scenario is that many rural farmers are not properly integrated into the food production value chain.

As such, they do not have the same bargaining power that their counterparts elsewhere possess, which prevents the first scenario from taking place and brings me to the second root cause of the poverty trap.

Whether agriculture or any other sector, international trade rules have not been set in favour of African countries, but the other way around. Agriculture is one example where the liberalising markets’ argument and pro free trade agreements (FTAs) stance have disadvantaged the underdeveloped and developing economic sectors in many African countries.

Unfair competition, through subsidies for different industries and tariffs on imports, ensured those sectors continue to underperform despite their naturally perceived advantage. The argument is not against free trade or open markets, but that it occurs at a peculiar stage during a country’s development, continuing to disadvantage countries that are yet to develop their competitive industries.

The third root cause of Africa’s poverty trap is the discovery of hydrocarbons and other natural resources. Sudan is a case in point. When oil was first discovered in Sudan by Chevron in 1979, with fields later developed by Chinese, Indian, and Malaysian interests among others, the country shifted its energy from agriculture and other industries to developing its oilfields and starting to export crude as soon as possible.

Decades of turmoil and a South Sudan later, Sudan’s ineffective economic reforms as well as losing three-fourths of all oilfields dealt its economy the final blow. Sudan knew that its oil reserves would only last until early 21st century and had at least two decades to reform its economy and invest in other sectors, which would have carried it forward, post-oil. It didn’t.

So, how can Africa move forward and escape its poverty? To assume that such a question can be answered here is a naive, presumptuous claim to make. There are though a few key points that could be of importance for Africa’s poverty and debt dilemma.

One, offshore investments into agriculture must be conditioned upon ensuring employment opportunities as well as access to food for neighbouring communities. Two, trade agreements must be signed on an equal footing, ensuring protectionist measures in favour of underdeveloped and developing nations with adequate market access allowed.

Three, African countries need to introduce significant domestic economic reforms that would lower over-reliance on any specific sector.

The last thought that I want to leave you with: is a different development model needed for African countries?