Saving Ethiopian Agriculture from Age-old Rigidities

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In recommending how to enhance food security through agricultural growth in Ethiopia, the International Food Policy Research Institute (IFPRI) once said, “successful policy will not only avoid large-scale famines, if and when major production shortfalls occur but will also lead to sustained improvements in food availability, access and nutrition at the national and household levels.” It is a quote that will make us ponder on the issue even more.

In relation to our country’s agriculture sector, I think the important questions are what policy framework we adopt and how far we have gone to improve the sector.

The existing government’s agricultural development strategy covers a wide range of activities essential to rapid agricultural growth. These include support for agricultural research; massive expansion of training of extension workers; extending credit on a commodity and input specific basis; and a large programme to expand the road system.

But all of these programmes require improvement and expansion. Two areas require major institutional change at present and are critical to reaching more than six percent long term growth rate. These are a more than double digit growth rate in fertilizer use and a shift from two percent growth in certified seed production to a large scale programme.

The most encouraging sign for the future is the fact that fertilizer use has reached a volume sufficient to have aggregate impact, providing the potential for increased production.

The objective should be more than doubling the growth rate of fertilizer use, however. This, in turn, means very large absolute increments per year. India, at a similar stage in fertilizer use, was increasing production at a 15pc rate.

It will be a challenge to maintain and preferably increase the response to fertilizers even as utilization increases. This puts pressure on the research system as well as extension.

It is reasonable to wish for cooperatives to be the major force in fertilizer delivery and this requires a focus on continued rapid expansion of coverage by the cooperatives.

The area covered needs to expand rapidly as does the intensity of use where there is coverage. Public expenditure on the administrative costs of rapidly adding branches and providing cooperative access to national and even international credit markets at government rates, are both common means of encouraging the cooperative movement without providing insurmountable problems for private competitors. However, competition always has a valuable impact.

In a way, competition would greatly increase the probabilities of meeting the very high fertilizer growth target, if the private sector were encouraged to purchase and import fertilizer at major wholesale points and then play a major role in fertilizer distribution. But this calls for a major public policy decision.

Since the grain traders generally have good access to credit, they can perhaps finance farmers as well. In the short run, the banks should be encouraged to extend loans for this purpose. In the long run, however, a national rural credit system is needed.

Of course, as fertilizer intensity expands, the productivity at the margin declines. However, technological innovation has fully compensated for this, keeping marginal response rates roughly constant over time.

A low response ratio is often caused by lack of critical complementary inputs, including certified seeds. Thus, meeting the high rate of growth target requires radically increasing the response to fertilizer to international norms and maintaining it at that level.

I think, two critical needs must be addressed – radical change in seed supply and seed supply policy; and improving the quality of the applied agricultural research (and extension) complex to provide dynamic improvement in farming practices. In addition, the infrastructure network must be expanded rapidly.

The most serious problem in meeting the accelerated growth target is the lack of growth in the production of high quality seeds. There has been little growth in use of certified seeds. All three stages of the seed process need rapid expansion.

Fertilizer use cannot be expected to grow rapidly without large scale use of improved seed. As fertilizer application rates increase rapidly, then, it is natural for the response coefficient to decline.

The norm, however, is for the response to be maintained. That is only possible if improved varieties and practices are constantly provided as fertilizer use rises. That, in turn, depends on huge quantities of certified seeds.

Production of breeder seeds by the research system needs to accelerate markedly. This is now a major bottleneck. Foundation seeds are also a bottleneck which needs to be expanded. In these terms, it would be logical to mobilize the large scale private and state farms for this purpose. For that to succeed, the margins for producing foundation seeds need to be increased.

I feel that production of certified seeds should be largely a private sector activity. Ready availability of rapidly growing supply is far more important to growth than seed price, which is, after all, a small portion of total production costs and in any case serves to greatly increase the profitability of fertilizer. Prices need to be determined so as to provide high levels of profit to seed producers to give them the incentive not only to provide high quality seeds but to expand rapidly.

The government of Ethiopia has put a major emphasis on hugely expanding and training the extension service, with a rightful emphasis on technical capacity. It also supports the research system well. But, maintaining the response ratio will require increased technical competence of the extension service and substantial expansion of the research system.

The large investment in road infrastructure has so far been allocated primarily to trunk roads. The next phase must provide the feeder roads. A ten year plan should add ten percent each year to the areas served by adequate infrastructure and thereby add ten percent per year to the areas that can be intensively developed to meet the high six percent growth target.

Likewise, expansion of the cell phone network, an improved cell phone service can also spur growth of commercial agriculture. Improved cell phone communications has the potential to lower price margins, raise farm gate prices, and enable farmers to target and time market sales more effectively.

In order to substantially increase agricultural productivity, market surpluses and achieve the substantial multiplier effects, it will be necessary to focus much of the productivity enhancing investments and extension on medium size farmers. Many crop farmers in Ethiopia lack sufficient land (and water) to provide full time employment and a level of living that places them above the World Bank 1.25 dollars a day poverty line. This definition is derived from the minimum calories required for an active life plus other goods and services of similar necessity. It is in essence a survival level of income.

Current farming practices in Ethiopia require about one hectare of land to achieve this level (although livestock and other incomes bolster household incomes significantly). It is this set of farm families who will most readily adopt innovation, increase production, and drive increased rural incomes. Nearly every one of these farmers resides in the moisture reliable cereal-based highlands, though medium size farmers in the drought-prone highlands are also numerous. However, in the absence of expanded irrigation or improved land and water management systems, it is the former group that in general are likely to have large numbers of farmers of both sufficient farm size and reliable water, to achieve large increases in productivity and marketed production.

In the moisture-reliable Enset-based highlands, population pressure has already diminished farm size to such an extent that out-migration has become a major pathway out of poverty. In contrast with the medium size farmers, at least 40pc of farms account for only 10.6pc of total area cultivated nationally.

They are unlikely to make a major contribution to increasing aggregate farm incomes. Of course, some with this size holding will farm intensively and produce substantial marketed surplus. Most of these households, however, will farm less intensively and for these households, their way out of poverty is to increase their income from non-farm employment.

Increasing their agricultural productivity will add to their income and is desirable, but their low income, attention to their non-farm income sources, and lack of capital require quite different farm income-raising measures than for the medium size farm population.

Neglect of agriculture includes neglect of rural infrastructure, which is the most expensive aspect of agricultural development. This too, is a standard African story.

The same expansion of infrastructure that is critical to agricultural growth is also critical to social improvement (health and education). Schools and clinics are easily built far from all-weather roads. But the teachers and health technicians and their families will generally live where there is a town with an all-weather road and electricity.

Entrance to the isolated village is a struggle and often does not happen. Thus, provision of rural social services cannot be put off for decades before urban growth is sufficient to productively absorb rural population increase. Providing these rural social services requires infrastructure expenditure that represents easily the largest element of investment for agricultural growth. The alternative is at least 20 years of ill health and under education for rural people.

Nothing could make the point more clearly than the fact that gross domestic product (GDP) growth alone is not an adequate measure of economic progress. I believe one does not have to go to the complexities of econometric analysis to see this. One need only recognise that in a view of justice approximating that of John Rawls, the employment growth rate is decisive and is driven by agricultural growth.