The Role of Risk in an Agriculturally Led Strategy in Sub-Saharan Africa

Agriculture's overwhelming role in the development of Sub-Saharan African (SSA) economies is self-evident. Development literature recognizes this important role in the process of structural transformation (Johnston and Mellor). Much of this literature, however, is derived from the large, densely populated, relatively closed economies. Small open economies pose some additional questions given the importance of trade in GNP, agriculture's importance in trade and the risky nature of the agricultural sector (Myint). Some of the controversy surrounding the World Bank's report, Accelerated Development in Sub-Saharan Africa (hereafter the Report), centers on this question of risk involved in following its recommendation for making export crop production the focus of Africa's future development strategy. The Report supports this recommendation by pointing out that "in the case of most export crops African countries have distinct comparative advantage" (World Bank 1981, pp. 55-56). Critics, however, contend that the considerations of risks associated with an export crop-oriented trade strategy are either minimized or neglected in the Report (IDS Bulletin). While they recognize the importance of agriculture and some concede its past neglect, they stress the need for African governments to become more self-reliant in food production (IDS Bullentin, Sender and Smith). To support their argument, the critics point both to the structure and the performance of SSA economies over the 1970s. In addition to the decline in the international terms of trade, the failure of the agricultural sector in many of the countries involves both a decline in primary agricultural exports, which has reduced f reign exchange earnings, and a decline in food crop production. Export performance wa uneven in volume in 1977/79-1980/82, ranging from a stagnation in coffee and tea, to a 3%-4% annual decline in cotton, sisal, and rubber, and a 7%-8% annual decline in oilseeds (World Bank data). Per capita African food output declined at a rate of 1.1% per year in the 1970s (World Development Report). Food imports have been rising by about 7.5% annually in the 1960-82 period and over 15% annually since the mid-1970s. Of these, 80% have been cereal imports. Thus, the focus on agricultural development has to be adopted not only within the context of severe foreign exchange constraints imposed by poor export erformance but the growing foreign exchange requirements of food imports. The critics of th Report argue that the case for increasing exports is not clear in relation to reducing import needs. Some structural aspects of SSA economies are also considered by critics. First, countries in SSA tend to be concentrated in their export structures, even when one disregards the oil exporters. Second, there is little domestic demand for major export crops such as coffee and cocoa. With such products (especially the perishable ones) a country does not have much scope to reduce the adverse impact of unexpected international price falls by diverting supplies to the domestic market for consumption. These twin features of high concentration and the limited possibility for domestic absorption of export products make SSA countries vulnerable to fluctuations in international prices. Third, international prices for many of SSA's primary exports have been falling since 1977-78 (World Bank 1983). The response of African Ministers of Economic Development and Planning to the Report was that the promotion of agricultural exports and greater reliance on market forces "have hitherto not helped and cannot be expected to Uma Lele is chief of the Development Strategy Division, Development Research Department, World Bank, Washington DC. The views expressed in this paper are the author's and do not represent those of the World Bank. The author is grateful to Y. Ansu for stimulating the focus for this paper on risks related to export instability and for comments, and to H. Mekonnen, T. Long, and C. Else for research assistance.