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# **1 Introduction**

Virtually every one of today’s high income economies enjoyed sustained agricultural productivity growth coupled with transformation of the rural non-farm economy that jointly sparked rapid industrialization and inclusive economic growth. Indeed, the Nobel Laureate W. Arthur Lewis famously wrote: “industrial and agrarian revolutions always go together, and ... economies in which agriculture is stagnant do not show industrial development” (Lewis 1954, p. 433). Until most recently, the economies of Sub-Saharan Africa (SSA) have also been enjoying robust economic growth (4.5 percent growth in gross domestic product (GDP) per capita per year during 1995-2013), according to World Bank data,<sup>1</sup> and the region shows early signs of agricultural productivity growth and structural transformation.

But much remains to be done. Despite notable progress—the share of people in SSA living on less than $1.90 a day (in 2011 international purchasing power parity PPP) declined from 54 percent in 1990 to 41 percent in 2013)—the number of extreme poor still increased, by more than 100 million (from 276 million to 389 million).<sup>2</sup> Extreme poverty remains high, with the $1.90 a day headcount poverty rates in SSA today twice as high as in South Asia, and more than ten times higher than in East Asia.<sup>3</sup> By 2030, most of the world’s extreme poor (four out of five) are predicted to be concentrated in Africa (World Bank, 2013).

This is partly driven by continuing high population growth (2.7 percent per year during 1990-2013). But the challenge of persistent extreme poverty that has plagued Africa for a generation is also closely bound up with continuing low agricultural productivity and the nature of the region’s structural transformation. Most of the region’s poor still find themselves in rural areas—an estimated 82 percent (Beegle et al., 2016)—earning the bulk of their income in agriculture—an estimated 69 percent among rural households in a sample of nine African countries, and even more among the rural poor (Davis, di Giuseppe and Zezza, 2016). The sheer size of these numbers makes what happens in agriculture particularly important for poverty reduction. At one level, real agricultural value added (constant 2010 US$) has been growing annually at 4.1 percent during 1990-2013, but only at 1.4 percent in per capita terms. The areas cultivated with cereals expanded annually by 1.3 percent; cereal yields by 1.6 percent. Not only is this productivity growth less than what has been observed, for example, in Asia during the Green Revolution, it started from a very low base and remains low. Cereal yields in SSA (about 1.5 ton/ha) are today still only about half those in South Asia (3.1 ton/ha in 2014), and about a quarter those in China (6.0 ton/ha).

There has also been structural transformation. Agriculture’s share in GDP declined from 23 percent in 1995 to 17 percent in 2013. The share of agricultural employment likewise fell during the 2000s, by an estimated 10 percentage points.<sup>4</sup> Yet Africa’s structural transformation has been towards (non-tradable) services, not tradable manufacturing (Rodrik, 2016). This partly links with Africa’s commodity boom during the 2000s, which fueled economic growth in many countries as well as urbanization, in particular the emergence of consumption cities, characterized by higher shares of imports (including of food) and employment in non-tradable services, as opposed to tradable manufacturing or services (Gollin, Jedwab and Vollrath 2016). While inconsequential regarding the level of urbanization (and also growth and aggregate income in the short run), such resource driven structural transformation, urbanization and

> 1 This and all subsequent ‘World Bank data’ come from the World Development Indicators data

> (http://wdi.worldbank.org/), unless otherwise indicated.

> 2 Careful scrutiny of the data suggests that the number may be somewhat lower, but even under the most optimistic data scenario, more than 330 million people were estimated to be extreme poor in 2012 (Beegle et al., 2016).

> 3 <u>http://iresearch.worldbank.org/PovcalNet/home.aspx</u> (read on 15 November 2016).

> 4 Calculations based on the I2D2 database using 12 African countries with at least two points of sectoral employment data during 1995-2013 separated by at least 5 years (excluding Nigeria) suggest a population weighted 10-year decline of about 10 percentage points. The numbers are similar in magnitude to those reported by MacMillan and Harttgen (2014) using the Demographic and Health Surveys and de Vries et al. (2014). For the 14 and 9 African countries studied, they also report about a 1 percentage point decline in the share of agricultural employment per year over the past 10 (2000-2005 and 2006-2012) and 20 years (1990-2010), respectively.