# EXECUTIVE SUMMARY

Africa's loss of world market shares for its major<sup>agricultural exports and the decline in food</sup> production per capita are the most telling signs<sup>of stagnation and decline in Africa since 1970.</sup> Africa's international market share for its 12 major<sup>agricultural commodities tell by half between</sup> 1970 and 1983. Over the same period, per capita<sup>food production fell about 1 percent per year.</sup> Since the mid-1980s, however, there have been<sup>improvements in both food and export agriculture, a</sup> reversal which has coincided with the implementation<sup>of policy reform programs by a subsiantial</sup> number of African countries.

This paper examines the impact of policy on<sup>agricultural performance in Sub-Saharan Africa in</sup> the 1970s and 1980s. Based on recently available<sup>data enabling a wider range of detailed empirical</sup> analysis, the study assesses the distorting effects of<sup>government policies on incentives, the impact of</sup> those distortions on agricultural performance, and<sup>the changes over time and across countries in both</sup> policies and agricultural performance Export<sup>agriculture and food producdon are assessed</sup> separately.

Africa's agricultural export performance<sup>deteriorated substandally from 1970-84. The pattern of</sup> decline - and partial recovery in the late-19SOs - follows closely the high levels of distortion<sup>in the</sup> agricultural sector. These distortions were the<sup>result of both direct government controls on producer</sup> prices for Africa's principal export crops and<sup>the indirect effects of exchange rate policies. As a</sup> result of these policies, real producer prices feil<sup>by one-fourth between the early 1970s and early</sup> 1980s. The share of these crops' value retained<sup>bv farmers (as measured by the real protection</sup> coefficient) dropped from about 90 percent to<sup>about 50 percent, on average, from 1971 to 1983.</sup> Government controls and involvement in the<sup>marketing and pricing of export crops has been</sup> responsible for a considerable share of the deterioration<sup>of producer incentives, although the</sup> magnitude of these distortions has not been<sup>larger, on average, than in other non-African developing</sup> countries. However, large _indirect_ distortions and<sup>disincentives have been caused in Africa by the</sup> prevalence of highly overvalued currencies,<sup>especially from the mid-1970¢ to mid-1980s. The large</sup> size and prevalence of these indirect distortions<sup>contrast with conditions iL</sup> non-African developing countries. Pegged exchange rate regimes,<sup>coupled with poor fl6. management and high</sup> domestic inflation, resulted in highly overvalued<sup>currencies. Those countries which maintained</sup> grosdly overvalued currencies over extended<sup>periods experienced severe deterioration of export</sup> agriculture. CFA-zone countries have been more<sup>successful in avoiding large exchange rate</sup> distortions over the period, and thus have been less<sup>affected by the deleterious effects on agricultural</sup> growth. In the late 1980s, however, overvaluadon<sup>of the CFA franc has become more of a problem.</sup> There has been considerable debate in the literature<sup>on the responsiveness of agriculture to price</sup> incentives in Africa. The issue is addressed<sup>here in an econometric framework combining cross-</sup> section and time-series data. In the short-run, tree crops<sup>exports ate shown to be ordy moderately</sup> responsive to changes in price incentives.<sup>Elasticities are on the order of 0.1. However, for</sup> countries exporting annual crops the short-run response<sup>is more elastic, above 0.9. Exports are also</sup> shown to be responsive to changes in the real exchange<sup>rate, reflecting the effects on price incentives</sup> and on efficiency caused by changes in exchange<sup>and trade restrictions that generally accompany</sup> overvalued currencies. Elasticities of export supply<sup>with respect to the real exchange rate varied</sup> from 0.1 to 0.3 for tree crop exporters, and 0.6 for<sup>annual crop exporters. These estimates may</sup> not, however, reflect long-run responses, which<sup>are influenced by</sup><sup>_expected_prices.</sup>