Group Assignment
What role does agriculture hold for inclusive growth in Africa? Drawing lessons from the African continent, provide evidence for the emerging consensus on the future role of small-holder farming for Africa’s economic growth.

Table of contents

1 Introduction 4
1.1 Definition of inclusive growth 4
1.2 Africa’s economic growth narrative 5
2 The Challenges of Africa’s Agricultural Sector 8
2.1 Issues surrounding Land Tenure and concomitant effects 8
2.2 Low diffusion and absorption of technology 11
3 The Role of Smallholder Farming for Africa’s Economic Growth –
Evidence of an Emerging Consensus 13
4 Smallholder Farming Success Narratives 15
4.1 Botswana: Competitiveness of beef smallholder farmers 15
4.2 Ethiopia: Commercialisation of small scale farmers of grain 16
5 Conclusion and Recommendations 17
References 20

Agriculture and its role in inclusive growth in Africa
1. Introduction
The purpose of this report is to consider the position of agriculture in Africa, and the potential that it has for improving the lives of the majority of those living on the continent.
The report starts off with defining inclusive growth, and highlights how agriculture can contribute towards this phenomena as a consideration. It then talks to agricultural concepts and considerations in the African context, and attempts to identify African specific challenges and provide workable solutions. The paper also reflects on an emerging consensus advocating for the promotion of the productivity of smallholder farmers which is believed could drive economic growth for a broader base of the African population.
A key consideration of this report is that in Africa, a majority of Africans live in a rural setting, participate in agricultural activities, especially women, and to address issues of food security, high unemployment, poverty, equity and human capital, economic growth should be considered in the construct of small-holder farming – thus inclusive growth.
1.1 What is Inclusive Growth

There is no consensus on the definition of inclusive growth even though the term inclusive growth is often used interchangeably with pro-poor growth, inclusive growth is however a much broader concept. While inclusiveness as a concept “encompasses equity, equality of opportunity, and protection in market and employment transitions” (Commission on Growth and Development, 2008), inclusive growth “comprises both outcomes and processes involving participation and benefit-sharing” (International Policy Center for Inclusive Growth).

As an initial consideration, the challenge in defining inclusive growth is perpetuated at the level of identifying an appropriate measure of inclusive growth. In attempting to provide a workable measurement, Stephan (2007) proposed that growth is inclusive when it:
• “allows participation and contribution by all members of society, with particular emphasis on the ability of the poor and disadvantaged to participate in growth (the “nondiscriminatory” aspect of growth); and

• associates with declining inequality in non-income dimensions of well-being that are particularly important for promoting economic opportunities, including education, health, nutrition, and social integration (the “disadvantage-reducing” aspect of inclusive growth)”.

1.2 Africa’s Economic Growth Narrative

The African continent, particularly the Sub-Saharan region, is witnessing its fastest growth ever having emerged from the devastating financial crisis, growing by approximately 6 percent a year in the past few years (Growth Report 2008). Table 1 below highlights the growth of the region, along with various global growth rates:

Table 1: Average annual growth rates of real output (%) 1970–1980 1980–1989 1990–2000 2000–2010 2008–2012
World 3.80 3.26 2.82 2.77 1.65
Developing economies: 5.80 3.53 4.89 6.07 5.17
Africa 4.22 1.81 2.62 5.28 3.79
America 5.97 1.76 3.12 3.64 3.02
Asia 6.18 5.34 6.24 7.13 6.09
Eastern Asia 7.80 9.66 8.13 8.30 7.20
Oceania 2.86 3.79 2.38 2.87 3.41 Source: UNCTAD 2014.

Table 1 above paints an encouraging picture depicting that African economies have been growing at a remarkable pace since year 2000 despite the sudden drop in growth in 2008 due to the world economic crisis. Effectively, African economic growth has been exceedingly higher than the developed economies or even the average world in the last two decades. Multiple factors contributed to this growth with most studies attributing it to better macroeconomic management, high domestic demand and a relatively more stable political environment, while on the external front, favourable commodity prices, stronger economic cooperation with emerging economies through trade partnerships, higher Official Development Assistance (ODA) since 2000, and an increase in Foreign Direct Investment (FDI) flows contributed to the growth process (Kanu, et al (2014); UNCTAD 2014). Other factors include the changing structure of global markets, democracy and political stability.

Despite African economies experiencing rapid economic growth, this growth has not translated to better living standards for all its inhabitants, with wealth still remaining in the hands of the few whilst a large population is still hovering in poverty. Several developmental challenges ranging from food insecurity, high unemployment, poverty and inequality are counted as the key factors for this.

The World Bank (2014), noted an alarming Gini Co-efficient of close to 45% for Sub Saharan African countries, despite eminent economic growth. Sub Saharan Africa’s relatively weak growth-poverty elasticity of 1.6 per cent reflects the fact that economic growth in Africa has had a lower impact on reduction in poverty of its population than in other regions (Kanu, et al (2014)).

In the quest of achieving sustainable development, land and its natural resources should be exploited so as to achieve the well-being of the majority of the population, and increasing agricultural productivity remain a key component in complementing this growth and thus significantly reducing poverty. Interestingly, countries with significant high incidences of poverty tend to show high inequality with Ravallion (2007) noting that “high initial inequality has been shown to reduce the poverty-reducing effects of economic growth”.

Table 2 below compares the share of the rural population, the share of agriculture in total employment and the share of women employed within agriculture across several regions. The table below also illustrates that the majority of Africans live in rural regions and engage in agricultural activity. Furthermore, women comprise a significant proportion of those engaged in agriculture in Africa.

Table 2: Regional Comparison of rural population, agricultural employment and proportion of women in agricutural employment
Indicators Africa N America America Asia Europe Oceania World Share of rural population (%) 64 23 21 29 29 30 50 Share of agri. in total employment (%) 57 12 2 9 9 19 44 Share of women in agri. Employment (%) 47 20 26 36 36 47 42 Share of women in tot employment (%) 40 41 46 45 45 44 40
Source: BS Kanu, AO Salami & K Numasawa using FAOSTAT, UNESCAP and AfDB online databases

As is noted above, about 65 per cent of Africa’s population currently resides in the rural periphery, practicing agricultural activity as its core business. The reality remains that real output from such activity remain far below its potential which breeds food security challenges, even though it may vary from country to country. As such, Africa is currently a net importer of food despite the majority of its population being engaged in farming activities.

Despite agriculture being the activity that a majority of Africans are engaged in, it is not the primary driver of economic growth in Africa. The agricultural sector accounts for 57 per cent of employment which is significantly more than that of industry and of services, which account for 11 per cent and 32 per cent respectively. Agriculture’s share of GDP is however significantly less at 15%, as compared to 38% and 44% for industry and services respectively. The emerging consensus is therefore that in order to achieve inclusive growth whereby economic growth translates to a reduction in poverty, economic growth must be driven by the activity that the majority of the population is engaged with – agriculture. Because of the potential for agricultural-led economic growth’s to enhance poverty reduction, Africa’s future growth lies in stimulating the potential of smallholder agricultural productivity, as is noted in World Bank (2013). Such stimulus will be complemented through high demand for food which is expected to quadruple over the next two decades while food prices remain high.

Another consideration is that the agricultural sector is generally characterized by smallholder farming. Table 4 below notes the share of farms per sample of African countries selected:

Table 3: Africa, number and share of small holdings in selected countries
Country Year No. of farms Share of farms% Share of area tilled%
Ethiopia 2001-2002 93 744 455 87 60
Nigeria 2000 6 252 235 74 -
DR Congo 1990 4 351 000 97 86
Tanzania 1994-1995 2 904241 75 -
Egypt 1990 2 616 991 90 49
Uganda 1991 - 73 27
Source: Nagayets 2005

A concern is that this sector faces numerous structural and non-structural challenges. These include:
• Land constraints (small holdings typically less than 2 ha)
• Poorly linked to markets
• More vulnerable to risk
• Dependent on rain fed production
• Simple, rudimentary technologies
• Low returns/yields compared to other regions
• High seasonal labour fluctuations
• Low productivity per worker, averaging US$318 vs. US$1000 for rest of the world (Rose & Shapouri, 2012)
• Resource distribution traditionally skewed towards food crops vs. cash crops

Given the above, it is asserted that inclusive growth in Africa can only be achieved through enabling smallholder farmer policies, and fostering productivity so as to drive economic growth.

2. The Challenges of Africa’s Agricultural Sector

2.1 Issues surrounding Land Tenure and concomitant effects

Land Tenure can be seen as the set of rights associated with land ownership, with particular reference to the management, control and usage thereof.

This subsection highlights the theory underpinning Land Tenure, and also the importance of securing rights over land for sustainable and inclusive growth on the continent, thereby improving living standards for all, especially those living in abject poverty.

The key point to note is that tenure cannot be thought about in isolation – the security of tenure is the key consideration when considering the resource allocation paradigm, addressing food security issues, and finally in improving the social construct.

2.1.1 Brief overview of the land tenure in Africa:
The historical background of land ownership in Africa is important when trying to understand the role that agriculture plays in the lives of the majority of Africans, and that the policies of land

reform, which includes ownership and control, will have under the construct of inclusive growth and sustainable development in Africa.

Based on our analysis of various sources, and with specific reference to the ECA Report (2004) on Land Tenure Systems and Toulmin and Quan (2000), it is our understanding that land tenure issues arose in most cases as a result of a combination of our past, both pre colonialization, colonialization itself and the period thereafter. We understand that both these periods had a bearing on specific tenure issues per country, however the central theme is that colonialization in a general sense entrenched the alienation of land from the masses, along with various cultural and customary practices. Given this, Africa is characterised by a combination of statutory and customary laws (i.e. Western and non-Western practices).

2.1.2 Tenure Systems – what determines rights to ownership and/or rights of use:
Although colonialization has had its impact on the continent, it is also important to understand the local customary context. Also, Africa cannot be seen as a single unit – each country has its own local dynamics and own customary understandings and principles. With this being said, the key categories used in understanding land tenure are Communal ownership, Private/Freehold, and State ownership.

The importance of understanding the above is in the concept that ownership largely determines control, which has a direct bearing on the decision on how and when to use land. Following on from this, the fruits of labour are expected to flow to the owner, and as such it has a direct bearing on the wealth and financial well-being of the owner. Taking this a step further, understanding the importance of tenure systems and the benefits thereof enables an understanding of why Africa finds itself in the current predicament, where the majority of the people are marginalised from ownership and thus vast levels of inequality, and thereby poverty, exists.

Kanu et al (2014), notes that the agricultural sector provides employment for 60% of Africans, and for 70% of the continents’ poorest communities. Under this statement, securing the benefits of agriculture is of utmost importance, and the underlying issues, one of which relates to the security of tenure, needs to be addressed. In addition to the above, the report suggests that small-holder farmers comprise the largest portion of employment and are thus the most negatively impacted by the current tenure and security systems in place, across geographies.

2.1.3 African specific considerations that impact tenure and security of tenure, especially for small-holder farmers:
Based on various publications, articles and studies on the topic, the following is our summary understanding of the key African specific factors impacting the security of tenure. We note that this is not an exhaustive list.
• Customary issues (e.g. Patriarchal/Matriarchal systems and impacts and its impact on women ownership and security of ownership,)
• Political instability and conflicts
• The use of land for cash crops as opposed to poverty alleviation and improving living standards
• Scarcity of land
• Natural issues (i.e. climate, topography, water scarcity) and disease (natural and not)
• Title deeds / proof of ownership and Land reform considerations
• Lack of funding, and Investment in technology for productivity gains
• Adequate infrastructure

Of the above, and without discrediting any of the other issues, it is our view that customary issues, political instability/conflicts and the export of cash products are the most pressing when considering small-hold farmers.

In terms of customary issues, this ranges from issues on deciding on land distribution and usage, the role of women in agriculture specifically linked to ownership, and also inheritance and continuity of ownership. The political landscape, which includes aspect of conflict and war, would also undermine aspect of ownership, and also impact on the stability of environment, and also impact on the safety of physical infrastructure, etc.

In terms of use of land for cash crops, small-holder farmers are marginalised given the relative contribution to output of cash crops over subsistence or small-holder farmers.

It is our view that none of the issues noted above can be thought of in isolation, as is evident in the impact 3 key issues mentioned above. What is important to note is that agriculture for both small and large scale farmers requires a stable environment for planting, harvesting and selling output, and the absence thereof diminishes the security of tenure and the potential positive impact that agriculture plays for those living on the continent.

2.2 Low Diffusion and Absorption of Technology

Despite recognition of the enormous potential of agriculture in Africa, productivity and competitiveness remain low. For example, maize yields and cash crop yields are only an estimated 20 per cent and 30 per cent to 50 per cent of potential yields respectively.

Figure 1 below compares the value addition per worker in Sub-Saharan Africa to that of other regions and illustrates that value addition per worker remains extremely low. Low productivity has resulted in a lack of competitiveness of agricultural produce and has resulted in a falling share of world agricultural trade from 8 per cent in 1965 to 3 per cent in 1996 (NEPAD, 2003).

Figure 1: Agricultural Value Added Per Worker Constant 2005 US$ Source: World Development Indicator (2011)

The low productivity of workers in Africa can largely be attributed to the limited diffusion and adoption of technology. It is estimated that an annual increase in total factor productivity of 3 per cent is necessary to achieve the Comprehensive African Agriculture Development Programme’s (CAADP) goal of achieving 6 per cent growth in agriculture annually (NEPAD, 2003). Achieving such an increase in total factor productivity is highly ambitious, particularly in light of the low levels of public investment in agriculture currently.

Despite agricultural output comprising a significant proportion of Gross Domestic Product (GDP) in the relatively agricultural-based economies of Sub-Saharan Africa, public spending on agriculture as a share of agricultural GDP is significantly lower than that of relatively more urbanized regions. Figure 2 shows that agriculture comprises 29 per cent of GDP in agricultural-based economies compared to 16 per cent and 10 per cent in transforming and urbanized

economies respectively. This is in contrast with figure 3 which shows that public spending on agriculture is only 4 per cent in agricultural-based economies compared to 11 per cent and 12 per cent for transforming and urbanized economies respectively. This low level of public investment in agriculture relative to its contribution is a significant challenge in addressing the issue of low productivity in African economies.

Figure 2: Share of Agriculture in GDP (%) Figure 3: Public spending on agriculture as a share of agricultural GDP (%) Sources: WDR2008, data for Moldova from “Public Expenditures for Agricultural Development” Moldova Agricultural Policy Notes, World Bank. All data in figure is for 2004

In order to increase total factor productivity, significant investment in agricultural research and building institutions is necessary. CAADP proposes the “adoption of appropriate technologies derived from research and development and supported by effective means to ensure adoption” (NEPAD, 2003) as the framework of its proposal to enhance the contribution of agriculture to economic growth. Central to its proposal is the need to devise ways to reduce the risks of smallholder farmers’ adoption of new technology. This includes increasing their access to rural financial services, including savings, credit and insurance. Furthermore, this includes investment in extensive research and strengthening of linkages amongst research institutions, the private sector, non-governmental organizations and communities (NEPAD, 2003).

3. The Role of Smallholder Farming for Africa’s Economic Growth – Evidence of an Emerging Consensus

Recent developments and initiatives within the continent point to an emerging consensus that promoting the productivity of smallholder farmers who comprise the majority of the farming population in Africa will result in higher rates of economic growth, driven by the activities of a broader base of the population. This will bring about the inclusive growth that has been largely absent in Africa’s growth narrative to date.

These developments and initiatives include several Sub-Saharan African countries’ endorsement of the New Partnership for Africa’s Development’s (NEPAD) Comprehensive African Agriculture Development Programme (CAADP) and continued commitments to national agricultural strategies. The CAADP was launched in 2003 and is an initiative of the African Union’s (AU) Heads of State and Governments. It is an agriculture development agenda that aims to increase agricultural growth rates to 6 per cent per annum as well as enable rural households across Sub-Saharan Africa to prosper (Kanu, et al 2014). The four pillars within which it focuses its interventions are:
• Pillar 1 – extending the area under sustainable land management and reliable water control systems
• Pillar 2 – improving rural infrastructure and trade related capacities for market access
• Pillar 3 – Increasing food supply, reducing hunger, and improving responses to food emergency crises
• Pillar 4 – improving agricultural research, technology dissemination and adoption
Source: African Development Bank Group

In addition to widespread endorsement of the CAADP, governments have made several other important decisions promoting agricultural-led growth. The Maputo Declaration of 2003 includes a commitment to allocate a minimum of 10 per cent of national budgets to agriculture and the implementation of rural development policies within 5 years. Burkina Faso, Ethiopia, Guinea, Malawi, Mali, Niger and Senegal are amongst the only countries that fulfilled this commitment within the period 2003 and 2009 on average, but several other African countries are actively striving to achieve this target. The 2013 Cotonou Declaration on Rural Futures further reaffirms the principle of agriculture-led economic growth (Kanu, et al, 2014).

The 2006 Abuja Declaration for the African Green Revolution adopted by AU Head of States and Governments is another initiative that reflects the emerging consensus that the key to inclusive growth lies in enabling Africa’s smallholder farmers to drive economic growth. It stipulates that fertilizer use should increase from 8 kilograms per hectare to 50 kilograms per hectare by 2015 (World Bank 2014).

The 5 key elements of its action plan in achieving this goal are:
• Development of agro-dealer networks across rural Africa
• Establishment of national agricultural input credit guarantee facilities
• Use of “smart” subsidies to ensure that poor smallholders have access to fertilizers
• Creation of regional fertilizer procurement and distribution centers, removal of trade barriers and promotion of local fertilizer production
• Establishment of an Africa Fertilizer Development Financing Mechanism hosted by the Africa Development Bank
Source: African Development Bank Group

Through its emphasis on improving access to finance, strengthening market access and trade, and enhancing the supply of farm inputs, the Abuja Declaration for the African Green Revolution places the smallholder farmer at the center of its strategy to promote inclusive growth (Kanu, Salami, & Numasawa, 2014).

Other initiatives promoting inclusive growth through rendering assistance to the vulnerable are the Sharm El-Sheik Declaration and the L’Aquila Food Security Initiative (AFSI). The AU reaffirmed its commitment to implement CAADP and the Maputo Declaration in order to reduce the number of undernourished people in Africa by half by 2015 and to ensure food security through the Sharm El-Sheik Declaration. The AFSI involved a pledge of USD 20 billion over a period of three years from the European Commission and 14 countries to assist vulnerable regions to develop and comprehensive strategies to address food security concerns (World Bank 2014).

The AFSI contributed towards the development of the Global Agriculture and Food Security Programme Trust Fund (GAFSP) which is a multilateral financing mechanism that assists in implementing the pledges set out by the AFSI with the goal of promoting food security in low-income countries in the long-term.

A total of USD 430.5 million in GAFSP grants had been disbursed to 11 recipients as of 2014. These funds are assisting in closing the funding gap required to implement CAADP and, as such, are promoting the notion of agriculture-led economic growth, centered on Africa’s smallholder farmers (Kanu, et al 2014).

Given this emerging consensus, regionally and globally, that agricultural output and inclusive growth and food security can be fostered through boosting smallholder farmers in Africa, this paper proceeds with case studies of how agricultural policy has been implemented in African countries.

4. Smallholder Farming Success Narratives:

4.1 Botswana: Competitiveness of beef smallholder farmers
Beef sector in Botswana is a major source of economic activity, income and wealth creation for majority of the people. The structure of beef sector is dualistic, comprising of commercial and communal systems. The former operates on freehold and leased land premised on property right. Meanwhile, the communal system operates in tribal land areas with no defined property right. The difference between the two is based on land turner.

The majority of live stocks are in communal system, for an example about 88% of cattle and 98% sheep and goats in 2011 (Bahta and Malope,2014).The study examined competitiveness of smallholder farms in beef sector looking at profit variation. The outcome of the study was that 74.2% of the variation in profit from maximum profit between farms was caused by inefficiencies in farms, but in varied degrees. This implies low productivity adversely affect profits in farms. (Bahta and Malope, 2014) argued that the wide spread between profit inefficiency in beef production and average mean suggests there is a great scope to improve profitability using same inputs mix. The authors advocate the importance of education, access to information, herd size, and access to finance for policy consideration. In addition, the emphasis is placed on investing in market infrastructure as mechanism to improve profitability of smallholder livestock system.

4.2 Ethiopia: Commercialisation of small scale farmers of grain
Agriculture represents about 40% of national income, 90% of exports, and 85% of employment of which 90% are poor. The drive to commercialise small scale resource poor farmers is associated with higher productivity, greater specialisation and higher income. These contribute to poverty reduction, agriculture development, food security and economic development. The rural producers’ organisations (RPO’s) are re-emerging as an important mechanism to assist smallholder farmers to aggregate their surplus output, achieve scale economies marketing, and bargain for better terms of trade in the market place. Bernard and Spielmian (2008) studied these cooperatives in Ethiopia. The purpose of the study was to examine the notion of inclusiveness in rural producer organisations (RPO’s). They discovered that the poor tend to be excluded from membership in grain markets. They note that the poor benefits from spillovers of these cooperatives. Secondly, the poor are not represented in decision making because management committees are responsible for making decisions, and they are less inclusive of the poor. For cooperatives to be far effective in grain market, inclusive membership, participatory decision and marketing performance are identified as crucial components.

Coffee cooperatives - a success story thus far
Coffee cooperatives unions in Ethiopia benefited farmers’ by providing new marketing channel known as fair-trade. The fair-trade system bring different stakeholders together such as the group of producers, consumers and they bridge information gap about consumer needs, and market access (Kodama, 2007).

The first three cooperatives unions established after the economy liberalised were sponsored by government and foreign aid agencies such as USAID. Cooperatives have become popular and the number is growing rapidly. Although coffee farmers are now exposed to exports price fluctuations, cooperatives unions have delivered higher profits to peasant farmers compared to the previous arrangement based on socialist principles. Moreover, growing popularity of cooperatives has contributed to quality improvement of the coffee produced by farmers. However, limited financial resource by cooperatives has been cited as a constraint and potential risk factor.

5. Conclusion and Recommendations to boost agricultural-led growth in Africa

Given the various issues noted throughout this report, our summary thinking is that land tenure is the central theme in promoting a system of inclusive growth in Africa. Without ownership, and security thereof, all other factors can be thought to be ancillary.

Recommendations for improvement are summarized as follows:

5.1 Stabilizing policies, with specific reference to formalising land owner rights
As noted by Johnson (1972) and Gavian and Fafchamps (1996), there is a conventional view that traditional or customary land rights impede agricultural development. We note that this recommendation is exceptionally wide as it requires significant input and consultation with a host of different stakeholders. Atwood (1990) notes that “many developing countries and major multilateral organizations have promoted formalization of land rights”

Another point to be made is that recommendation does not refer to an ‘African solution’ as this is simply too complex to even consider. What we are suggesting is that interaction is required by various governments with the affected parties (e.g. with tribal or community leaders), and that this is captured. Although this would not necessarily solve problems of the ethical, customary or moral divide, documenting context appropriate policies would be beneficial for improved agricultural output.
Government support in terms of ownership, including formalising practices such as tenancy, could improve asset security and investment by both external sources, and small-hold farmers themselves. Improved asset security has the potential to induce investment into the sector, thereby allowing for both technological advances and also improved productivity. A 2012 Mozambiquen study titled Tenure (In) security and Agricultural Investment notes the scarcity of studies on the impact on tenure land reforms and associated long term investment. The conclusion reached from this study however, which was specific to Mozambique, was that “households’ perception of tenure security contributed to enhance long-term land-related investment in the form of soil conservation structure and parcel boundary demarcations”.

Reducing unnecessary state interventions and encouraging private sector entry into liberalized markets will require an improved credibility of rules. About 60% of entrepreneurs in sub-Saharan Africa reported that unpredictable changes in rules and policies seriously affected their business (Brunetti, Kisunko and Weder, 1998).

Furthermore, as noted by Binswanger & Townsend (2000), the macroeconomic environment is by far the most important policy determinant of agricultural investment and growth. Particularly damaging are overvalued exchange rates prior to the onset of adjustment policies, and high real interest rates which linger long after the onset of stabilization policies, especially if policy instability characterizes the post adjustment period.

5.2 Consolidate agricultural policy improvements and complete the reform agenda
According to the UNCTAD Report (2010), in certain countries the liberalization of domestic markets has not yet lowered the transactions costs involved in marketing export commodities. While privatization has reduced the role of marketing boards, it has often not yet succeeded to improve marketing arrangements for inputs and products, to provide access to credit and storage, and to increase competition. This suggests that reforms need to be further considered, as is confirmed by Binswanger and Townsend (2000).

5.3 Agriculture infrastructure investment and rural development
To accelerate agricultural growth and rural development, huge investments will be required, both by the private and the public sector. On-farm investments include agricultural inputs, livestock, tree capital, soil improvements, irrigation, farm machinery, housing, and human capital. Agro-industrial investments are required for plants and equipment, as well as for skills, operating systems, and market development. Farmers and the private sector will have to drive this investment response. However, major investments financed by the public sector are also needed. Investments partly or fully financed by central and local governments include transport infrastructure, water supply and irrigation, electrification and communication, agricultural research and services, etc.

Agriculture specific human capital: The last two decades have seen an expansion of these investments; rather the succession of macroeconomic crises and adjustment pro- grams has cut deeply into their financing.

Convincing governments to support these investments directly, and to create the decentralized institutional environment where local populations can partly undertake and finance them, remains an enormous challenge (Binswanger & Townsend, 2000).

5.4 Prioritise health imperatives in rural areas especially with regards to Aids and Malaria
Apart from the enormous pain and suffering it inflicts, AIDS has now emerged as the greatest development challenge. In agriculture it undermines the incentives and the ability to save, and leads to disposal of assets under distress when households have to take care of AIDS victims and the orphans left behind. Since it hits mainly young adults, it sharply reduces the labour supply, and increases dependency rates, a direct determinant of poverty. Cropping patterns will shift in favour of less labour intensive crops and it will be more difficult to undertake the necessary labour investments in land and animal husbandry, and in housing and public infrastructure.(Binswanger & Townsend, 2000).

5.5 Consider the appropriate balance of large scale and small-hold ownership
Large scale farming drives economic growth, but it is not necessarily inclusive. When considering policies, this should be seriously factored into the decision making process. As cited by the World Bank (2013) in the report titled Unlocking the Potential for Agribusiness, factors to consider include:
- Local user rights
- Consultation with local communities
- Fair compensation for services and products
- Reduction in tenure security will threaten livelihood and thereby increase the risk of conflict
- Unclear land right for small-hold farmers at reduce the value of holdings, negotiations with investors and ultimately “discourage long term investment by smallholders themselves”

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