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Chocolate-fueled growth

Chocolate-fueled growth

VIENNA – As an African, my dream for the next decade is to see the continent producing and selling chocolate to 300 million Chinese, instead of exporting raw commodities like cocoa. Several weeks ago, at the China-Africa Symposium in Xiamen, China, I tested this vision on the audience, and the 2,000-plus delegates joined in resounding applause.  Business and government leaders are evidently ready to see Africa introduce structural change aimed at creating manufacturing-based national economies.

While many have touted Africa’s success in maintaining a 5-6% average GDP growth rate during the past decade, this masks the reality that by 2005, sub-Saharan Africa was little better off than it was a quarter-century earlier: it was still the world’s poorest region, with just over half of its population living on less than $1.25 a day in purchasing parity terms. The region’s countries are on a poverty treadmill, running fast just to remain in the same position.

This needs to change. The orthodox agriculture-led growth strategy of the 1960’s, the favored antidote to five decades of a “happy peasant” aid doctrine, must be replaced with an agribusiness development strategy whereby policymakers, donors, and entrepreneurs target the entire value chain to support a shift from bulk products to value-added, agro-industrial manufactured products.

Several years ago, James Wolfensohn, the late World Bank president, describing a new international order, described a “four-speed world”: the affluent, the converging, the struggling, and the poor. Converging countries are closing the gap with the affluent OECD countries; struggling countries have failed to progress from middle-income status; and poor countries – most of them in Africa– are mired in extreme poverty.

The good news is that since the 1990’s, the number of poor countries in Africa has fallen from 35 to 21, and the number of converging economies has increased from two to 17. But 13 of the latter are either dependent on oil exports (Angola, Chad, Equatorial Guinea, Nigeria, and Sudan), or mineral exports (Botswana, Ghana, Mozambique, Namibia, Sierra Leone, South Africa, and Tanzania). Moreover, the new realities of the unfolding global economic crisis that started in 2008 suggest that the North-South flow of capital, aid, and finance of the past 50 years will not continue.

But it is also clear that by 2030, today’s emerging markets will account for 60% of global GDP and 40% of the world’s consumer spending. Justin Lin, Vice-President and Chief Economist of the World Bank, speaking recently inMozambique, encouraged African countries to take advantage of the “emergence of large middle-income countries such as China, India, and Brazil.” They should position themselves to capture from China “100 million labor-intensive manufacturing jobs; enough to more than quadruple manufacturing employment in low-income countries.”

Can Africa position itself in the global economy to produce and sell finished goods, especially processed foods and agricultural products? Can the continent break the North-South commodity-based pattern of trade, and inaugurate a pattern of South-North-South triangular trade based on higher-value products? 

Working with leading experts like Tony Hawkins of the University of Zimbabwe Graduate School of Business, the United Nations Industrial Development Organization has formulated a roadmap to accelerate Africa’s agribusiness revolution. It calls for enhancing agricultural productivity; upgrading value chains; exploiting local, regional, and international demand; strengthening technological effort and innovation capabilities; promoting effective and innovative financing; stimulating private participation; and improving infrastructure and energy access.

An agribusiness development strategy focused on higher-value output and stronger productivity growth throughout the value chain represents one of the best opportunities for rapid and broad-based economic growth and wealth creation inAfrica. It also may be one of the few local pathways out of poverty for small farmers.

Africastill has limited agro-processing activity and capacity in rural areas. As a result, sub-Saharan countries experience up to 40% post-harvest losses, especially for perishable commodities such as fruit and vegetables. In other words, almost half of what is produced on Africa’s farms rots there, while the vast majority of the population goes to bed hungry. I have seen this happen in Plateau and Benue States (supposedly the breadbasket of Nigeria), and in villages and towns in my home country, Sierra Leone.

The average chemical fertilizer use in sub-Saharan Africa is 12.5 kilograms per hectare of arable land, compared to the world average of 102 kg/hectare. Similarly the agriculture sector is under-capitalized, with extremely low levels of mechanization: an average of 13 tractors per 100 square kilometers compared to 129 per square kilometer in South Asia. Only 10% of Africa’s hydropower potential is exploited, compared to 70-80% in OECD countries.

By 2030, more than 50% of Africa’s 1.4 billion inhabitants are expected to live in cities. Urbanization brings with it opportunity, as consumer demand will most likely shift towards higher-value processed foods, including fruit, vegetables, vegetable oils, fish, and dairy products. Thanks to skillful marketing, an Indonesian company convinced millions of Nigerians in just five years to consume an instant-noodle product, known as Indomie, instead of the popular cassava product called Garri.

There is no immovable reason whyAfrican countries – and companies – cannot do the same thing. But that requires adopting a new mantra for eradicating poverty, eliminating hunger, and creating wealth: from cocoa to chocolate, from cotton to garments, and from bauxite to aluminum.

by Kandeh K. Yumkella

Kandeh K. Yumkella is Director-General of the UN Industrial Development Organization (UNIDO) and an editor of a new publication Agribusiness for Africa’s Prosperity. 

Credit:    http://www.project-syndicate.org/commentary/yumkella7/English 

Copyright: Project Syndicate, 2011.

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