Improving Agricultural Market Performance:
Creation and Development of Market Institutions
39
Policy failures, perhaps more than any other factor, have hampered the development of
productive agriculture in Africa. “Africa desperately needs the scientific innovations in
drought-resistant seeds, in higher-yielding varieties and in water use, fertilizer and pesticide
that helped to transform agriculture in other regions. Returns on investments in these key
areas will be diminished if deep-rooted policy failures are not tackled. These range from
exorbitant transport costs for farm produce to underinvestment in storage and market
infrastructure and barriers to intraregional trade.”74
But the failures do not begin and end with policies. Infrastructure and limited access to finance
are also binding constraints to development of effective agro-food markets in many, if not
most, African countries. The Africa Progress Panel (APP) has identified the main constraints to
food security and growth in agricultural production, productivity, trade, and investment as:
1. Infrastructure: “No region has less-developed road networks and energy systems
than Africa. Changing this picture will require significant up-front capital spending,
prefaced by the development of bankable proposals and the emergence of new
business models. The current financing gap has been estimated at around US$48
billion.”
2. Financial Systems: “No region has a lower level of access to financial services [than
Africa]. Only one in five Africans have any form of account at a formal financial
institution…Lacking access to insurance, Africa’s farmers have to put their meagre
savings into contingency funds to deal with emergencies, rather than investing them in
boosting productivity. Similarly, lacking access to loans and saving institutions, they
are often unable to respond to market opportunities.”
It would be misleading, however, to concentrate only on negative experiences and policy and
institutional failures. The APP report notes, “It is possible to double Africa’s agricultural
productivity within five years… African countries can end hunger and malnutrition and
become major players in global food markets. It is also vital to unleash the potential of
sustainable agriculture and aquaculture to provide food, jobs and export earnings. Some of the
requirements for achieving a breakthrough in agriculture are financial. Now is the time for
Governments to act on their pledge to spend at least 10% of budget resources on agriculture.
But Governments also have to create the right market conditions.”75
The tremendous interest on the part of some of the wealthier OIC member states in investing
in African agriculture76 is evidence that improving Africa’s agricultural productivity is essential
not only for the well-being of Africans but also for the food security of many other OIC member
states.
74 Africa Progress Panel (2014), “Grain, Fish, Money: Financing Africa’s Green and Blue Revolutions,” Africa Progress Report
2014, p. 15, Geneva: Africa Progress Panel.
75 Ibid
76 COMCEC (2013), “Increasing Agricultural Productivity: Encouraging Foreign Direct Investments in the COMCEC Region,”
Prepared by Investment Consulting Associates for the COMCEC coordination Office, Ankara: COMCEC.