Africa must redouble its efforts to boost agricultural productivity or face economic and humanitarian catastrophe, African Development Bank (AfDB) president Donald Kaberuka has urged, as a shock surge in food prices threatens to wipe out a decade’s worth of development gains.
The bank chief also appealed for a substantial increase in infrastructure investment to ease supply bottlenecks pushing up prices, but warned that without fiscal prudence government purses are likely to buckle under severe strain in the years ahead.
“We need to act now on the productivity of African agriculture,” Kaberuka told Emerging Markets in an interview on the eve of the bank’s Maputo annual meeting.
“Today Africa is importing almost half the rice it consumes, yet Africa is able to grow rice. We can double the yields of our rice but that requires inputs – fertilizers, water, management and infrastructure.
“One of the solutions [to the food crisis] must be more investment in infrastructure – this will get food transported, prevent harvest losses and improve storage.”
Kaberuka acknowledged that increased government subsidies, while a necessary short-term measure, could prove damaging if deployed over a longer period. “In the short term, governments will act to ensure people can buy food, but as a long-term solution it is fiscally unsustainable and can undermine the achievements made over the last decade,” he said.
His plea comes as African nations scramble to ease prices. Nigeria last week announced the suspension of import duties and other taxes on rice while launching a series of measures to head off a food crisis in Africa’s most-populous nation.
Increased energy prices, competition between biofuels and food, rising demand from economic growth in emerging countries and the effects of sudden climatic shocks, such as drought and floods, have caused prices to skyrocket in some of the world’s poorest countries, such as Ethiopia and Burkina Faso.
African governments are watching nervously as violent and sometimes fatal food riots have been reported in recent weeks in several countries, including Cameroon, Cote d’Ivoire, Mauritania and Senegal.
Kaberuka’s appeal also comes as the International Monetary Fund begins talks with 10 mostly African countries over a possible increase in financial support to help deal with balance-of-payments and fiscal problems caused by high food prices.
The IMF is advocating targeted cash transfers to help the poor buy food. But it is opposed to blanket subsidies, and says that cutting import duties – while one way of reducing food costs – can have serious implications for government finances.
Kaberuka said the longer-term solution is to “increase productivity in agriculture” – a goal which would warrant “subsidies for productivity, but not subsidies for consumption”.
Infrastructure investment is the cornerstone of the AfDB’s medium-term strategy. Kaberuka said the plan – which will be discussed in Maputo – “will provide a road map for the response by the bank” to the food crisis, as well as challenges arising for rising energy prices and global financial turmoil.
“Every sector of the economy – from agriculture to education – requires infrastructure, especially energy [infrastructure],” he said.
But to succeed, a new framework for the bank will have to set key priorities while remaining “relevant for all countries because they are different,” he said. “We don’t want to do everything. We want to focus on a few things and do them well.”
The bank is also focusing “enormously” on regional integration to bring the continent’s disparate markets together.
Private-sector development will remain a top priority for the bank, which has more than doubled private-sector lending in the past two years. Kaberuka said: “This is not just volumetric, it is also about the diversity of operations – lending, equity, guarantees, small businesses, and the like.”