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The time is ripe to modernise agriculture through industrial development – expert

The time is ripe to modernise agriculture through industrial development – expert

By Helmke Sartorius von Bach

The government has on various platforms stated that the agricultural sector is critical to the economy and plays a strategic role in the process of economic development. In the history of any country, agriculture acts as a driver of development to economic prosperity.

The reader is reminded of the green revolution in India at the beginning of the mid-20th century. Namibia is no different. For the past decades, agriculture made its contribution to economic development in several ways such as providing food, growing the labour force, providing raw material for industrial production, adding tax revenue, earning foreign exchange and creating market opportunity for growing domestic manufactures.

Like the rest of the world, the agricultural sector in Namibia was used for many years, before and after Independence, as a driver for industry. Traditional agricultural practices were slowly revised through government support measures to allow productivity gains and the start of economic prosperity.

Although the early support was focused to benefit the regime at that time, many intentions had significant multiplier effects. These multipliers contributed to a well-structured agricultural sector.

After independence, many important policy changes were effected to correct the past. However, despite efforts by the government to transform the agricultural economy, the transformation interventions yielded meagre results for most citizens in terms of livelihood, income and food security.

Historical data on agricultural activities going back to 1980 provides an opportunity to revisit the importance of agriculture and determine the need for specific changes.

In Namibia, agriculture was always considered as a contributing factor for welfare gains in rural areas. For example, figure 1 below shows that some years ago, almost half of the national workforce was employed in agriculture, however, presently, employment has declined to a mere 22%. A disturbing finding is that the agricultural workforce is comprised of ageing employees and that the youth are not really interested in agricultural jobs. Statistics show that rural – urban migration is persistent.

Further analysis shows a significant elasticity, implying that for example a 10% increase in the urbanization rate leads to a decrease in agriculture’s contribution to employment of 11%. This important finding equally shows that the national unemployment rate (as indicated in figure 1) is not affected negatively by the declining agricultural labour force. This is true because migrant workers found urban employment. It shows that some structural transformation within the agricultural system took place allowing an employment shift from the primary sector to the industrial sector.

Figure 1

Figure 2 below gives an overview of the main agricultural sectors livestock and crop production, indexed over the years. In figure 2 the effects of the droughts in the early 80’s, late 90s and the recent one, can be seen. The livestock sector was more affected by drought than the crop sector, which showed a steady production improvement over the past 4 decades. Both production outputs are summarized in the total agricultural revenue. However, in order to keep the revenues compatible, the nominal revenue was deflated by the consumer price index to obtain the real agricultural revenue. This annual real revenue shows huge fluctuations, but with a concerning decline over the years. This value contributes to agriculture`s contribution to the GDP as presented in figure 3 below. However, before we leave this figure 2, it remains important to conclude that the crop sector’s contribution to the total agricultural revenue stands at 40%, while the livestock sector contributed to the rest of real agricultural revenue. The latter sector unfortunately is under pressure with declining stock numbers and constrained productivity levels.

Figure 2

For the past decade, newspapers reported widely on the declining share of agriculture to GDP. However, most analysts based their presentation only on two decades. The discussion in this paper uses a longer time period of available data, from 1980. The discussion shows that prior to 2000, agriculture’s contribution increased for two decades. Thereafter, the contribution to GDP declined continuously, from 10% to around 5%.

This decline may be the result of structural change. Typically, structural changes come in the form of reform, policy intervention or changing trade patterns. The declining GDP growth led to the formulation and implementation of the Industrialisation Policy in 2011, with the notion of stimulating growth and industrialization. In the short-run, this policy has contributed further to agriculture’s decline through the policy’s implied reduced budgetary support to agriculture.

Evidence from all over the globe shows that industrial growth always depends on agricultural growth. For example, the supply of inputs and farm technologies trigger industrial growth, which in turn creates a reciprocal demand for agricultural output.

Therefore, the implementation of an industrialisation policy must be aligned with continued agricultural support. However, at present, our agriculture only receives 3% of the total national budget. Appropriate support would have stimulated investment to develop forward and backward economic linkages, used as pointers to higher level national development. The Malabo Declaration (2014) on Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods suggested a 10% budgetary commitment for agriculture.

Figure 3

The evaluation of policy outcomes for structural adjustment can be observed in economic variables over the long term. Adjustment’s mandate is to meet Vision 2030 and other national strategies, such as the Harambee Prosperity Plan, the NDPs, Growth at Home, etc. However, these adjustments have not always resulted in agricultural sector corrections.

Two examples are presented in figure 4 below where for example the industry’s contribution to GDP (manufacturing included) has not directly responded in the short-term to the industrialization policy. The capital investments’ share to GDP however responded positively to trust in governance and financial policies. Capital investments generally have positive longer-term implications for agriculture, and may one day sway agriculture from the use of low technology to the adoption of modern systems. This is generally referred to as leapfrogging and is defined as the notion that areas with poorly-developed technology or economic bases can move themselves forward rapidly through the adoption of modern systems without going through intermediary phases.

Figure 4

From the above discussion, it appears as if the agricultural sector in general lost its importance in Namibia. As displayed in figure 5, agricultural growth declined at a faster rate than that of the national economy for the past two decades. The question is why this previously strong economic pillar lost its contributing energy to the economy. Of critical concern is that the sector has lost its role in employment creation, export, contribution to GDP, and in terms of food security. Thus far, Namibia produces only about 40% of its food requirements meaning there is a mismatch between production (supply side) and consumption (demand side).

Figure 5

Maybe the current recession and the Covid-19 trade restrictions allow us to be reminded of the inherent value of agriculture to the Namibian economy. Even in times of an economic downswing, the fact remains that this sector from which most of the population derives their livelihood in terms of income, employment and food, is trending towards its ebb.

It remains important to promote investment in agriculture through government and financial institutions’ aligned instruments and packages to support the realities of the sector and its downstream industries. The time is ripe to modernise agriculture through industrial development.

This requires technological changes to increase substantially the efficiency of agricultural processes and to raise the rate of increase across the spectrum of agricultural production. Such a process will raise the interdependence between the industrial and agricultural sector to at least double their respective current contributions to GDP.

With improved policy support and budgetary allocation in place, the agricultural sector will remain key to Namibia’s future. It should be noted that compared to other economic sectors, agriculture can produce most of the imported products, produce crops for inputs in the manufacturing sector and for the export markets. Renewed support for agriculture in Namibia will further position the country to build a formidable and competitive manufacturing base. In order to achieve this, agricultural investment, and commitment from both the government and private sector. is needed.


 

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About The Author

Helmke Sartorius von Bach

Helmke Sartorius von Bach is currently employed as professor at the Neudamm campus of the University of Namibia. He obtained his PhD in Agriculture Economics at the University of Pretoria in 1992 and became professor in 1994 at the age of 32 and headed the Department of Agricultural Economics, Extension, and Rural Development. He returned to Namibia in 1996, taking up full-time farming and part-time consulting as agricultural economist. His academic and theoretical background coupled with his practical and implementation experience allowed him to successfully lead the MCA-N Agriculture project as Director of Agriculture from 2009 to 2014. He continues to consult for both Namibian and international organizations on resource economics. Some of his recent work was done for USAID, Future Works and Urban Econ.

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