Promoting agriculture will help sustain East Africa’s economic growth

Wednesday February 19 2020



Raymond Mugisha

Raymond Mugisha 

By Raymond Mugisha

I recently read an article in which the African Development Bank president sounded the importance of agriculture, sending a reminder that it is actually the most important business in the world. Now, this reminder may not sound commercially aggressive enough, by view of the profiles of globally successful entrepreneurs and their occupation. Agriculture may not present an impressive competitive proportion of individuals among the world’s richest, as of today. However, when viewed off the coin mill, food is arguably the most important provision for humanity to survive.

In his communication noted above, the AfDB president made a couple of quick highlights to ponder. The size of food and agriculture in Africa will rise to $1 trillion by 2030. The population of Africa, now at 1.2 billion, will double to 2.5 billion by 2050. They all must eat. And only through food and agribusiness can this be achieved. It should also be noted that already, Africa is unable to feed herself and depends on huge food imports, despite the untapped potential for agriculture that the continent enjoys. The continent has 60 per cent of global arable land but has unfortunately become one of the most prospective food importers targeted by jurisdictions that produce food extensively. Whether the continent can sustain the trend of food importation is highly doubtful.

East Africa presents impressive economic growth prospects. A recent report by the African Union Development Agency indicated that the East Africa region recorded the highest performance in five out of the seven aspirations in Africa Agenda 2063’s First Ten Year Implementation Plan with an aggregate score of 40 per cent against the 2019 targets. The aggregate performance of the entire continent was only 32 per cent.
The East African region performed well mainly on the aspirations towards a peaceful and secure Africa, an integrated continent, politically united and based on the ideals of Pan-Africanism and a vision of the African Renaissance, and an Africa whose development is people driven, relying on the potential of the African people. It may be said that this forms a relatively solid base against which to push an insistent development agenda for the region even further.

It may therefore be as well that the East Africa region has been reported to be the fastest growing on the continent, economically. The African Development Bank Group Economic Outlook report for the year 2018 for example indicated that real GDP in the region grew by an estimated 5.7 per cent, while it had actually grown by 5.9 per cent the previous year. For purposes of this economic outlook assessment by AfDB, East Africa is a bloc of 13 countries; Uganda, Kenya, Tanzania, Rwanda, South Sudan, Ethiopia, Burundi, Comoros, Eritrea, Somalia, Seychelles, Sudan, and Djibouti.

The impressive growth outlook for the region, from the supply side, is mainly anchored in the services sector. According to the AfBD report, the countries with the highest economic growth were Ethiopia, Rwanda, Tanzania, Kenya, and Djibouti. In both Ethiopia and Rwanda, real GDP growth had been driven by industry and services. The service sector had also been the main driver of growth in Tanzania and Kenya, followed by the agricultural sector, the main growth driver from the supply side. The service sector’s contribution to growth was highest in Kenya, at 71 per cent, while agriculture accounted for 15 per cent and industry for 15 per cent. On the demand side, consumption is the main driver of East Africa’s growth.

Despite the region progressing ahead of the rest of the continent, it is still highly vulnerable. From the report, in 2018, eight East African countries had an economic vulnerability index higher than the threshold for classification as a least developed country. This index is partly based on eight indicators that cover exposure to external shocks, distance to the world market, sectoral share of the primary sector, instability of export earnings, and geographic distribution of the population.

Advertisement

With Africa’s extensive potential in agriculture, escalating need for food, and current efforts to enhance intra-continent trade through the Africa Continental Free Trade Area initiative, vulnerabilities around East Africa’s economy can be minimised to capitalize on the current good trends within the region. It will close the distance to market, minimise shocks that result from far-away markets over which the continent has no control, and diversify the economy.

Riding on agriculture to diversify the region’s economy away from services will offer a more sustainable economic portfolio supported with the guaranteed demand for food. It is also easier to promote a people-led agricultural expansion program that is all-inclusive, since agriculture is already in the hands of the masses, and thus further deepen pursuit of Africa Agenda 2063.

Raymond is a Chartered Risk Analyst and risk management consultant
rmugisha@afriaccent.com

Advertisement