By the Governor of the Bank of Uganda, at the International Symposium on Agricultural Developments in the EAC Partner States,Kampala, 5 November 2013.
1. Introduction All the countries of East Africa share the long term vision of transforming the structure of their economies to attain middle income status and eradicate mass poverty. Structural transformation, which is the essence of economic development, will not be achieved without the modernisation of the agricultural sector. The lessons of successful development around the world demonstrate that agricultural modernisation, involving the transformation of low productivity subsistence farming into high productivity commercial farming, is almost always a precondition of industrialisation.
In this address I want to set out what I believe should be the key elements of a feasible strategy for agricultural modernisation in East Africa. I will start by diagnosing the reasons for the stagnation of the region’s agriculture over several decades and discuss the key constraints which hold back the modernisation of agriculture. I will then examine how these constraints can be progressively alleviated, to allow farmers to make the transformation from subsistence production to commercial farming. Finally I will explore the implications for public policy in East Africa.
Modernising agriculture in East Africa will require more financial resources to be invested in the sector, by both the public and private sectors, but the amount of resources required is not vast; agriculture is not a capital intensive sector. It should be possible to provide the public goods and services needed to support agricultural modernisation, such as agricultural extension services and rural feeder roads, with relatively modest increases in the share of Government budgets allocated to agriculture.
Getting the policies right is more important than the total amount of public resources invested in agriculture. Agricultural policies should be clearly focussed on helping the broad mass of smallholder farmers to begin the process of transforming from subsistence production to commercial farming. Unfortunately, the record of agricultural performance in the region over the last two decades is very weak, which indicates that the agricultural policies pursued over a long period have been deficient. Without radical reform of these policies, I don’t believe that it will be possible to modernise agriculture in the region.
5. Conclusions To conclude, I will briefly summarise the main messages of my address.
First, the very weak performance of agriculture in East Africa, especially food crop agriculture, demonstrates that our agricultural policies have not worked. They must be reformed. Although agriculture deserves a larger share of Government budgets than it currently receives, modernising agriculture will not require huge public investments. Far more important is putting in place the right policies for the sector.
Secondly, the strategy for agricultural modernisation should involve helping smallholder farmers to raise their yields and to produce more output for the market. This strategy can support inclusive growth and reduce poverty by raising farm incomes. Agricultural modernisation should not involve displacing smallholders to make room for large scale mechanised farming. This would be extremely regressive and, given that large farms have much lower yields per acre than small farms, lead to lower agricultural output.
Thirdly, the first step on the road to the modernisation of smallholder farming should be to encourage smallholders to adopt good agricultural practises, which can enable substantial gains in yields even without the use of high input farm technology. This should be the priority of the agricultural extension services. Government should also strengthen the rural feeder road network and strive to enhance the security of land rights for farmers.
Fourthly, Government spending on agriculture should be focussed on the provision of public goods and services, such as extension services which provide technical advice to farmers. Scarce public resources should not be used to subsidise inputs which can be provided by the market.