Financing

Increased financing for African agriculture is a prerequisite for developing the sectors potential. Aid levels must be increased, but the availability of micro-financing for peasants is just as important. (Photo: D. Leraand)

During the 1990s, donors and national governments halved their overall investment in agriculture, while the number of people in need of food aid doubled. Despite this, agriculture continues to be the main engine of economic growth for most developing countries.

Investment in agriculture provides many multiplier effects. In Africa, USD 1 of new farm income results in USD 2 of additional household income. Rates of return on agricultural research are also very high, at 40-70 percent. Considering this, it is alarming that development aid - particularly to agriculture, rural development and food security - has declined significantly in the last 20 years.

Aid levels
World Bank lending for agricultural activities declined from 31 percent of total lending in 1979-81 to less than 10 percent in 1999-2000. According to the Organisation for Economic Co-operation and Development (OECD), total aid to Africa increased from around USD 1 billion in 1960 to more than USD 30 billion in 1991, before decreasing to less than USD 20 billion at the turn of the century.

These figures appear quite insignificant when compared to what is needed to achieve the World Food Summit goal of halving African hunger. The Comprehensive Africa Agriculture Development Programme (CAADP) estimates that more than USD 240 billion is required during 2002-2015 - around USD 18 billion per year.

Financing Agricultural Development
Africa's need for investment to reduce poverty, increase food security and develop the indigenous private sector is generating a renewed focus on the imperatives of broad-based rural development among bilateral and multilateral development institutions and developing-country governments. African governments have identified agriculture as a priority sector in the New Partnership for Africa's Development. Development partners are supporting Africa in developing viable and well-functioning rural financial institutions to allow households, farms and non-farm enterprises to save, borrow and safeguard themselves against various risks.

According to the Anti-Hunger Programme proposed by the Food and Agriculture Organization, reducing hunger-by whatever means-would yield enormous economic benefits in addition to meeting the humanitarian imperative. This requirs a doubling of external development assistance to agriculture and rural development, which is in line with the Monterrey Consensus from the International Conference on Financing for Development, and a 20 percent increase in public expenditure on agriculture by developing-country governments.

External resources