Framing Land Policy and Governance within the Process of Africa’s Rural and Structural Transformation

Why focus on structural transformation in framing Africa’s land issue?

The way in which land issues are addressed will be critical for Africa’s social and economic transformation over the next few decades. There is an increasing demand for land (e.g. agriculture, urbanization, infrastructure, mining, protected areas, etc.) and therefore competing use. Land policy and institutional arrangements and decision making systems governing access to land, land use and rights recognition, and land use planning and regulation, will determine the incentives to enhance productivity and investments, efficiency of land use and the way in which the benefits from land are distributed. Transitions envisaged from today’s agrarian society to a largely urban-industrial society, will largely depend on the extent to which land policy and governance in African countries will facilitate sustainable and inclusive development. Structural transformation is the process that a society undergoes as it evolves from a predominantly agrarian society to a predominantly urban-industrial society. When structural transformation occurs successfully as it first occurred in England followed by Europe, it starts with an ‘agricultural revolution’ which catalyses an ‘industrial revolution’.  The backward and forward linkages between the 2 sectors ensure near-full employment in both sectors throughout the transformation, and equally important is that labour productivity and incomes continue to rise in both sectors. The expanding domestic market continues to feed manufacturing and services. This process was successful in UK and Europe initially, then was equally successful in the so-called ‘new world’ of USA, Canada and Australia. The only other country to complete successful structural transformation is Japan following a US-imposed land reform programmes post World-War II, with South Korea following in the same footsteps. India and China are on their way and are the main current examples for Africa to learn from in terms of a smallholder farmer driven transformation. Africa, however, is undergoing an ‘unorthodox’ nature of structural transformation where rapid urbanisation is as a result of lack of economic development, rather than a result of economic growth. There is urbanisation with no urban jobs, the attraction being services, not manufacturing. It does not matter whether economic growth is low or high, it is invariably accompanied by rising equilibrium rates of unemployment and inequality, especially in rural areas where poverty is deepest.

Africa undergoing un-orthodox structural transformation

Agricultural and rural transformation occurs within a broader process of economy-wide structural transformation. It involves rising agricultural productivity, commercialization
and diversification of production patterns and livelihoods within the agricultural sector and 
the rural non-farm sector (IFAD 2016). Countries in Africa, however, are taking longer to reach the turning point in structural transformation, as compared to the historical experience of industrial countries. This is why there is growing rethinking about structural transformation in Africa. Neo-classical growth models struggle to explain dual economy models and structural change in Africa. The emerging main conclusion is that unemployment and poverty is structural not temporary; and this is not mostly self-correcting; there is need for major policy intervention by a proactive state with a developmental ideology, accompanied by a flourishing domestic business sector that can harness the backward and forward linkages between the agrarian sector and manufacturing. It is within this context that land policy and governance has to be understood and positioned.

The challenge is that outside of the already industrialised world, all other countries have struggled to complete sustainable structural transformation. It is crucial to understand WHY Africa and other developing regions are struggling with structural transformation, and why this matters for the future of agriculture and landed rural sectors. Outside of the industrialised countries or High Income Countries (HICs) the rest of the world, including all of Africa, is divided into Middle Income Countries (MICs) and Low Income Countries (LICs). The structural transformation process, however, stagnated to varying degrees –with post-colonial economies struggling the most. In general, some graduated from LICs to MICs. Unfortunately, global experience has been that most of these countries stagnate into the so-called ‘middle income country trap’ where the economies experience the ‘triple challenges’ of a) low economic growth; b) high unemployment; and high inequality. No single country in Africa has managed to overcome the ‘middle income trap’. S. Africa, Africa’s most industrialised country, is firmly in the middle-income trap, with an increasing equilibrium rate of unemployment, low economic growth, and pervasively high inequality. There have been African countries in the past who rose from LIC to MIC, and also failed to break through, eventually succumbing to the triple challenges and falling backward into de-industrialising and back into LIC status. Such countries include Senegal, Cote d’Ivoire, Zimbabwe, recently Nigeria, and others.

The most strategic question to ask of every African country including S. Africa and Nigeria is: What is the main reason why none of our economies cannot break through the MIC barrier and complete a successful structural transformation? The supplementary questions are: Why is it that even with high economic growth we still experience poverty and unemployment growing at the same time? What options do we have to get out of this poverty trap? How will agriculture and rural development provide the needed long-term and sustainable response in completing a sustainable structural transformation? What are options and policy choices, and what constitutes international good practice? What is the appropriate role of land tenure and governance in catalysing new engines of agricultural and structural transformation?

Why the rural sector is still the main pathway to sustainable transformation

International experience shows four strategic options to creating new engines of growth, and these have been attempted in various combinations by LICs and MICs: a) Import substitution industrialization using protective tariffs; b) Export-oriented industrialization using targeted firm-level subsidies; c) Open- economy industrialization inviting foreign direct investment in domestic industry; d) Expand domestic market through land and agrarian reforms and agriculture-led rural industrialization. Once a country reaches MIC level, the propensity is to prioritise any one or combination of the first 3 options because these are urban-based solutions. Creating urban jobs is politically a higher priority for MICs and that is for various reasons (policy makers believe, unwisely and with no evidence, that prioritizing the urban-industrial sector will accelerate structural transformation). International experience however has proven that import substitution and export-oriented strategies of industrialisation generally have a limited impact in job creation, tend to benefit a few businesses and hardly expand the domestic market. For Africa, as was for China and India, the rural transformation option has the greatest potential for addressing unemployment, poverty and inequality. This is because the rural sector continues to carry the largest population, and investment in agriculture and rural sectors creates more inclusive wealth for more people (expanded domestic market) than the same amount invested in urban-based solutions such as import substitution and export promotion manufacturing.

Sustainable structural transformation requires that as many rural people as possible have to experience a rise in labour productivity and income (a broad based agricultural revolution) in order to afford a large enough domestic market for locally manufactured products. Where a rise from LIC to MIC status is driven by a narrow dual economy, and where a rise in labour productivity and income occurs to a narrow band of rural and urban populations, then the economy may grow for a while, then invariably enter the ‘middle income trap’. There, most rural people are still poor with low total factor productivity. Extractive industries such as mining and oil may extend periods of economic growth, but invariably the growth rates will stagnate, unemployment will continue to rise, and the rich will get richer, the poor will get poorer. This explains why even major economic giants such as Brazil and South Africa still face serious threat to sustainable structural transformation. Pushing a large farm strategy in a backward dual economy where most folk are essentially at the periphery of the mainstream economy maybe a viable option only as part of a very short-term strategy out of some crisis, or as part of a well designed multi-tenure solution. As a long-term agenda, however, the entire economy has to pull the agricultural and rural sectors, as opposed to dual economy solutions. The domestic market has to grow so that the economy is not too reliant on exports in order to grow. A proactive public sector is needed to develop and promulgate agriculture and rural transformation agenda. This requires reform in the public budget architecture towards this agenda, investing where the smallholder farmers are, and investing in people more than investing in things. What is needed for sustainable transformation is a rise in labour productivity, as the primary ingredient towards raising land productivity – not the popular reverse logic. Growing the domestic market therefore has to start with raising labour and land productivity for the largest number of people as possible—that is smallholder farmers.

Conclusion

The main argument in this paper is to confirm the primacy of smallholder family farmers as the source of immediate and potential rural middle class that will trigger sustainable structural transformation –as is beginning to happen in other parts of Africa, especially West and East Africa (Reardon et al 2013). Secondly there is need to place priority on strengthening land tenure security across the board as the general strategy especially at early stages of structural transformation –where most African countries are. At this stage, both the state and private sector are weak; economic integration between rural and urban is weak; and public, local and community level administration are weak and poorly integrated. Land tenure reforms, therefore, as well as modernisation and strengthening are needed across all tenure systems. Reforms and modernisation targeting the replacement of smallholder farmers with a few large and mega-farms is not the long-term solution. Governments should avoid the belief and temptation to prematurely substitute smallholder farms for large ones. Rather government should be decisive about investing in an agricultural revolution driven by small family farms.

The landmark study by Lele et al (2011) compares Africa with the other 4 regions, (namely, East Asia, South Asia, industrial countries, Latin America and Caribbean (LAC)) with respect to value added per worker, i.e., labor productivity, and how it rises in agriculture. The study concludes that “Small-scale but Efficient rather than Large-scale, Mechanized and Efficient” is a more relevant strategy for agrarian conditions such as Africa. India and China have therefore pursued strategies that are more relevant to developing regions with similar resource endowments and current level and pattern of development than Brazil’s   large   farm   strategy.  Brazil has been achieving rapid technical change while shedding labour rapidly. The transformational forces for smallholder farmers as lessons from these countries include: a) technology capital of public goods that improve labour and land productivity, including agricultural research, farmer training and extension, education, transport and power; b) better flow of information to farmers including publicly available information on land; c) role of the central versus local governments, that is much of the action on agricultural and land policy and investments is now at the local level where land governance systems that deliver land rights security and competent land administration are needed most; d) a rural transformation strategy that is multi-sector, economy-wide, and founded on a deeper understanding of the role of land in overall socio-economic structural transformation in contemporary Africa, given its specific character of structural transformation.

Bibliography

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