Technological Innovation for African Productivity

1. Technological Innovation for African Productivity African Forum in Brussels, 26. June, 2012 Philipp Aerni ETH Zurich & Food and Agriculture Organization (FAO)

2. Overview 1. Aid, trade and business in African Agriculture 2. Common Agricultural Policy and its side effects 3. Neocolonial Trade Patterns 4. Poverty and Agricultural Productivity 5. Enabling African development with fresh theory 6. Lessons for EPAs 7. Concluding Remarks

3. 1. Aid, Trade and Business in African Agriculture What are the best jobs for skilled Africans? • Working for a multinational corporation (commodities, retailing) • Working for an international NGO/Donor (aid, policy advocacy) • Working for the government (more committed to foreign donors) Most of these organizations serve non-African customers, donors and constituencies Problem: Heteronomous Development (not driven by Africans) - Africa has a great unrealized potential in the primary sector • Africans better educated but low chance to succeed with a formal business > complying with regulation can be as expensive as in Europe (missing bottom-up dimension) > Europe: part of the problem rather than part of the solution?

4. 2. Common Agricultural Policy and its side effects Welfare economics, a theory from the Cold War, still shapes minds • The idea of a rational social planner leads to top-down approach • Wrong baseline assumption: Private Sector and Technology as • part of the problem (e.g. Ag Treadmill). Agriculture is still about • food production, not just landscape management • The missing historical context: We grew wealthy and learned how • to address problems thanks to university-private sector links The problem of ecological fallacy Transfer of CAP idea to developing countries as foreign aid • Agricultural policy as prescriptive environmental regulation • > top-down paternalism that stifles innovation/sustainability • Private Standards set by European Retailers: One size fits all approach that makes retailers de-facto law-makers and gate-keepers in Africa

5. 3. Neocolonial trade patterns Most trade with Africa is Intra-firm trade of European companies • E.g. Glencore in Zambia (complying with CSR but is it sustainable?) • Many African governments tend to accept bad deals if some if it helps to strenghten the ruling party’s power • Aid agencies: negative selection (aiming to support to less able rather than the more able) and foster dishonesty (evalution reports done by locals often as a copy-paste exercise) • European Partnership Agreements (EPAs): Trade between unequals leads to unequal trade • Trade liberalization makes sense as a means to an end, not an end it itself > China knew that (local content requirements) • CAP for Africa may cause more problems than solutions (child labor) > small-scale farming is not a freely chosen life-style • Ag Productivity increases are necessary to fight poverty

6. 4. Poverty and agricultural productivity High productivity in Asia was key in the fight against poverty (Poverty rate in China decreased from 30% to 3% over the past 40 years) • Once there is a surplus of food, capital accumulates that can be invested in other sectors • Structural change eventually creates an entrepreneurial middle class that is able to articulate its interests in politics. It starts but does not end with fertilizer • Average yield in African agriculture: 1 tons/hectare • Average yield in Asia: 4 tons/he > China: TVE supported with government input (irrigation, improved seed, crop protection, extension services, fertilizer

7. A fertilizer tale Average NPK use rates (kg ha-1) by fertilizer markets in 2008/09 source: IFDC derived from FAO data

8. 5. Enabling African agricultural development with fresh theory Shifting from Robert Malthus (population growth as a problem) to Esther Boserup (population growth > induced innovation as the driver of sustainable change in agriculture (tenure, labor market, gender reform, social capital, empowerment to increased technology adoption and adaption > She proved it empirically Shifting from welfare economics to new growth theory (Paul Romer) > agriculture needs to become better integrated into the global knowledge economy > catch-up growth is easier and faster than ever before in history, if you have the right institutions (closing the technology gap but also learning from mistakes) > successful economies today practice it already

9. The Holistic Approach (E. Boserup) Innovation Population Growth Institutions Overcoming trade-offs (provisioning versus supporting services) > innovation, creation of new markets, connecting urban/rural dev

10. 6. Lessons to learn for EPAs Preferential Trade may not contribute to development because a) it benefits mostly the incumbents in commodities trade b) cheap labor and market access privileges > bad for innovation c) political lobbying of incumbents made new entries difficult d) colonial heritage kept universities away from local private sector e) growing influence of European stakeholders on politics/business EPAs should not just be about diversification of ag-production but a) Matching innovative entrepreneurs with European mentors b) Support for innovation hubs/business venture at universities c) Creating special economic zones (charter cities)

11. 7. Concluding remarks We need to move away from the paternalist approach practiced in aid, trade and regulation with Africa • The need for a paradigm shift in sustainable development: An idea that is sustainable in Europe must not necessarily be sustainable in Africa. Africa needs to start with productivity increases in agriculture in order to make its population growth an asset rather than a burden to the environment • This would also require more awareness and perception change in Europe • Introducing the history of technological change in schools and social science departments • Move from old economics to new economics • Save agriculture departments from environmental takeover