For now Africa should focus more on developing agriculture instead of manufacturing. Most of them have same cereal yields per hectares since decolonisation.
The low population density, frequent insecurity and poor power supply in many countries in SSA strikes me as a big disincentive to farmers to invest in their plots, as they have problems getting stuff to market cheaply, and processors also struggle to do so cheaply. Not sure how much of a role this plays?
Australia also has a lot population density. We have been a food exporter for most of our history. The natives didn't even develop agriculture when we arrived (outside of some very small pockets).
The biggest disincentive in agriculture comes from weak property rights. The fact that farmland is controlled by these big tribal chiefs instead of individual household farmers.
The logistics thing is a challenge. But it comes Africa's historic lack of navigable river. Disease pressure also kills the beasts of burden like horses and cows. The latter should be less of a problem now due to the advent of ICE and EVs.
yes, but I think african elites simply clearing the resident populations to build cattle and wheat farms and then giving themselves property rights will have a few problems along the way....
The tribal land system was built up during the colonial period. No need to be all nostalgic about it. In the current system there reason for a farmer to work hard if all their extra income is spread to their 100 cousins.
Also asia went through massive land to tiller programs in the 60-80s period. I don't know why these leftists types thing being pro property rights mean being pro elites. Before the modern property rights regime the elites were the only ones who could afford to own land since land owners needed their own private security.
I am referring to why people in Australia are able to have 10,000 hectare farms..... there were people there beforehand, evne if they weren't farming.
Am not nostalgic, I have regular dealings with chiefs in several countries, they vary from extremely helpful and well intentioned to pure rent extracters, the one thing they are not is consistent and easy to reckon with at scale.... regardless there isn't a great drive ot buy up land in most countries in the few lands I know well, even where it is easily possible.
Food processing is something you get into once after you have increased yields. Other than South Africa, none of them can produce enough food to be self sufficient motivating the governments to overvalue the exchange rates and causes currency crisises.
So you're saying if you are a net importer of food then the government manipulates the exchange rate so that it's easier to import. Am I understanding that correctly?
Kenya also has low yields per hectare. Agro processing often makes it easier to export your agricultural surpluses. Usually you're not importing agricultural commodities to process them due to many non grain food products being hard to transport. One of the UN agencies (I forget which one) has a tracker for food security and most African countries don't meet that criteria and aren't showing any signs of improvement.
When a country's exchange rates need devaluation, their food and energy prices will increase dramatically since their a net importer. Food processing is also relevantly energy intensive. So African countries should focus on increasing yields and connecting farms to urban markets to reduce dependence on food imports. Plus most of their poor is stuck doing agriculture. If they don't improve farm productivity their rural population will be stuck in poverty. Ethiopia saw a massive fall in poverty as they developed their agricultural sector and are almost food secure.
Also most educated Africans are completely unaware they have yields that haven't improved and that are 1/5th that of Europe even though Africa has ~50% more sunshine.
Are they retarded or something? Every developing countries decided to get out of subsistence agriculture but these Africans need foreign advisers to figure this out.
Great article and I love the math and graphs. I think much of this can be explained by currency overvaluation in Africa.
A lot of African countries purposely overvalue their currencies to make food and fuel imports cheap. They artificially strengthen African currencies( and thus prices) until they run out of foreign currency, request an IMF loan, and then their currency devalues. Nigeria's currency was overvalued for the longest time (like 460 naira to 1 dollar in 2023) And now it's like 1500 now that the new president is letting the currency float.
In addition , many African countries have anchored currencies. Cabo Verde and sao tome are anchored to the euro (initially Portuguese escurdo, but then Portugal joined the EU) and all Black French Africa countries - (Mauritania & Guinea)+ Equatorial Guinea & Guinea Bissau are in the cfa franc and they are anchored to the euro also.
Those currencies haven't had a devaluation since 1994 and those countries mainly run current account deficits. All those anchored currency countries all have overvalued currencies.
I think that explains most of it tbh. African countries will continue to purposely overvalue their currencies until food imports don't matter when they can grow their own food. This is why agricultural productivity has always been a prereq before manufacturing.
Unreliable energy makes manufacturing impractical.
Just as Germanys green energy polices are killing German manufacturing, high energy cost and low energy reliability prevents Africas manufacturing from taking off.
1) There is might be not enough literate people in Africa because of poorly run schools.
2) Because there is so much rural poverty and agricultural productivity is so low that there is not enough people moving to the cities. Even rural to urban migration costs money. Basically rural Africans are in a poverty trap.
3) There might be frictions against rural to urban migrations because of clan links and poor infrastructure (higher transport costs). Many cities have insecure land tenure which increases the cost of housing in urban areas.
4) In the first wave of industrialisation, factories are dominated by women. There might be barriers to women working in factories. This probably isn't true because most majority Christian African countries have relatively high female labour participation rates.
5) Unionisation and government regulations. This might artificially raise wages for industrial workers in Africa.
Im not an economist, but what role do regulated sector input prices on logistics and energy costs play here? My experience tells me they are uniquely high in many countries in SSA due to low population densities and political decisions around power prices
For now Africa should focus more on developing agriculture instead of manufacturing. Most of them have same cereal yields per hectares since decolonisation.
The low population density, frequent insecurity and poor power supply in many countries in SSA strikes me as a big disincentive to farmers to invest in their plots, as they have problems getting stuff to market cheaply, and processors also struggle to do so cheaply. Not sure how much of a role this plays?
Australia also has a lot population density. We have been a food exporter for most of our history. The natives didn't even develop agriculture when we arrived (outside of some very small pockets).
The biggest disincentive in agriculture comes from weak property rights. The fact that farmland is controlled by these big tribal chiefs instead of individual household farmers.
The logistics thing is a challenge. But it comes Africa's historic lack of navigable river. Disease pressure also kills the beasts of burden like horses and cows. The latter should be less of a problem now due to the advent of ICE and EVs.
yes, but I think african elites simply clearing the resident populations to build cattle and wheat farms and then giving themselves property rights will have a few problems along the way....
The tribal land system was built up during the colonial period. No need to be all nostalgic about it. In the current system there reason for a farmer to work hard if all their extra income is spread to their 100 cousins.
Also asia went through massive land to tiller programs in the 60-80s period. I don't know why these leftists types thing being pro property rights mean being pro elites. Before the modern property rights regime the elites were the only ones who could afford to own land since land owners needed their own private security.
I am referring to why people in Australia are able to have 10,000 hectare farms..... there were people there beforehand, evne if they weren't farming.
Am not nostalgic, I have regular dealings with chiefs in several countries, they vary from extremely helpful and well intentioned to pure rent extracters, the one thing they are not is consistent and easy to reckon with at scale.... regardless there isn't a great drive ot buy up land in most countries in the few lands I know well, even where it is easily possible.
What about Agri processing? It's somewhere in between. Feels like canning, sauces etc should be the next frontier here.
Food processing is something you get into once after you have increased yields. Other than South Africa, none of them can produce enough food to be self sufficient motivating the governments to overvalue the exchange rates and causes currency crisises.
So you're saying if you are a net importer of food then the government manipulates the exchange rate so that it's easier to import. Am I understanding that correctly?
But let's take Kenya as an example. The currency is floated. It's has a slight positive trade balance in agriculture and there's still limited agriprocessing. https://atlas.cid.harvard.edu/explore?country=116&queryLevel=location&product=undefined&year=2021&tradeDirection=import&productClass=HS&target=Product&partner=undefined&startYear=undefined
Or am I misunderstanding.
Kenya also has low yields per hectare. Agro processing often makes it easier to export your agricultural surpluses. Usually you're not importing agricultural commodities to process them due to many non grain food products being hard to transport. One of the UN agencies (I forget which one) has a tracker for food security and most African countries don't meet that criteria and aren't showing any signs of improvement.
When a country's exchange rates need devaluation, their food and energy prices will increase dramatically since their a net importer. Food processing is also relevantly energy intensive. So African countries should focus on increasing yields and connecting farms to urban markets to reduce dependence on food imports. Plus most of their poor is stuck doing agriculture. If they don't improve farm productivity their rural population will be stuck in poverty. Ethiopia saw a massive fall in poverty as they developed their agricultural sector and are almost food secure.
Also most educated Africans are completely unaware they have yields that haven't improved and that are 1/5th that of Europe even though Africa has ~50% more sunshine.
People don't know the opportunity.
Are they retarded or something? Every developing countries decided to get out of subsistence agriculture but these Africans need foreign advisers to figure this out.
"def. retarded: delayed in terms of progress or development."
Yes.
Great article and I love the math and graphs. I think much of this can be explained by currency overvaluation in Africa.
A lot of African countries purposely overvalue their currencies to make food and fuel imports cheap. They artificially strengthen African currencies( and thus prices) until they run out of foreign currency, request an IMF loan, and then their currency devalues. Nigeria's currency was overvalued for the longest time (like 460 naira to 1 dollar in 2023) And now it's like 1500 now that the new president is letting the currency float.
In addition , many African countries have anchored currencies. Cabo Verde and sao tome are anchored to the euro (initially Portuguese escurdo, but then Portugal joined the EU) and all Black French Africa countries - (Mauritania & Guinea)+ Equatorial Guinea & Guinea Bissau are in the cfa franc and they are anchored to the euro also.
Those currencies haven't had a devaluation since 1994 and those countries mainly run current account deficits. All those anchored currency countries all have overvalued currencies.
I think that explains most of it tbh. African countries will continue to purposely overvalue their currencies until food imports don't matter when they can grow their own food. This is why agricultural productivity has always been a prereq before manufacturing.
Unreliable energy makes manufacturing impractical.
Just as Germanys green energy polices are killing German manufacturing, high energy cost and low energy reliability prevents Africas manufacturing from taking off.
If the wages are too high, it's not going to give them a comparative advantage in the first place.
This might be a labour shortage problem.
1) There is might be not enough literate people in Africa because of poorly run schools.
2) Because there is so much rural poverty and agricultural productivity is so low that there is not enough people moving to the cities. Even rural to urban migration costs money. Basically rural Africans are in a poverty trap.
3) There might be frictions against rural to urban migrations because of clan links and poor infrastructure (higher transport costs). Many cities have insecure land tenure which increases the cost of housing in urban areas.
4) In the first wave of industrialisation, factories are dominated by women. There might be barriers to women working in factories. This probably isn't true because most majority Christian African countries have relatively high female labour participation rates.
5) Unionisation and government regulations. This might artificially raise wages for industrial workers in Africa.
What are African prices my friend ?
Im not an economist, but what role do regulated sector input prices on logistics and energy costs play here? My experience tells me they are uniquely high in many countries in SSA due to low population densities and political decisions around power prices
This was awesome - more pls!!
hockey-stick shape! not banana