Frances Cossar

Light Manufacturing in Africa: Targeted Policies to Enhance Private Investment and Create Jobs

The World Banks strategy for Africas future recognizes the central importance of industrialization in Sub-Saharan Africa, and the consequent creation of productive jobs for Africans, which have long been a preoccupation of African leaders and policy makers. This book represents an attempt to address these issues. The book stresses that, while the recent turnaround in Africas economic growth is encouraging, this growth must be accompanied by structural transformation to be sustainable and to create productive employment for its people. For many African countries, this transformation involves lifting workers from low-productivity agriculture and informal sectors into higher productivity activities. Light manufacturing can offer a viable solution for Sub-Saharan Africa, given its potential competitiveness that is based on low wage costs and abundance of natural resources that supply raw materials needed for industries. This study has five features that distinguish it from previous studies. First, the detailed studies on light manufacturing at the subsector and product levels in five countries provide in-depth cost comparisons between Asia and Africa. Second, building on a growing body of work, the report uses a wide array of quantitative and qualitative techniques, including quantitative surveys and value chain analysis, to identify key constraints to enterprises and to evaluate differences in firm performance across countries. Third, the findings that firm constraints vary by country, sector, and firm size led us to adopt a targeted approach to identifying constraints and combining market-based measures and selected government interventions to remove them. Fourth, the solution to light manufacturing problems cuts across many sectors and does not lie only in manufacturing alone. Solving the problem of manufacturing inputs requires solving specific issues in agriculture, education, and infrastructure. Fifth, the report draws on experiences and solutions from other developing countries to inform its recommendations. The reports goal is to find practical ways to increase employment and spur job creation in Sub-Saharan Africa.

Mechanization in Ghana: Searching for sustainable service supply models:

This paper assesses the sustainability of the current supply network for mechanization, given government policy. Stylized models of mechanization supply are developed based on experience in Bangladesh, China, and India during similar stages of agricultural transformation. Ghana’s supply network is then analyzed in light of key lessons from the Asian experience. The analysis focuses on two policy issues: (1) whether the current model promoted by the government has left enough room for the private sector to develop the supply chain, including machinery imports and trade, and (2) whether this model can better link smallholders’ demand for mechanized services to its supply, such that supply can further induce demand and mechanization can broaden its role in agricultural transformation.

Agricultural mechanization in Ghana: Is specialization in agricultural mechanization a viable business model?

The Government of Ghana (GoG) since 2007 has been providing subsidized agricultural machines to individual farmers and private enterprises established as specialized Agricultural Mechanization Services Enterprise Centers (AMSECs) to offer tractor-hire services to small-scale farmers across the country. Current demand in the country is primarily focused on land preparation services, especially plowing. This paper assesses whether AMSEC enterprises are a viable business model attractive to private investors. Using firm investment theory and field-based data on costs, revenues, and tractor efficiency, this research examines the profitability of specialized agricultural mechanization service provision with a focus on land preparation. Findings suggest that the AMSEC model is not a viable business model, even with the current level of subsidy. Low operational scale is the most important constraint to the profitability of investment in specialized agricultural mechanization service provision. With such a low operational scale, it is essential to consider various options for introducing low-cost, small tractors suited to the current farming scale in the country. Also, a used tractor model is one of the options available for policymakers in the country. Tractor-hire services can play an important role in transforming smallholder agriculture, but with heavy subsidies on big and costly tractors, the subsidy policy can distort supply chain development. As a result, many better-suited and lower-cost machines are unlikely to be introduced into local markets.

Evidence on Key Policies for African Agricultural Growth

It is widely agreed that reducing poverty in Africa south of the Sahara (SSA) depends largely on stimulating growth in agriculture. To this end, heads of state in Africa rallied to form the pan-African Comprehensive African Agriculture Development Programme (CAADP) with the goal of raising investments and improving strategy implementation. However, while implementing an agricultural agenda under the CAADP framework, more and more countries have realized that increasing public investment in agriculture alone is not enough. Policy can play an important role not only to make public investment more efficient, but also is crucial for incentivizing private sector and farmer investment in agriculture. Against this backdrop this paper takes stock of current agricultural policies in SSA with a view to identifying policies that are working as well as areas for improvement. The paper examines policies to encourage the adoption of agricultural inputs, initiate greater private-sector investment in agriculture and agro-industries, and manage price volatility while encouraging openness. The paper further reviews successful land tenure policies and property rights systems, reviews the evidence on the synergies between agriculture and nutrition, and examines how CAADP is laying the institutional architecture for improved policy formulation in Africa. In general, the paper finds that although substantial progress has been made, there is considerable scope for improvement. This is not surprising given the relatively primitive and deeply rooted nature of smallholder farming in Africa. Evidence synthesized in the paper supports the view that most policies cannot be implemented in isolation. Rather, policies tend to be most effective when implemented along with complementary policies and public investments.