Farmers typically need various resources to organise agricultural production, but for the sake of this chapter we focus on purchased inputs (seeds and fertiliser) and access to finance. We acknowledge upfront that access to secure land is equally important, deserving a separate chapter, and it is therefore only briefly discussed here to contextualise the discussion.
2.1 Limitations in Access to Secure Agricultural Land
Africa accounts for over 60% of the available arable land on Earth. Nevertheless, smallholder farmers in Africa are unable to secure sufficient and suitable land to grow their crops and keep livestock. As shown in Fig. 3, land pressure is severe in Rwanda, Malawi, Kenya and Uganda, with an average holding of barely one hectare, compared to Burkina Faso, Mali, Niger and Ghana, where the average holding is more than three hectares. Not only is access a problem, the security of access is an even bigger problem facing farmers. This is partly because of the predominantly customary land tenure system observed in many countries including Mali, Zambia, Malawi, Ghana, Burkina Faso and Niger and in large parts of Sierra Leone, Liberia, Nigeria, Tanzania and Mozambique. Under such tenure arrangements, land tends to be held collectively by lineages or families without providing any form of security to users, especially women and young people (Namubiru-Mwaura et al. 2012). In most parts of Africa, women’s rights to land are limited to 1–2% of land and dependent on their marital statuses, although evidence suggests they contribute more than 70% of agricultural labour (Bennett 2010). The problem of land tenure insecurity is exacerbated by state interference, through acquisitions and forceful seizure of farmlands in the name of investment.
Tenure security affects agricultural productivity through the choice of crop to grow, limited investment in land and adoption of unsustainable agricultural practices (UNECA 2005). Although privatisation of land would seem to be effective in reducing insecurity, evidence seems to suggest that although short-term land rentals improve land productivity (Kebede 2002; Holden et al. 2008), they provide no incentives for either the landlord or the tenant to make long-term improvements (Place 2009), thereby compromising on sustainable production.
Land productivity is largely influenced by access to reliable water sources, especially under predominantly rainfed conditions often characterised by significant climatic variability. About 60% of SSA is exposed to drought, and 30% extremely (Hodson et al. 2009), yet irrigation facilities are limited (Fig. 4). Most of the existing irrigation facilities are ineffectively and inefficiently utilised. This is because constructions are often fraught with problems, such as generally insufficient farmer involvement in design; development often far removed from existing farming systems; inadequate land tenure system development for irrigation; capital-intensive investment requiring high input levels; and chronic institutional weaknesses.
The Intergovernmental Panel on Climate Change 2007 Report predicts that up to 250 million people in Africa will experience problems in accessing sufficient water by 2020 because of climate change, potentially leading to halving of agricultural production (IFPRI 2012). The report also predicts that, without adaptation, the impact of climate change on agriculture and food security will be high, with the number of malnourished children possibly increasing by an extra 10 million to a total of 52 million by 2050.
2.2 Policies and Institutional Factors Hindering Farmers’ Access to Improved Seed
Seed is an essential, strategic and relatively inexpensive input to agriculture, with a high rate of return on investment that often sets the upper limit for crop production. Improved seeds typically yield 4–6 mt/ha, compared to traditional unimproved ones that yield less than 1 mt/ha. Yet the uptake of the former is limited in Africa. Langyintuo et al. (2010) suggest that the adoption rates for improved maizeFootnote 1 seed average 28% of the cultivated area of approximately 17 million ha (Table 1). This low adoption rate is blamed on a combination of policy and technical problems that hinder the supply of and demand for improved seeds. On the demand side, risk aversion among farmers, lack of knowledge of the availability of ecologically adapted varieties, relatively high seed price and lack of cash resources are the main determinants of adoption. The high-risk aversion observed among smallholder farmers is due to the absence of physical assets, which diminishes their risk-bearing abilities, and hence, their reluctance to invest in untried technologies, including improved seed.
The lack of knowledge of adaptable varieties is primarily due to weak extension service delivery, relative to the numerous unfamiliar varieties released onto the market without adequate farmer education on the types and economic benefits of improved varieties, to improve their adoption decisions. Unfortunately, extension coverage is weak and sometimes skewed towards the relatively richer farmers (Langyintuo and Setimela 2007). Farmer confidence in the improved seed is sometimes further eroded by the proliferation of fake seeds on the market.
Some unscrupulous traders engage in unethical advertising practices, or simply painting grains in colours similar to known and trusted genuine varieties, to undercut prices. This not only cheats farmers out of their meagre cash resources, but permanently damages the loyalty built over time.
The relatively high seed prices are the combined effects of market policy failures and supply-side imperfections (discussed below). Whereas market imperfections sometimes cause misalignment of seed and grain prices, policy failures often lead to high production and marketing costs, poor seed quality assurance and uncompetitive seed markets leading to inferior pricing mechanisms ultimately affecting farmers negatively. For example, policymakers often attempt to improve consumer welfare by imposing price ceilings on outputs, as part of their market reforms strategy, without any attempt to make similar adjustments to seed prices. The end result is that farmers, who are less organised, are forced to buy seed at relatively high prices, thereby subsidising urban consumers to prevent urban unrest at the expense of their own welfare. Although free seed handouts by governments and non-governmental organisations are designed to address the liquidity constraints of farmers, they are known to have negative impacts on rural seed market development, as beneficiaries tend to be unwilling participants in the commercial seed market.
Although many countries have made significant progress in liberalising and restructuring their seed sectors in the past two decades (Hassan et al. 2001), some still operate dated seed policies or none at all, partly contributing to the incidence of fake seeds (Langyintuo 2004). Where policies exist, they almost exclusively concentrate on the formal seed sector and fail to support the diversity of initiatives that farmers employ for their seed security (Louwaars and Engels 2008). In most cases, the emphasis is always on hybrids to the neglect of open-pollinated varieties, as observed in India by Spielman et al. (2009).
Even where there are updated policies, their implementation may sometimes pose a significant challenge to seed sector development. For instance, most national governments in Africa insist on the registration of all newly developed varieties, to ensure the genetic identity of the variety and discourage the release of germplasm that is inappropriate, unproductive or unsafe. However, the registration processes have been observed in many countries to be very lengthy (up to three or more years) and expensive. Depending on the country, a breeder may pay between USD 1000 and USD 2500 per entry per year for both national performance trials (NPTs) and the distinctness, uniformity and stability (DUS) test, which are necessary components of the registration process (Langyintuo et al. 2010; Mwala and Gisselquist 2012). Not only are these costs ultimately passed on to farmers, but the process lengthens the time it takes farmers to access newly developed varieties.
Regional spillover of genetic improvement, through harmonisation of regional seed laws, can significantly reduce the costs of seed development and shorten the time it takes for farmers to benefit from improved genetics. Unfortunately, this has become problematic because the legislative frameworks of countries within regional economic communities vary widely in facilitating harmonisation. For example, plant variety protection is not enforced in countries such as Angola, Malawi, Uganda and all West African countries excluding Ghana. Ethiopia and Uganda are yet to update their Seeds Acts, while International Seed Testing Association (ISTAFootnote 2) and OECD accreditation required for official seed shipment across borders are available in only Ghana, Kenya, Malawi, South Africa, Zambia and Zimbabwe. Differences in certification systems, standards and procedures have led to diminished trust among seed certification authorities in the different countries.
It is important to comment on the use of biotechnology in crop genetic improvement. For many years, biotechnology has been providing value-added foods and medicines for mankind. Recent advances in genomics, including the ability to insert genes across species, have distinguished ‘modern biotechnology’ from traditional methods. Resulting transgenic or genetically modified (GM) crops, forestry products, livestock and fish have potentially favourable qualities such as pest and disease resistance, however, with possible risks to biodiversity and human health (Paarlberg 2014). With the exception of four African countries (Table 2), the use of GM varieties remains controversial, largely driven by negative perceptions originating from Western consumers and exported to Africa (De Groote et al. 2014; Clive 2012; Paarlberg 2000, 2002, 2008). It is important to point out that GM crops have been subject to more testing worldwide than any other new crops and have been declared as safe as conventionally bred crops by scientific and food safety authorities worldwide (Paarlberg 2014). As noted by Paarlberg (2014), a recent EU report concludes that more than 130 EU research projects, covering a period of more than 25 years of research and involving more than 500 independent research groups, concur that consuming foods containing ingredients derived from GM crops is no riskier than consuming the same foods containing ingredients from conventional crops. Such well-known organisations as the World Health Organization, the US National Academy of Sciences and the European Food Safety Authority (EFSA) have come to the same conclusion (Paarlberg 2014).
2.3 Constraints to Smallholder Farmers’ Access to Fertiliser in Africa
Organic and inorganic (or mineral) fertilisers are strategic inputs to crop production, especially where the existing soils are exhausted from continuous cropping without adequate soil amelioration. Evidence shows that about 25% of crop production is lost each year without application of nitrogen fertiliser; by the 10th year, 60% is lost (Donovan and Casey 1998). Nonetheless, the average consumption of inorganic fertilisers is very low, at around 16 kg/ha of nutrients—ranging from less than 1 kg/ha in Niger and Gambia to about 89 kg/ha in South Africa (Fig. 5). This is compared with 331 kg/ha in East Asia and Pacific and 160 kg/ha in South Asia and over 180 kg/ha in the upper middle income world (World Bank 2019). Within SSA, Zambia, South Africa and Côte d’Ivoire have achieved the target in the Abuja Declaration of 50 kg/ha. Whereas high levels of fertiliser use create environmental problems in developed countries and in a few countries in Africa such as Egypt and Morocco, in most parts of Africa, the limited use of the input creates environmental degradation leading to an estimated loss of 4–12% of GDP, through soil mining and clearing of forest land to expand farms in an attempt to increase production (Olson and Berry 2003).
It is believed that demand and supply-side policy failures are to blame for the limited use of fertilisers in Africa. On the demand side, the risk of fertiliser use and the poor nitrogen to maize price ratio that has been trending downward by 0.9% are a disincentive to fertiliser use (Gregory and Bumb 2006; Heisey and Norton 2007; Morris et al. 2011). Because most of the crops grown by farmers are staples and non-tradable while fertilisers are imported, currency devaluation often increases the price of fertiliser several times above output prices.
In addition, fertiliser prices are uncompetitive because of the slow emergence of the private sector and consequent lack of a vibrant market, which in turn is an artefact of unfavourable private-sector policies: poorly defined rules of the game, weak regulatory enforcement, proliferation of taxes and fees, cumbersome bureaucratic importation procedures, general lack of security and widespread incidence of corruption (World Bank 2006). Prices are further increased by poor road infrastructure and the cost of finance. Added to the many official and unofficial tolls and taxes, security check points along the roads slow the delivery of services and impose transaction costs.
Unfortunately, the high cost of importation and distribution of fertiliser is likely to remain for a long time to come. At the present level of African fertiliser markets development it is cost-effective to import until markets expand to support large-scale local production (World Bank 2006). Presently, over 90% of the fertiliser used in Africa is imported at very high sourcing costs, which ultimately reduce the profitability of distributing fertiliser and discourage increased supply. The scope for negotiating bulk purchases and arranging bulk shipments in order to save on freight charges is limited by the lack of port facilities capable of handling large volumes.Footnote 3
2.4 Access to Agricultural Finance for Smallholder Farmers
Agriculture is the predominant activity in African economies, yet less than 4% of total commercial bank lending goes into the agricultural sector (Fig. 6). Financial institutions often cite lack of usable collateral, high transaction costs due to remoteness of clients, dispersed demand for financial services, the lag between investment needs and expected revenues, lack of irrigation, pests and diseases, small size of farms and of individual transactions, underdeveloped communication and transportation infrastructure and high covariate risks due to variable rainfall and price risks (Adesina et al. 2012) as reasons why they do not lend to smallholder farmers. Other challenges include poorly developed agri-food value chains, which significantly increase risks and exposure for the bank, and general lack of understanding among financial institutions of the agricultural sector and the opportunities.
In principle, the unsatisfied demand by smallholder farmers and SMEs for financial services can be met by microfinance institutions (MFIs). These institutions have emerged to provide credit facilities and deposits but have not succeeded in expanding financing for agriculture, due to a number of reasons including limited capital bases, high interest rate, small size of disbursement insufficient for investment and being located in urban centres when the bulk of farmers are in rural areas. Moreover, the repayment schedules for microfinance loans often do not synchronise with the seasonality of agriculture and the timing of farmers’ cash flows.
Furthermore, Poulton et al. (2006) noted that some of the challenges faced by MFIs included very small outreach compared to demand, inadequate capacity to properly conduct credit analysis and loan appraisals, inadequate risk management and control systems, small shares of total deposits and loans compared to commercial banks, non-performing collateral laws limiting the effectiveness of the MFIs and inadequate capitalisation limiting levels when assessing the potential of default by a prospective borrower.