5 December 2017
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African Development Bank (Abidjan)

Agricultural Growth Should Drive Structural Transformation, Says Expert

Unless there a good focus on agricultural and economic transformation, efforts at structural transformation of African countries won't amount to much, says Neway Gebreab, former advisor to the Prime Minister of Ethiopia.

Gebreab, who spoke on Tuesday at a session on the Role of institutions in transformative governance at ongoing 12th African Economic Conference (AEC) in Addis Ababa, Ethiopia, said the importance of agriculture should not be overlooked in the debate about structural transformation.

This year's conference focuses on the achievement of structural transformation in Africa with an emphasis on developmental governance. The meeting is co-organized by the African Development Bank, the United Nations Development Programme and the United Nations Economic Commission for Africa under the theme "Governance for structural transformation".

"Let us talk about structural transformation, but let us also be aware that this has to go hand-in-hand, concurrently and simultaneously, with agricultural growth through enhanced productivity and smallholder farmers," Gebreab told participants.

He called on African countries to lay the right foundation for development and explained why agriculture should be at the forefront of structural transformation of African countries. "On the one side, if we do not have agriculture and development, we will not be able to supply food at a relatively cheap price, and therefore we will not have the comparative advantage for cheap labour, which should be ours given the endowments that we have," he said.

"Cheap labour is cheap food. You are not going to have cheap food unless you focus on agriculture. Agricultural development is important for other reasons as well: primarily for the reduction of poverty. Without being able to eradicate poverty, structural transformation will be very much a challenge."

Good governance must be accompanied by economic growth, he said, calling for the creation of clusters of economic zones.

In his keynote address, Mushtaq Khan, a Professor from the Department of Economics, University of London, highlighted how imbalances in the allocation of industrial interventions lead to conflicts in several countries.

He described transformative governance as the transition of society from low-productivity activities to high-productivity ones. He expanded his definition to include the creation of high capability organizations, which he said are the key to economic development.

"Most organizations in developing countries are not high capability," he said. "Politics is not high capability. So powerful people don't like the rule of law, because they make their money by violating the rule of law, by making their own arrangements with each other and with politics."

He cited the story around the emergence of Bangladesh and how the old East Pakistan was written off as not having the capacity for entrepreneurship, and called on African countries to learn from such experiences.

"When you have ethnic diversity, one of the first things to do is to build organizational capabilities across all the tribal ethnic and other divisions. You have to combine not just capability development, but also industrial development, balanced across your different ethnicities, tribes and divisions. Otherwise, you would have disaster."

He went on: "Again the Bangladesh example is very interesting. The story then was that East Pakistan was not an entrepreneurial group. So the entrepreneurs had to come from West Pakistan. This did not work and the country exploded and split. Industrial activities are now higher in Bangladesh than Pakistan. This is one of the lessons of not having ethnic and cultural considerations of who is entrepreneurial and who is not entrepreneurial. The worst thing that we can do is to try to keep countries together by buying up support from different ethnicities."

The idea of buying up support, he said, should not take the place of building entrepreneurial capacity of these different ethnic groups.

"This is as important in Ethiopia, in Nigeria, in Tanzania, as in any African country, and I think the Asian experience is actually something to learn from," he noted.

Gabriel Negatu, Director General of the East Africa Regional Development and Business Delivery Office at the African Development Bank, who moderated the session, called on institutions to enforce rules, emphasizing how strong institutions were important for Africa's transformation.

"Balancing capacity development across regions in our respective countries is very important to resolving imbalances that lead to conflicts in our various African countries," Negatu added.

Dr. Adam Elhiraika, Director, Macroeconomic Policy Division at the Economic Commission for Africa (ECA), spoke on the need for long-term development plans, which he said Africa had abandoned long ago.

"For a long time a lot of countries and institutions that adopted industrial policies that were not adapted to the African context. Africa needs a new approach to industrial policy formulation. We need industrial policy institutions that are innovative, flexible and adaptive to changing circumstances," Elhiraika said.

Africa needs industrial policies that are dynamic and needs to move away from static policies that fuel cultural disparities and corruption, he said.

Good governance is a fundamental requisite to successfully achieve sustainable structural transformation. The African Development Bank has made efforts to boost governance in Africa through a series of initiatives, policies and frameworks, including the Governance Strategic Framework and Action Plan.

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