African governments need to implement policies that encourage fair competition to protect small farmers from being exploited by middlemen involved in cash crops trading and exports.
This, according to experts from African Centre for Economic Transformation (ACET), will improve small farmers' incomes and boost production.
While African farmers need governments and donors to make investments aimed at increasing agricultural productivity, such investments could depress commodity prices and farm incomes if they are not linked to market opportunities for farmers.
Poorly functioning markets, weak domestic demand, and lack of export possibilities are major constraints on Africa's agricultural growth prospects.
"Overall we find that an increase in competition among processors is good for the farmers while the reduction has the opposite effect," said Francis Mulangu, an agricultural economist at ACET He expressed these views in a research paper on 'Market competition in exports cash crops and farm income' presented at a session on Households and Market competition at the sixth African Economic Conference in Addis Ababa.
The conference is organized by the African Development Bank, the United Nations Economic Commission for Africa and the United Nations Development programme, on the theme 'Green Economy and Structural Transformation' African countries are still heavily dependent on traditional export crops, with cocoa, coffee, cotton, sugar, tea, and tobacco currently accounting for 50 percent of their total agricultural exports.
Due to falling world prices, increased production of traditional export crops has not translated into much growth in farm incomes.
Agriculture experts also argue that African agriculture has been severely undercapitalized and starved of much needed investments to structurally transform the sector and create linkages to ensure growth and competitiveness in the value chain.
"Weakness of the existing institutional frameworks has hindered development of proper market structures that can benefit small farmers. Governments must create credible institutions that will ensure proper competition in the market to protect farmers," said Ginette Camara, Economic Advisor at the UNDP Country office in Chad.
Ms. Camara also underscored the need for governments to improve access to information for small farmers as middlemen take advantage of their easy access to information to exploit farmers.
However, Professor William Amponsah from the School of Economic Development, Georgia Southern University, said that maintaining political stability was crucial to trade competitiveness and growth sustenance in the agriculture sector.
Using a case study on Kenya's flower trade with the European Union in the wake of the 2007 post-election conflict, Mr. Amponsah underscored that the conflict may have caused EU rose flower importers to shift their demand for Kenyan roses to other leading exporting countries such as Ecuador and other East African countries.
In addition, Mr. Amponsah also noted that the destruction of agricultural land, crops and related infrastructure associated with the political violence may have long-term implications for environmental sustainability and in raising the costs for Kenya's economic transformation as well.
"Governments must take into consideration the potential long-term costs of political instability relative to short-term benefits in conceptualizing a transformative development path that would address grievances associated with political instability."
For his part, Souleymane Abdullah, of UNECA, cautioned countries about Foreign Direct Investment in the agriculture sector that is mostly directed to exports which encourages use of pesticides and fertilizers that may have adverse effects on the environment.
In a presentation on "Household credit, Consumption and Asset Growth in Urban Ethiopia", Abbi Kedir from the University of Leicester, UK, said that provision of household credit was crucial for employment generation and serves as a growth engine.
Hundreds of economists, academics, researchers, government and civil society representatives and media from Africa and other continents are attending the four-day event, organized annually to discuss African development and related issues.