The Africa Continental Free Trade Agreement as an indispensable arsenal in the fortifying of Africa’s agri-food systems and ensuring that the economic potential of the sector is fully exploited for the benefit of the continent at large, says agricultural economist Thulasizwe Mkhabela. Photo: Supplied
JOHANNESBURG – There is no doubt that agriculture is one of Africa’s most important economic sectors as it contributes up 23 percent of the continent’s gross domestic product (GDP).
Agriculture’s importance to African economies goes beyond its narrow contribution to GDP. In sub-Saharan Africa, for example, the agriculture sector employs 60 percent of economically active population.
Furthermore, Africa’s exports of food and agricultural products are worth between $35 billion (R605bn) and $40bn a year, and some $8bna year flows through intra-regional trade in these products. Moreover, Africa’s food and agricultural imports amount to between $45bn and $50bn a year, together with $6bn a year in imports of agricultural inputs.
The information above paints a picture of a negative balance of trade, where African countries import more agri-food products than they export.
This skewed trade with the rest of the world is exacerbated by the continent’s inability to produce its own agricultural inputs thus heavily relying on imports despite Africa’s perennial fiscal constraints worsened by weak exchange rates.
The current agricultural trade is a typology of the rest of the African economy. This situation needs to be ameliorated and the Africa Continental Free Trade Agreement is a step in the right direct and should not be allowed to be derailed – not even by the unforgiving Covid-19 pandemic.
It is heartening to see that Africa’s agricultural markets remain largely open, and that prices in African markets are largely stable, despite initial price hikes caused by panic buying and stockpiling at the beginning of the lockdown in many countries.
Agricultural exports, however, have faced severe disruptions. These disruptions have been largely a consequence of border shutdowns as countries entered lockdown and intensified their endeavours to “flatten the curve” and avoid more catastrophic escalation of infections.
Despite the resilience of the agriculture sector in Africa, the Covid-19 pandemic has had (and continues to have) deleterious effect on the sector.
On the demand side, these shocks include loss of jobs and livelihoods, and food price volatility, which could deepen the crisis through increased food insecurity. Covid-19 has created significant demand-side pressure that may worsen food insecurity on the continent owing to loss of incomes and potential food price increases caused by localised supply shocks and depreciating currencies.
In the short term, with the closure of restaurants and hotels, demand for higher-end food categories such as meat, dairy products and fresh produce has already been depressed in most countries. A number of African countries are now easing restrictions, and restaurants are coming back into operation, albeit under strict restrictions in line with guidelines for dealing with the pandemic.
However, in the medium- to long-term, demand within countries is likely to remain depressed and even fall further as more than 150 million Africans could lose all or part of their livelihoods because of the pandemic.
Job losses are likely to disproportionately affect low-income earners and informal jobs in urban areas. Taking into consideration the impact of these job losses on dependants, it is likely that between 400 million and 460 million people in Africa, are facing the prospect of reduced incomes and subsequent food insecurity.
Given that lower-income households often spend 60 to 80 percent of their incomes on food, even a moderate reduction in income could lead to food security and nutritional problems like skipping meals, reducing caloric intake, or switching to cheaper but less nutritious foods. This is likely to be exacerbated by school closures and/or phased-in reopening; given that school feeding schemes are often a major source of nutrition for children and assist in increasing demand of food products thus creating market outlets for
farmers.
Governments and other agri-food industry players are in a unique position to consider measures that could cushion the sector and speed up recovery thus positioning the sector for the emerging new normal. This is an opportunity that cannot be missed if the African agriculture sector is to withstand current and future crises with the fortitude required.
It is necessary to minimise disruptions to Africa’s agricultural and food systems. If governments and private-sector players along the value-chain act now, they can lessen the potential shocks that lie ahead.
Key steps include safeguarding food security, understanding and managing the forces that shape demand, and ensuring that agricultural production is sustained. It will also be important to maintain trade flows, including keeping regional and international borders open for trade as far as possible.
Hence, the importance of the Africa Continental Free Trade Agreement as an indispensable arsenal in the fortifying of Africa’s agri-food systems and ensuring that the economic potential of the sector is fully exploited for the benefit of the continent at large.
Suffice to say that the available evidence suggests that the impacts of the Covid-19 pandemic will be felt widely, but variedly. Operations at farm may be spared the worst, while small and medium-sized enterprises in urban areas, including restaurants and other hospitality catering facilities will face significant problems.
Governments will have to develop policies to respond to these uneven impacts to avoid supply chain disruptions, higher food prices, and severe economic ramifications for millions of workers and, consequently, their dependants.
Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact & Partnerships at the Agricultural Research Council; mkhabelat@arc.agric.za