The policy and legislative environment is a key driver of agricultural transformation. Policy and regulatory regimes “define the rules of the game”. They regulate the roles and behaviour of players in the sector, determine resource allocation, and assign incentives and disincentives accordingly.
Policies shape the business environment by influencing costs, risks, and competition barriers for different players in the agricultural value chain. This in turn extensively affects investment decisions not only by the government but also by the private sector. Thus, by a single stroke of a policy or law, the government can shift the direction and pace of agricultural development.
By Davis Muthini
Opinion leaders in agricultural development agree that the observed changes in Africa’s agriculture and economic fortunes over time have much to do with the policies that African leaders have chosen than anything else. Weak policies and poor legislative decisions have shaped the continent’s agriculture and economic growth by stifling investments in skills, technology, services, and infrastructure.
Whereas regulation is important to ensure safe agricultural practices, setting quality standards, encouraging innovation and sustainable use of resources; heavy regulation creates burdensome procedures and high transaction costs and can be detrimental, especially to small players. Therefore, the benefits of regulations should always outweigh its social and economic costs. Excessive regulation with opaque discretion and overbearing regulations in the agriculture sector can constrain innovation and trade, to the detriment of poor farmers in the rural villages in the continent.
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Agriculture policy and legislative regimes are very dynamic. Governments are constantly enacting new policies and revising existing ones. Yet, a lingering question is how grounded these decisions are in solid data and evidence. Many times, policies have had unintended negative consequences, while others are lacking in key aspects that ensure effectiveness, equity, and sustainability.
Consider the policies enacted by African countries since independence. In the 1960s-1980s, many nations implemented import substitution industrialization policies, which included trade restrictions like import barriers, marketing controls, and export taxes. These measures aimed to protect nascent industries from competition. However, they inadvertently raised prices for imported fertilizer and equipment, while exports lost competitiveness due to currency appreciation.
The infamous Structural Adjustment Programs (SAPs) instituted in the 1980s-1990s pushed for better incentives for producers and reduced restrictions for the private sector to invest by eliminating public agricultural marketing boards, ending subsidies, deregulating agricultural pricing and marketing. Evidence is mixed, but many countries experienced strong productivity growth in the 2000s, as a result of macroeconomic stabilization.
At the continental level, the post-2000s era policy has been driven by the Comprehensive Africa Agriculture Development Programme (CAADP), the 2014 Malabo Declaration on Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods, and the Africa Continental Free Trade Area (AfCFTA). These commitments require countries to allocate at least 10 percent of public expenditures to agriculture, achieve a 6 percent average annual agricultural growth rate, and reduce restrictions to intra-African agricultural trade, among others. Although CAADP has resulted in increased prominence of agriculture in policy agendas and therefore expenditure and funding, research shows that most of the funding has been allocated to input subsidies.
The subsidies, although associated with increased use of inputs and higher agricultural yields, are poorly designed and rife with inefficiency, bias, and corruption. Implementation of the AfCFTA is constrained by the continued use of temporary regional trade restriction policies, ostensibly as countries seek to respond to food supply and deficit conditions. The International Trade Centre data finds that 70% of African food exporters are affected by challenges related to non-tariff measures. These trade-restricting policy measures sometimes founder and push prices higherEx-ante policy analysis and pre-legislative assessments utilize predictive analysis techniques to forecast the impact of a policy or legislation prior to its implementation.
During an ex-ante evaluation, policymakers gather data and evidence to assess the thoroughness of problem/gap diagnostics, relevance and coherence of proposed strategies and objectives to users, consistency with other policies and strategies, pragmatism of expected results, and economic and social impacts on various stakeholders and their activities.Policies informed by data and evidence are more likely to be effective, equitable, and sustainable. Yet, despite the clear benefits, there are many instances where agriculture policy and legislative decisions are driven more by political expedience or ideology than by data and evidence.
Policymakers in Africa face data availability and quality challenges. Outdated, incomplete, and biased data hinder effective decision-making. Political interests often override evidence-based choices. For instance, despite evidence of inefficiency, bias, and corruption, some governments persistently implement publicly driven input subsidy programs instead of exploring private sector-driven alternatives.To overcome such challenges, African governments and partners should invest in robust data collection and analytics infrastructure (technology) and skilling (training of personnel to analyze and interpret data). To effectively utilize the data for policy, a culture of transparency and accountability, where data and the rationale behind policy decisions are shared publicly to build trust with stakeholders should be fostered.
The CAADP Biennial Review process is an example of a publicly available accountability mechanism where the performance of countries against the various Malabo declaration indicators is tracked. Lastly, the role of stakeholder engagement cannot be ignored.The inclusion of various interest groups such as scientist groups and think tanks, provides reliable evidence and exchange of knowledge, while public engagement enhances scrutiny, relevance, and acceptance of policies.
Muthini is a Policy Analyst at AGRA
