2.3.2. Transforming Agriculture and Food Systems

successfully use these programs to shield their citizens from the worst impacts of the pandemic. The recent rise in global food and fuel prices provides further opportunity to test and scale these systems to support vulnerable households, while continuing to advocate for increases in domestic ownership and financing to these initiatives.

2.3.2. Transforming Agriculture and Food Systems

Africa has the potential to contribute to feeding nine billion people across the globe by 2050 as it has a significant amount of underutilized land and water resources. Agriculture remains a pivotal sector for Sub-Saharan African development to provide calories and nutrition for 294 million severely food insecure Africans, and as a source of employment opportunities for nearly two-thirds of the 11 million young people in the region who will be joining the job market every year over the next decade.81 Finally, the sector plays a key role in effectively adapting to climate change and improving the lives of the extremely poor.

Food demand in Sub-Saharan Africa will continue to grow at a fast pace as the trends in population growth and urbanization persist. This offers a unique opportunity for farmers in the continent to step up efforts to meet this growing demand. In turn, meeting such demand requires the reorientation and/or implementation of policies and investments that transform agriculture and food systems along the value chain—with important implications for strengthening urban-rural linkages. This agenda will include the following:

First, the implementation of measures and systems that improve the quality and effectiveness of government support to agriculture. While fiscal space remains limited for many countries in the region, governments need to repurpose (the scarce) resources toward investments in high-quality, high-return public goods such as research and development (R&D), human capital (including education, training, and extension services), technology (including green innovations), energy, transport and water-efficient irrigation infrastructure, as well as actionable climate change adaptation policies, and the strengthening of sanitary, phytosanitary, and veterinary systems.

Second, government efforts to boost agricultural output and productivity—especially for food staples—need to be complemented with policies that enable the free flow of foodstuffs and agricultural innovations (for example, certified seeds) across borders in the continent. Promoting trade in agricultural products, inputs, and technologies within Sub-Saharan Africa and beyond provides an opportunity to enhance the resilience of agri-food systems to international market shocks (such as price and/or supply shocks arising from global weather shocks or external conflicts). Leveraging existing regional trade agreements and the AfCFTA offers an opportunity to coordinate and commit to the organization of production and trade—particularly, fostering the development of regional value chains. Removing trade and technical barriers, improving trade facilitation, and enabling the free flow of investments across borders are essential.82

Third, the transformation of agri-food value chains requires an increased focus on the development of whole value chains, rather than a production-centric view of agriculture. Whole value chains have a large job-multiplier effect, with activities potentially more attractive to the

81 Filmer and Fox (2014). 82 The regional strategy can potentially absorb smallholder farmers and micro, small, and medium-sized enterprises and connect them to the larger private sector that dominates input and output markets. In addition, the rising integration of stakeholders along agri-food value chains (say, from farmers to processors, transporters to retailers, among others) has the potential to create jobs, improve agricultural productivity, and guarantee food security.

youth than on-farm work. They enable smallholders to add value and attract investments, as well as increase dietary diversity and nutritional outcomes. Seizing this opportunity requires policies that support the transformation of the midstream segments of agricultural chains— namely, processing, storage, transport, wholesale, retail, and food services, among others. New equipment and products as well as enhanced management practices improve the quality and reduce the cost of processing, storage, transport, retail, and food services. The transformation of processing and trading systems as well as changes in the organization model of supply chains will enable farmers to access (domestic and global) higher value markets and improve the standards of their products (for example, the teff value chain supplying Addis Ababa, Ethiopia).

Overall, transformation and modernization of agriculture is crucial to foster an inclusive, climatesmart, and productivity-enhancing structural transformation across Sub-Saharan African economies. The continent needs to develop a new agrarian system—one that combines smallholder farmers with a new dynamic generation of medium-sized and large commercial farmers while preserving its natural capital.83 This emerging segment of dynamic, commerciallyoriented, small/medium-sized farmers can become a significant source of demand for innovation, capital investment, and service provision, which together will drive productivity growth.84

A. Boosting the Quality of Public Investment to Raise Agricultural Productivity Public policies have an essential role in building sustainable food systems, and they are crucial for enhancing agricultural productivity growth. There is a need to spend more public funds on agriculture to meet the Comprehensive African Agricultural Development Programme target of 10 percent of the total budget. However, the current environment of restricted fiscal space caused by the pandemic and the energy and food crises requires Sub-Saharan African countries to improve the quality of spending and use the scarce resources more efficiently. On average, countries in the region spend around 6 percent of their total budgets on agriculture,85 and this funding level may remain in place for the foreseeable future. Hence, improving the efficiency and effectiveness of public spending will be critical to unlock the potential of agricultural growth and job generation, while meeting the climate change challenges.. Countries would need to reallocate funds to high-return investments in public goods that will advance the long-term food systems transformation agenda.

The effectiveness of high-quality public spending in bolstering growth has strong empirical validation.86 Although many studies find quite low returns to aggregate spending on agriculture, almost all find high returns to specific types of spending, such as investments related to technology generation and diffusion, market linkages, and irrigation infrastructure. However, currently a large part of the spending in some countries goes to low-return expenditure programs, such as variable input subsidies (fertilizers). They provide incentives for unsustainable patterns of production and consumption, and are dragging down the overall returns relative

83 Medium-scale farms (5-100 hectares) now control roughly 20 percent of total farmland in Kenya, 32 percent in Ghana, 39 percent in Tanzania, and over 50 percent in Zambia. In Tanzania, medium-sized farms generate 13 million labor days per year. This trend in most cases reflects increased interest in land by urban-based professionals or influential rural people. About half of these farmers obtained their land later in life, financed by nonfarm income. A greater share of savings in urban areas is being reinvested in farming and agribusiness. 84 Jayne et al. (2019). 85 This figure is taken from Pernechele et al. (2021). 86 For example, see Gautam et al. (2022).