High value products or staple crops? A discussion on development strategies for Southern Africa

Unexploited agricultural potential and regional trade opportunities together with the presence of South Africa and other middle-income countries, offer Southern Africa the unique opportunity to foster agricultural growth through regional linkages. In this study a global general equilibrium model that focuses on Southern Africa is used to analyze the implications that these specific characteristics of the regional economy have on growth choices of low-income countries. Three groups of growth scenarios are define to analyze the role of South Africa as a possible engine of growth, the role of own growth engines in low-income countries, and growth linkages between middle- and low-income countries. Results of the simulation scenarios show that larger benefits to low-income countries can be expected from grain and livestock productivity growth as a result of high multiplier effects and the large share of these activities in GDP. Productivity growth in grain and livestock results in higher GDP growth, higher agricultural output and food consumption, and lower agricultural imports than with productivity growth in non-traditional export crops. Unlike other regions where growth in grain production is likely constrained by domestic demand, growing middle-income economies in Southern Africa can provide additional demand to grains and livestock, slowing down the decline in grain prices in the region.