Developing Effective and Growth-Sustaining Agribusiness Markets in Sub-Saharan Africa

Strengthening agribusiness holds the key to economic revitalisation in much of Africa. For sub-Saharan countries, agriculture accounts for 70% of full-time employment, 33% of GDP and 40% of total export earnings, with importance highest for the continent’s poorest nations. With the right investment, it should relatively easily be able to double or triple Africa’s agricultural output and re-establish the continent as a major exporter of agricultural products. Despite having abundant lands processing levels is extremely low. In this paper we examine the potential impact of key policy actions in the agribusiness sector in selected countries in SSA. We focus on the significance of costs between the farm gate and the factory gate and investment costs for food manufacturing. We also estimate the impact on food manufacturing on the reduction of postharvest losses in selected countries in SSA. We estimate the importance of these costs by running simulations with the GTAP computable general equilibrium (CGE) model and data for the year 2011 from version 9 of the GTAP database. Results show that most sub-Saharan food manufacturing sectors are fairly responsive to lowering the costs of investment. For example, Kenya’s food manufacturing sector could expand the most, by about 0.65% for a 1% reduction in investment cost. With the same reduction, Cote d’Ivoire’s, Namibia’s, and Senegal’s food manufacturing sectors could expand by about 0.3-0.4%. Results also show that when the cost of farm products declines, demand for farm products and countries such as Cote d’Ivoire’s food manufacturing sector is the most responsive sector to reductions to post farm gate costs. A 1% reduction in the effective price paid by food manufacturing for farm products could lead to a 0.71% increase in Cote d’Ivoire’s food manufacturing.