The World Bank recently conducted a risk assessment study of Rwanda’s agricultural sector and found that the country on average lost about $65 million annually over the past two decades. The findings were the focus of this year’s Rwanda economic update launched a fortnight ago. Washington based Asa Giertz, World Bank’s Agricultural Specialist who was the lead researcher of that risk assessment survey, exclusively talked to The New Times’ Kenneth Agutamba about her findings; excerpts.
You recently presented a risk assessment paper on Rwanda’s agricultural sector, what were the contents of that paper?
Rwanda is free from risks that greatly affect the sector. Nevertheless, we found that dry-spells and erratic rainfall greatly impact on crop and livestock production.
We also found that pests and diseases have significant impact on productivity and that the economic implications of disease outbreaks in the livestock sector can be substantial. We also found important price volatilities for milk and coffee.
But aren’t these the same risks the sector has been facing?
You are right, the people involved in the sector are aware of the risks they face and the risk assessment may not bring anything new. Our study only serves to show where the largest losses to the sector are in terms of commodities and regions, and how prevalent risks are in the different supply chains.
This makes it easier to prioritise risk management approaches as it gives a better idea of how managing the risks would decrease losses. It also gives an idea of how to prioritise risk management as the sector develops and sub-sectors grow.
You also say in the paper that Rwanda on average lost $1.2 billion to agricultural-related loses between 1995 and 2012. How did you reach the figure?
Actually, the annual average over the past two decades is about $65 million annually in terms of losses in crop production from adverse events that give lower yields than what could normally be expected (adding up to $1.2 billion in total over this period).
This figure captures only pre-harvest crop production losses from adverse events that have visible impacts at the national or provincial level. It does not; however, capture losses in the livestock sector or adverse impacts from, for example, price volatilities.
Weather and price fluctuation pose serious risks to the agriculture sector How can farmers/government circumvent these risks?
It is the private sector tasked with the responsibility of managing these risks. What the Government can do is to provide a suitable environment and invest more in research and services.
For weather-related risks, much of the risk management in the country will likely be improved agricultural practices, through improved water management and improved inputs, or through altering the commodities produced to better suit the climate.
Farmers will never be able to fully protect themselves from losses due to risks, but mitigating risks can go a long way. It is also important that farmers are able to achieve good yield levels and make profits in normal years so that they have some reserves to cope with inevitable risk events.
Prices are trickier as low prices can mean losses on one end of the supply chain and profits on the other, depending on the ability of the actor to profit from this price change. Also, high prices are good for producers but can be bad for consumers.
It is important that price setting is transparent so that an actor has all available information at hand when making investment decisions. Other than that, more productive producers are more resilient to price changes as their margins are bigger.
A price fall will be more damaging for someone who doesn’t produce that much on their land or with the inputs they use. Price volatilities can to a certain extent also be mitigated through more integrated supply chains, especially for perishable products, through contracting arrangements, or through branding of products for niche markets.
Considering the task at hand, would you be right to say that stakeholders are doing enough?
I would say no. Efforts are definitely underway to manage risks, but given the losses and existing yield levels, I would say that more can be done. However, the risk assessment that was conducted was only the first out of two assessments.
The second assessment, which will be carried out this spring, will look at existing risk management approaches in the sector, identify gaps, and propose areas of improvement for both the private and the public sector.
Are you aware that commercial banks in the country, last year, rejected 58 per cent of all loan applications from the agricultural sector?
This is really sad but but it is not a surprise because agriculture is often wrongly perceived as a risky sector to lend to by credit institutions and that’s why agricultural lending is low in many countries. But the World Bank works with financial institutions all over the world to introduce new methodologies to better evaluate loan applications for agriculture investments.
Can agriculture be relied on as a key pillar of economic development or should government focus on other sectors?
In all countries around the world, the agro-food sector plays an important role in national development. However, as agricultural productivity increases and other sectors in the economy develop, the main component of the agro-food sector tends to shift from primary production toward more processing and supply chain services.
Retail and food services also expand as incomes grow and consumers demand more food choices. Boosting investment, productivity and efficiency are proven ways of triggering new business opportunities in the sector beyond that of primary agriculture.
Your co-worker Apurva Sanghi, said the other day that unlike in Asian countries, the African elite have left agriculture for the poor rural folk. What is your take on this?,
I have not read the book that my colleague Apruva Sanghi referred to so I do not want to comment on that. The larger issue, however, is that those countries that have been successful in developing their agricultural sectors have done so with significant government support.
While a financial commitment is important, this support does not necessarily have to be in the form of subsidies, which is what we commonly think of when we think of agricultural support.
Instead, financing agricultural services, research and development, and rural investments have proven central in fast-tracking development of the agricultural sector; accommodative policies for the sectors’ development are also essential, thus, a true commitment from the government is critical for the success of the sector.
How can regional governments attract elites, particularly the youth, to engage in agriculture?
This is a challenge many countries grapple with around the world, with the average age of farmers worldwide standing at 60 years in Sub-Saharan Africa and 55 years in the United States.
In the age of Smartphones, fast fashion, and digital entertainment –how do we make agriculture appealing to young people and those with higher education?
First of all, farming has to make financial sense to someone who has a secondary or tertiary education. But the sector must also be attractive for entrepreneurs, with an environment that supports technological innovation and new ideas for marketing.
How to do this is more challenging. In some countries, the sector is promoted as any other business with farmers serving as the managers. In other countries, actors in the sector are promoted as custodians of a cultural heritage in the food they produce and the agricultural landscape they take care of.
So it depends on the local context, but the best approach may be a mixture of both. Beyond the agricultural sector, I think it’s important to invest more in rural infrastructure and public services. Young people do not want to stay in rural areas if the standard of water and sanitation, health services, or schools for their children is much below that of urban areas.
As an expert, what’s the surest way of making agricultural practice in this country commercially viable given our extremely limited land resource?
In general, limited land means that the cost of using it is high, which means that the user of land should make the most of it. For agriculture, this means that the land available should produce as much as possible in a sustainable manner.
However, the environment is constrained not only by the land available and by resources such as water, but also by the topography. Rwanda would have to determine what to produce and where in order for production to make financial sense.
Given the natural landscape, labour availability, and low level of mechanisation, high-value, labour-intensive agriculture is probably the best for Rwanda. But it depends, of course, also on labour productivity and salary levels, as well as product quality and available supply chains.
If agriculture was to achieve the targeted annual growth of 8.5 per cent by 2018, would this help get majority of farmers out of poverty?
Growth would be necessary for poverty reduction but growth by itself does not automatically lead to poverty reduction. First, population increase can outpace growth in the sector, so it’s important that economic growth is higher than population growth.
Second, growth only reduces poverty if it reaches the poor, either because the poorest segments see their incomes grow (through productivity increases or employment) or through redistribution measures. Obviously, inclusive growth through income increases generates more sustainable poverty reduction.
As a leading development partner, how’s World Bank’s working with Rwanda to mitigate these agricultural risks?
The World Bank is financing several projects that support risk mitigation in agriculture and increase resilience among the beneficiaries.
Such projects include: Rural Sector Support and the Land Husbandry and Water Harvesting and Hillside Irrigation projects, among others.
The projects aim at increasing productivity and commercialisation of marshland and hillside agriculture through watershed approaches, marshland and hillside irrigation and capacity building for farmers and their organisations.
The Transformation of Agriculture Programme supports improved agriculture and animal resource intensification practices, research and technology transfers and professionalisation of farmers, value chain development to encourage more private sector engagement, and institutional capacity development.
In addition, the World Bank also avails various resources for both the private and the public sectors such as technical advice, financing and learning material through the Forum for Agricultural Risk Management in Development (FARMD) and the AgriFin on-line platforms.