Tag Archives: growth

Transforming Zimbabwe’s agrarian economy: why smallholder farming is important

In a recent article in the Cape Times , prompted by Max du Preez’s review of Joe Hanlon and colleague’s book, Tony Hawkins (professor of economics at UZ) and Sholto Cross (research fellow at UEA) make the case that Zimbabwe’s land reform has been a disaster, and that a smallholder, ‘peasant’ farming is not a route to economic growth.

Beyond the wholly inappropriate ad hominem attack on Hanlon (respectable newspapers should not publish such insults I believe – although they have printed a response), what is their actual argument? The views of a neoliberal economist and a one-time communist should be interesting I thought.

The full-page article starts with a slightly bizarre critique of what has become to be known as ‘peasant studies’, a strand of academic work that has built over the years (it’s the 40th anniversary of the Journal of Peasant Studies this year – and you can read 40 of the ‘classics’ in a free virtual issue – just sign in, it’s quick and easy!) that examines the dynamics of change in agrarian societies. They pinpoint the work of Frank Ellis at UEA and those at Sussex, including myself – but probably more appropriately Michael Lipton – who have advocated a smallholder path to economic development.

But it is a very odd caricature of these positions. There are very few who argue for a permanent condition of subsistence peasantry, somehow preserved in aspic. The point is that as a labour intensive, efficient form of production, small-scale agriculture, given the right support, can be an important driver of economic growth and poverty reduction (inclusive, pro-poor growth to use the current jargon). Diversification out of agriculture is an important dynamic too, as Frank Ellis’ work has shown from across Africa. As Michael Lipton argues in his magisterial book (now thankfully available in paperback), based on a mass evidence and experience, land reform can be an important spur to such a transformation. This is the foundation for the so-called East Asian economic miracles – in Korea, Taiwan, Japan and elsewhere.

This process of change is always dynamic, and takes time. Resettlement success, just as wider economic change resulting from large-scale redistribution, is never immediate, as Bill Kinsey and Hans Binswanger have shown. Restructuring of agricultural production has to be combined with the reconfiguration of supply industries and wider value chains. And following any redistributive land reform, there are inevitable processes of differentiation among agrarian classes. Some end up with larger plots, some smaller, others as labourers. It is the well-known multiplier effects of small-scale agriculture that can create economic opportunities elsewhere, and provide other non-farm livelihood opportunities, and so broader based growth. Migration to urban areas is also important, but maintaining a rural base as part of a wider social security mechanism is also crucial. And, yes, as the economy grows, there is a greater pull towards higher paid, industrial jobs and people leave the countryside over time. In their article, Hawkins and Cross forget this historical experience, and misinterpret the experience of China. Ha-Joon Chang has written a brilliant piece in JPS that is well worth a read if you want to get to grips with the comparative historical lessons – from Europe, Asia, Latin America and beyond.

Such transformations are therefore long-term processes, and always highly context specific. In the developmental states of East Asia (and elsewhere, and earlier in Europe), the state has an important role to play: protecting people and new businesses, and so guiding and nurturing the transition through targeted incentives and subsidies. You cannot expect the existing arrangement to be appropriate to a new scenario, so it’s important to facilitate the change of the wider agro-industrial base. What we are seeing in Zimbabwe is not so much “deindustrialisation” but a fundamental restructuring. Supporting such a transformation is essential, and this requires investment – something starkly absent in Zimbabwe due to a bankrupt government, a lack of private finance and donors refusing engagement due to sanctions.

Hawkins and Cross appear to reject such an agrarian vision for Zimbabwe. A welter of statistics are presented that fail to engage with the now substantial evidence base on Zimbabwe’s rural economy, presenting once again dubious production, employment, displacement and GDP figures to support their argument. Without reviewing the data (in Hanlon et al’s book, as well as ours, Matondi’s, Moyo and Chambati’s and many others), they proclaim that Zimbabwe’s land reform has been a failure, and that only option for economic growth in Zimbabwe is the old model of a large-scale commercial agricultural sector, combined with industrial manufacturing, reclaiming the assumed halcyon days of the 1990s (which of course they were not).

This view is deeply problematic. A focus on the large-scale agricultural sector may produce some growth, although in the globally competitive markets of today it is unlikely to produce much, but will it produce jobs and livelihoods? Jobless growth creates social divisions, inequality and pressure on the state to provide social protection to the economically disenfranchised. Look at the ‘third world’ in Europe and you can see the challenges. Zimbabwe’s own history, from the liberation war to the events of 2000, should show anyone that a return to an economic structure dominated by a few, but excluding the majority is not a politically viable option, even if it made any economic sense (which is very doubtful).

Hawkins and Cross seem blind to the opportunities of the new agrarian structure, rejecting these out of hand. Have they done any field research I wonder (I could not find any – only multiple ‘opinion’ articles from Hawkins)? Research from diverse sources has shown how across the new resettlements there are large numbers of new farmers ‘accumulating from below’ – generating surpluses, investing and accumulating. Not everyone, but enough to generate an economic dynamic that creates investment and employment. This has been done with vanishingly little external support. What more could be done if such support was larger and more effectively directed? Hawkins and Cross begrudgingly acknowledge the successes of some communal farmers in the 1980s, but this time the impact could be much wider, as there are more people involved, and they are geographically spread. In our book we argue for a form of local economic development that capitalises on this new agrarian dynamic, rooted in smallholder farming, but spinning out to new businesses and value chains. The new farmers are creating new local economies – currently small-scale, but with clear opportunities for generating further economic linkages.

Take the tomato farmers in Wondedzo resettlement areas near Masvingo – one of the case studies being documented by the PLAAS project on non-farm economies. Recognising the importance of the local market, they have invested in small-scale irrigation pumps, cleared land near the river areas, and have started to produce vegetables on a large scale. As their businesses have grown, they have employed more people, mostly women from nearby areas, and have worked with suppliers to get their crops to market. This has generated more employment along the value chain, with traders, transporters, retailers, supermarket chains and others becoming involved. Several have bought new one tonne trucks in the last year, to ensure prompt delivery to market. Again, this has brought new economic activity, with drivers, mechanics and others finding work. Input suppliers are attracted to the area, offering seeds, fertilisers, pesticides, piping, pump spare parts and more. And all of this is happening in the new land reform areas – without external support; yes on a small scale, but with significant cumulative impacts.

By area this sort of economic activity generates far more jobs and livelihoods than the large-scale commercial farms ever did. Being economically and socially integrated within rural settings, not set apart as was the case before, the multiplier effects are greater. Sales occur to supermarkets but also to small-scale traders – women who travel by bus to other towns and business centres to sell vegetables, sometimes processing them too to add value and to avoid losses.

But of course an agricultural economy cannot be just small-scale. The new agrarian structure of Zimbabwe is ‘tri-modal’, with a majority being small-scale (in the communal, A1 and old resettlement areas), but there are also medium scale commercial farms (A2) and the large-scale estates. Each can seek out their comparative advantages, and specialise production and marketing appropriately. But the important point is that there are now much greater opportunities for interaction – through contract farming, sharecropping, labour and market exchanges, and so on. This sort of integrated approach across farm scales to agricultural and rural development can have many spin-offs, and appropriately banishes the old dualism – a separation between ‘peasant’ agriculture and ‘modern’ commercial agriculture with its stark racial and economic divides – firmly to the past.

Hawkins and Cross seem to wish that this returns. They argue – on quite what basis it is not clear – that this is the only route to economic recovery for Zimbabwe. Yet they seem to reject the potentials of the dynamic entrepreneurialism and economic multipliers of the new agrarian system. With the potential of substantial state revenues from mining (as yet not fully captured of course), this is a moment when Zimbabwe could and should become southern Africa’s new developmental state, rebalancing the economy, and directing and supporting development in ways that allows for long-term, inclusive, poverty-reducing growth, initially rooted in smallholder production, but always transforming, as the economy rebuilds and restructures. Looking east, may well be the right thing to do, and the lessons from East Asia, as well as now SE Asia, may well provide important lessons.

At this critical moment, in advance of elections, political parties, media commentators, and academics alike need to engage with the realities on the ground, and avoid the posturing, the ideological grandstanding and the bitter, personal attacks and get to grips with the new realities. Harking on about the past, and failing to accept that there have been important successes of Zimbabwe’s land reform means that new thinking does not emerge. Hawkins and Cross need to engage with the facts of the present, not some idealised notion of the past.

This post was written by Ian Scoones and originally appeared on Zimbabweland

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Growth in jeopardy? Reflections on Zimbabwe’s 2013 budget statement

Minister of Finance Tendai Biti recently presented the 2013 budget. It was, in his words, the most difficult yet. He revised growth projections downwards to only 4.4%, because of continued depression in the global economy and uncertainty about Zimbabwe’s economic and political prospects.

But there were some bright spots. The minister has presided over a remarkable period of recovery. Some basic graphs in his budget statement illustrate the point (copied below). Zimbabwe has grown faster than any other country in the region, and mining and agriculture have been the greatest contributors to growth. By 2010 mining contributed a massive 18% to overall economic output as measured by formal GDP indicators, and nearly 50% of export revenue.

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Growth in agriculture was stronger than expected in 2012, as both tobacco and cotton performed better than projections. Maize was however heavily affected by drought. The treasury expects a continued pattern of growth in the sector, around 5-6%.

But the success of agriculture has been overshadowed by the growth of mining, with annual growth rates of around 30%. Exports increased by a massive 230% in the period from 2009-2011. By the end of 2011, mineral exports accounted for 47% of total exports, made up of platinum (43%), gold (28%), and diamonds (20%) in particular.  Furthermore, the average share of mining to GDP has grown from an average of 10.2% in the 1990s to an average of 16.9% from 2009–2011 overtaking agriculture. Diamond output is expected to increase to 16.9 million carats in 2013, largely driven by enhanced production from the major diamond mining houses at Marange Diamond Fields. Platinum output is expected to rebound to 11.5 tons in 2013.

However, while growth has occurred at impressive levels since dollarization in 2009, it has not continued at such rates. Zimbabwe’s seemingly miraculous recovery from the dire doldrums of the late 2000s may have stalled, a concern raised in the budget. With continued investment uncertainty, and the prospects of yet more disruption during and following elections, question marks are raised about the robustness of the economy. While minerals and agriculture can continue to underpin some growth, the levels required for recovery to earlier levels are still not being achieved.

How can the economy be revived for the longer term? This will require investment, including by the state. The 2013 budget offered US$3.8bn in government expenditure. But this is a pathetically small amount in relation to needs, and much of it already accounted for in terms of salary obligations. Government taxation and revenue collection is improving, but the economic base remains small. Tendai Biti is in a bind. He is right when he says there is no more cash – not even to finance an election, let alone forge a recovery.

Next week, I will look at some future scenarios, making the case for a greater focus on agriculture, and avoiding an overly strong reliance on minerals, despite their allure.

This post was written by Ian Scoones and originally appeared on Zimbabweland

 

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‘Resource nationalism’: a risk to economic recovery?

 In a recent presentation, Southern Africa: Economic Prospects 2012, Professor Tony Hawkins from the University of Zimbabwe, offered some notes of caution about Zimbabwe’s economic recovery, despite the high growth rates being recorded recently.

 He argues that Zimbabwe is becoming “increasingly resource-reliant with the share of GDP of agriculture and mining together now virtually double that of manufacturing”. This structural change is illustrated in a table, contrasting the share of GDP and percentage of exports in 1990 and 2010-11.

SHARE   IN GDP 1990 2010
Mining 4% 9.1%
Agriculture 15% 13%
Manufacturing 22% 11.5%
EXPORT   SHARES 1990 2011
Primary 82% 94.5%
Manufactures 18% 5.5%
Exports:GDP 28% 50%

Exports he explained “now contribute half of GDP – up from 28% – while the share of primary exports is up 95% from 82%. This reflects the de-industrialization of the economy”. He continues: “…if Zimbabwe is to re-industrialize, firms will need to have very different business models from those of the past”. But, he says policymakers are fixated “on capacity utilization, strategic industries, import substitution, self-sufficiency and local ownership”. This, he says, is “more likely to accelerate de-industrialization than reverse it”.

This is overlain with what he calls a “toxic cocktail of resource nationalism and the resource curse”. He explains: “The two interact as politicians, desperate for revenue and votes, prioritize wealth exploitation over wealth creation. The resource curse is evident where policymakers use diamond revenues to finance current – not capital – spending”.  Policymakers, he says, “argue that Zimbabwe is not a poor country – its diamond, gold and platinum wealth could – and should – be used to repay our foreign debt, rather than seeking debt relief. This is a political – sovereignty – argument, not an economic one. Those who tout this argument believe not just that Zimbabwe can – and should – go it alone, but also that this is a means of escaping the governance and structural reforms implicit in HIPC debt relief.”

He argues: “Resource nationalism takes many forms ranging from higher mining taxes to indigenization and local ownership laws. Regardless of what form it takes resource nationalism fails unless its long-run focus is on wealth generation, not asset ownership and short-termist wealth exploitation”. Reflecting on the statistics, he comments: “Today the Zimbabwe economy is recovering – not growing – by consuming its wealth. The country has increased its reliance on resource-depletion growth, while failing to diversify production and exports and invest in the future”.

He concludes that policy needs to shift the focus

  • “From consumption to investment
  • From asset ownership and wealth consumption to wealth creation
  • From needs-based remuneration to productivity-based earnings
  • From reviving uncompetitive firms that have passed their sell-by date to start-ups and new entrants.
  • From near-term income growth, reliant on wealth depletion and consumption, to long-term growth sustainability based on investment and competitiveness”.

These are all certainly good aims, and the note of caution about how mineral and agricultural riches can be fragile, if not reinvested is important. But the commodity boom driving economic growth across Africa is not going to go away. Africa is resource rich, and the demand for these riches is growing, particular in Asia. The new geopolitics reflects this as China, India, the Middle East, Brazil and others seek out alliances in Africa in order to secure access to resources to fuel their own economic growth.

This new world order is what Hawkins calls the ‘new normal’. Rethinking the political economy of growth in the era of the commodity boom will require accommodating these new realities, but also guarding against the risks, making sure the new riches are broadly shared and appropriately invested, and keeping the new investors accountable  and avoid dependency in a new periphery.  This will be a major challenge for future economic policy, in Zimbabwe and beyond; one that will require some major rethinking.

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