Africa, Population, Exports & Agriculture: Does any country get it?

Dear Africa interested individuals:

                                                     
         When a country has a large population in comparison to most other countries in the world, its has to overly prioritize feeding its population.  Efforts should be focused on responsible agricultural investment within the populous country.  Beyond feeding a country's population and generating produce for internal consumption and export, agriculture is also the world's largest provider of jobs.  

The twenty (20) most populous countries in the world as at 2015 are:

1. China

2. India

3. USA

4. Indonesia

5. Brazil

6. Pakistan

7. Nigeria

8. Bangladesh

9. Russia

10. Japan

11. Mexico

12. Phillipines

13. Ethiopia 

14. Vietnam

15. Egypt

16. Iran

17. Germany

18. Turkey

19. Democratic Republic of Congo (DRC)

20. Thailand   

There are four (4) African countries among the twenty most populous countries in the world.  How are these countries faring, feeding their population through maximization of their agricultural resources?  We will find out very soon; in the interim check this out.  

The five largest producers of cotton in the world are: China, India, USA, Pakistan and Brazil.  These five countries are also among the top six most populous countries in the world and all have a larger population than Nigeria.  Brazil produces more than 1.5 million metric tonnes per year.  Nigeria, the seventh most populous country in the world can only muster a production of about 600 (six hundred) metric tonnes per year.  Can you see Nigeria has a problem here? Nigeria did succeed in signing into law its National Biosafety Bill in May 2015.  This will help cotton farmers in Nigeria to obtain better seeds which has been a boost to cotton farming in Burkina Faso and enable cotton farmers in Nigeria to pivot from subsistence farming to commercial farming with better yields per hectare.  The link will continue to unfold between populous countries and their focus on agriculture to remain relevant and dominant.   

The three largest producers of rice in the world are: China, India & Indonesia; all three are among the five most populous countries in the world.  The top 5 rice exporters in the world for 2015 were: India, Thailand, USA, Vietnam and Pakistan.  China and Indonesia are conserving most of their production for internal consumption to feed their teeming population as rice is a staple food item and therefore do not factor as a top ten rice exporter.  Three of these top five rice exporters are among the top six most populous countries in the world (India, USA & Pakistan.)  Nigeria, as the seventh most populous country does not even factor into the rice export league table.  Indonesia is responsible for producing 52% of the world's palm oil trade and 27% of the world's rubber trade.  I have shown you a few examples of how countries with large populations have earned themselves a place at the top of the leader board for a variety of agricultural products.  Agricultural investment and production should be most paramount for populous countries.  Some get this and some do not.  Back to the African continent...

Ethiopia is the tenth largest exporter of coffee in the world with exports hitting the $1 Billion mark in 2015.  Kenya is the fourth largest exporter of tea in the world with exports valued at $440m in 2015.  Cote D' Ivoire is the largest exporter of cocoa in the world and earned $3.58B in 2014.  DRC Congo is the leading cobalt producer in the world and is rich in reserves of other hard commodities like gold, diamonds, copper and exports oil.

The five most populous countries in Africa are: Nigeria, Ethiopia, Egypt, DRC Congo & South Africa.  Ethiopia has been investing more in its agriculture sector and achieved a 10% GDP growth rate for 2014.  Ethiopia's largest export is coffee and the country is the fifth largest exporter of the product globally.  Agricultural exports contribute about 11% of Egypt's GDP while oil and related products contribute about 32% of GDP.  Egypt has had four devaluations since the start of 2015; the last one was in March 2016.  We see here the first sign of agricultural neglect.  Oil and tourism drive Egypt's economy.   

DRC Congo is the most resource rich African country.  While majority of DRC's exports are hard commodities, it is not solely dependent on one hard commodity like Nigeria and Egypt for a significant chunk of its exports.  DRC is the leading cobalt producer globally and the third largest diamond producer by volume globally.  South Africa is also hard commodity dependent, but on multiple commodities like DRC Congo.  Gold, Diamonds, Platinum, Coal and Iron Ore are the five main export earners for South Africa.  South Africa is the fifth largest producer of gold globally across most reviews.  

DRC Congo has an interesting story.  Inflation has decreased from about 50% in 2009 to 1% since 2013 due to cautious monetary and budgetary policies including a reduction in spending.  GDP growth rate was 9% for 2014.  DRC had a positive trade balance for 2013 and 2014.  The country has more untapped resources than tapped resources.  DRC Congo has prevented foreign entry into its diamond industry except for one joint venture with Belgium and De Beers.  Diamond is still mined informally and may be largely responsible for DRC Congo having the third largest production by volume and the tenth largest by value.  

DRC Congo, South Africa, Nigeria and Egypt (to a lesser extent) are said to be suffering from the 'resource curse.'  This in a nutshell is when a country's people suffer in the midst of plenty of natural resources.  Hard commodities are extracted from their land and the wealth from resources is structurally prevented from reaching the larger population.  In the midst of high GDP growth rates, poverty rates within the populace continue to remain high.  Transaction transparency across extractive industries continues to be poor.  The people continue to agitate for the government to ensure that the proceeds from the country's natural resources be properly accounted for and reach the wider population, not just the foreign direct investors and government leaders addicted to malfeasance and pursuance of rent-seeking opportunities for indivdual benefit.  Nigeria formed the Nigerian Extractive Industries Transparency Initiative (NEITI) in 2004 to improve the transparency of the extractive industries with particular emphasis on the oil and gas sector.  The jury is still out on its valued added twelve years on.  Let us talk more in two years... 

South Africa has the worst unemployment rate in the world at 26.7% for an emerging market country.  Nigeria continually grapples with violent agitations by people from the Niger Delta where Nigeria's crude oil is extracted from.  South Africa and Nigeria's currencies remain under pressure of further loss in value.  South Africa's investment grade credit rating may be lost on Friday this week when S&P does a review.  Pressure continues to build for Africa's populous countries without a strong agricultural footprint.    

The only country among Africa's five most populous countries with relative stability is Ethiopia.  Ethiopia is also the only one that has invested a lot in agriculture (the government made agriculture a priority since 1991.)  Agriculture also provides employment for about 80% of Ethiopia's population, 45% of GDP and 90% of export earnings.  GDP growth rate for 2015 was 9.6% while that of DRC Congo declined to 7.7% in 2015 from 9% in 2014.  It is said that about a third of Ethiopia's FDI goes into the agricultural sector.  South Africa's GDP growth rate was 1.3% in 2015, Nigeria was 2.1% and Egypt was 3.8% for 2015.  

Ethiopia is aiming to be the second largest exporter of coffee in the world (a position currently occupied by Columbia.)  Ethiopians are also the highest consumers of coffee in Africa.  This has led to domestic prices for coffee being higher than international prices.  Local populace consumes about half of the country's coffee production.  While coffee cannot be considered a staple commodity, it is clear that Ethiopians do not share that opinion.  The dilemma for Ethiopia is how best to balance local demand against the need for exports to generate foreign exchange badly needed for infrastructural development, given the price differential, which favors local consumption over exports for farmers.  Coffee exports generate a third of Ethiopia's foreign exchange earnings.  The country has a law that all the best coffee beans must be exported by coffee farmers as the government strives to meet increased international coffee demand and generate more foreign exchange.  It is alleged that only coffee beans damaged by moisture or insects can be sold locally.  The increased pressure on farmers to export more, may lead to a domestic shortage in the future which will likely be plugged by cheap imports.  A country in Africa has discovered what it can produce (as a staple product) through increased investment, export and still meet local demand.  This commitment to agriculture will create more employment (80% of Ethiopia's population is employed in the agricultural sector) and boost infrastructure development.  FDI investment will also boost technology transfer.

The key to economic prosperity (not just surface level growth) is: export consumption and import development.  Ethiopia has an absolute advantage in coffee production in Africa and a competitive comparative advantage globally and this is reflected in its impressive GDP growth rate.             

DRC Congo has also put emphasis on agriculture as the necessary antidote to the poverty that plagues its people in the midst of high GDP growth.  About two years ago, DRC Congo offered to lease vast hectares of land to foreign investors to farm on.  The government has realized that the private sector is key to developing the agricultural sector.  This renewed emphasis on agriculture over mining has helped limit the decline in the rate of GDP growth from 2014 - 2015 despite a tumble in commodity prices in 2015.  The DRC government is providing the necessary infrastructure in roads and electrification to encourage private sector investment coupled with 25-year land leases instead of outright sales to avoid land ownership conflicts.     

Nigeria is a major importer of rice and Egypt is a major importer of wheat globally.  When a country is saddled with a large population and cannot grow enough quantity of staple food items for local consumption, its economy will likely experience a cash crisis (reliance on aid, loans and debt to finance expenditure) and currency shocks as is the case now in Nigeria and Egypt.     

This article is not about economic diversification; the article is about economic realization for populous countries.  If a populous country cannot produce enough staple food to feed its people, it will enrich other countries and impoverish its own people.  China and Indonesia are top rice producers but not top rice exporters.  Simple economics tells us that you need to save to be able to invest.  Consumption is not investment.  The more a country consumes that it does not produce, the less is left for investment (except through external inflow) and the more dependent that country becomes on the rest of the world for its subsistence needs instead of investment needs.  This is exacerbated for populous countries.  Countries need to strive to import more of what can help develop the country and not import more of consumption items (staple foods) that are just a drain on resources.  Here today and gone tomorrow with nothing to show for it.  Nature cannot be cheated.  Use what you have in exchange for what you need.  The six most populous countries in the world and Ethiopia understand this.  DRC Congo is catching on fast. Nigeria, South Africa and Egypt have still refused to fully realize the extent of their folly and its negative perennial impact on their economies.  Hopefully, a new day will bring a new dawn.     

P.S. In Brazil, the economy is just waiting for the impeachment of Rousseff; every activity, every decision is pretty much suspended.  In Nigeria, the economy is apparently waiting for the devaluation of the Naira; every activity, every decision is pretty much on the back burner.  Brazil's unemployment rate just rose to an all-time high of 11.2% and Nigeria's stock market tanked on Monday because the president said he is not budging on official devaluation of the Nigerian currency when he gave a speech over the holiday weekend.  The former scenario makes sense, the latter does not, except if you are (an institutional investor/sell-side research analyst) trying to drive trades which has no tangible positive sustained impact on the people that reside in Nigeria.  Tomorrow beckons; as the Boy Scout motto says; be prepared.  

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