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Agriculture and the rural non-farm sector: rivals or complements?

Date
Time (GMT +00) 13:00 14:30

Speakers:

Deborah Bryceson, Leiden and Peter Hazell, Imperial College

Chair:

Steve Wiggins, ODI

Peter Hazell outlined the key characteristics of the rural non-farm economy (RNFE). Typically the sector generates around 35-40% of rural incomes and occupies about 25% of labour time: these shares are higher for the rural poor who depend disproportionately on the RNFE for their livelihoods. The sector consists of heterogeneous activities; typically produced on a small scale, tending to agglomerate in rural market centres.

Most of what is produced is non-tradable, being consumed in local markets. This means the sector depends on the growth of rural activities that produce tradables of which agriculture is usually the main example. Given such growth, multipliers stimulate the RNFE, partly from linkages in production inputs, processing, etc. but above all from spending of additional (agricultural) incomes in consumption linkages. The multipliers can be considerable: estimates for Asia run in the range of 1.6 to 1.9, for Latin America 1.3 to 1.5, and for Africa 1.3 to 1.5.
Globalisation and market liberalisation can create opportunities: the output of some rural activities become tradable a prime example being tourism in remote rural areas of outstanding natural beauty. On the other hand, competition from imports can decimate rural manufacturing including craft production.

The RNFE is affected by the investments of large private firms, NGO programmes and government policies. Policy for the sector, however, tends to be uncoordinated: usually there is no single government ministry or agency that has overview of the RNFE. The appropriate role for government is that of
# creating an enabling environment institutions and policies, provision of physical infrastructure and human capital, and stimulating rural financial systems, where there is much scope for putting rural savings to work;
# ensuring the poor have access to opportunities, and that there is buffering from market shocks; and
# sustaining the environment.
Principles for public intervention include:
# Assessing the regional context, where the key point is to foster engines or drivers of growth, that is activities capable of producing tradable surpluses. In remote rural areas finding these may be difficult;
# Analysing supply chains, with tools as simple as SWOT, to identify bottlenecks; and,
# Building flexible institutional coalitions of government, private and NGO agencies to make interventions, rather than creating new public bureaucracies that may stifle private initiatives.
Deborah Bryceson  Deborah Bryceson, noting her approach to be that of a geographer and sociologist, stressed the changing work patterns seen in rural areas, and associated cultural changes. Most of what follows comes from observing African cases.

The 1980s saw price movements against traditional smallholder export crops. As structural adjustment programmes were introduced, households diversified into a wider range of activities. This not only produced a stratification of peasant households, but also women and youth became significant earners of cash incomes. As markets were progressively liberalised in the 1990s, export crops came to be seen as an old man's occupation, while women and youth moved into diversified activities in the RNFE although the patterns that emerged were highly varied by location. Urbanisation, above all the growth of secondary towns, proved a major stimulus.

In Tanzania the strong growth of opportunities in tourism, urban areas, and in gold mining by the end of 2003 formal mining was earning more than US$600M in forex, three times the value of traditional export crops accelerated de-peasantisation.

In Malawi, the rural areas were hit by the decline in remittances from migrant labour. With low rates of urbanisation and little to invest in intensified farming, a process of agricultural involution took place. The results seen include rampant poverty, with many forced to resort to casual ('ganyu') labour, recurrent famines, peasants dispossessed of land, and as if it this were not bad enough having to cope with HIV/AIDS as well.

For households, considerations of agriculture or the non-farm economy is not an issue: they seek whatever opportunities that can be had. But in the process we see loss of coherence of households. In Tanzania, new opportunities offer more flexibility, while in Malawi we see desperation. Agricultural specialists need to recognise the emerging patterns, with the associated changes in lifestyles and attitudes.

In conclusion:
# Old models of rural activity, with smallholder farming at the core, are disintegrating;
# Producing traditional agricultural commodities for export is a lost cause unless there is major reform to address the imbalance between producer subsidies received by farmers in developed countries as opposed to farmers without subsidies in developing countries;
# Linkages between farming and the RNFE are affected by changes in household relations for farming households there is a crisis in access to agricultural inputs;
# Rural households will continue, however, to try as far as possible to produce the bulk of their staple foods; and,
# A national policy challenge is to find ways to facilitate commercial food production.

The following issues arose in discussion:

The role of remittances: a source of investment and consumption, as well as a way to offset risks in rural activities, noted Peter Hazell.

Rainfall variations: Deborah Bryceson agreed these had a strong effect on rural economies, as did movements in commodity prices.
The basis for public interventions: the government role needs to be restricted to correcting market failures. Peter Hazell agreed: government had a poor record of co-ordination, coalitions of common interest that could be led by private firms or NGOs were a better way to get the public goods and institutions provided.

The salience of urbanisation and its potential to transform rural economies. Deborah Bryceson noted how rural areas can be urbanised: energy, electricity above all, is key all manner of new activities can be undertaken once power supplies are to hand. Scope exists for active policy on urbanisation, in zoning, for example.

Estimates of multipliers: critiques of quantitative models, including those for the Muda Valley in Malaysia, pointed out that they ignored the distribution of benefits across households and between areas, and that they took no account of environmental impacts. Peter Hazell replied that the study of Muda took place in the early 1970s, when Malaysia was still an agrarian country, when getting growth was paramount. That capital flowed out from the Valley may have been true, but the multipliers were both large and contained within Malaysia for the overall benefit of national development.

Distribution of benefits matters, insisted one participant. The quantitative models tell us only so much of the story: we need to know more of the dynamics in particular locations; we need to learn from specific cases of success.

Transport: Peter Hazell pointed out that the poorer the physical infrastructure the weaker the linkages seen are.
Disaster relief monies have the potential to produce dramatic impacts on rural economies, but how sustainable are such impacts? Deborah Bryceson replied that mining had similar effects of creating a sudden large injection of funds into the rural economy.

Where should investment in rural areas go? And if we speak of engines of growth, should this be agriculture? Peter Hazell noted that agriculture was often the only option, especially in Africa South of the Sahara. Despite this there had been little investment in farming by government or donors. In contrast, in Vietnam, public investment in agriculture had produced, within a decade, large increases in exports of crops such as coffee.

Deborah Bryceson concurred that governments had done too little on behalf of agriculture,. Indeed structural adjustment policies had betrayed the green revolution in Africa. Fertiliser subsidies, targeted to deserving farmers, were a case in point: in Malawi the loss of subsidies on fertiliser was one of the most keenly felt grievances in rural areas. Policy, she added, cannot be laissez-faire: government has to have a vision, and it needs to recognise de-agrarianisation.

Description

Overwhelming evidence shows that in rural economies the non-farm sector is becoming increasingly important for jobs and incomes. At first sight, the RNFE offers an alternative to agricultural development, a rival for policy-makers’ attention and development funding. But how much does the non-farm sector’s growth depend on agriculture? Or is there substantial scope for independent development of the sector, and if so what policies are needed to realise the potential?