Implementing strategies for the rural economy: Lessons from Zimbabwe, options for South Africa

World Development,

Vol. 21, No. 9, pp. 15491566, 1993.

Printed in Great Britain.

0

0305-750X/93 $6.00 + 0.00 1993 Pergamon Press Ltd

for the Rural Economy: Options for South Africa

Implementing Strategies Lessons from Zimbabwe,

ROBERT E. CHRISTIANSEN The World Bank, Washington DC Summary. The growing likelihood that a new government will soon take power in South Africa means that many decisions must be made about the objectives, design, and implementation of a strategy for the rural economy in general and agricultural development in particular. The paper examines several lessons pertaining to the design and implementation of agricultural policy, based on the experience of Zimbabwe.

1. INTRODUCTION As prospects for a new government in South Africa improve, attention is beginning to focus on the elements of a policy framework for the new South Africa. A central element of this debate concerns the objectives and design of future policy for agriculture and the rural economy. Among the topics included in this debate are the extent and methodology of Iand reform; questions about the appropriate size of holdings; the labor absorptive capacity of the agricultural and, more broadly, the rural sector; and the productive potential of the rural sector in the context of a macroeconomic strategy. A less frequent topic for debate is the methodology that should be used to implement an agricultural strategy. Determining that methodology involves decisions about the roles of the public and private sectors, the responsibilities and authority of public sector agricultural institutions, and the degree of choice that farmers should have in selecting support services. The methodological approach, judging from the experience of other countries, will be critical to the success of any strategic objectives. During the design phase for the World Bank/ UNDP workshop held in Swaziland,’ representatives of a wide range of groups in South Africa requested that a case study of a single country’s experience with agricultural policy be included in the program. Zimbabwe was chosen as that case study for two reasons. First, there are many similarities between Zimbabwe and South Africa, including, history, distribution of resources, and climate. Second, many present and potential policy makers in South Africa see Zimbabwe as the country with the most relevant recent experi-

ence in managing the transition from a minority white government to a majority black government. The choice of Zimbabwe is not meant to suggest that only Zimbabwe’s experience is relevant to South Africa; and it is certainly not meant to single out that country for either criticism or praise. Instead, the choice is intended to recognize the importance that many South Africans assign to Zimbabwe’s experience. The purpose of this report is to: (a) provide a brief overview of Zimbabwe’s postindependence experience with the agriculture sector; (b) examine some of the lessons emerging from Zimbabwe’s experience with designing and coordinating an agricultural strategy; and (c) propose themes and directions for agricultural strategy in South Africa. The report is divided into three major parts. The first very briefly examines some of the relevant aspects of Zimbabwe’s experience with the agriculture sector. This is far from a complete treatment of Zimbabwe’s postindependence experience (we have ignored environmental issues, wildlife, input supply, and livestock), and is intended only to provide the reader with a sense of sectoral issues as a means of developing the lessons. The second section discusses several lessons relevant to South Africa. Then finally, and with several caveats, we examine some of the issues surrounding the formulation of a rural strategy for South Africa.

2. ZIMBABWE’S EXPERIENCE AGRICULTURE 198&89’

in

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In contrast Africa,

IN

to the economies of many countries Zimbabwe’s economy is well-

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diversified. In 1989, the industrial sector accounted for about 43% of GDP, services accounted for about 46% and agriculture accounted for about 11%. Despite the extensive diversification of the economy and agriculture’s relatively small share of GDP, however, agriculture’s contribution to exports and employment is significant. In 1988, for example, tobacco and cotton accounted for 25% of exports, while the sector as a whole accounted for about 40% of total merchandise exports and two-thirds of employment. At independence in 1980, Zimbabwe’s agricultural economy was characterized by: a badly skewed distribution of resources and production patterns that were a consequence of policies prior to independence, and a comprehensive set of regulations and controls that affected virtually all activities in the sector. The skewed distribution was - and continues to be - the result of the highly dualistic structure of the agricultural sector. The large-scale commercial sector (LSCS)” consists of about 4,600 farmers who own 29% of the nation’s land area and account for about two-thirds of the total agriculture output. In contrast, more than one million families live in overcrowded communal areas (CAs) that account for 42% of total land area, mainly in regions with poor soils and low, erratic rainfall. The high degree of government control of the economy and in particular the agricultural sector - was a result of the policy framework adopted by government following the Unilateral Declaration of Independence (UDI) in 1965. The controls were, however, well-suited to the philosophy and needs of the new government, and as a result, the system of economic management was retained - but with different objectives - and in some cases expanded throughout the 1980s. For example, with the exception of a few recently decontrolled crops, virtually all major commodities remained designated as controlled. Parastatal marketing boards continued to be directly responsible for trading the controlled commodities. Prices of controlled commodities and of all agricultural inputs continued to be determined administratively, and a wide range of regulations and licensing systems governed the activities of traders, transporters, and processors. The government’s main objectives in the agriculture sector during the first decade of independence were to redistribute land and to extend public sector agricultural support services to farmers in the communal and resettlement areas. In keeping with the style of economic management prior to independence, the land redistribution and resettlement programs were designed and implemented by the public sector, as were

the majority of agricultural services; but the programs were complemented and facilitated by the private sector.4 In order to achieve its objectives in agriculture, the government implemented three major initiatives. These were to: acquire and resettle agricultural land; reorient research, extension, credit, and veterinary services to be more favorable to small-scale farmers; and provide agricultural marketing services to farmers in communal areas for the first time. Each of these initiatives was supported by several departments as well as numerous donors. In the following sections, we provide an overview of the circumstances and policy decisions in four areas - macroeconomy, land and resettlement, pricing and marketing, and small-scale technology - that are essential to understanding events in the agriculture sector as a whole.

(a) Macroeconomic

and sectoral framework

During the first decade of independence (198&90), the real GDP in Zimbabwe grew by an average of 3.4% a year, and real exports grew by 3.5% -both only slightly greater than the 3% average yearly population growth. During the latter part of the decade, however, GDP growth reached 4.2%, due largely to increased agricultural production resulting from favorable weather conditions. For example, agricultural production in 1987-88 was 25% higher than in the drought year of 198687. More recently, though, poor weather conditions in the 1990-1991 growing season, and the disastrous drought in 1991-92, have severely affected macroeconomic performance. At the same time, relatively heavy shortterm borrowing in the early 1980s resulted in a debt service ratio of 37% by 1987 - up from 4% in 1980 - and there was, consequently, virtually no growth in imports. In addition, both public and private sector investment was low, with private sector investment falling to 8% of GDP by 1987. One of the most disappointing features of Zimbabwe’s economic performance during the 1980s was the failure of the economy to create sufficient employment for those entering the labor force. For the estimate 200,000 people who graduated from secondary school every year, only about 60,00&70,000 employment opportunities become available, and only 2O,OOtK30,000 of these were new jobs. Presently, about 70% of total employment, and 2&25% of formal employment, is in the agriculture sector. Agriculture’s contribution to formal employment declined during the 1980s chiefly because of

LESSONS

FROM

minimum wage legislation and other disincentives to labor-intensive production in the largefarm sector. This pattern of slow growth, low investment, and inadequate creation of jobs is the result of: risks associated with unsustainable fiscal deficits; limited and unpredictable access to imported capital goods and materials; and the high cost of doing business in Zimbabwe because of the wide array of regulations. macroeconomic performance Zimbabwe’s over the last 12 years highlights three important lessons: (i) Successive years of large fiscal deficits undermine private sector confidence and thereby constrain private sector investment; and fiscal options become more restricted as public debt mounts; (ii) Insufficient export growth, combined with external debt accumulation and debt servicing, constrains imports and subsequent investment and growth; and (iii) Large investment in human resources (education and health) needs to be complemented by growth in employment-intensive investment, in order to generate employment opportunities and enable expectations of rising living standards to be fulfilled.

(b) Land and resettlement The importance of the land issue in Zimbabwe becomes obvious by comparing the distribution of land in the large-scale commercial sector and the communal areas. As of 1988, the LSCS held 28.6% of the total land area, while the CAs accounted for about 42% of total area. The land in the LSCS is overwhelmingly of good quality 56.1% of LSCS land is in Natural Regions (NRs) I, II, or III.’ By contrast, only 25.8% of the communal areas are in these more fertile natural regions. The LSCS consists of approximately 4,660 farms, while there are 1,020,400 households in the CAs. Current schemes to resettle small farmers on LCSC and on state land, however, account for only about 8% of total land area and target only 52,000 households (World Bank, 1991). (i) Profile of agricultural subsectors The CAs consist of a total of 16.4 million hectares, 74% of which are located in the poorest rainfall zones, NRs IV and V. The total CA population in 1988 was roughly 5.1 million persons, representing a population density of about 31.1 persons per square kilometer.h The resettlement program has been the gov-

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ernment’s main instrument for redressing inequities in land distribution. Initiated in 1980, it was originally intended to last for three years and to resettle 18,000 families on 1.2 million hectares of land previously owned by European farmers. In 1982, however, the new government drafted a Transitional Development Plan that raised the targeted number of settlers to 162,000 families on 10 million hectares of land (Cusworth and Walker, 1988). According to the Ministry of Lands, Agriculture and Water Development (MLAWD), the government acquired 3,248 million hectares of land, at a total cost of Z$68,524 million (US$25-35 million), during 198&89. Of this area, 504,491 hectares were taken from state land and 2,743,827 were acquired through commercial purchases. The official target is still 162,000 families, but the amount of land to be redistributed has been revised and now stands at about five million hectares. The LSCS consists of about 4,660 large commercial farms on 11.2 million hectares of land; these farms employed 227,600 permanent and casual workers in 1988. Based on data from the 1983 census, which is the most recent, Zimbabwe had a population of 1,571,300 in 1982. Assuming a 3% growth rate, it is estimated that 1,876,200 people resided in the LSCS in 1988. Owners have full title to the land, as governed by the RomanDutch Law of the Cape Colony in 1891, as amended. Corporate ownership of farms is the most common form of farm management by area (61.0%), followed by individual ownership (34.3%).7 Government farms, parastatals, cooperatives, and the other categories make up the remaining 4.7%. Average farm size is 2,406 hectares; individual farms average 1,402 hectares, company farms average 3,835 hectares, and parastatals average 19,611 hectares. The small-scale commercial subsector (SSCS), formerly the Purchase areas,s encompasses 1,238,700 hectares located mainly in NR III (35.4% of all SSCS farms) and NR IV (38.2%). Estimates of the number and area of farms indicate that the sector comprises 8,653 farms on an area of 1,074,767 hectares. Average farm size at the time of the 1983 census was 124.2 hectares. Information on tenure is equally outdated. According to MLAWD, the SSCS comprised 1,428,623 hectares and 9,129 holders in 1981. Of this total, 564,800 hectares were allocated under agreements of lease and purchase, and 484,000 hectares under deed of grant and transfers, leaving 379,800 hectares unallocated. Of this remaining area, 177,400 hectares were taken by the government for resettlement in 1985, and 202,400 hectares are still vacant and unallocated.

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(ii) Resettlement Under the Land Acquisition Act of 1985, the seller of any private rural land gives the government the right of first refusal. Payment for the land is to be in local currency, with the price negotiated at the prevailing market rate. If the government acquires land other than through the willing buyer/willing seller system, then it is obliged to compensate the landowners in convertible currency. Government offers of purchase are based on technical assessments of the properties by both government and private valuers. Appropriate cropping patterns and livestockcarrying capacities are assessed, using norms developed within the commercial farm sector. The assessment is used by the AGRITEX Planning Branch to develop a farm plan for the resettled small farmers. The plan incorporates a scheme layout, investment proposals, farm budgets, and an overall financial and economic analysis. The original guidelines of the Land Acquisition Act required that applicants for resettlement be landless; unemployed and poor with dependents of 18-55 years; and prepared to forego all land rights in their CAs. Or they could be returning Zimbabwean refugees. Concern that scarce resources were being allocated to those least able to make use of them, however, led to revised settler selection criteria in 1984-85, which allowed some experienced CA farmers to be chosen for resettlement. These farmers were expected to forego all land rights in the CAs and give up any paid employment. Some 85% of all settlers are now former CA farmers. 5-10’~ are former farm laborers, and the remainder are refugees or displaced ex-combatants (Cusworth, 1990). Settlers are established on land according to one of five development models, the most common of which is Model A.Y The normal Model A scheme involves nucleated village settlements where individuals are allocated: a residential plot within a planned village; parcels of arable land (normally five hectares per family, of which three are expected to be cropped each season, with two lying fallow); and a grazing area based on the number of livestock units, which varies according to agro-ecological zone. Resettlement schemes that follow the Model A design proceed on either an intensive (normal) or accelerated basis. Land is occupied on the basis of temporary permits, and village grazing areas are shared. A typical scheme includes 250-600 families on 20,00025,000 hectares, depending on location and resource base. Schemes are provided with access roads. that link all villages with a rural service center where agricultural extension agents,

cooperative and health workers, and resettlement officers are located. The schemes are ultimately expected to have a health center and primary school. As of 1990. more than 75% of all resettlement schemes were normal Model A (Roth, 1990). Between 1980 and July 1989, about 52,000 families were resettled on more than 3,100,OOO hectares of acquired land. The pace of resettlement was more rapid during the first half of the 1980s than in the second half, which reflected the rate of land purchase and the level of funding available for the program. Land acquisition was most rapid during 198&84, when 83% of the total amount for the decade was acquired. In 1981-82 and 1982-83, the total amount of land purchased for resettlement exceeded 800,000 hectares, while in four of the five years following 1983-84, land purchase declined to about 80,000 hectares a year. In 198687, there was an unusually large amount of land purchased 133,000 hectares. During most of the decade, land prices were relatively constant in real terms, but since 1988-89 prices have risen sharply. In recent years, land offered to government for resettlement has been in smaller and more dispersed blocks than in previous years. Judgments on the performance of the resettlement program depend on expectations. Although the performance of resettled farmers - in terms of yields - has been well below that of the LSCS farmers, many analysts argue that resettlement planners expected progress to be slow. The opposing view is that even if it can be assumed that the yields of resettled farmers will eventually meet expectations, the economy cannot afford to continue to devote increasingly scarce resources to a comparatively small group. Against this background, we can make some observations. First, the dual objectives of attempting to address welfare goals in agriculture while seeking to duplicate the high levels of productivity that characterize the LSCS are likely to be mutually incompatible, at least in the short to medium term (5-15 years). The former objective requires selecting people who are disadvantaged and often not very able farmers; while the latter requires that settlers be skilled managers with adequate levels of resources. The available evidence indicates that a resettlement program is an inefficient vehicle for achieving equity goals, although the political pressures for expanded resettlement are evident. That fact, combined with the need to increase agricultural production, employment, and exports, means that the resettlement program should place much greater emphasis on increasing production in the resettlement areas.

LESSONS

FROM

With that goal in mind, guidelines for operating settlements will need to be modified. For example, tenure arrangements will need to be modified to provide greater security for settlers, especially female settlers because of their weak tenurial rights under current law. In addition, multiple sources of income, including off-farm sources, should be encouraged rather than prohibited. Further, it is clear that a central element in a strategy to increase the productivity of resettlement (and communal) area farmers should be to increase their use of improved technology. This will require improved availability of inputs through changes in marketing policy and increased profitability of inputs through improved technological packages. (For a more detailed discussion of resettlement, see Kinsey and Binswanger, 1993.) With respect to the acquisition of land for resettlement schemes, the guidelines should be changed to allow the subdivision and sale of small portions (e.g., 10 hectares) of land. In addition, a customized program of support will need to be devised for these small resettlement units, possibly through links with neighboring large-scale farms. More generally, it is important to recognize the links between resettlement performance, the continued pace of resettlement, and the government’s program of land acquisition. From the perspective of total production, and assuming current technological constraints, the wide-scale replacement of commercial production with lower-yield alternatives will have a strong adverse affect on national agricultural output, as well as on other sectors that rely on agriculture. Consequently, the future pace of resettlement should be determined more by effective support and by actual productivity increases within the resettlement areas, and less by the rate at which land is acquired or settlers can be put in place. The implication of these conclusions for government policy toward resettlement areas given the current resettlement model - is that the pace of resettlement should be slowed to perhaps 2,000 families a year, and that the focus of resettlement efforts should be on improving the performance of existing schemes. Given that many of the constraints facing resettlement farmers are the same as those facing CA farmers, these efforts could be easily coordinated. In addition, it is necessary to strengthen the operational and institutional aspects of the resettlement program, and in particular to allow more flexibility in how the schemes are implemented and managed. An effort to strengthen those aspects of the program should be at the heart of

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any further resettlement.

investments

(c) Pricing

or projects

and

that address

marketing

One of the primary tools that government has employed in regulating the pattern, source, and mix of agricultural production has been its system of pricing and marketing controls. A chief objective of these controls since independence has been to increase the participation of communal and resettlement area farmers in the market economy. As a result of these efforts, the share and volume of total maize and cotton production originating in the CAs increased significantly during the 1980s. Overall, the share of smallscale farm production in total marketed output increased from 15% in 1978 to 35% in 1988-89. The beneficiaries of the government’s efforts, however, have been concentrated on only a small percentage of farms; e.g., 90% of the marketed maize coming from the CAs is produced by only 10% of the farmers in these areas. In addition, while there has been some diversification toward horticultural crops, the capital requirements of such investment has meant that it has been undertaken exclusively in the large-farm sector, and therefore is effectively closed to small-scale farmers. (i) Agricultural marketing The main issue in agricultural marketing is the extent to which control is exerted over the marketing network. With the exception of a few recently decontrolled crops, virtually all major commodities are designated as controlled, and parastatal marketing boards are directly responsible for trading the vast majority of these commodities. Prices of controlled commodities and of all agricultural inputs are determined administratively, as is the allocation of foreign exchange for importing inputs. In addition, a wide range of regulations and licensing systems govern the activities of traders, transporters, and processors. “’ This highly regulated marketing network is the legacy of the preindependence era, and in part reflects needs that arose during the period of sanctions imposed on what was then Rhodesia by the international community.” This system was retained by the postindependence government because it was needed for extending marketing services to farmers in communal areas. The desire to correct past inequities in providing marketing services to these farmers, however, led to expansion of the marketing infrastructure and of the types of crops that were controlled.

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The number of producers registered with the Grain Marketing Board (GMB) rose from 28,160 in 1979 to 490,000 in 1989; and the number of GMB depots rose from 38 in 1980, almost all of which served the LSCS, to 70 in 1990, with most of the new markets established to serve the CAs. In addition to the Grain Marketing Board, there are the Cotton Marketing Board, the Dairy Marketing Board, and the Cold Storage Commission, all of which are responsible for physically implementing the government interventions in the marketing of controlled commodities. In the case of the GMB, the controlled commodities are white maize, yellow maize, wheat, white sorghum, red sorghum, pear1 millet, finger millet, soybeans, groundnuts, sunflower, edible beans, rice, and coffee. The involvement of the Ministry of Lands, Agriculture and Water Development (MLAWD) in marketing includes, inter ah: establishing policy for the parastatals and overseeing its implementation; analyzing price proposals on an annual basis and advising the Ministerial Economic Coordinating Committee and the Cabinet on prices to be gazetted; and considering applications for import licenses from the sector and forwarding them to the Ministry of Industry and Commerce. The respective marketing roles of the various public and private sector agencies are defined overall by regulations applying to all crops; and defined on a crop-specific basis by the way in which controlled crop regulations are applied. The main framework under which these agencies operate is laid down by the crop marketing acts, which give the Minister for Lands, Agriculture, and Water Development the authority to control crops, fix prices, and specify the parties that may engage in marketing. Of particular importance are the regulations governing crop movement. For the purpose of managing agricultural marketing, Zimbabwe is divided into two zones: Zone A, which encompasses all commercial farming areas and urban areas and includes resettlement areas on former commercial farms; and Zone B, which includes all CAs. The significance of this distinction is considerable. Within Zone A, the norm for most controlled crops is for a single channel market from the producer through the relevant marketing board. LSCS producers of white maize and oilseeds, for example, are allowed to sell only to the GMB. This system has ensured a high level of throughput for the board from those parts of the country that have the least year-to-year variation in production and amounts marketed. Controlled crops are not allowed to be moved into Zone B for sale - a ruling of considerable importance,

given that the requirements of deficit Zone B areas cannot be met by supplies from neighboring surplus areas. Within Zone B, local marketing is uncontrolled among the CAs, but any movement of cro s between the CAs and Zone A is prohibited. R Although many factors affect the performance of Zimbabwe’s marketing network, the most notable is the government’s control of the single channel marketing network, which is exercised through the parastatals and the system of administered prices. Efforts to apply this system to the needs of communal and resettlement area farmers have not been entirely satisfactory for either the boards or the farmers. For example, while extending the marketing system was crucial to increasing CA production of maize and cotton, it has also contributed to large parastatal deficits (which have also been exacerbated by a decline in the level of efficiency, due largely to increased costs). In turn, the deficits have played an important role in creating the fiscal crisis that is currently facing the government. The dominance of the parastatal marketing system has also severely hindered the development of informal markets in the rural areas, although these markets are common in neighboring countries (Food Studies Group, 1990). In the case of maize, the lack of effective informal markets has been a contributing factor in the high rate of malnutrition among children in many areas of the country (Rukuni et al., 1990). In broad terms, the factors hindering grain marketing are: high costs due to a variety of restrictions; widespread market fragmentation that results in an inadequate flow of food grains into deficit rural areas; and a weak transport infrastructure. These factors are manifested in prices for controlled crops, including the main food crops (maize, white sorghum, and pearl millet), which are higher in low potential zones than in high potential zones by a margin of 3253%. Although local market price data are limited, one clear implication of this situation is that there is no system in place either to ensure that grain will flow to deficit areas in response to shortages, or to control the consumer prices of basic foods. The absence of such a system in lower potential areas means that farmers will continue to place a high priority on domestic food self-sufficiency and will limit diversification of smallholder production. The most significant barrier to creating a more effective marketing network is the regulation that restricts the movement of controlled crops between Zone A and Zone B rural areas. This along with the requirement that restriction, surplus producers of controlled crops deliver

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these crops to the marketing boards, has the effect of channneling most surplus maize to the formal public sector marketing system, and from there to the industrial milling sector located in the urban areas. As a result, maize prices to consumers are much higher in many rural areas than would otherwise be the case. It is the present policy of ensuring relatively inexpensive supplies of food to the urban areas that results in this strong bias against the rural areas, which in turn partly accounts for the uneven development of the rural markets and small farmer incomes (Food Studies Group, 1990). (ii) Agricultural pricing As with marketing, the determination of agricultural prices in Zimbabwe is highly interventionist, with producer and consumer prices for most major products administratively determined. At the heart of price policy is the economic importance of white maize, because of its weight in consumer expenditure patterns and the high proportion of land and other resources that producers dedicate to this crop. To a considerable extent, the price levels of most other crops are determined in relation to the price of maize. This interventionist policy framework dates to the 1930s and was and is part of government’s effort to provide producers with predictable prices to facilitate investment and planting decisions. After independence, the objectives of price policy were formally expanded to include: promoting self-sufficiency in food and fiber production and satisfying the demand for agricultural raw material; improving the allocation of resources within the economy; achieving greater control over supply, thereby reducing price and income instability; raising the average level of producer incomes and increasing foreign exchange allocations; providing producers with the necessary incentives to increase output to meet production requirements; and retaining expertise and capital within the agricultural industry through incentive pricing.” As is the case with the agricultural marketing network, Zimbabwe’s interventionist pricing policy is a holdover from the preindependence era. Pricing policy was designed to serve a small agricultural elite and ensure the availability of inexpensive supplies of maize in urban areas, however; and it is not necessarily the best from an efficiency, equity, or budgetary point of view. The issues that need to be examined in regard to agricultural pricing policy, therefore, are: - the absolute and relative level of prices; - the timing of price announcements; -the uniformity of prices across distance and time;

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- the development of the private sector. The level of prices (especially relative prices) has had an important effect on the allocation of and somewhat surprisingly, has resources, favored the LSCS. In addition, the subsidies inherent in the level of input and output prices have tended to accrue to upper income groups. In reference to the issue of the timing of price announcements, it is essentially a matter of convenience. By relying on postplanting price announcements, it is easier for government to protect the financial interests of the marketing boards. Although this issue is not a critical one, preplanting prices are more compatible with a liberalized marketing environment than are postplanting price announcements. In reference to uniformity of prices, the development of an effective marketing system depends heavily on panterritorial prices. The high degree of regional (and seasonal) price uniformity results in inefficient transport movements, promotes production in inappropriate areas, discourages diversification, and favors surplus producers who are not typically among the lowest income groups. Relatedly, panterritorial prices have discouraged the development of private traders in rural areas, a result that has had strong negative consequences for household food security. In general, agricultural pricing policy since independence has created an incentive structure for producers that is broadly consistent with the type of structural change in agriculture that the government intended. At the same time, however, this policy has failed to sustain opportunities for raising agricultural productivity. Relative prices have moved consistently to the disadvantage of maize producers while benefiting producers of wheat, sunflower seeds, soybeans, and groundnuts. Of the main export earners, tobacco and cotton, tobacco prices have risen much faster than the general level of prices, in large part because tobacco is not a controlled crop. Cotton prices have grown relatively slowly, however, which means that the cotton/maize price ratio has remained static. Prices controlled by the government have not generally kept pace with inflation (the exception being wheat prices), with the result that real output prices have fallen over the decade. The differential pattern of price change has resulted in the intersectoral terms of trade moving against CA farmers and marginally in favor of LSCS farmers. The differences in cropping patterns causing this movement stem from CA farmers’ dependence on relatively low-value crops such as small grains and maize. Government efforts to promote diversification in production patterns toward higher value export crops appear to have

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been reasonably successful as far as the commercial farming subsector is concerned, but there are fewer technical options available for CA farmers, particularly in the drier NRs IV and V. The derivation of nominal and effective protection coefficients (NPCs and EPCs) demonstrates that on the whole, the sector is implicitly taxed rather than subsidized. Although NPCs lead to ambivalent conclusions with regard to some commodities (including cotton, groundnuts, and maize), in genera1 it is clear that agriculture is subject to fairly high levels of implicit taxation. The present system of setting administered prices involves extensive consultation with interested parties, and a detailed analysis of each controlled crop. It is inevitable, therefore, that some distortions enter the pricing structure, because of the inherent complexity of setting administered prices, especially where there are competing objectives, and shortcomings in the data available. In order to eliminate these distortions, it will be necessary to continue with the present policy of devaluing the currency and decontrolling producer prices. Decontrol of white maize will need to be phased, given its importance as a food crop.

(d)

productivity: The case of smallholder maize”

Zimbabwe’s experience with two crops cotton and maize - provides excellent information about what is required to encourage smailholders to adopt improved technologies. In comparison with other developing countries, especially in sub-Saharan Africa, Zimbabwe’s efforts to encourage smallholders to use improved production technology have been successful. This success, however, has been limited to maize and cotton hybrids. Almost every farm household grows maize as both a subsistence and - to some extent - a cash crop. The government estimates that during a normal year, well over 90% of maize is grown from hybrid seed. Evidence of the rapid adoption of hybrid maize comes from the full range of natural regions. In the ~angwende communal area (NR II) as of the late 1980s 100% of the maize area was planted to hybrid maize, an increase from about 29% in 1979 and 70% in 1985. Even in the dry NRs IV and V of Chivi, nearly 100% of the farmers are using hybrid maize (although they do not use only hybrid seed). Chivi farmers claim that the higher yields of hybrids over open-pollinated varieties make them a low-cost input. According to these farmers, the yield advantages were evident even in years of poor rainfatl (Rohrbach,

1988). Their preference for hybrid maize is due to both social and economic factors: seeds are readily available; the producer price is high; it is easy to process; and it has a low labor input compared to small grains, due to row planting. (i) Factors affecting adoption of new technology In order for new technology to be adopted, two general criteria need to be met - profitability and acceptable levels of risk. Fulfilling these criteria depends on stable price relationships, the availability of inputs and marketing services, and an efficient transport system. (ii) Factors affecting growth of production One of the most comprehensive analyses of the sources of growth of maize production (Rohrbath, 1988) concludes that no single factor explains the growth of smalIholder maize production and sales during the postindependence period. Rather, most growth is due to a complementary set of changes in agricultural policies, institutions, and technologies. The five most important causes of smallholder maize production growth have been: the ending of the independence war; the expansion of smalIholder credit; the expansion of input markets; the maintenance of favorable producer prices; and strong research and extension support. To this list should be added the fact that maize is the staple food of subsistence farmers, and that they therefore find technologies that improve the quantity and security of the supply to be highly attractive.

Table

1. Hybrid Maize Seed Sales in the

Co~m~nai Year

CA Sales

tons 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Source: Ashworth

Areas, 1980-89

4,300 5,683 11,411 15,120 17,872 17,599 23,312 20,141 21,409 23,999 Rohrbach (1990).

index 100 132 265 352 416 409 542 468 498 558

Total tons 10,524 17,747 23,601 24,152 23.049 24,164 29,323 24,896 25,640 28,502 (1989),

Sales index 100 169 205 229 219 234 279 237 244 271. cited

in

LESSONS

3. LESSONS

AND

FROM

IMPLICATIONS

In broad terms, two types of lessons emerge from recent experience in Zimbabwe. These lessons pertain to: the specifics of investment and policy reform efforts, and the working relationship between donors and government. As a starting point for a discussion of lessons and implications, it is necessary to stress that external agencies often cannot fully appreciate the political imperatives or constraints as perceived by a national government. What is presented here very much from the perspective of an external agency - aims to articulate the first best options for reform; but in fact, circumstances in Zimbabwe might not have permitted the luxury of the best option.

(a) Lessons

from policy and investment experience

The first lesson, which is central to any genuinely collaborative program between a government and donors, is that all parties need to understand, if not agree on, the management philosophy that government will practice in the sector and toward the broader economy. Failure to achieve this working understanding of the basic framework for developing solutions to problems will lead to frustration and allegations of duplicity. The second lesson is that extensive public sector control of the rural economy must be avoided. Regulations should be designed with a careful eye toward their impact on the structure of production incentives and the capacity of the public sector to enforce the regulations. In other words, it is necessary to weigh the gains to society of imposing a specific regulation against the cost of implementation. Experience in Zimbabwe suggests that efforts by the public sector to exercise extensive control over farmers or more generally, all economic agents in the agriculture sector - typically are not very effective in terms of achieving the goal of developing the sector. This is true because the public sector is not particularly good at anticipating or responding to market conditions, partly because of its inability to respond quickly to changes, and partly because of the tendency for many decisions to become politicized. For example, the real value of producer prices for maize declined during the latter half of the 1980s thereby contributing to reduced incentives for maize producers and low levels of maize stocks at the beginning of the drought in 1972. Both the complexity of setting maize prices, and the fact

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that producer and consumer prices had to be cleared by the Cabinet, were factors in this outcome. Another reason for the failure of models that feature extensive public sector control is that the mechanisms of control, e.g., regular price-setting exercises and the enforcement of regulations, are difficult to manage, especially as the target population expands. In the case of Zimbabwe, the transition from a target group that consisted of just white farmers (numbering 5,00&6,000) to one consisting of all farmers (totaling about one million households), overwhelmed public sector agricultural institutions. Quite apart from the number of households, and the starkly different requirements of households in the communal and the large farm sectors, the capacity of these institutions to cope with the transition was severely hindered by budgetary constraints. Third, at an operational level, there is need to translate the philosophy of public sector management into a clear mandate that will guide public as well as private sector agricultural institutions. Specifically, for which population will the public sector provide agricultural services, and at what level? At root, this is a question about the sustainability and quality of public sector agricultural services. Few governments can afford to finance agricultural services for the full range of potential users. Therefore, not only is it necessary to establish priorities for the types of services to be supplied, and for whom; but it is also necessary to develop cost-recovery strategies that give special consideration to low-income groups. Failure to articulate and implement such a mandate results in agricultural institutions that are underfunded relative to their assigned task, and therefore unable to provide satisfactory services to any group. A few public sector agricultural support services that are sustainable are preferable to a wide range of services that are not. Fourth, the process of reorienting agricultural support services, in both the public and private sectors, must focus on understanding the unique needs of small-scale farmers as distinct from those of their large-scale counterparts. As a starting point, it is necessary to understand that most small-scale farm households are characterized by an optimization process that is designed - among other things - to provide a stable supply of food and not necessarily to maximize yields per hectare. Given a variety of constraints (labor, access to inputs) this typically means that households will seek to diversify their sources of income. It is, therefore, not the case that the only viable farm households are those with access to 100, 200, or more hectares. A small-scale farm

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household can efficiently cultivate a small farm plot (5-10 hectares) and treat this as a single component of the household’s portfolio of assets. Further, it is often the case (and this appears to be true for South Africa) that a substantial body of research relevant to small-scale farmers is available, but that further research is required before these small farmers can adapt the new technologies to their own purposes.” Fifth, the determination of agricultural prices and the system of agricultural marketing should be as marketed-oriented as possible, but not without regulation. The lesson from Zimbabwe is that the price-setting mechanism has not proved flexible enough to respond to the needs of either producers or consumers. This does not mean that some regulations might not be appropriate. In the case of white maize, a compelling argument can be made for a floor on producer prices (with the government holding a maize stock) as a means of ensuring a minimum price incentive for farmers. A consumer price ceiling is more difficult to justify, since it is likely that consumers will be better served by encouraging competition in local maize markets. Finally. with regard to subsidies on agricultural inputs (including credit), experience suggests that it is best to avoid subsidies. Typically, subsidies are expensive to finance, with the result that the subsidized commodity is in scarce supply. Consequently, illicit markets could arise that charge farmers a price that is well above the subsidized price, and also above what the market price would have been. Alternatively, the subsidized commodity could be distributed in accordance with nonprice criteria, which usually favor the larger, richer farmers. With respect to marketing lessons, the evidence from Zimbabwe unequivocally shows that the system of regulation and crop movement controls, especially on white maize, has principally served the interests of urban millers. A liberalized crop marketing system - but one that ensures competition in local maize markets will better serve the interests of both consumers and producers than the present system of regulation. Sixth, it is essential that areas with a large public good component (e.g., household food security, safeguards against environmental degradation, women’s issues) be incorporated into public sector programs at an early stage. Failure to do so will result in these important issues being addressed in piecemeal fashion, as “add-ens.” In regard to this lesson, Zimbabwe provides an example that other countries would do well to emulate. The Department of Research and Specialist Services in the Ministry of Agriculture,

Lands and Water Development plans to send research teams to assess the technology needs of low-income rural households, paying special attention to households headed by women. These teams will consist not just of the usual agricultural researchers (e.g., plant breeders), but will also include strong representation from the social sciences (e.g., sociologists and anthropologists). Seventh, decisions concerning the nature and extent of public sector investment should be transparent and based on sectoral strategies that explicitly compare cross-sectoral needs. Making the process and criteria for allocating public sector investment funds as open as possible would enable sectoral actors (including the nonpublic sector) to more effectively participate in formulating a sectoral strategy. Eighth, the importance of the macroeconomic and sectoral environment can hardly be overstated, and it is widely recognized that exchange rates, interest rates, and monetary policy can have a profound effect on the performance of the sector. The more challenging question, however, is how to assist both the economy at large and individual sectors during the transition away from a heavily managed macroeconomic environment. Although there are numerous advocates of rapid transition, the pace of change needs to be based in part on: the capacity of the sector’s economy to respond to market forces, and the degree of competitiveness in the sector’s economy.

(b) Lessons

from

the working

relationship

The three lessons that are presented below are based on an evaluation that was limited to the experience of donors working with government. Readers who are interested in a more exhaustive analysis are referred to the World Bank’s recently published 600-page review of donor experience in six African countries (Lele, 1992). That review, which took five years to complete, goes into considerable detail about successful and unsuccessful approaches to assisting agricultural development in Africa. The first lesson from the evaluation of donor experience is that the working relationship between donors and the government must be dictated by the needs of the country and directed by government. Although this principle sounds obvious enough, it is rarely implemented. At the heart of successful implementation is the need for a sector strategy that is agreed upon by all parties. An articulated strategy provides a framework for individual investment and policy change

LESSONS

FROM

activities. Failure to agree, or at least understand, the operative framework, on the other hand, will result in conflicts over how to achieve goals. Second, government must take the lead in designing the program of sectoral research, policy change, and investments. Because each donor agency has its special area of interest, it is necessary, in order for the collective donor program to be coherent, for government ideally in cooperation with the nonpublic sectors - to define and coordinate operational priorities. Defining and coordinating can involve everything from evaluating donor requests for the government to undertake certain activities, to chairing steering committees that oversee activities, to refusing some donor requests. If setting and coordinating priorities is not properly handled by government, potentially valuable donor support could be lost. Failure to handle this task could also have other negative consequences. In one country in Southern Africa, for example, there are reportedly more than 300 ongoing agricultural projects. Third, effective channels of communication should be established between individual donors and the donor community. Without regular discussions of experience, problems, and objectives, donor coordination is doomed.

4. IMPLICATIONS

FOR

SOUTH

AFRICA

Agriculture in South Africa is widely regarded as a sophisticated and efficient sector. At the same time, the sector’s small (6%) share of GDP is seen as indicating a pattern of long-term decline of agricultural production that is consistent with a normal pattern of economic growth and development. Such a growth pattern implies that agriculture’s future contribution, in terms of employment and share of GDP, will continue to diminish. It is in this context that agriculture’s role in a strategy for a new South Africa is expected to be overshadowed by growth in the industrial and services sectors. A closer look at the present structure and performance of South Africa’s agricultural sector reveals that despite the appearance of efficiency, the economy in general - and that sector in particular - has followed a growth pattern that is far from normal. International comparisons with countries of similar level of GDP per capita and share of agricultural labor in the work force suggest that the current share of agriculture in South Africa’s GDP is lower than could be statistically expected (Lipton and Lipton, 1993). This low share in GDP is the result of

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widespread distortions introduced during the long history of government intervention, which was guided by the political and economic philosophy of white domination and apartheid. Some of these distortions are not particular to agriculture, but characterize the entire economy, as evidenced by the high capital-intensity of production in the presence of widespread unemployment. It seems, however, that the distortions in agriculture have been extremely far-reaching. In agriculture generally characterized by constant returns to scale - a comparatively small number of white farmers now own and operate large farms that account for more than 80% of South Africa’s agricultural land. These farmers enjoy income levels comparable to those in the urban sectors. The hypothesis on which our view of an appropriate agricultural strategy is based is that given South Africa’s factor endowments - in particular its abundant supply of labor its pattern of growth was not normal. On the contrary, it was perverse and came at great economic cost. The policy distortions that have produced a sector dominated by large-scale white farms do not reflect the optimum use of the country’s resources. The large-scale farm sector is inefficient in its current use of resources, in contrast to the small-scale farms that could operate in their place. The extent of the distortions suggests that agriculture’s potential contribution to the economy of a future South Africa is higher than reflected in its current low share of GDP, and that agriculture’s capacity to create employment is higher than that of any other major sector of the South African economy. A fundamental change in agricultural policies - i.e. removing current distortions in the existing commerial farm sector and coupled with creating a hitherto nonexistent small-scale commercial farm sector - will generate substantial new rural income, employment, and exports.

(a) The extent

of chunge

The most obvious point about South African agriculture - but one that deserves repetition is the magnitude of distortions, both economic and racial, that have characterized policies and institutions in the rural economy. These distortions have three principal dimensions. First, in the generation and allocation of assets - land and water, capital and human skills - a combination of racially based legislation and economic pressures has created an extremely unequal distribution.

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Second, entry into the sector, and growth within it, have been strongly influenced by a highly developed structure of regulations and institutions, many of them with statutorily defined roles. Output markets have been dominated by marketing boards responsible for the great majority of agricultural products; and these boards often exercise monopoly powers in such a way as to define the terms under which producers and processors can participate in production and marketing. The Land Bank, closely linked to the cooperatives, has been a channel for providing subsidized credit and other forms of financial assistance to selected producers. The close links of the Land Bank and other public sector organizations with the cooperatives, and with approved private sector companies that often operate in oligopolistic roles, have created an interlocking system of mutual interests that have not necessarily been responsive to the changing needs of producers and consumers. Third, for some decades, the emphasis in South African economic policy, at both the macroeconomic and sectoral levels, has been on administrative decisions for resource allocation rather than on market mechanisms. Labor markets, until recently, were highly regulated through discriminatory legislation intended to keep black populations in rural areas, except for those needed for formal employment in white areas. Capital markets have been segmented, with favorable access to subsidized interest rates for commercial farmers. Output and input prices have, for long periods, been kept out of line with market-clearing levels. Among the beneficiaries of these administered prices have been particular groups of agricultural producers, and parts of industry. Reforms to these interlinked systems of legal, institutional, and economic controls are underway to varying degrees. Economic policy has been liberalized, with the presumption among policy makers now being that market forces should increasingly play the dominant role in resource allocation. Some public institutions in the agricultural sector have been reformed, many regulatory controls are being eased, and most discriminatory legislation has been repealed. While these new approaches will take years to fully implement, the effects have already been dramatic for parts of the agricultural sector. Clearly, there is a strong case for continuing and accelerating this process, with a progressive move away from systems of economic control and direction over the economy and society, to one that favors more integrated, flexible, nondiscriminatory market-based systems of allocation. The market-based systems will not of themselves

correct inequities, however, and will need to be accompanied by affirmative actions. Despite the recent movement toward liberalization, it is important to recognize the sheer magnitude of the task of bringing about orderly change to the foundations of the agricultural sector. The present structure of agriculture reflects many decades of apartheid, which has shaped every aspect of society. Even with vigorous affirmative programs to corret past inequities, South African society will, for a long time to come, reflect patterns developed in the past. Recognizing that not all changes can be undertaken simultaneously, there is a need, as part of a reform agenda, to define an appropriate time scale and sequence for action.

(b) Redistribution and growth potential The main challenge facing the sector is to bring about needed changes to the distribution of productive assets while increasing agriculture’s contribution to the economy. The wider objectives to which agriculture can contribute include employment; income growth; human resource development; narrowing inequalities of income; access to education, health, and other services; and food security. While recognizing that agriculture is not likely to be an engine of growth for the economy as whole, its role is still significant. In particular, the export potential of the sector could make a major contribution to foreign exchange earnings and employment. There are two main aspects to this challenge. First is the question of how to promote the entry into land ownership and commercial agriculture of farmers who are presently excluded, but who have the potential to play an important role in production and marketing. These farmers will require access to land, complementary resources including credit, and supporting services such as research and technical training. This task will be complicated by the almost complete absence, by comparison with other countries of the region, of an independent class of black landowners or land leasers. It must also be recognized that many people, both black and white, will want access to land for reasons other than farming, including for residences, security of income and food, and emotional and cultural fulfillment. These needs must also be accommodated. The second aspect to the challenge is to ensure that the most productive parts of the sector are encouraged to grow and develop. There is widespread recognition that a core productive commercial sector is necessary to ensure costeffective supplies to urban and deficit rural

LESSONS

FROM

populations, to industry, and to export markets. The recent process of market liberalization has begun to reveal more clearly which subsectors, commodities, and areas have a comparative advantage and constitute the productive core. Several factors will assist in the process of continued growth and development of agriculture during the transition. These fall into two groups: wider economic factors, and factors internal to the sector. Recent national-level economic reforms have gone a long way toward correcting distortions in the agricultural sector and providing a sounder basis for future growth. For example, the currency depreciation has strengthened incentives for producers of exportable agricultural commodities; and the replacement of quantitative restrictions by tariffs has put South Africa in a better position to adjust to, and benefit from, the international trade liberalization that is expected to result from the General Agreement on Tariffs and Trade (GATT) negotiations. Taxation and interest rate changes have removed the earlier damaging inducements to overcapitalization in the sector, and may have begun to increase employment in agriculture. The progressive reduction in tight controls over agricultural markets has started to ease entry for new participants, and there is evidence of the growth of black enterprises, especially in marketing. The priorities for agricultural policy in the near future should be to continue the process of enabling new participants to enter production, processing, and trade, and to ensure that price signals for inputs and outputs encourage efficiency, growth, and employment. Within the sector, there are important complementarities between growth and redistribution that can be exploited. Black agriculture will have particular strengths - e.g., lower capital and import intensity of production, and readier access to family labor - that can help ensure the future growth of particular commodities. Examples of this possibility already exist. In sugar, for example, the expansion of production by black farmers in South Africa - as elsewhere in Africa - is a source of dynamism as some of the larger estates go out of production. Cotton is another crop that lends itself to production by blacks. Citrus and other horticultural crops also offer such potential, although care needs to be taken to ensure that the complex needs of quality production and marketing are met to obtain the full income benefits. Deciduous fruits offer a similar opportunity, so far largely unexploited. These and other enterprises based on commodities with favorable market prospects offer a wide range of opportunities for development programs involving both the private and public sectors. In

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this context, it is important to recognize that these market opportunities extend to foreign markets as well as domestic ones. Although considerable opportunities exist for redistribution and growth, however, it must be recognized that other factors will make it difficult to combine them successfully. First, unlike in Zimbabwe, there are few large, underutilized sources of well-watered high-potential land in South Africa that can be transferred to new owners without altering existing production and employment patterns. Second, the relative absence of a black commercial farming group will make the sector’s strong contribution to sustained growth more problematic. There are nevertheless several mitigating circumstances, including the existence of a large number of blacks in commercial agricultural areas who, as tenants or employees, have for many years been taking managerial and technical responsibility for the operations of farms owned by absentees. Third, the structure of private, cooperative, and public institutions serving commercial agriculture is not at present oriented toward the needs of black farmers. Fourth, the decline in profitability of major subsectors, in particular the grains, means that it would be imprudent to encourage new entrants to the sector to invest in these enterprises. Finally, it will be important to reassure existing producers in the core parts of the sector that they will be able to continue to invest and improve efficiency. In summary, there are many potential complementarities between existing subsectors and the interests of black entrants into agriculture. To use them to the fullest will call for a clear, consistent approach by government that combines the efficiency of markets with targeted interventions. Elements of such an approach should include: macroeconomic and pricing pohties that provide incentives for economically efficient patterns of production; mechanisms for opening access by blacks to production resources and support services; focused programs to enable blacks to participate in the production of commodities with the most promising market outlook; and measures to promote an environment of investor confidence among all participants in the sector.

(c) The role of agriculture in the rural economy South Africa’s rural economy presents unusual challenges for transition and further development. Some of its characteristics are similar to those found in other countries, but taken in

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combination, they underline the uniqueness of the country. These characteristics mean that no single paradigm can be used to design an appropriate development strategy. One characteristic is the gross imbalance between the large human population and the scarcity of land and other natural resources in the homeland areas, in striking contrast to some of the commercial areas, where the population is smaller and land is more abundant. In the latter areas, however, the state has intervened to help develop capital-intensive production over the past 20 years. As these distortions are removed, it is expected that agriculture in the homelands will become more labor-intensive. Another characteristic of South Africa’s rural economy is that the economic situation and motivation of those with access to land in the homelands reflects the long history of labor and means that a conventional migration, approach to agricultural production will not succeed. For many but not all households with plots of land, there are income-earning opportunities outside of agricultural that offer far better remuneration than field crop production, which accounts for an average of only about 15% of household income. There are at least three implications of the country’s unusual rural situation: (i) A rural growth strategy needs to take account of the fact that for many people, urban - or at least nonagricultural - employment is the priority. It cannot therefore be assumed that making available the normal services will induce range of agricultural agriculture-led growth. (ii) Agriculture is nevertheless a critical sector because it will effectively set the reference wage for a large percentage of the population. This will be especially important for some of the lowest income groups who do not have access to remittances, pensions or other nonfarm incomes. Such people will be highly motivated to raise production and incomes, although they will be short of resources with which to do so. Further, there is evidence that the flow of remittances to the rural areas is decreasing, which suggests greater reliance on agriculture in the future. (iii) The incomes of rural populations can be raised by instituting measures to strengthen the demand on the nonfarm rural labor market, or by improving access to employment through measures such as training. Two major points emerge. First, agriculture is important to a strategy for rural growth and development, both in commercial and in existing black farming areas, but it is not the only factor.

A wide range of measures to enhance the access of rural households to nonfarm incomes will also be essential. Second, it will be difficult to find a single set of policies or institutional approaches to meet the needs of the very disparate subsectors of the rural economy. While a strategy should be guided by the principle of creating more integrated and flexible markets for production factors and for outputs, there will also be a need for affirmative action and other programs tailored to the peculiar circumstances of the black population.

(d) Ekments of a rural strategy for South Africa The central objectives of a rural and agricultural strategy should be to: correct the present egregious distribution of resources, including agricultural land, while ensuring the economic and environmental sustainability of the resource base; improve income earning opportunities for households in the rural economy by strengthening support services and improving the policy context; promote black entrepreneurs in the rural economy; and encourage the growth of agricultural production, especially with regard to export markets. Certainly, the first step toward achieving these objectives should be to expand the program of research on the rural economy. The present understanding of how the rural economy operates - and in particular the behavior of households - is fragmented at best. Although there is extensive and reliable literature on rural South Africa, it tends to cover only small parts of the sector. In addition, the country’s rural economy seems to be among the more complex in the region. To increase understanding of the rural the Land and Agricultural Policy economy, Center was established in January 1993; this institution is an important step forward. In terms of an investment and policy reform program, the core elements of a strategy should include: (i) Land reform and resettlement Although the need for land reform is undeniable, it is necessary to guard against unduly high expectations about the extent to which land reform can resolve current and future problems. Two points are central. First, land reform, however widely implemented, will not be sufficient to fully alleviate the poverty of rural blacks. Second, the available supply of arable land is simply not sufficient to provide arable land to all, or even to the majority of those who want it. Based on the land reform and resettlement

LESSONS

FROM

experience of other countries, the program developed for South Africa will probably incorporate a market-assisted approach to land reform, but with a strong affirmative action component. The land reform program will need to be flexible enough to accommodate a range of land reform and use models, but structured enough to prevent abuse. The program should include the following central principles:‘6 - Land policy over the long-term needs to deemphasize class, race, and regional distinctions, and more toward a more integrated agricultural economy while recognizing that a vigorous affirmative action program in the short run will be necessary; - Sustained agricultural growth over the long term will depend on a more integrated rural structure, comprising a broad and continuous spectrum of farm sizes; - Government should not buy or expropriate any land. Instead, group of eligible beneficiaries should be helped to purchase land through the market; - Groups and/or individuals should purchase both privately held and state-owned land using a combination of their own resources, loans, and matching grants financed under the project. Land purchased by a group could then be either legally subdivided among group members or held as a single entity, depending on the group’s preferences; - Groups and/or individuals purchasing land through the land reform program should be eligible for financial and technical assistance in acquiring the land, and in establishing and managing the enterprise. This assistance should be designed to let members of the groups exercise as much choice as possible over the nature and source of the assistance, for example, through vouchers; - Criteria for a group’s participation in the program should be based on the strength of group; its income level; and its willingness to commit some of its own resources to part- or full-time farming; - Finally, more efficient and sustainable use and management of the nation’s soil and water resources are needed to correct decades of soil degradation. While there is considerable diversity of opinion about the scope of land redistribution and appropriate reform mechanisms, there is a clear consensus on the need for change. Whatever approach is ultimately taken toward land reform will need to be multifaceted and aimed at preserving the best characteristics of the commercial sector, while accommodating the realities confronting rural households. Simply redistribut-

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ing land from one sector to the other will not necessarily benefit recipient families, and could result in undesirable levels of absenteeism, idle land, loss of productivity, and loss of productive soils to farm land. A mix of legal, market, and resettlement approaches that are carefully tailored to different social, historical, and agroenvironmental situations will ultimately be required. Problems of productivity, agricultural growth, and sustainability of resource management, while they are challenges to land reform, can be alleviated through careful planning. This process needs to begin immediately with the design of policy changes and investments that will address tenure arrangements, land acquisition, land taxation, sub division, provision of support services, and most critically models of production.

(ii) Environrnenr It is commonly believed that the natural resource base in South Africa is extremely fragile and is being seriously degraded by many of the farming methods currently being practiced. Degradation is well-advanced in the commercial areas, and to an even greater extent in the homeland areas. Some policies have exacerbated these tendencies; for example, price supports have encouraged grain production in unsuitable areas, and influx control measures have led to localized overcrowding in the homelands. Economic and political reforms that are now underway or envisaged should correct many of these imbalances and ease some of the heaviest pressures on the natural resource base. Nevertheless, pressures on the resource base will continue unless we refine our understanding of all the factors - especially the policies - that account for its current degraded condition. This assessment should not be confined to just the rural areas. It will need to encompass the critical environmental issues in urban areas, such as water and air. Emerging from this assessment should be a program of policy change and investment that can be reconciled with crosssectoral priorities and the public sector budget. On the basis of this reconciliation, an investment program can be implemented. The central point here is that certain investments will need to be undertaken, but of equal or greater importance is the need to redesign the fundamental approach to rural activities to incorporate environmental costs. This new way of thinking should influence the entire range of activities contemplated in the rural sector, including the development of smallscale farming, alleviation of poverty, and promotion of exports.

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(iii) Reorientation of agricultural services At present, public sector agricultural institutions are not oriented toward the needs of smallscale farmers and will need to be restructured. The key questions that need to be answered before restructuring are which services will be provided by the public sector, and toward which groups will these services be directed; what are the needs of the target groups; and what combination of public sector financing. user fees, and grant resources will be used to finance public sector agricultural institutions? Once these questions are answered, it will be possible to devise a restructuring plan and determine the investments - relocating research stations and reorienting

extension services, for example needed for implementation.

-

that will be

(iv) Alleviation of poverty Recognizing the importance of the commercial dimensions of the rural economy is not to preclude poverty-oriented interventions. Not only will many of the commercial investments have a welfare component, but it will be necessary to design a program that alleviates the poverty of many households in the rural areas. Again, and only as a first step, it would be useful to examine the potential of public works program as a vehicle for transferring resources to low-income households.

NOTES 1. For a more detailed description of this workshop, see the editor’s introduction to this special section. 2. This section concentrates primarily on events during Zimbabwe’s first decade of independence (198049). Accordingly, much of the experience with the adjustment process that began in 1990 is not covered in this report. Much of the background material for the present section is taken from the Zimbabwe Agricultural Sector Memorandum (World Bank, 1991). which was prepared jointly by the Government of Zimbabwe, the World Bank, and donors active in Zimbabwe. Copies of the Memorandum are available from the author. 3. Since independence in 1980, land categories have been redefined as the large-scale commercial sector (LSCS), the small-scale commercial sector (SSCS), communal areas (CA), resettlement areas (RA), and public lands. 4. For example, improved seed varieties were developed, tested, and certified by the Department of Research and Specialist Services, but were multiplied and sold by the Seed Coop, a monopoly of large-scale commercial farmers. The Seed Coop was licensed to operate and regulated by the public sector. 5. Zimbabwe is divided into five natural regions (NRs) on the basis of quantity and reliability of rainfall, soil quality, and related factors. Natural Region I has the best agricultural conditions and Natural Region V has the poorest. 6. The 1988 population of the CAs was estimated to be 5,101,959 persons, based on population estimates of 4,272,811 in district councils (communal lands and small-scale commercial sector) in 1982, and a population growth rate of 3% during 1982-88. The number of households is calculated as the estimated population for 1988, divided by an average family size of 5.0 members per household.

7. The high percentage of corporate ownership does not necessarily mean that the sector is dominated by corporate farming interests. Most of these corporations are believed to be family corporations formed for tax purposes. 8. Purchase areas denote areas of the country where black farmers were legally permitted to purchase land prior to independence. 9. In Zimbabwe, there are four distinct resettlement models. Model A comprises smallholder farming based on individual allocations of arable land, communal grazing land, and nucleated villages; Model B comprises collective cooperatives; Model C is satellite production around a core estate; and Model D is an experiment to explore options for livestock-based resettlement. For a more complete discussion of these models, see Kinsey and Binswanger (1993). 10. The Minister of Lands, Agriculture, and Water Development has the power under the relevant Acts (e.g., the Grain Marketing Act) to control prices, movements, and marketing channels for controlled crops. 11. The sanctions were imposed shortly after Unilateral Declaration of Independence in 1965, and were kept in place until 1980. 12. Movement of controlled crops within the communal areas was legalized in 1991, but the failure of most agricultural production because of the drought means there is little experience with the impact of this change. 13. To these explicit objectives can be added three others that are implicit: providing food for consumers, in particular the urban population, at moderate prices; promoting the development of agriculture in the CAs; and restraining the growing budgetary cost of agricultural intervention. Clearly, there are conflicts among these objectives. For example, the need to restrain the budgetary cost of agricultural intervention conflicts with the desire for food security stockholdings and

LESSONS

FROM

expansion of the rural network of depots. Similarly, a fixed producer price might destabilize producer incomes where production is highly variable from year to year, as in the CAs. A system that maintained with lower levels of supplies could stimulate a price increase; but the fixed price system benefits urban interests (World Bank, 1991). 14. This section draws heavily on Rohrbach 1989) and Ashworth (1990).

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15. See Pritchard and Boekstegen analysis of the agricultural research Africa. 16. This section (1993).

draws

on Binswanger

(1992) system

for their in South

and Deininger

(1988 and

REFERENCES Ashworth, Vincent A., “Agricultural technology and the communal farm sector,” Background paper prepared for Zimbabwe Agriculture Secror Memorandum (Washington, DC: The World Bank, 1990). Binswanger, Hans, and K. Deininger, “South Africa land policy: The legacy of history and current options,” World Development, Vol. 21, No. 9 (September 1993), this issue. Bruce, John W.. “Land policy and state farm divestiture in Mozambique,” Land Tenure Center Paper (Madison: University of Wisconsin, 1990). Bruce, John W., “Legal issues in land use and resettlement,” Background paper prepared for Zimbabwe Agriculture Sector Memorandum (Washington, DC: The World Bank, 1990). Bruce, John W., “The variety of reform: A review of recent experience with land reform and the reform of land tenure, with particular reference to the African experience,” Paper prepared for the Conference on Human Rights in a Post Apartheid South African Constitution (New York: Columbia University, September 25-28, 1989). Bruce, John W., “Land tenure issues in project design and strategies for agricultural development in SubSaharan Africa,” Land Tenure Center Paoer No. 128 (Madison: University of Wisconsin, 1986). Cusworth, John, “Land resettlement issues,” Background paper prepared for Zimbabwe Agriculture Sector Memorandum (Washington, DC: The World Bank, 1990). Cusworth, John, and Judy Walker, “Land resettlement in Zimbabwe, a preliminary evaluation,” Evaluation Report EV 434 (London: Overseas Development Administration, 1988). Food Studies Group, “Agricultural marketing and pricing in Zimbabwe,” Background paper prepared for Zimbabwe Agriculture- Sector’ Memorandum (Washington. DC: The World Bank. 1990). seed industry,” F&s-Hans&, Esbern, “ The Zimbabwe Background paper prepared for Zimbabwe Agriculture Sector Memorandum (Washington, DC: The World Bank, 1991). Kinsey, B. H., “Forever gained: Resettlement and land policy in the context of national development in Zimbabwe,” Journal of the International African Institute, Vol. 52, No. 3 (1992). PP. 92-113. Kinsey, B. H., and Hans P. Binswanger, “Characteristics and performance of resettlement programs: A review,” World Developmenf, Vol. 21, No. 9 (September 1993), this issue.

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