By Asha Farag Injeri
February 13, 2013 (SSNA) — South Sudan depends highly on the export of oil to pay its imports and to finance government expenditure. This dependency needs urgently to be reduced, for several reasons: South Sudan’s oil is a finite, a limited resource: The oil production has already reached its peak in 2011 and is declining steadily until it will be negligible in 2035. Oil incomes are also due to unforeseeable price fluctuations that make a country depending on those vulnerable. Furthermore, oil production does not create sizeable local employment, as it depends mainly on relatively highly skilled labour that is not available locally and is also very capital intensive. Thus, oil production does not directly contribute to poverty reduction through employment creation. More generally, as oil is only pumped out of the soil and directly exported, it has very little linkages to the local economy which would stimulate the overall national economy.
This is very different for South Sudan’s agriculture. First, most people depend on agriculture and are employed in it. More than 80% of all South Sudanese live in rural areas. Agriculture is also very labour intensive, that is, much labour is used per output unit. It also meets the very first need of people: food. People spend almost 80% of their income on food. Before meeting any other needs of people, they must be able to eat. Furthermore, the sector can produce food exports for the region (which is characterised by food shortages) and beyond. In a time of rising demand for food worldwide this can be a perfect income creator. And specifically for South Sudan, agricultural production must realistically be the backbone of any strategy to overcome the oil dependency and diversify the economy.
However, currently agriculture is almost only practised with very low-level technologies and with very limited output. The country is not able to feed itself: food imports were nearly half (43%) of all imports in 2012, while food exports were negligible. And poverty is concentrated in rural areas. Many reports state that ‘only 4% of the country’s fertile land is used’, while the country is only sparsely populated (13 people per square kilometre).
For all these reasons, agricultural development must be given highest priority: to feed the country’s people, to provide income creating employment, to develop non-oil exports to pay for imports and to incresingly be a base for government’s incomes through taxes. Agriculture is also very well placed to stimulate other economic sectors through its typically strong linkages to other activities: forward linkages (industries processing agricultural products), backward linkages (industries providing agricultural inputs: tools and machinery) and consumer linkages (meeting the consumption needs of the rural population).
As South Sudan is a latecomer to development, it can learn from past experiences of others. However, it is best to learn from own experiences, as development depends in the first place on local conditions and strategies appropriate to these. And there are these experiences, in particular in the 1970s where an ambitious ‘breadbasket strategy’ was tried in Sudan, of which South Sudan was a part – and this was the most peaceful period of the joint Sudan as well. Nevertheless, the breadbasket strategy largely failed. There are in fact a number of lessons that can and should be learnt from this experience. South Sudan can ill afford to repeat these mistakes again.
The strategy was designed in the wake of the first ‘oil shock’ which suddenly provided the Arab oil producers with huge cash. Idea of the strategy was to invest this capital in Sudan’s agriculture in order to reduce the Arab region’s high food deficits. Modern technologies were to be used to open up the vast savannahs of the country, mainly in its West, through mechanised farming systems (MFS).
Key document of the strategy was the ‘Basic programme for Agricultural development 1976-85’. Its comprehensive and ambitious formulations influenced Government’s Six-Year Plan (1976/77-1982/83) and it’s Food Investment Strategy (1977-85). The programme based on assumptions about the huge agricultural potential of Sudan: an irrigable area of 9.0 m. feddan (1 feddan is 0.42 hectares), a potentially cultivable area under rainfed conditions of 71.0 m. feddan, of which only 33% and 17% resp. were presently under cultivation. Realization of this potential would make possible high production increases: from less than 2.0 m. tons (1972/73) to 27 m. tons (1985) in grain production, from less than 1.0 m. tons to 12.0 m. tons in oil seeds (mainly ground nuts, sesame and cotton seeds), cotton from 0.6 to 3.6 m. tons, fruits and vegetables from less than 1 m. to over 7 m. tons, pulses from 35,000 to 250,000 tons, and 110,000 to 2, 7 m tons of sugar. On top of this, even after full implementation of these increases the potential in meat production was estimated to be 8-10 times the present level (from 4-500,000 to 3.5 m. tons).
Overall, the Basic Programme planned for a quite phenomenal increase in agricultural output. Furthermore, a substantial degree of diversification was planned away from the high concentration on cotton: Its share in agricultural export earnings was to fall from 60% (1970-73) to 23% in 1985. While the production of grains, oil seed crops, livestock products and gum Arabic would expand, new export commodities were to become prominent: sugar, wheat, rice, fruits, and vegetables. Except for cotton and gum Arabic, all these exports were particularly interesting for the Arab market. However, the geographical concentration of investments on North-East Sudan was not planned to be altered significantly: only 24% was targeted on the West and only 4% (!) on the South.
The approach of the Basic Programme relied on two key assumptions:
However, both of these assumptions were questionable and actually questioned by several critics at the time. In fact, the vast savannahs of West Sudan had been appropriately used in the past by systems of rotational farming, combining animal husbandry and monadic cattle breeding. This extensive way of land use can be seen as appropriate for the relatively unfavourable climatically and geological conditions of much of West Sudan. Already in the 1960s experts had pointed out that ‘statistical under population has little correspondence with reality’. Indeed, it was found that in reality, a lot of many already pointed to a condition of acute and increasing shortage of land. Intensification of land use and increasing population density had started to disturb the fragile ecological balance of the western savannahs since the 1930s.
These problems were only exacerbated by the establishment of modern sector projects in irrigation and mechanised farming that were reported to almost always cause a high level of expulsion of native peasants and nomads from the ecologically most favourable areas. Government statements of basically empty land only waiting for investors contrasted with long time phenomena of overgrazing, over-cultivation and soil erosion registered mainly in the West (Darfur and Kordofan), but also in Red Sea Province, the Butana and even the South. Government statements inviting investors were basically a policy aiming at a maximisation of exports without consideration of effects on traditional producers. They were to bear the opportunity cost of expansion of the modern sector that Government declared to be about zero.
Concerning the feasibility of expansion of MFS to the Western savannahs and other areas, doubts existed with regard to technical, economic, ecological, and social considerations. MFS are extensive cultivation with high capital costs. Start-up costs of new farms (1000-1500 fd each) were estimated of as US$ 27,000 of foreign exchange for machinery. Yield levels were typically high after initial clearing but declining after a short time. For sorghum that covered more than 90% of mechanised farms initial yields might be 1000 kg/fd, but would quickly reduce to 100-200 kg/fd. For this reason, farmers would leave their land after few years and move to new farms.
In comparison to traditional farming, MFS achieved at best slightly higher yields, but the production costs were almost double as high. Thus, the return on MFS were higher only because higher sales prices, or even lower than in traditional farming, as some studies found. In sum, the yields/cost relationship in MFS was precarious. These figures reflect the risky character of MFS, characterised by wide fluctuations in yields. The low yield had to be compensated by area expansion. In sum, MFS did not offer comparative advantages.
However, government – favouring development based on MFS – subsidised the sector by provision of land at a nominal rent, credits to be repaid over 25 years at well below market interest rates and by a dual exchange rate that allowed producers to import inputs at the artificially low official rate, while exporting at a higher ‘incentive rate’. An additional indirect subsidy were the high losses of the two government bodies supporting agricultural development, the Mechanised Farming Corporation (MFC) and the Agricultural Bank of Sudan, caused by a very low capital repayment performance.
Thus, the actual profits of leaseholders were estimated to be much higher than the critical return on farming. In addition to the various subsidies a second source of profits was the own marketing of crops by producers outside the production area, which actually created local shortages. A third source was the premium prices paid for Sudanese sorghum in Saudi Arabia, well over the world market price (on which the Sudanese sorghum was not competitive). For these reasons MFS were financially profitable for investors, but not in a strict economic sense for the country.
On top of this, serious side-effects on the fragile ecological balance of the savannahs were observed. These areas were often characterised by poor soils and low rainfall. Former MFS land was often found to be lost to desert.
Most importantly, in the MFS the investors, mainly traders, were interested in quick returns on the large investments, rather than long-term consolidation and sustained yields. Instead of sustainable farming, with land having practically a price of zero and government giving incentives to expand, the farmer-traders were inclined to move to new areas.
A lot of expansion, especially in marginal land, was completely uncontrolled. But even the expansion supervised by the MFC was carried out without the necessary technical support of lad surveys and soil studies to determine suitability and stability of production over extended periods. This was because the MFC proved unable to enforce its rotation rules. Overall, the financial logic of the trader-investors, aiming at profit rates similar to those in trading, proved to be stronger than the MFC’s aim to combat desertification.
Last not least, the social effects of MFS were alarming. In contrast to the picture given by government that the land was practically empty, in fact all land was used to a lower or higher degree by traditional producers. Thus, MFS disrupted these systems whose overriding objective is food security and whose farmers are more interested in a long-term sustained production.
Furthermore, MFS could not compensate its disruption by offering employment, because the new large-scale farms were rather capital-intensive than labour intensive.
In sum, the implementation of the breadbasket strategy as envisaged in the 1970s was neither compatible with ecological nor with social aims stated in national development plans, nor was it economically feasible for the country. Although doubts with respect to the technical, economic, social and ecological feasibility were expressed quite early on, these were ignored for long as vested special interests push forward its implementation. Only the arising debt crisis in the late 1970s put a brake on it. The dream that you could push a country forward simply by injecting huge sums of money and applying modern technology in ignorance of the existing producers did not last long.
Nevertheless, such experiences of replacing traditional producers and their rights by external investors for whom the profit interest is predominant and supersedes the interests of the existing producers and other social, ecological, and wider economic interests, continue. In particular now there is a new rush for such ‘land grabbing’ based on high hopes of quick wins – for government or only privileged individuals who can evade control because of in transparent and weak governance systems.
The lessons South Sudan should take from Sudan’s own experience are obvious:
In fact raising the technological level and institutional environment of agriculture (infrastructure, markets, inputs, credit systems) – in short, its modernization – is vital and urgent.
However, there is no shortcut by simply replacing those who cultivate the land (or use it for husbandry) by external investors. Instead, the local community should be fully involved in the modernization process. If possible, they should be the farmers who are helped to modernize. If not, they should at least benefit through employment and upgrading of the local environment.
Properly established land rights are an indispensable basis for agricultural modernization. Traditional land rights need to be transformed into modern rights and officially registered by local administration. This will not only provide incentives, it will also provide the basis, as it can be used as collateral to raise bank credit.
Extending the road network will reduce prices of imports and help making agricultural produce competitive.
Probably most important, transparency in the process of land ownership, land allocation and land sales must be created in order to stop individuals who abuse positions of power and conditions of in transparency to benefit illegitimately from sale or use of South Sudan’s prime resource, land.
If the lessons from Sudan’s first ‘Breadbasket Strategy’ are learnt, South Sudan’s new Breadbasket Strategy can be the basis of its way out of poverty.
Asha Farag Injeri (PhD) is university Ass/professor of Economics and Development Studies, and a consultant with numerous regional and international organizations. She is also Secretary, Information, Public Relations of the recently established South Sudan Economic Association (SSEA). She is reachable at [email protected].